Exhibit 10.4


 


MASTER CREDIT FACILITY AGREEMENT


 


BY AND BETWEEN


 


SNH FM FINANCING LLC,


 


AND


 


CITIBANK, N.A.


 


DATED AS OF


 


August 4,
2009


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  1

  	
  THE
  TERM LOAN

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  2

  	
  ALLOCABLE
  LOAN AMOUNT/SUPPLEMENTAL LOANS

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  3

  	
  VALUATIONS/COLLATERAL
  CHANGES

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  4

  	
  RESERVED

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  5

  	
  RESERVED

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  6

  	
  CONDITIONS
  PRECEDENT TO ALL REQUESTS

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  7

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
  17

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  8

  	
  AFFIRMATIVE
  COVENANTS OF BORROWER

  	
  17

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  9

  	
  NEGATIVE
  COVENANTS OF BORROWER

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  10

  	
  FEES

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  11

  	
  EVENTS
  OF DEFAULT

  	
  38

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  12

  	
  REMEDIES

  	
  42

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  13

  	
  INSURANCE,
  REAL ESTATE TAXES AND REPLACEMENT RESERVES

  	
  44

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  14

  	
  LIMITS
  ON PERSONAL LIABILITY

  	
  45

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  15

  	
  MISCELLANEOUS
  PROVISIONS

  	
  48

  



 


i

















 


	
   

  	
  EXHIBITS

  
	
   

  	
   

  
	
  EXHIBIT A

  	
  Schedule of Initial
  Mortgaged Properties, Initial Allocable Loan Amounts and Initial Valuations

  
	
   

  	
   

  
	
  EXHIBIT B

  	
  Confirmation of
  Guaranty

  
	
   

  	
   

  
	
  EXHIBIT C

  	
  Compliance Certificate

  
	
   

  	
   

  
	
  EXHIBIT D-1

  	
  Borrower Organizational
  Certificate

  
	
   

  	
   

  
	
  EXHIBIT D-2

  	
  Guarantor
  Organizational Certificate

  
	
   

  	
   

  
	
  EXHIBIT E

  	
  Reserved

  
	
   

  	
   

  
	
  EXHIBIT F

  	
  Reserved

  
	
   

  	
   

  
	
  EXHIBIT G

  	
  Reserved

  
	
   

  	
   

  
	
  EXHIBIT H

  	
  Reserved

  
	
   

  	
   

  
	
  EXHIBIT I

  	
  Request

  
	
   

  	
   

  
	
  EXHIBIT J

  	
  Confirmation of
  Obligations

  
	
   

  	
   

  
	
  EXHIBIT K

  	
  Reserved

  
	
   

  	
   

  
	
  EXHIBIT L

  	
  Reserved

  
	
   

  	
   

  
	
  EXHIBIT M

  	
  Reserved

  
	
   

  	
   

  
	
  EXHIBIT N

  	
  Reserved

  
	
   

  	
   

  
	
  EXHIBIT O

  	
  Disclosure Schedule

  
	
   

  	
   

  
	
  EXHIBIT P

  	
  Letter of Credit

  
	
   

  	
   

  
	
  EXHIBIT Q-1

  	
  Bank Legal Opinion
  (Foreign)

  
	
   

  	
   

  
	
  EXHIBIT Q-2

  	
  Bank Legal Opinion
  (Domestic)

  
	
   

  	
   

  
	
  EXHIBIT R

  	
  Form of Rent Roll

  
	
   

  	
   

  
	
  EXHIBIT S

  	
  Expansion Guaranty

  



 


ii

















 


	
  EXHIBIT T

  	
  Expansion Security
  Agreement

  
	
   

  	
   

  
	
  SCHEDULE 1

  	
  Minimum Rent Payments

  
	
   

  	
   

  
	
  APPENDIX I

  	
  Definitions

  



 


iii

















 


MASTER CREDIT FACILITY AGREEMENT


 


THIS MASTER CREDIT FACILITY AGREEMENT is made as of the 4th day of
August, 2009, by and between SNH FM FINANCING LLC, a Delaware limited liability
company and CITIBANK, N.A., a national banking association.


 


RECITALS


 


A.            Borrower owns one (1) or more
Seniors Housing Facilities (unless otherwise defined or the context clearly
indicates otherwise, capitalized terms shall have the meanings ascribed to such
terms in Appendix I of this Agreement) as more particularly described in Exhibit A
to this Agreement.


 


B.            Borrower has requested that Lender
make a loan in the amount of $512,934,000 to Borrower, comprised of a
$205,174,000 Variable Loan, and a $307,760,000 Fixed Loan.


 


C.            To secure the obligations of
Borrower under this Agreement and the other Loan Documents issued in connection
with the Term Loan, Borrower shall create a Collateral Pool in favor of
Lender.  The Collateral Pool shall be
comprised of (i) the Seniors Housing Facilities listed on Exhibit A
and (ii) any other collateral pledged to Lender from time to time by
Borrower pursuant to this Agreement or any other Loan Documents.


 


D.            Each Note and Security Document
related to the Mortgaged Properties comprising the Collateral Pool shall be
cross-defaulted (i.e., a default under any Note, Security Document
relating to the Collateral Pool and under this Agreement, shall constitute a
default under each Note, Security Document and this Agreement related to the
Mortgaged Properties comprising the Collateral Pool) and cross-collateralized (i.e.,
each Security Instrument related to the Mortgaged Properties within the
Collateral Pool shall secure all of Borrower’s obligations under this Agreement
and the other Loan Documents) and it is the intent of the parties to this
Agreement that, after an Event of Default, Lender may accelerate any Note
without needing to accelerate any other Note and that in the exercise of its
rights and remedies under the Loan Documents, Lender may, except as provided in
this Agreement, exercise and perfect any and all of its rights in and under the
Loan Documents with regard to any Mortgaged Property without needing to
exercise and perfect its rights and remedies with respect to any other
Mortgaged Property and that any such exercise shall be without regard to the
Allocable Loan Amount assigned to such Mortgaged Property and that Lender may
recover an amount equal to the full amount outstanding in respect of any of the
Notes in connection with such exercise and any such amount shall be applied as
determined by Lender pursuant to the terms of this Agreement, the Notes and the
other Loan Documents.


 


E.             Subject to the terms, conditions
and limitations of this Agreement, Lender has agreed to make a Term Loan.


 


NOW, THEREFORE, Borrower and Lender, in consideration of the mutual
promises and agreements contained in this Agreement, hereby agree as follows:


 

















 


ARTICLE 1

THE TERM LOAN


 


Section 1.01.                                       Term
Loan.


 


(a)           Subject
to the terms, conditions and limitations of this Agreement, Lender agrees to
make the Term Loan to Borrower on the Initial Closing Date.  The maximum aggregate principal balance of
the Term Loan shall be $512,934,000.


 


Section 1.02.                                       Notes.


 


The obligation of the Borrower to repay the Term Loan shall be
evidenced by the following Notes: (i) a Fixed Facility Note in the
principal amount of $307,760,000 and (ii) a Variable Facility Note in the
principal amount of $205,174,000.  The
Notes shall be payable to the order of Lender and shall equal the aggregate
original principal amount of the Term Loan to the Borrower.


 


Section 1.03.                                       Maturity
Date/Prepayment.


 


The maturity date of the Term Loan shall be September 1,
2019.  The Term Loan shall amortize over
the Amortization Period with the outstanding principal balance due and owing on
the maturity date.


 


Section 1.04.                                       Yield
Maintenance/Prepayment.


 


The terms and conditions of yield maintenance and/or prepayment
premiums as applicable, are contained in the Notes and such terms and
conditions shall apply to the prepayment in part or whole of the Term Loan
during the term of this Agreement.


 


Section 1.05.                                       Interest
Rate Execution.


 


In the event that the Term Loan made on the Initial Closing Date is
solely a Fixed Loan, the provisions in this Agreement referencing the Variable
Loan and Variable Facility Note shall be deemed to be of no further force and
effect and be deemed to be eliminated from this Agreement.


 


ARTICLE 2

ALLOCABLE LOAN AMOUNT/SUPPLEMENTAL LOANS


 


Section 2.01.                                       Determination
of Allocable Loan Amount and Valuations.


 


(a)           Initial
Determinations.  On the Initial
Closing Date, Lender shall determine (i) the Allocable Loan Amount and
Valuation for each Initial Mortgaged Property, (ii) the Aggregate NOI Debt
Service Coverage Ratio and the Aggregate Loan to Value Ratio and (iii) the
Aggregate Lease Payment Debt Service Coverage Ratio.  The determinations made as of the Initial
Closing Date shall remain unchanged until the First Anniversary.  Changes in Allocable Loan Amount, Valuations,
the Aggregate NOI Debt Service Coverage Ratio, the 


 


2

















 


Aggregate Lease
Payment Debt Service Coverage Ratio and the Aggregate Loan to Value Ratio shall
be made pursuant to Section 2.01(b).


 


(b)           Monitoring
Determinations.  Once each Calendar
Quarter within twenty (20) Business Days after Borrower has delivered to Lender
the reports required in Section 8.03, Lender shall determine the
Aggregate NOI Debt Service Coverage Ratio, the Aggregate Lease Payment Debt
Service Coverage Ratio, the Aggregate Loan to Value Ratio, Level of Care
Diversity Requirements, the Valuations and the Allocable Loan Amounts and
whether Borrower is in compliance with the other covenants set forth in the
Loan Documents.  After the First
Anniversary, on an annual basis, and if Lender decides that changed market or
property conditions warrant, Lender shall redetermine Allocable Loan Amounts
and Valuations.  Lender shall also
redetermine Allocable Loan Amounts to take account of any substitution or
release of Collateral or other event that invalidates the outstanding
determinations.  In determining
Valuations, Lender shall use Capitalization Rates based on its internal survey
and analysis of capitalization rates for comparable sales in the vicinity of
the Mortgaged Property, with such adjustments as Lender deems appropriate and
without any obligation to use any information provided by Borrower.  If Lender is unable to determine a
Capitalization Rate for a Mortgaged Property, Lender shall have the right, with
the prior consent of Borrower, not more than once annually, to obtain, at
Borrower’s expense, a market study in order to establish a Capitalization
Rate.  In the event Borrower fails to
consent to Lender obtaining a market study, Lender shall determine the Capitalization
Rate pursuant to the Underwriting Requirements. 
Lender shall promptly disclose its determinations to Borrower.  Until redetermined, the outstanding Allocable
Loan Amounts and Valuations shall remain in effect.  Notwithstanding anything in this Agreement to
the contrary, no change in Allocable Loan Amounts, Valuations, the Aggregate
Loan to Value Ratio, the Aggregate NOI Debt Service Coverage Ratio or the
Aggregate Lease Payment Debt Service Coverage Ratio shall, unless resulting
from the concurrent release or substitution of Collateral from the Collateral
Pool, (i) result in a Potential Event of Default or Event of Default, (ii) require
the prepayment of any Note, or (iii) require the addition of Collateral to
the Collateral Pool.


 


Section 2.02.                                       Supplemental
Loan.


 


After the First Anniversary, Borrower may participate in the Fannie Mae
Supplemental Loan product, if the Supplemental Loan product is offered by
Fannie Mae at the time and if no Targeted Entity is a Prohibited Person.  Any such Supplemental Loan is subject to
Lender’s determination that, as a result of its annual valuation of the
Collateral Pool, a Supplemental Loan may be made pursuant to Lender’s
Underwriting Requirements for Tier Four loans in effect at the time of the
request.  The Supplemental Loan will be
documented with loan documents similar to the Loan Documents (“Supplemental Loan Documents”).  Supplemental Loans will not be loans advanced
under this Agreement.  Any Supplemental
Loan will be priced at market at the time of the loan and will be
cross-defaulted with the Term Loan.  To
secure the obligations of Borrower under the Supplemental Loan Documents,
Borrower shall grant, convey and assign to Lender a second Lien on each
Mortgaged Property in the Collateral Pool and on any other collateral pledged
to Lender from time to time pursuant to the Supplemental Loan Documents.  On the closing date of the Supplemental Loan,
Lender shall determine the portion of the 


 


3

















 


Supplemental Loan allocated to a particular Mortgaged
Property by Lender (the “Supplemental Allocable
Loan Amount”), which Supplemental Allocable Loan Amounts shall
be set forth in a separate exhibit to this Agreement.  Lender shall redetermine the Supplemental
Allocable Loan Amounts in the same manner and at the same time as the
redetermination of the Allocable Loan Amounts pursuant to Section 2.01(b).
Notwithstanding the foregoing, the Supplemental Loan shall be monitored
pursuant to Section 2.01 of this Agreement and Lender shall include the
Supplemental Loan upon calculating the Aggregate NOI Debt Service Coverage
Ratio, the Aggregate Lease Payment Debt Service Coverage Ratio and the
Aggregate Loan to Value Ratio, in connection with any Request.  Borrower agrees to pay any fees (including
legal fees) that may be charged in connection with a Supplemental Loan.


 


ARTICLE 3

VALUATIONS/COLLATERAL CHANGES


 


Section 3.01.                                       Reserved.


 


Section 3.02.                                       Reserved.


 


Section 3.03.                                       Right
to Obtain Releases of Collateral.


 


Subject to the terms and conditions of this Article 3, and the
limitations set forth in Section 15.17, Borrower shall have the right
after the First Anniversary, from time to time, to obtain a release of
Collateral from the Collateral Pool.


 


Section 3.04.                                       Procedure
for Obtaining Releases of Collateral.


 


(a)           Request.  To obtain a release of Collateral from the
Collateral Pool, Borrower may deliver a Release Request to Lender.  Upon delivery of the Release Request,
Borrower shall not be permitted to re-borrow any amounts that will be prepaid
in connection with the release of Collateral.


 


(b)           Closing.  If all conditions precedent contained in Section 6.05
and all General Conditions contained in Section 6.01 are satisfied,
Lender shall cause the Release Mortgaged Property to be released, at a closing
to be held at offices designated by Lender on a Closing Date selected by
Lender, and occurring within thirty (30) days after Lender’s receipt of the
Release Request (or on such other date as Borrower and Lender may agree), by
executing and delivering, and causing all applicable parties to execute and
deliver, all at the sole cost and expense of Borrower, the Release
Documents.  Borrower shall prepare the
Release Documents and submit them to Lender for its review.


 


(c)           Release
Price.  The “Release Price”
for each Release Mortgaged Property means the greater of (i) one hundred
percent (100%) of the Allocable Loan Amount for the Release Mortgaged Property
plus one hundred percent (100%) of the Supplemental Allocable Loan Amount for
the Release Mortgaged Property and (ii) one hundred percent (100%) of the
amount, if any, of the Term Loan Outstanding and any Supplemental Loan
Outstanding that is required to be repaid by Borrower to Lender in connection
with the proposed release of the 


 


4

















 


Release Mortgaged
Property from the Collateral Pool, so that, immediately after the release, the
Release Coverage and LTV Tests will be satisfied, the Aggregate NOI Debt
Service Coverage Ratio or Aggregate Lease Payment Debt Service Coverage Ratio
will not be reduced, and the Aggregate Loan to Value Ratio will not be
increased as a result of such release. 
In addition to the Release Price, Borrower shall pay to Lender all associated
prepayment premiums and other amounts due under the Notes being repaid.  In connection with a non-simultaneous
substitution of Collateral pursuant to Section 3.06(c)(ii) of
this Agreement, Borrower shall be permitted, in lieu of paying the Release
Price, to post a Letter of Credit issued by a financial institution acceptable
to Lender and having terms and conditions acceptable to Lender, having a face
amount equal to the Release Price.


 


(d)           Application
of Release Price.  (i) The
Release Price for the Release Mortgaged Property shall be applied in the order
selected by Borrower, provided that (A) any amount of the Supplemental
Loan Outstanding which Borrower elects to prepay must be prepaid in full, or if
the Release Price is not sufficient to do so, the Supplemental Loan shall only
be partially prepaid; (B) any amount of the Term Loan Outstanding which
Borrower elects to prepay must be prepaid in full, or if the Release Price is
not sufficient to do so, the Term Loan shall be only partially prepaid; (C) any
prepayment is permitted under the applicable Note; (D) any prepayment
premium due and owing is paid; and (E) interest is paid through the end of
the month.  If Borrower  does not give Lender direction with respect
to the application of the Release Price or if such direction does not comply
with the provisions of (A) — (B) above, then the Release Price shall
be applied first against any variable rate Supplemental Loan Outstanding so
long as the prepayment is permitted under the applicable note, until any
variable rate Supplemental Loan is no longer Outstanding (provided that, in the
event there are multiple variable rate Supplemental Loans Outstanding, Lender
shall determine the order of application of the Release Price taking into
account factors including the unpaid
principal balance of the variable rate Supplemental Loan notes, and which
variable rate Supplemental Loan note Outstanding has the lowest prepayment
costs or highest interest rate), then against any Variable Loan
Outstanding so long as the prepayment is permitted under the Variable Facility
Note, until any Variable Loan is no longer Outstanding, then against any fixed
rate Supplemental Loan Outstanding so long as the prepayment is permitted under
the applicable note, until any fixed rate Supplemental Loan is no longer Outstanding
(provided that, in the event there are multiple fixed rate Supplemental Loans
Outstanding, Lender shall determine the order of application of the Release
Price taking into account factors including the unpaid principal balance of the fixed rate Supplemental Notes, and which
fixed rate Supplemental Loan note Outstanding has the lowest prepayment costs
or highest interest rate), then
against any Fixed Loan Outstanding as permitted under the applicable Fixed
Facility Note.


 


(ii)           In
the event Borrower desires to release a Release Mortgaged Property on a date
other than the last Business Day of the month, the Release Price or the
remainder of the Release Price, if any, shall be held by Lender (or its
appointed collateral agent) as substitute Collateral (“Substitute Collateral”),
in accordance with a security agreement (if required by Lender) and other
documents in form and substance acceptable to Lender.  Any Substitute Collateral shall first be used
to prepay the applicable Supplemental Loan and then the applicable Term Loan on
the last Business Day of the month.


 


5

















 


(e)           Test
for Release.  A release may be
effected provided that immediately after giving effect to the requested release
(i) the Release Coverage and LTV Tests for the Collateral Pool are met, (ii) the
Geographical Diversification Requirements are satisfied and (iii) the
Level of Care Diversity Requirements are satisfied.  Notwithstanding the foregoing, if either the
Release Coverage and LTV Tests, the Geographical Diversification Requirements
or the Level of Care Diversity Requirements are not satisfied after the release
of a Mortgaged Property, such release may be permitted by Lender if the release
improves the Collateral Pool based on factors that are consistent with Lender’s
Underwriting Requirements and result in improvement in one or more of the
following areas: the then current Valuation of the Mortgaged Properties, the
then current Aggregate NOI Debt Service Coverage Ratio, the then current Aggregate
Lease Payment Debt Service Coverage Ratio or the then current Aggregate Loan to
Value Ratio.


 


Section 3.05.                                       Right
to Substitutions.


 


Subject to the terms and conditions of this Article 3 and
the limitations set forth in Section 15.17, Borrower shall have the
right to obtain the release of the Mortgaged Property securing the Term Loan
made to Borrower (the “Release Mortgaged Property”) by replacing such
Mortgaged Property with a Seniors Housing Facility that meets the requirements
of this Agreement (the “Substitute Mortgaged Property”) thereby
effecting a “Substitution” of Collateral.


 


Section 3.06.                                       Procedure
for Substitutions.


 


(a)           Request.  Borrower shall deliver to Lender a completed
and executed Substitution Request.  Each
Substitution Request shall be accompanied by the following:  (i) the information required by the
Underwriting Requirements with respect to the proposed Substitute Mortgaged
Property and any additional information Lender reasonably requests; and (ii) the
payment of all Additional Collateral Due Diligence Fees.


 


(b)           Underwriting.


 


(i)            Lender shall
evaluate the proposed Substitute Mortgaged Property in accordance with the
Underwriting Requirements.


 


(ii)           A Substitution may
be effected provided that: (i) Lender determines that the Substitute
Mortgaged Property is of similar or better quality taking into account such
factors as age of the asset, property condition and vacancy rate and located in
a similar or better market, taking into account such factors as demographics,
income levels, market occupancy rates and level of unemployment as the released
Seniors Housing Facility, (ii) the proposed Substitute Mortgaged Property
individually satisfies the Loan to Value Ratio requirements for all Mortgaged
Properties in the Collateral Pool, (iii) immediately after the
Substitution, the resulting Collateral Pool satisfies the better of (A) the
Substitution Coverage and LTV Tests or (B) the Aggregate Lease Payment
Debt Service Coverage Ratio, the Aggregate NOI Debt Service Coverage Ratio and
the Aggregate Loan to Value Ratio of the Collateral Pool immediately prior to
the Substitution Request, (iv) after the Substitution, the Geographical
Diversification Requirements are met, (v) after the Substitution the Level
of Care Diversity 


 


6

















 


Requirements are
met, (vi) the Substitute Mortgaged Property is leased to the Master Tenant
pursuant to the Operating Lease and Operator pursuant to the Sub-Lease and (vii) if
the proposed Substitute Mortgaged Property contains Skilled Nursing Units, the
Net Operating Income of the Substitute Mortgaged Property obtained from the
Skilled Nursing Units is less than twenty percent (20%).  Notwithstanding the foregoing, if either the
Substitution Coverage and LTV Tests, the Geographical Diversification
Requirements or the Level of Care Diversity Requirements are not satisfied
after the Substitution of a proposed Substitute Mortgaged Property, such
Substitution may be permitted by Lender if the Substitution improves the
Collateral Pool based on factors that are consistent with Lender’s Underwriting
Requirements and result in improvement in one or more of the following areas:
the then current Valuation of the Mortgaged Properties, the then current
Aggregate NOI Debt Service Coverage Ratio, the then current Aggregate Lease
Payment Debt Service Coverage Ratio or the then current Aggregate Loan to Value
Ratio.


 


(iii)          Within thirty (30)
Business Days after receipt of (A) the Substitution Request and (B) all
reports, certificates and documents required by the Underwriting Requirements
and this Agreement, including a zoning analysis required by Lender in
connection with similar loans anticipated to be sold to Fannie Mae, Lender
shall notify the applicable Borrower whether the Substitute Mortgaged Property
meets the requirements of this Section 3.06(b) and the
Underwriting Requirements and the other requirements for the Substitution of a
Mortgaged Property as set forth in this Agreement.  Within five (5) Business Days after
receipt of Lender’s written notice in response to the Substitution Request,
Borrower shall notify Lender whether it elects to proceed with the
Substitution.  If Borrower fails to
respond within the period of five (5) Business Days, it shall be
conclusively deemed to have elected not to proceed with the Substitution.


 


(c)           Closing.  If Lender determines that the Substitution
Request satisfies the conditions set forth herein, Borrower timely elects to
proceed with the substitution, and all conditions precedent contained in Section 3.05,
Section 3.06,  Section 6.05,
Section 6.06, Section 6.11 and all General Conditions
contained in Section 6.01 are satisfied, the proposed Substitute
Mortgaged Property shall be added in replacement of the Mortgaged Property
being released, at a closing to be held at offices designated by Lender on a
Closing Date selected by Lender and occurring —


 


(i)            if the substitution
of the proposed Substitute Mortgaged Property is to occur simultaneously with
the release of the Release Mortgaged Property, within sixty (60) days after
Lender’s receipt of the applicable Borrower’s election (or on such other date
to which Borrower and Lender may agree); or


 


(ii)           if the substitution
of the proposed Substitute Mortgaged Property is to occur subsequent to the
release of the Release Mortgaged Property, within ninety (90) days after the
release of such Release Mortgaged Property (provided such date may be extended
an additional ninety (90) days if Borrower provides evidence satisfactory to
Lender that Borrower has identified and is under contract to purchase or
already owns a suitable proposed Substitute Mortgaged Property) (the “Property
Delivery Deadline”).


 


7
















 


Section 3.07.                                       Substitution
Deposit.


 


(a)           The
Deposit.   If a Substitution of the
proposed Substitute Mortgaged Property is to occur subsequent to the release of
the Release Mortgaged Property pursuant to Section 3.06(c)(ii), at
the Closing Date of the release of the Release Mortgaged Property, Borrower
shall deposit with Lender the “Substitution Deposit” described in Section 3.07(b) in
the form of cash in a non-interest bearing account held by Lender or, in lieu
of depositing cash for the Substitution Deposit, Borrower may post a Letter of
Credit issued by a financial institution acceptable to Lender and having terms
and conditions acceptable to Lender, having a face amount equal to the
Substitution Deposit.


 


(b)           Substitution
Deposit Amount. The “Substitution Deposit” for each proposed
substitution shall be an amount equal to the sum of (i) the Release Price,
plus (ii) any and all fee maintenance or prepayment premium for: (A) such
Note or Notes designated by Borrower in accordance with the conditions set forth
in Section 3.04(d) in connection with the application of Release
Price, as the Notes Borrower elects to prepay if the substitution fails to take
place or (B) if Borrower does not make such designation or such
designation does not comply with the provisions of Section 3.04(d), Lender
shall choose such Note in accordance with the provisions of Section 3.04(d) (the
“Selected Note”), calculated as of the end of the month in which the
Property Delivery Deadline occurs, as if the Selected Note were to be prepaid
in such month, plus (iii) principal and interest due and owing on the
portion of the Selected Note which is to be prepaid through the end of the
month in which the Property Delivery Deadline occurs, plus (iv) reasonable
costs, expenses and fees of Lender pertaining to the substitution (the “Substitution
Cost Deposit”).  The amount of the
Substitution Deposit shall be recalculated by Lender in the event the Property
Delivery Deadline is extended pursuant to Section 3.06(c)(ii).  If a Substitution of the last remaining asset
is taking place, the cash collateral or Letter of Credit must include, (A) any
yield maintenance that would be due to the extent that the Fixed Facility Note
must be prepaid to effect a release at that time and (B) any fee
maintenance that would be due to the extent that the Variable Facility Note
must be prepaid to effect a release at that time and (C) the full amount
of principal and interest owing under all remaining Notes.  The Substitution Cost Deposit shall be used
by Lender to cover all reasonable out-of-pocket costs and expenses incurred by
Lender and Fannie Mae, including any out-of-pocket legal fees and expenses
incurred by Fannie Mae and Lender in connection with such substitution whether
such substitution actually closes.


 


(c)           Failure to
Close Substitution.  If the
substitution of the proposed Substitute Mortgaged Property does not occur by
the Property Delivery Deadline in accordance with Section 3.06(c)(ii),
then such Borrower shall have irrevocably waived its right to substitute such
Release Mortgaged Property with the proposed Substitute Mortgaged Property, and
the release of the Release Mortgaged Property shall be deemed a prepayment of
the Note.  Subject to the terms of Section 3.06(c)(ii),
the Property Delivery Deadline shall be no later than the date ninety (90) days
after the date the Lender’s lien on such Release Mortgaged Property is
released. Any MBS being prepaid shall be deemed to be prepaid as of the end of
the month in which the Property Delivery Deadline falls and the Lender shall
follow standard Fannie Mae procedures for the prepayment of the Note, including
delivery of the Substitution Deposit (less the Substitution Cost 


 


8

















 


Deposit) to Fannie Mae in
accordance with such procedures.  Any
portion of the Substitution Deposit not needed to prepay the Note, all
interest, and any prepayment fees (including any portion of the Substitution
Cost Deposit not used by Lender to cover all reasonable out-of-pocket costs and
expenses incurred by Lender and Fannie Mae, including any out-of-pocket legal
fees and expenses incurred by Fannie Mae and Lender in connection with such
Substitution) shall be promptly refunded to the applicable Borrower after the
Property Delivery Deadline.


 


(d)           Substitution
Deposit Disbursement.  At closing of
the Substitution, the Lender shall disburse the Substitution Deposit (less any
portion of the Substitution Cost Deposit used by Lender to cover all reasonable
out-of-pocket costs and expenses incurred by Lender and Fannie Mae, including
any out-of-pocket legal fees and expenses incurred by Fannie Mae and Lender in
connection with such substitution) directly to the Borrower at such time as the
conditions set forth in Sections 3.05, 3.06, 6.05, 6.06,
6.11 and all General Conditions contained in Section 6.01
have been satisfied, which must occur no later than the Property Delivery
Deadline.


 


ARTICLE
4

RESERVED


 


ARTICLE
5

RESERVED


 


ARTICLE
6

CONDITIONS PRECEDENT TO ALL REQUESTS


 


Section 6.01.                                       Conditions
Applicable to All Requests.


 


Borrower’s right to close
the transaction requested in a Request shall be subject to Lender’s
determination that all of the following general conditions precedent (“General
Conditions”) have been satisfied, in addition to any other conditions
precedent contained in this Agreement:


 


(a)           Geographical
Diversification. The Mortgaged Properties in the Collateral Pool satisfy
the Geographical Diversification Requirements.


 


(b)           Payment of
Expenses.  The payment by Borrower of
Lender’s and Fannie Mae’s reasonable third party out-of-pocket fees and
expenses payable in accordance with this Agreement, including, but not limited
to, the legal fees and expenses described in Section 10.03.


 


(c)           No
Material Adverse Change.  There has
been no material adverse change in the financial condition, business or
prospects of Borrower or Key Principal in the physical condition, operating
performance or value of any of the Mortgaged Properties (excluding any
Mortgaged Property which is requested to be released) since the date of the
most recent Compliance Certificate (or, with respect to the conditions
precedent to the Term Loan, from the condition, business or prospects reflected
in the financial statements, reports and other 


 


9

















 


information obtained by
Lender during its review of Borrower and Key Principal and the Initial
Mortgaged Properties).


 


(d)           No Default.  Subject to Section 8.25 and the
last paragraph of Section 11.01, there shall exist no Event of Default or
Potential Event of Default in each case under Sections 11.01(b)-(k) or,
in any material respect, under Sections 11.01(a), (l) or (m) (it
being understood and agreed that any default comparable to the Events of
Default listed in 11.01(b) - (k) in the other Loan
Documents or Supplemental Loan Documents will be treated to be material) on the
Closing Date for the Request and, after giving effect to the transaction
requested in the Request, no Event of Default or Potential Event of Default
shall have occurred.


 


(e)           No
Insolvency. Receipt by Lender on the Closing Date for the Request of
evidence satisfactory to Lender that neither Borrower nor Key Principal is
insolvent (within the meaning of any applicable federal or state laws relating
to bankruptcy or fraudulent transfers) or will be rendered insolvent by the
transactions contemplated by the Loan Documents, or, after giving effect to
such transactions, will be left with an unreasonably small capital with which
to engage in its business or undertakings, or will have intended to incur, or
believe that it has incurred, debts beyond its ability to pay such debts as
they mature or will have intended to hinder, delay or defraud any existing or
future creditor.


 


(f)            No Untrue
Statements.  The Loan Documents shall
not contain any untrue or misleading statement of a material fact and shall not
fail to state a material fact necessary to make the information contained
therein not misleading except in relation to a Mortgaged Property which is
requested to be released.


 


(g)           Representations
and Warranties.  All representations
and warranties made by Borrower and Key Principal in the Loan Documents shall
be true and correct in all material respects on the Closing Date for the
Request with the same force and effect as if such representations and
warranties had been made on and as of the Closing Date for the Request except
in relation to a Mortgaged Property which is requested to be released.


 


(h)           No
Condemnation or Casualty.  Except in
connection with a Release Request or a Substitution Request, there shall not be
pending or threatened any condemnation or other taking, whether direct or
indirect, against the Mortgaged Property and there shall not have occurred any
casualty to any improvements located on the Mortgaged Property, which casualty
would have a Material Adverse Effect.


 


(i)            Delivery
of Closing Documents.  The receipt by
Lender of the following, each dated as of the Closing Date for the Request, in
form and substance satisfactory to Lender in all respects:


 


(i)            The Loan Documents relating to such
Request;


 


(ii)           A Compliance Certificate;


 


(iii)          An Organizational Certificate; and


 


10

















 


(iv)          Such other documents, instruments,
approvals (and, if requested by Lender, certified duplicates of executed copies
thereof) and opinions as Lender may reasonably request.


 


(j)            Covenants.  Except to the extent that a covenant applies
exclusively and specifically to a Mortgaged Property which is requested to be
released, Borrower is in full compliance with each of the covenants contained
in Article 8 and Article 9 of this Agreement, without giving effect
to any notice and cure rights of Borrower.


 


Section 6.02.                                       Conditions
Precedent to Term Loan.


 


The obligation of Lender
to make the Term Loan is subject to the following conditions precedent:


 


(a)           Receipt by
Lender of the Replacement Reserve Agreement and Completion/Repair Security
Agreement;


 


(b)           Receipt by
Lender of the Certificate of IDOT Guarantor and IDOT Guaranty;


 


(c)           Receipt by
Lender of opinions of counsel to Borrower, counsel to Master Tenant and counsel
to Operator in form and content satisfactory to Lender;


 


(d)           Receipt by
Lender of the documents and instruments required by Sections 6.11;


 


(e)           Delivery to
the Title Company with fully executed instructions directing the Title Company
to file and/or record in all applicable jurisdictions, all applicable Loan
Documents required by Lender to be filed or recorded, including duly executed
and delivered original copies of the Variable Facility Note or Fixed Facility
Note, as applicable, the Guaranty, the Initial Security Instruments covering
the Initial Mortgaged Properties and UCC-1 Financing Statements covering the
portion of the Collateral comprised of personal property, and other appropriate
instruments, in form and substance satisfactory to Lender and in form proper
for recordation, as may be necessary in the opinion of Lender to perfect the
Liens created by the applicable Security Instruments and any other Loan
Documents creating a Lien in favor of Lender, and the payment of all taxes,
fees and other charges payable in connection with such execution, delivery,
recording and filing;


 


(f)            Receipt by
Lender of the Initial Origination Fee pursuant to Section 10.01(a) and
the Initial Due Diligence Fee pursuant to Section 10.02(a); and


 


(g)           Such other
documents, instruments, approvals (and, if requested by Fannie Mae and Lender,
certified duplicates of executed copies thereof) and opinions as Fannie Mae or
Lender may reasonably request.


 


11

















 


Section 6.03.                                       Reserved.


 


Section 6.04.                                       Reserved.


 


Section 6.05.                                       Conditions
Precedent to Release of Property from the Collateral Pool.


 


The release of a
Mortgaged Property from the Collateral Pool is subject to the satisfaction of
the following conditions precedent on or before the Closing Date:


 


(a)           Receipt by
Lender of the fully executed Release Request.


 


(b)           Immediately
after giving effect to the requested release, the provisions of Section 3.04(e) are
satisfied.


 


(c)           Receipt by
Lender of the Release Price and all amounts owing under Section 3.04(c);


 


(d)           Receipt by
Lender of the Release Fee;


 


(e)           Receipt  by Lender of all legal fees and expenses
payable by Borrower in connection with a Release Request.


 


(f)            Receipt by
Lender on the Closing Date of one (1) or more counterparts of each Release
Document, dated as of the Closing Date, signed by each of the parties (other
than Lender) who is a party to such Release Document;


 


(g)           If required
in Lender’s judgment under state law in order to preserve and protect Lender’s
rights, amendments to this Agreement, the Notes and the Security Instruments,
reflecting the release of the Release Mortgaged Property from the Collateral
Pool and, as to any Security Instrument or Note so amended or if Lender
determines that such endorsement is necessary to maintain the priority of the
Lien created in favor of Lender with respect to the Outstanding Indebtedness or
to maintain the validity of any Title Insurance Policy, the receipt by Lender
of an endorsement to each Title Insurance Policy insuring the Security
Instruments, amending the effective date of each Title Insurance Policy to the
Closing Date and showing no additional exceptions to coverage other than the
exceptions shown on the Initial Closing Date, Permitted Liens and other
exceptions approved by Lender;


 


(h)           If Lender
determines the Release Mortgaged Property to be one (1) phase of a
project, and one (1) or more other phases of the project are Mortgaged
Properties which will remain in the Collateral Pool (“Remaining Mortgaged
Properties”), Lender must determine that the Remaining Mortgaged Properties
can be operated separately from the Release Mortgaged Property and any other
phases of the project which are not Mortgaged Properties and whether any cross
use agreements or easements are necessary. 
In making this determination, Lender shall evaluate access, utilities,
marketability, community services, ownership and operation of the 


 


12

















 


Release Properties and
any other issues identified by Lender in connection with similar loans
anticipated to be sold to Fannie Mae;


 


(i)            Receipt by
Lender of endorsements to the tie-in endorsements of the Title Insurance
Policies, if deemed necessary by Lender, to reflect the release;


 


(j)            Receipt by
Lender on the Closing Date of a Confirmation of Obligations;


 


(k)           Receipt by
Lender prior to the Closing Date of the amendment to the Operating Lease
evidencing only the release of the Release Mortgaged Property from the terms of
the Operating Lease and adjusting the rent payment under the Operating Lease
pursuant to the terms of the Operating Lease.


 


Section 6.06.                                       Conditions
Precedent to Substitutions.


 


The obligation of Lender
to make a requested Substitution is subject to Lender’s determination that each
of the following conditions precedent has been met:


 


(a)           Receipt by
Lender of the fully executed Substitution Request;


 


(b)           Receipt by
Lender of the Substitution Deposit to the extent necessary under Section 3.07;


 


(c)           Receipt by
Lender of the Additional Collateral Due Diligence Fees and Substitution Fee;


 


(d)           Such
Substitute Mortgaged Property shall comply with the provisions of Section 3.06(b) of
this Agreement;


 


(e)           Delivery to
the Title Company, with fully executed instructions directing the Title Company
to file and/or record in all applicable jurisdictions, all applicable Loan
Documents required by Lender to be filed or recorded, including duly executed
and delivered original copies of the Security Instruments covering the
Substitute Mortgaged Properties and UCC-1 Financing Statements covering the
portion of the Substitute Mortgaged Property comprised of personal property,
and other appropriate instruments, in form and substance satisfactory to Lender
and in form proper for recordation, as may be necessary in the opinion of
Lender to perfect the Lien created by the applicable additional Security
Instrument, and any other relevant Loan Document creating a Lien in favor of
Lender, and the payment of all taxes, fees and other charges payable in
connection with such execution, delivery, recording and filing;


 


(f)            Receipt by
Lender of endorsements to the tie-in endorsements of the Title Insurance
Policies, if deemed necessary by Lender, to reflect the substitution;


 


(g)           Receipt of
all documents required for the addition of the Substitute Mortgaged Property
pursuant to the Underwriting Requirements;


 


(h)           The Borrower
is the owner of the proposed Substitute Mortgage Property;


 


13

















 


(i)            Receipt by
Lender on the Closing Date of a Confirmation of Obligations; and


 


(j)            If required
by Lender, amendments to this Agreement, the Notes and the Security
Instruments, reflecting the Substitution and, as to any Security Instrument or
Note so amended or if Lender determines that such endorsement is necessary to
maintain the priority of the Lien created in favor of Lender with respect to
the Outstanding Indebtedness or to maintain the validity of any Title  Insurance Policy, the receipt by Lender of an
endorsement to each Title Insurance Policy insuring the Security Instruments,
amending the effective date of each Title Insurance Policy to the Closing Date
and showing no additional exceptions to coverage other than the exceptions
shown on the Initial Closing Date, Permitted Liens and other exceptions
approved by Lender, together with any reinsurance agreements required by
Lender.


 


(k)           Receipt by
Lender prior to the Closing Date of the amendment to the Operating Lease
evidencing only the following: (i) the release of the Release Mortgaged
Property from the terms of the Operating Lease, (ii) the addition of the
Substitute Mortgaged Property to the terms of the Operating Lease, and (iii) adjusting
the rent payments under the Operating Lease pursuant to the terms of the
Operating Lease.


 


Section 6.07.                                       Reserved.


 


Section 6.08.                                       Reserved.


 


Section 6.09.                                       Reserved.


 


Section 6.10.                                       Delivery
of Opinion Relating to Substitution Request.


 


With respect to the
closing of a Substitution Request, it shall be a condition precedent that
Lender receives favorable opinions of counsel (including local counsel, Master
Tenant’s counsel, Operators counsel, as applicable) to Borrower, as to the due
organization and qualification of Borrower, the due authorization, execution,
delivery and enforceability of each Loan Document executed in connection with
the Request and such other matters as Lender may reasonably require, each dated
as of the Closing Date for the Request, in form and substance satisfactory to
Lender in all respects.


 


Section 6.11.                                       Delivery
of Property-Related Documents.


 


With respect to each of
the Initial Mortgaged Properties or a Substitute Mortgaged Property, it shall
be a condition precedent that Lender receive from Borrower each of the documents
and reports required by Lender pursuant to the Underwriting Requirements in
connection with the addition of such Mortgaged Property to the Collateral Pool
and, each of the following, each dated as of the applicable Closing Date for
the Initial Mortgaged Property or a Substitute Mortgaged Property, as the case
may be, in form and substance satisfactory to Lender in all respects:


 


14

















 


(a)           A commitment
for the Title Insurance Policy applicable to the Mortgaged Property and a pro
forma Title Insurance Policy based on the title commitment in the amount of
title insurance afforded by the Title Insurance Policy for each Mortgaged
Property in the Collateral Pool equal to (i) if tie-in endorsements are
available for all or a portion of the Mortgaged Properties, in an aggregate
amount equal to the combined Allocable Loan Amounts for all of the Mortgaged
Properties covered by the tie-in endorsements, not to exceed the amount of the
amount of the Term Loan, or (ii) if tie-in endorsements are not available
for any of the Mortgaged Properties, then with respect to such Mortgaged
Properties not subject to the tie-in endorsement an amount equal to 150% of the
Valuation of such Mortgaged properties not subject to the tie-in endorsement
(or such lesser amount that is the maximum allowed by law or regulation);


 


(b)           the Insurance
Policy (or a certified copy of the Insurance Policy) applicable to the
Mortgaged Property;


 


(c)           The Survey
applicable to the Mortgaged Property;


 


(d)           Evidence
satisfactory to Lender of compliance of the Mortgaged Property with Applicable
Laws;


 


(e)           A Replacement
Reserve Agreement or an amendment thereto, providing for the establishment of a
replacement reserve account, to be pledged to Lender, in which the owner shall
(unless waived by Lender) periodically deposit amounts for replacements for
improvements at the Mortgaged Property and as additional security for
Borrower’s obligations under the Loan Documents;


 


(f)            A
Completion/Repair and Security Agreement or an amendment thereto, together with
required escrows, on the standard form required by Lender;


 


(g)           A
Subordination Assignment and Security Agreement for each Mortgaged Property;


 


(h)           An Assignment
of Leases and Rents, if Lender determines one to be necessary or desirable,
provided that the provisions of any such assignment shall be substantively
identical to those in the Security Instrument covering the Collateral, with
such modifications as may be necessitated by applicable state or local law;


 


(i)            In relation
to each Initial Mortgaged Property, a Security Instrument to effectuate the
addition of such Initial Mortgaged Property to the Collateral Pool and in
relation to each Substitute Mortgaged Property, a Security Instrument to
effectuate the addition of such Substitute Mortgaged Property to the Collateral
Pool and a Note relating to the Mortgaged Properties.  The amount secured by each Security
Instrument shall be equal to the Term Loan;


 


(j)            A
Certificate of Borrower;


 


(k)           Indemnification
Agreement Regarding Taxes


 


15

















 


(l)            Any and all
Operating Leases, Sub-Leases or leases relating to a Mortgaged Property; and


 


(m)          Such other
documents, instruments, approvals (and, if requested by Fannie Mae and Lender,
certified duplicates of executed copies thereof) and opinions as Fannie Mae or
Lender may reasonably request.


 


Section 6.12.                                       Letters
of Credit.


 


(a)           Letter of
Credit Requirements.  If Borrower
provides Lender with a Letter of Credit pursuant to this Agreement, the Letter
of Credit shall be in form and substance satisfactory to Lender and Lender
shall be entitled to draw under such Letter of Credit solely upon presentation
of a sight draft to the LOC Bank.  Any
Letter of Credit shall be for a term of at least 110 days.  Any Letter of Credit shall be issued by a
financial institution satisfactory to Lender and shall have its long-term debt
obligations and its short-term debt obligations rated in accordance with the
requirements of Fannie Mae then in effect.


 


(b)           Draws
Under Letter of Credit.  Lender shall
have the right to draw monies under the Letter of Credit:


 


(i)            upon the occurrence of (A) an
Event of Default; or (B) a Potential Event of Default of which the
Borrower has knowledge which has continued for two (2) Business Days;


 


(ii)           upon the failure to close a
substitution pursuant to Section 3.07(c); or


 


(iii)          upon the downgrading of the ratings of
the long-term or short-term debt obligations of the LOC Bank below the
requirements of Fannie Mae then in effect.


 


(c)           Default
Draws.  If Lender draws under the
Letter of Credit pursuant to Section 6.12(b)(i) above, Lender
shall have the right to use monies drawn under the Letter of Credit to prepay
any Note.


 


(d)           Other
Draws.  If Lender draws under the
Letter of Credit pursuant to Section 6.12(b)(ii) or (iii) above,
Lender shall have the right to use monies drawn under the Letter of Credit to
prepay a Selected Note as such term is defined in Section 3.07(b).


 


(e)           Legal
Opinion.  Prior to or simultaneous
with the delivery of any new Letter of Credit (but not the extension of any
existing Letter of Credit), such Borrower shall cause the LOC Bank’s counsel to
deliver a legal opinion substantially in the form of Exhibit Q-1 or
Exhibit Q-2, as applicable, and in any event satisfactory in form
and substance to the Lender in the Lender’s discretion.


 


16
















 


ARTICLE 7

REPRESENTATIONS AND WARRANTIES


 


Section 7.01.                                       Representations
and Warranties of Borrower.


 


The representations and warranties of the Borrower are
contained in the Certificate of Borrower.


 


For purposes of the Loan Documents, where Borrower
purports to have knowledge and without limiting the scope of the meaning of
Borrower’s having actual knowledge, Borrower will automatically and immediately
be deemed to have actual knowledge:


 


(i) of written public disclosure; or


 


(ii) in the event
that Key Principal or REIT Management Research LLC or its successors and
assigns has actual knowledge.


 


Section 7.02.                                       Representations
and Warranties of Lender.


 


Lender hereby represents and warrants to Borrower as follows as of the
date hereof:


 


(a)           Due
Organization.  Lender is a national
banking association duly organized, validly existing and in good standing under
the laws of the United States.


 


(b)           Power
and Authority.  Lender has the
requisite power and authority to execute and deliver this Agreement and to
perform its obligations under this Agreement.


 


(c)           Due
Authorization.  The execution and
delivery by Lender of this Agreement, and the consummation by it of the
transactions contemplated thereby, and the performance by it of its obligations
thereunder, have been duly and validly authorized by all necessary action and
proceedings by it or on its behalf.


 


ARTICLE 8

AFFIRMATIVE COVENANTS OF BORROWER


 


Borrower agrees and covenants with Lender that, at all times during the
Term of this Agreement:


 


Section 8.01.                                       Compliance
with Agreements.


 


(a)           Borrower
shall comply with all the terms and conditions of each Loan Document to which
it is a party or by which it is bound; provided, however, that Borrower’s
failure to comply with such terms and conditions shall not be an Event of
Default until the expiration of the applicable notice and cure periods, if any,
specified in the applicable Loan Document.


 


(b)           Borrower
shall comply with all the material terms and conditions of any building permits
or any conditions, easements, rights-of-way or covenants of record,
restrictions of record or any recorded or, to the extent Borrower has knowledge
thereof, unrecorded agreement affecting or concerning any Mortgaged Property
including planned development 


 


17

















 


permits,
condominium declarations, and reciprocal easement and regulatory agreements
with any Governmental Authority; provided, however, that Borrower’s failure to
comply with such terms and conditions shall not be an Event of Default until
the expiration of the applicable notice and cure periods, if any, specified in
the applicable document.


 


Section 8.02.                                       Maintenance
of Existence.


 


(a)           Borrower
shall maintain its existence and continue to be organized under the laws of the
state of its organization. Borrower shall continue to be duly qualified to do
business in each jurisdiction in which such qualification is necessary to the
conduct of its business and where the failure to be so qualified would
adversely affect the validity of, the enforceability of, or the ability to
perform, its obligations under this Agreement or any other Loan Document.


 


(b)           During
the Term of this Agreement, if Key Principal intends to qualify, and be taxed
as, a real estate investment trust under Subchapter M of the Internal Revenue
Code, Key Principal will not be engaged in any activities which would
reasonably be anticipated to jeopardize such qualification and tax treatment.


 


Section 8.03.                                       Financial
Statements; Accountants’ Reports; Other Information.


 


(a)           Borrower
shall keep and maintain at all times at the address set forth in Section 15.08
of this Agreement, and upon Lender’s request shall make available at the
Mortgaged Property, complete and accurate books of accounts and records
(including copies of supporting bills and invoices) in sufficient detail to
correctly reflect (i) all of Borrower’s and Key Principal’s financial
transactions and assets, and (ii) the results of its operations, Borrower
shall cause each Operator to keep and maintain at all times at the address set
forth in Section 11 of the Subordination, Assignment and Security
Agreement or at the Mortgaged Properties complete and accurate books of
accounts and records (including copies of supporting bills and invoices) in
sufficient detail to correctly reflect (x) all its financial transactions
and assets, and (y) the results of the operation of each Mortgaged
Property, and copies of all written contracts, Leases and other instruments
which affect each Mortgaged Property (including all bills, invoices and
contracts for electrical service, gas service, water and sewer service, waste
management service, telephone service and management services).  The books, records, contracts, Leases and
other instruments shall be subject to examination and inspection at any
reasonable time by Lender.


 


(b)           In
addition, Borrower (with respect to clauses (i), (ii), (iii), (ix) and
(xi) set forth below) shall furnish, or cause to be furnished, to Lender:


 


(i)            Annual Financial
Statements.  As soon as available,
and in any event within ninety (90) days after the close of its fiscal year
during the Term of this Agreement, the balance sheet showing all assets and
liabilities of Borrower and Key Principal as of the end of such fiscal year,
the statement of income, expenses, equity and retained earnings of Borrower’s
operation and Key Principal’s operation for such fiscal year, and the statement
of changes in financial position and cash flows of Borrower and Key Principal
for such fiscal year, all in reasonable detail and stating in comparative form
the respective figures for the 


 


18

















 


corresponding date
and period in the prior fiscal year, prepared in accordance with GAAP
consistently applied and accompanied by a certificate of Borrower’s and Key
Principal’s independent certified public accountants to the effect that (a) such
financial statements have been externally prepared by and reviewed by such
accountants, (b) such financial statements fairly present the results of
its operations and financial condition for the periods and dates indicated,
with such certification to be free of exceptions and qualifications as to the
scope of the audit as to the going concern nature of the business.  As soon as available, and in any event within
ninety (90) days after the close of its fiscal year during the Term of this
Agreement,  Key Principal’s Chief
Financial Officer will provide to Lender, a letter as of January 1 of each
year, to the effect that such officer has reviewed the records and systems of
the Borrower and the Key Principal and that Borrower is in compliance with
subsections (v), (vi) and (xvi) of the Single- Purpose requirements (as
set forth in the definition of Single-Purpose herein) (the “Compliance
Letter”).  If the Key Principal is no
longer a publicly traded entity, such Compliance Letter will be provided by
Borrower and Key Principal’s independent certified public accounting firm or
any other nationally recognized accounting firm and such Compliance Letter will
be based upon agreed upon procedures satisfactory to Lender.  All financial statements required by this
subsection (i) with respect to Key Principal shall be audited, and all
financial statements required by this subsection (i) with respect to
Borrower may be unaudited;


 


(ii)           Quarterly
Financial Statements.  As soon as
available, and in any event within forty five (45) days after each of the first
three fiscal quarters of each fiscal year during the Term of this Agreement,
the unaudited balance sheet showing all assets and liabilities of Borrower as
of the end of such fiscal quarter, the unaudited statement of income, expenses,
equity and retained earnings of Borrower and the unaudited statement of changes
in financial position and cash flows of Borrower for the portion of the fiscal
year ended with the last day of such quarter, and if required by Lender, a
statement of income and expenses of each Mortgaged Property for the prior
month, all prepared in accordance with GAAP and in reasonable detail and
stating in comparative form the respective figures for the corresponding date
and period in the previous fiscal year, accompanied by a certificate of an
authorized representative of Borrower reasonably acceptable to Lender stating
that such financial statements have been prepared in accordance with GAAP,
consistently applied, and fairly present the results of its operations and
financial condition for the periods and dates indicated, subject to year end
adjustments in accordance with GAAP;


 


(iii)          Quarterly
Property Statements.  As soon as
available, and in any event within forty five (45) days after each Calendar
Quarter, a statement of income and expenses of each Mortgaged Property prepared
in accordance with GAAP and accompanied by a certificate of an authorized
representative of Borrower reasonably acceptable to Lender to the effect that
each such statement of income and expenses fairly, accurately and completely
presents, in all material respects, the operations of each such Mortgaged
Property for the period indicated;


 


(iv)          Annual Property
Statements.  On an annual basis
within forty five (45) days after the close of its fiscal year, an annual
statement of income and expenses of each Mortgaged Property accompanied by a
certificate of an authorized representative of Borrower 


 


19

















 


reasonably
acceptable to Lender to the effect that each such statement of income and
expenses fairly, accurately and completely presents, in all material respects,
the operations of each such Mortgaged Property for the period indicated;


 


(v)           Intentionally
Deleted;


 


(vi)          Updated Rent
Rolls.  Within forty five (45) days
after each Calendar Quarter, and at any other time upon Lender’s request, a
current Rent Roll for each Mortgaged Property, showing the name of each tenant,
and for each tenant, the space occupied, the lease expiration date, the rent
payable for the current month, the date through which rent has been paid and
any other information requested by Lender and accompanied by a certificate of
an authorized representative of Borrower reasonably acceptable to Lender to the
effect that each such Rent Roll fairly, accurately and completely presents the
information required therein;


 


(vii)         Security Deposit
Information.  Within forty five (45)
days after each Calendar Quarter, and at any other time upon Lender’s request,
a listing of all security deposits held in connection with any Lease of any
part of any Mortgaged Property, including the name and identification number of
the accounts in which such security deposits are held, the name and address of
the financial institutions in which such security deposits are held and the
name and telephone number of the person to contact at such financial
institution, along with any authority or release necessary for Lender to access
information regarding such accounts;


 


(viii)        Accountants’
Reports; Other Reports.  Promptly
upon receipt thereof: (i) copies of any reports or management letters
submitted to Borrower by its independent certified public accountants in connection
with the examination of its financial statements made by such accountants
(except for reports otherwise provided pursuant to subsection (a) above);
provided, however, that Borrower shall only be required to deliver such reports
and management letters to the extent that they relate to Borrower or any
Mortgaged Property; and (ii) all schedules, financial statements or other
similar reports delivered by Borrower pursuant to the Loan Documents or
requested by Lender with respect to Borrower’s business affairs or condition
(financial or otherwise) or any of the Mortgaged Properties;


 


(ix)           Ownership
Interests.  Within 120 days after the
end of each fiscal year of Borrower, and at any other time upon Lender’s
request, a statement that identifies all owners of any interest in Borrower and
the interest held by each, if Borrower is a corporation, all officers and
directors of Borrower, and if Borrower is a limited liability company, all
managers who are not members;


 


(x)            Complaints.  By the 15th day of each month, copies of any complaint
filed against Borrower or any Mortgaged Property management during the prior
month alleging any violation of fair housing law, handicap access or the
Americans with Disabilities Act and any final administrative or judicial dispositions
of such complaints.


 


(xi)           Resident Care
Agreements.  Upon the Lender’s
request, copies of resident care agreements.


 


20

















 


(xii)          Other
Information.  Upon the Lender’s
request, a property management report for each Mortgaged Property and any other
information reasonably requested by Lender.


 


(xiii)         Regulatory or
Licensing.  Within 10 Business Days
after receipt thereof, copies of all material inspection reports, surveys,
reviews, and certifications prepared by, for, or on behalf of any licensing or
regulatory authority relating to any Mortgaged Property and any legal actions,
orders, notices, or reports relating to any Mortgaged Property issued by the
applicable regulatory or licensing authorities which in any instance would
cause Borrower to be in noncompliance with any term or covenant in this
Agreement.


 


For purposes of this
paragraph an inspection report, survey, review or certification or related
correspondence is material if:  (i) it
contains 8 or more deficiencies or items which need to be corrected or (ii) if
it relates to assisted living units, it requires a plan of correction or
otherwise imposes or threatens to impose sanctions or penalties of any kind or (iii) if
it relates to skilled nursing units, cites any  deficiency which has
a  scope and severity of “F” or higher or otherwise imposes or
threatens to impose sanctions or penalties of any kind.


 


(xiv)        Services and
Operations.  Upon the request of
Lender, copies of all reports relating to the services and operations of each
Mortgaged Property, including, if applicable, Medicaid cost reports and records
relating to account balances due to or from Medicaid or any private insurer.


 


(xv)         Intentionally
Deleted.


 


(xvi)        Certification.  All certifications required to be delivered
pursuant to this Agreement shall run directly to and be for the benefit of
Lender and Fannie Mae.


 


(xvii)       Standards.  Each of the statements, schedules and reports
required by this Agreement shall be certified to be complete and accurate, or
in the case of financial statements, to fairly present the information
presented, by an individual having authority to bind Borrower or Operator, as
the case may be, and shall be in such form and contain such detail as Lender
may reasonably require.


 


(xviii)      Books and Records.  If an Event of Default has occurred and is
continuing, Borrower shall deliver to Lender upon written demand all books and
records relating to its Mortgaged Property or its operation.


 


(xix)         Incident Reports.  By the 15th day
of each month, copies of all incident reports submitted by or on behalf of
Borrower during the prior month to any liability insurance carrier or any
elderly affairs, regulatory or licensing authority.


 


(xx)          Annual Financial
Statements of Operator.  Within 10
days of submission to Borrower by Master Tenant or Operator, the financial
statements, reports, documents, communications and information delivered to
Borrower by Master Tenant or 


 


21

















 


Operator pursuant
to the Operating Lease as in effect on the date of this Agreement, to the
extent not otherwise provided under this Agreement.


 


(xxi)         Annual Budgets.  Within sixty (60) days after the start of its
fiscal year, an annual budget for each Mortgaged Property for such fiscal year,
setting forth an estimate of all of the costs and expenses, including capital
expenses, of maintaining and operating each Mortgaged Property.


 


(c)           Each
of the statements, schedules and reports required by Section 8.03
shall be certified to be complete and accurate in all material respects by an
individual having authority to bind Borrower, and shall be in such form and
contain such detail as Lender may reasonably require.  After an Event of Default, Lender also may
require that any statements, schedules or reports be audited at Borrower’s
expense by independent certified public accountants acceptable to Lender.


 


(d)           After
an Event of Default, Lender shall have the right to have Borrower’s books and
records audited, at Borrower’s expense, by independent certified public
accountants selected by Lender in order to obtain such statements, schedules
and reports, and all related costs and expenses of Lender shall become
immediately due and payable and shall become an additional part of the Indebtedness
as provided in Section 12 of each Security Instrument.


 


(e)           (e)           If an Event of Default has occurred
and is continuing, Borrower shall deliver to Lender upon written demand all
books and records relating to the Mortgaged Property or its operation.


 


(f)            Borrower
irrevocably authorizes Lender to obtain a credit report on Borrower at any
time.


 


(g)           If
an Event of Default has occurred and Lender has not previously required
Borrower to furnish a quarterly statement of income and expense for the
Mortgaged Property, Lender may require Borrower to furnish such a statement
within forty-five (45) days after the end of each fiscal quarter of Borrower
following such Event of Default.


 


Section 8.04.                                       Access
to Records; Discussions With Officers and Accountants.


 


To the extent permitted by law and in addition to the applicable
requirements of the Security Instruments, Borrower shall permit Lender and
shall cause the Operator to permit Lender to:


 


(a)           inspect,
make copies and abstracts of, and have reviewed or (after an Event of Default)
audited, such of Borrower’s and/or the Operator’s books and records as may
relate to the Obligations or any Mortgaged Property;


 


(b)           at
any time discuss Borrower’s affairs, finances and accounts with Borrower’s
Senior Management or property managers and (provided that an officer of
Borrower or Key Principal has been given the opportunity by Lender to be a
party to such discussion) 


 


22

















 


independent public
accountants; after an Event of Default, discuss Borrower’s affairs, finances
and account with Key Principal’s officers, partners and employees;


 


(c)           discuss
the Mortgaged Properties’ conditions, operations or maintenance with the
officers of the Operator of such Mortgaged Properties, the officers and
employees of Borrower and/or the Key Principal; and


 


(d)           receive
any other information that Lender reasonably deems necessary or relevant in
connection with the Term Loan, any Loan Document or the Obligations from the
officers and employees of such Borrower or third parties.


 


Notwithstanding the foregoing, prior to an Event of Default and so long
as no Potential Event of Default has occurred and is continuing and in the
absence of an emergency, all inspections shall be conducted at reasonable times
during normal business hours upon reasonable notice to Borrower.


 


Section 8.05.                                       Certificate
of Compliance.


 


Borrower shall deliver to Lender concurrently with the delivery of the
financial statements and/or reports required by Section 8.03(a) and
Section 8.03(b) a certificate signed by an authorized
representative of Borrower reasonably acceptable to Lender (i) setting
forth in reasonable detail the calculations required to establish whether
Borrower and Key Principal were in compliance with the requirements of this
Agreement on the date of such financial statements, and (ii) stating that,
to the best knowledge of such individual following reasonable inquiry, no Event
of Default or Potential Event of Default has occurred, or if an Event of
Default or Potential Event of Default has occurred, specifying the nature
thereof in reasonable detail and the action Borrower is taking or proposes to
take.  Any certificate required by this Section shall
run directly to and be for the benefit of Lender and Fannie Mae.


 


Section 8.06.                                       Maintain
Licenses.


 


Borrower shall procure and maintain or cause the Operator to procure
and maintain full force and effect all licenses, Permits, charters and
registrations which are material to the conduct of its business and shall abide
by and satisfy all terms and conditions of all such licenses, Permits, charters
and registrations.


 


Section 8.07.                                       Inform
Lender of Material Events.


 


Borrower shall promptly inform Lender in writing of any of the
following (and shall deliver to Lender copies of any related written
communications, complaints, orders, judgments and other documents relating to
the following) of which Borrower has actual knowledge:


 


(a)           Defaults.  The occurrence of any Event of Default or any
Potential Event of Default under this Agreement or any other Loan Document or
any “Default” or “Event of Default” under the Operating Lease, Sub-Lease or any
loan document in connection with a Supplemental Loan;


 


23

















 


(b)           Regulatory
Supervision or Penalty.  The
commencement of any rulemaking or disciplinary proceeding or the promulgation
of any proposed or final rule which would have, or may reasonably be
expected to have, a Material Adverse Effect; the receipt of notice from any
Governmental Authority having jurisdiction over Borrower or Operator that (A) Borrower
or Operator is being placed under regulatory supervision, (B) any License,
Permit, charter, membership or registration material to the conduct of
Borrower’s or Operator’s business or the Mortgaged Properties is to be
suspended or revoked or (C) Borrower or Operator is to cease and desist
any practice, procedure or policy employed by Borrower or Operator in the
conduct of its business, and such cessation would have, or may reasonably be expected
to have, a Material Adverse Effect;


 


(c)           Bankruptcy
Proceedings.  The commencement of any
proceedings by or against Borrower, Operator or Key Principal under any
applicable bankruptcy, reorganization, liquidation, insolvency or other similar
law now or hereafter in effect or of any proceeding in which a receiver,
liquidator, trustee or other similar official is sought to be appointed for any
such party;


 


(d)           Environmental
Claim.  The receipt from any
Governmental Authority or other Person of any notice of violation, claim,
demand, abatement, order or other order or direction (conditional or otherwise)
for any damage, including personal injury (including sickness, disease or
death), tangible or intangible property damage, contribution, indemnity, indirect
or consequential damages, damage to the environment, pollution, contamination
or other adverse effects on the environment, removal, cleanup or remedial
action or for fines, penalties or restrictions, resulting from or based upon (i) the
existence or occurrence, or the alleged existence or occurrence, of a Hazardous
Substance Activity on any Mortgaged Property in violation of any law or (ii) the
violation, or alleged violation, of any Hazardous Materials Laws in connection
with any Mortgaged Property or any of the other assets of Borrower;


 


(e)           Material
Adverse Effects.  The occurrence of
any act, omission, change or event (including the commencement or written
threat of any proceedings by or against Borrower in any Federal, state or local
court, or before any Governmental Authority, or before any arbitrator), that
has, or would have, a Material Adverse Effect, subsequent to the date of the
most recent audited financial statements of Borrower delivered to Lender
pursuant to Section 8.03;


 


(f)            Accounting
Changes.  Any material change in
Borrower’s accounting policies or financial reporting practices;


 


(g)           Legal
and Regulatory Status.  The
occurrence of any material act, omission, change or event, including any
Governmental Approval, the result of which is to change or alter in any way the
legal or regulatory status of Borrower or Operator;


 


(h)           Change
in Senior Management.  Any change in
the identity of Senior Management; and


 


(i)            Legal
Proceedings.  The commencement or
written threat of, or amendment to, any proceedings by or against Borrower,
Master Tenant or any Operator in any 


 


24

















 


Federal, state or
local court or before any Governmental Authority, or before any arbitrator,
which, if adversely determined, would have, or at the time of determination may
reasonably be expected to have, a Material Adverse Effect.


 


Section 8.08.                                       Compliance
with Applicable Law.


 


Borrower shall comply and shall cause the Operator to comply in all
material respects with all Applicable Laws now or hereafter affecting any
Mortgaged Property or any part of any Mortgaged Property or requiring any
alterations, repairs or improvements to any Mortgaged Property.  Borrower shall procure and continuously
maintain or shall cause the Operator to procure and maintain in full force and
effect, and shall abide by and satisfy or shall cause the Operator to abide by
and satisfy all material terms and conditions of all Permits and shall comply
with all written notices from Governmental Authorities.  Borrower shall comply and shall cause the
Operator to comply in all material respects with all requirements of insurance
companies or similar organizations which have provided insurance with respect
to Borrower or any Mortgaged Property, affecting the operation or use of any
Mortgaged Property or the consummation of the transactions to be effected by
this Agreement or any of the other Loan Documents.


 


Section 8.09.                                       Alterations
to the Mortgaged Properties.


 


Borrower shall have the right to undertake, or permit to be undertaken,
any alteration, improvement, demolition, removal or construction (collectively,
“Alterations”) to the Mortgaged Properties without the prior consent of
Lender; provided, however, that in any case, no such Alteration shall be
made to any Mortgaged Property without the prior written consent of Lender if (i) such
Alteration when completed could reasonably be expected to adversely affect the
value of such Mortgaged Property or its operation as a Senior Housing Facility
in substantially the same manner in which it is being operated on the date such
property became Collateral, (ii) the construction of such Alteration could
reasonably be expected to result in interference to the occupancy of tenants of
such Mortgaged Property such that tenants in occupancy with respect to five
percent (5%) or more of the Leases would be permitted to terminate their Leases
or to abate the payment of all or any portion of their rent, or (iii) such
Alteration will be completed in more than twelve (12) months from the date of
commencement or in the last year of the Term of this Agreement.  Lender acknowledges that Borrower may request
consent to perform an Expansion (as defined in the Expansion Security
Agreement) to the Mortgaged Property known as Heartsfield at Easton, pursuant
to the terms of the Expansion Security Agreement.  In the event such request is made and such
consent is granted, Borrower agrees to execute and deliver the Expansion
Security Agreement and to cause Key Principal to execute and deliver the Expansion
Guaranty.   Notwithstanding the foregoing, Borrower must
obtain Lender’s prior written consent to construct Alterations with respect to
the Mortgaged Property costing in excess of, with respect to any Mortgaged
Property, the number of units in such Mortgaged Property multiplied by $3,000,
but in any event, costs in excess of $500,000 within a Calendar Year  and Borrower must give prior written notice
to Lender of its intent to construct Alterations with respect to such Mortgaged
Property costing in excess of $250,000. For purposes of this Section 8.09,
the defined term Alterations is not intended to include any (i) routine
maintenance, routine repairs or routine 


 


25

















 


capital expenditures or (ii) repairs or capital
expenditures specified in the Completion Repair and Security Agreement or
Replacement Reserve Agreement.


 


Section 8.10.                                       Loan
Document Taxes.


 


If any tax, assessment or Imposition (other than a franchise tax or
excise tax imposed on or measured by, the net income or capital (including
branch profits tax) of Lender (or any transferee or assignee thereof, including
a participation holder)) (“Loan Document Taxes”) is levied, assessed or
charged by the United States, or any State in the United States, or any
political subdivision or taxing authority thereof or therein upon any of the
Loan Documents or the obligations secured thereby, the interest of Lender in
the Mortgaged Properties, or Lender by reason of or as holder of the Loan
Documents, Borrower shall pay all such Loan Document Taxes to, for, or on
account of Lender (or provide funds to Lender for such payment, as the case may
be) within 30 days after written notice thereof by Lender and shall promptly
furnish proof of such payment to Lender, as applicable.  In the event of passage of any law or
regulation permitting, authorizing or requiring such Loan Document Taxes to be
levied, assessed or charged, which law or regulation in the opinion of counsel
to Lender may prohibit Borrower from paying the Loan Document Taxes to or for
Lender, Borrower shall enter into such further instruments as may be permitted
by law to obligate Borrower to pay such Loan Document Taxes.


 


Section 8.11.                                       Further
Assurances.


 


Borrower, at the request of Lender, shall execute and deliver and, if
necessary, file or record such statements, documents, agreements, UCC financing
and continuation statements and such other instruments and take such further
action as Lender from time to time may reasonably request as reasonably necessary,
desirable or proper to carry out more effectively the purposes of this
Agreement or any of the other Loan Documents or to subject the Collateral to
the lien and security interests of the Loan Documents or to evidence, perfect
or otherwise implement, to assure the lien and security interests intended by
the terms of the Loan Documents or in order to exercise or enforce its rights
under the Loan Documents.  If Lender
believes that an “all-asset” collateral description, as contemplated by Section 9-504(2) of
the UCC, is appropriate as to any Collateral under any Loan Document, the
Lender is irrevocably authorized to use such a collateral description, whether
in one or more separate filings or as part of the collateral description in a
filing that particularly describes the collateral.


 


Section 8.12.                                       Transfer
of Ownership Interests in Borrower.


 


(a)           Prohibition
on Transfers.  Subject to paragraph (b) of
this Section, no Targeted Entity shall cause or permit a Transfer or a Change
of Control.


 


(b)           Permitted
Transfers.  Notwithstanding the
provisions of paragraph (a) of this Section, or any other provisions of
this Agreement or any other Loan Document to the contrary, the following
Transfers by a Targeted Entity, (upon thirty (30) days’ prior written notice to
Lender, in the case of subclauses (iv) and (v) below and in the case
of subclause (iii) within thirty (30) days of such event), are permitted
without the consent of Lender:


 


26
















 


(i)            A Transfer of any
direct or indirect Ownership Interest in Key Principal; provided, however, that
no Change of Control occurs as the result of such Transfer.


 


(ii)           The issuance by Key
Principal of additional membership interests or stock (including by creation of
a new class or series of interests or stock and all varieties of convertible
debt, equity and other similar securities), as the case may be, and the
subsequent direct or indirect Transfer of such interests or stock; provided,
however, that no Change of Control occurs as the result of such Transfer.


 


(iii)          Any amendment,
modification or any other change in the governing instrument or instruments of
Key Principal; provided, however, that no Change of Control  or material change in the decision making
process occurs as the result of such Transfer.


 


(iv)          A merger with or
acquisition of another entity by Key Principal, provided that (1) such
merger is not with or acquisition is not of Five Star Quality Care, Inc.
or any subsidiaries of Five Star Quality Care, Inc., (2) no Change in
Control occurs and (3) such merger or acquisition does not result in an
Event of Default, as such terms are defined in this Agreement.


 


(v)           A Transfer of 100%
of the Ownership Interests in the Borrower to a Single Purpose entity that is
wholly owned by  the Key Principal.


 


Section 8.13.                                       Transfer
of Ownership of Mortgaged Property.


 


(a)           Prohibition
on Transfers.  Subject to paragraph (b) of
this Section, Borrower shall not cause or permit a Transfer of all or any part
of a Mortgaged Property or interest in any Mortgaged Property.


 


(b)           Permitted
Transfers.  Notwithstanding provision
(a) of this Section or any other provisions of this Agreement or any
other Loan Document to the contrary, the following Transfers of a Mortgaged Property
by Borrower are permitted without the consent of Lender:


 


(i)            The grant of a
leasehold interest in individual dwelling units or commercial spaces in
accordance with the Security Instrument.


 


(ii)           A sale or other
disposition of obsolete or worn out personal property which is
contemporaneously replaced by comparable personal property of equal or greater
value which is free and clear of liens, encumbrances and security interests
other than those created by the Loan Documents or Permitted Liens.


 


(iii)          The creation of a
mechanic’s or materialmen’s lien or judgment lien against a Mortgaged Property
which is released of record, bonded or otherwise remedied to Lender’s
satisfaction within thirty (30) days of the date of creation.


 


(iv)          The grant of an
easement if, prior to the granting of the easement, Borrower causes to be
submitted to Lender all information required by Lender to evaluate the 


 


27

















 


easement, and if
Lender consents to such easement based upon Lender’s determination that the
easement will not materially adversely affect the operation of the Mortgaged
Property or Lender’s interest in the Mortgaged Property and Borrower pays to
Lender, on demand, all reasonable third party out-of-pocket costs and expenses
incurred by Lender in connection with reviewing Borrower’s request.  Lender shall not unreasonably withhold its
consent to or withhold its agreement to subordinate the lien of a Security
Instrument to (1) the grant of a utility easement serving a Mortgaged
Property to a publicly operated utility, or (2) the grant of an easement
related to expansion or widening of roadways, driveways or parking areas,
provided that any such easement is in form and substance reasonably acceptable
to Lender and does not materially and adversely affect the access, use or
marketability of a Mortgaged Property.


 


(v)           The execution of the
Operating Lease and any Sub-Lease, and of any replacement Operating Lease and
any replacement Sub-Lease entered into in accordance with Section 8.19.


 


(vi)          Any commercial
sub-lease of a Mortgaged Property permitted by Section 4 of any
Subordination, Assignment and Security Agreement.


 


(c)           Assumption
of Collateral Pool.  Notwithstanding
paragraph (a) of this Section, a Transfer of the entire Collateral Pool
may be permitted with the prior written consent of Lender if each of the
following requirements is satisfied:


 


(i)            the transferee (“New
Collateral Pool Borrower”) is a Single-Purpose entity, is not directly or
indirectly owned by and is not a Prohibited Person and executes an assumption
agreement that is acceptable to Lender pursuant to which such New Collateral
Pool Borrower assumes all obligations of Borrower under all the applicable Loan
Documents and Supplemental Loan Documents;


 


(ii)           the applicable Loan
Documents and Supplemental Loan Documents shall be amended and restated as
deemed necessary or appropriate by Lender to meet the then-applicable
requirements of Fannie Mae; provided, however, any waivers granted in
connection with the Term Loan or Supplemental Loan will not be reinstated
unless specifically approved by Lender and Fannie Mae;


 


(iii)          after giving effect
to the assumption, the requirements of Section 6.05 and the General
Conditions contained in Section 6.01 shall be satisfied;


 


(iv)          New Collateral Pool
Borrower shall make such deposits to the reserves or escrow funds established
under the Loan Documents and Supplemental Loan Documents, including replacement
reserves, completion/repair reserves, and all other required escrow and reserve
funds at such times and in such amounts as determined by Lender at the time of
the assumption;


 


(v)           New Collateral Pool
Borrower shall propose a guarantor acceptable to Lender, which guarantor is not
directly or indirectly owned by and is not a Prohibited Person executes and
delivers a guaranty acceptable to Lender provided that the 


 


28

















 


guaranty is
guaranteeing a non-recourse loan with comparable exceptions to non-recourse as
set forth in Section 14.01;


 


(vi)          Lender shall be the
servicer of the loan; and


 


(vii)         the requirements of Section 8.14
are satisfied.


 


Section 8.14.                                       Consent
to Prohibited Transfers.


 


(a)           Consent
to Prohibited Transfers.  Lender may,
in its sole and absolute discretion, consent to a Transfer that would otherwise
violate Sections 8.12 and 8.13 if, prior to the Transfer,
Borrower has satisfied or caused to be satisfied each of the following
requirements:


 


(i)            the submission to
Lender of all information required by Lender to make the determination required
by this Section;


 


(ii)           the absence of any
Event of Default;


 


(iii)          the transferee and
any guarantor is not directly or indirectly owned by and is not a Prohibited
Person and meets all of the eligibility, credit, management and other standards
(including any standards with respect to previous relationships between Lender
and the transferee and the organization of the transferee) customarily applied
by Lender at the time of the proposed Transfer to the approval of borrowers or
guarantors, as the case may be, in connection with the origination or purchase
of similar mortgages, deeds of trust or deeds to secure debt on Seniors Housing
Facilities;


 


(iv)          in the case of a
Transfer of direct or indirect ownership interests in Borrower, if transferor
or any other person has obligations under any Loan Documents, the execution by
the transferee or one (1) or more individuals or entities acceptable to
Lender and/or Fannie Mae of an assumption agreement, guaranty or any other
required loan documents, as applicable, that is acceptable to Lender and that,
among other things, requires the transferee to perform all obligations of
transferor or such person set forth in such Loan Document, and may require that
the transferee comply with any provisions of this Agreement or any other Loan
Document which previously may have been waived by  Lender;


 


(v)           Lender’s receipt of
all of the following:


 


(A)                              a
transfer fee equal to one percent (1%) of the unpaid Outstanding principal
balance of the Term Loan.


 


(B)                                In
addition, Borrower shall be required to reimburse Lender for all of Lender’s
reasonable out-of-pocket costs (including reasonable attorneys’ fees) incurred
in reviewing the Transfer request.


 


29

















 


(vi)          The Transfer will
not result in a significant modification under Section 1001 of the
Internal Revenue Code of any Fixed Loan or any Variable Loan that has been
securitized in a mortgage-backed security.


 


Section 8.15.                                       Date-Down
Endorsements.


 


Before the release or substitution of a Mortgaged Property and at any
time and from time to time that Lender has reason to believe that an additional
lien may encumber a Mortgaged Property, Lender may obtain an endorsement to
each Title Insurance Policy containing a revolving credit endorsement, amending
the effective date of each such Title Insurance Policy to the date of the title
search performed in connection with the endorsement. Borrower shall pay for the
cost and expenses incurred by Lender to the Title Company in obtaining such
endorsement, provided that, for each Title Insurance Policy, it shall not be
liable to pay for more than one (1) such endorsement in any consecutive
twelve (12) month period.


 


Section 8.16.                                       Ownership
of Mortgaged Properties.


 


Borrower or an IDOT Guarantor shall be the sole owner of each of the
Mortgaged Properties free and clear of any Liens other than Permitted Liens.


 


Section 8.17.                                       Compliance
with Net Worth Test.


 


Until the date upon which all of the conditions set forth in Section 8.25
are satisfied, Key Principal shall at all times maintain its Net Worth so that
it is not less than $515,000,000.


 


Section 8.18.                                       Compliance
with Liquidity Test.


 


Until the date upon which all of the conditions set forth in Section 8.25
are satisfied, Key Principal shall at all times ensure that the sum of (i) cash
and Cash Equivalents maintained by it and (ii) the amount available to be
drawn by it under its lines of credit (including, without limitation, under the
Amended and Restated Credit Agreement dated as of July 29, 2005, as
amended, with certain lenders and Wachovia Bank, National Association, as
administrative Agent) is not less than $21,000,000.


 


Section 8.19.                                       Master
Tenant and Operator.


 


The Borrower shall not remove or permit or suffer the removal of the
Master Tenant or the Operator without the prior written consent of the Lender
and unless and until Lender has approved in writing a replacement Master Tenant
or Operator as the case may be.  If any Master Tenant and/or
Operator is removed by Lender pursuant to the terms and conditions of the Loan
Documents, Borrower agrees to use commercially reasonable efforts to enter into
a new lease with a new Master Tenant and establish a new Operator on or prior
to the effective date of termination unless otherwise directed by Lender.  Any new Master Tenant or Operator must be
approved in writing by Lender.  Any
operating lease or other similar agreement between the Borrower and a new Master
Tenant and any Sub-Lease or management agreement with any new Operator must be
approved in writing by Lender and the Borrower, new Master Tenant and each 


 


30

















 


new Operator must execute and deliver to Lender a
Subordination, Assignment and Security Agreement.  The Borrower shall cause the Master Tenant
and Operator to notify Lender in writing of any name change or any change in
its place of incorporation.  The Borrower
agrees that the Lender shall have the right to remove the Master Tenant and the
Operator at any time: (i) upon the occurrence of an Event of Default under
(and as defined in) the Operating Lease or Sub-Lease and (ii) upon the
occurrence of an “Event of Default” under (and as defined in) any
Subordination, Assignment and Security Agreement.


 


Section 8.20.                                       Borrower
and Any Operating Lease.


 


Except in connection with a transaction permitted under Sections 8.12,
8.13, 8.14 or 8.19, Borrower shall not assign its rights under the Operating
Lease and shall cause Master Tenant and Operator to not assign either of their
rights under the Operating Lease or Sub-Lease, without the prior written
consent of Lender.  Within five days of
Borrower’s receipt, Borrower shall give Lender written notice of any notice or
information that Borrower receives which
indicates that either Borrower, Master Tenant or Operator is in default under
the terms of any Operating Lease or Sub-Lease, Operator is terminating the
Sub-Lease, Master Tenant is terminating the Operating Lease or that Operator is
otherwise discontinuing its operation and management of the Mortgaged Property.


 


Section 8.21.                                       Enforcement
of Leases.


 


Borrower will comply with and shall (a) enforce the obligations of
the Master Tenant under the Operating Lease, (b) cause the Master Tenant
to perform its obligations under the Sub-Lease as sub-landlord and (c) cause
the Operator to perform its obligations under the Sub-Lease.  Borrower shall not and shall cause Master
Tenant or Operator, as the case may be, not to make any material amendments or
modifications to the Operating Lease or any Sub-Lease, terminate the Operating
Lease or any Sub-Lease (except as provided in Section 8.19), or
waive a default thereunder, without the prior written consent of the
Lender.  Material amendments or
modifications include, without limitation, amendments or modifications that (i) reduce
or change the rent or other payments required to be made by the Master Tenant
or Operator, (ii) reduce or change the term, (iii) release any
security for the obligations of the Master Tenant or Operator, (iv) change
any provisions of the Operating Lease or Sub-Lease relating to facility
mortgages and the rights of mortgagees, (v) grant options to purchase or (vi) adversely
impact the rights or interests of Lender or Fannie Mae.


 


Section 8.22.                                       Single
Purpose Entity.


 


Borrower and the sole member of Borrower shall maintain itself as a
Single Purpose entity.  Borrower shall
cause Master Tenant and each Operator (to which Licenses are transferred
pursuant to Section 8.25 hereof) to maintain itself as a Single
Purpose entity.


 


Section 8.23.                                       ERISA.


 


Borrower shall at all times remain in compliance in all material
respects with all applicable provisions of ERISA, if any, and shall not incur
any liability to the PBGC on a Plan 


 


31

















 


under Title IV of ERISA.  Neither the Borrower, nor any member of the
Controlled Group is or ever has been obligated to contribute to any
Multiemployer Plan.  The assets of the
Borrower do not constitute plan assets within the meaning of Department of
Labor Regulation §2510.3-101 of any employee benefit plan subject to Title I of
ERISA.


 


Section 8.24.                                       Consents
or Approvals.


 


Borrower shall obtain any required consent or approval of any creditor
of Borrower, any Governmental Authority or any other Person to perform its
obligations under this Agreement and any other Loan Documents.


 


Section 8.25.                                       Transfer
of Licenses by Operator.


 


Within one (1) year of the Initial Closing Date, Borrower shall
cause each existing Operator for each Mortgaged Property, to transfer its Licenses
and all Licenses relating to the operation of the Mortgaged Property or cause
such Licenses to be issued or re-issued to a separate Single-Purpose entity
wholly owned by Five Star Quality Care Inc. for each such Mortgaged Property.  The Organizational Documents of each Single
Purpose entity shall be in form and substance satisfactory to Lender.  Such Single-Purpose entity will (i) become
a tenant under the Sub-Lease for such Mortgaged Property by assuming all
obligations of the existing Operator with respect to such Mortgage Property, (ii) become
an Operator under this Agreement, (iii) become a party to the applicable
Subordination, Assignment and Security Agreement by assuming all of the
obligations of the existing Operator with respect to such Mortgaged Property, (iv) hold
in its name all Licenses pertaining to the operation of the Mortgaged Property
operated by such entity which are required to be held in such entity’s name
under Applicable Law and (v) cooperate with Lender in effectuating these
transactions including by delivery of 
customary corporate legal opinions satisfactory to Lender and by
cooperating in the perfection of the collateral, including an “all-asset”
collateral description in a UCC filing, as contemplated by Section 9-504(2) of
the UCC, as is appropriate as to any Collateral under any Subordination
Assignment and Security Agreement.  The
Lender is irrevocably authorized to use such a collateral description, whether
in one or more separate filings or as part of the collateral description in a
filing that particularly describes the collateral.


 


If Borrower fails to comply with the provisions of this Section 8.25,
Borrower may release the specific Mortgaged Properties that are not operated by
a Single Purpose entity in compliance with the requirements of this Section 8.25,
so long as the release of the specific Mortgaged Property satisfies the
requirements of Sections 3.04 and 6.05. 
Borrower’s failure to release such Mortgaged Property pursuant to the
requirements of Sections 3.04 and 6.05 within 30 days of the breach of this Section 8.25,
will constitute an Event of Default under this Agreement.


 


Section 8.26.                                       Indemnification.


 


The Borrower hereby releases Lender and Fannie Mae and their respective
officers, directors, members, shareholders, officials, agents, independent
contractors and employees from, and covenants and agrees to indemnify, hold
harmless and defend Lender and Fannie Mae and 


 


32

















 


their respective officers, members, directors,
shareholders, officials, agents, independent contractors and employees and each
of them (each an “indemnified party”)
from and against (a) any and all claims, joint or several, by or on behalf
of any person arising from any cause whatsoever in connection with (i) a
Master Tenant/Operator Bankruptcy Event prior to the transfer contemplated in Section 8.25,
or (ii) the transferring of any Licenses (or failure to transfer) to a
Single-Purpose entity wholly owned by Five Star Quality Care as set forth in Section 8.25
or (iii) the multi-purpose nature of each existing Operator prior to the
transfer contemplated in Section 8.25.  Borrower shall pay all reasonable costs,
counsel fees, expenses or liabilities incurred in connection with any such
claim or proceeding referred to in clauses (i) through (iii) above.


 


In the event that any action or proceeding is brought against any
indemnified party with respect to which indemnity may be sought under this
Section, the Borrower, upon written notice from the indemnified party, will
assume the investigation and defense thereof, including the employment of
counsel selected by the Borrower, but acceptable to the indemnified party, and
must assume the payment of all expenses related thereto, with full power to
litigate, compromise or settle the same in its sole discretion, provided that
such indemnified party has the right to review and approve or disapprove any
such compromise or settlement.


 


Each indemnified party has the right, if such indemnified party
concludes in good faith that a conflict of interest exists, to employ separate
counsel in any such action or proceeding and participate in the investigation
and defense thereof, and the Borrower must pay the reasonable fees and expenses
of such separate counsel.


 


In the event that an indemnified party does not conclude that a
conflict of interest exists and yet such party prefers to employ separate
counsel in such action or proceeding, it may do so at its own cost and
expense.  If such separate counsel is
employed as described above, the Borrower and any such indemnified party agree
to cooperate as may reasonably be required in order to ensure the proper and
adequate defense of any such action, suit or proceeding, including, but not
limited to, making available to each other, and their counsel and accountants,
all books and records relating to such action, suit or proceeding.  If any such counsel reasonably determines
that the rendering of such assistance will adversely affect the defense or
interests of its client, such counsel is not required to comply with the terms
of the immediately preceding sentence.


 


Notwithstanding any transfer of the Mortgaged Properties to another
owner, the Borrower will remain obligated to indemnify each indemnified party
pursuant to this Section with respect to acts occurring prior to the date
of transfer of legal title to the Mortgaged Properties (irrespective of when a
claim is actually made).  All amounts due
under this Section 8.26 are payable within 30 days after delivery of
written notice from Lender to the Borrower unless judicial order requires that
any such payments must be made on an earlier date in which case payment is made
by such date on written demand therefor.


 


33

















 


Section 8.27.                                       Operator
Rent Security Deposits.


 


Borrower shall deposit any and all cash security deposits paid by
Master Tenant in accordance with the Operating Lease or the Operator in
accordance with the Sub-Lease into an account designated by Lender.


 


Section 8.28.                                       Operator
Guaranty.


 


Borrower shall remit and shall cause Operator and/or Master Tenant, as
applicable, to remit any and all payments made under the Operator Guaranty to
Lender.  Borrower, Master Tenant and
Operator will cause each Operator Guaranty to remain in full force and effect
until the Term Loan under this Agreement is paid in full.  Borrower will not suffer or permit a material
non-payment default under the Operator Guaranty.


 


Section 8.29.                                       Post-Closing
Obligations.


 


Borrower shall use
commercially reasonable efforts to deliver to Lender, at Borrower’s sole cost
and expense, no later than sixty (60) days from the Initial Closing Date
(“Estoppel Delivery Date”) the estoppel certificates as described below in the
form previously agreed upon with Lender. 
If Borrower uses commercially reasonable efforts but is unable to
deliver the estoppels within the sixty day period, the obligation to do so will
terminate.  Borrower shall pay, or
reimburse Lender for, all reasonable out-of-pocket third party legal fees and expenses
incurred by Lender and by Fannie Mae in respect of the review and/or
negotiation of such estoppel certificates.


 


a.             In connection with the Coral Oaks, Coral Springs,
Florida property:  An  Estoppel Certificate, in the form approved by
Fannie Mae, that addresses the issues, restrictions, assessments, liens and
obligations granted within that certain Declaration of Easements, Covenants and
Restrictions recorded November 6, 1986, in Book  6355, page 1101.


 


b.             In connection with the Woodlands, Montgomery County,
Texas property, an  Estoppel Certificate
from adjoining property owners, in the form approved by Fannie Mae, that
addresses the issues, shared maintenance costs, liens and other obligations
granted within that certain Lake Maintenance Agreement as
Document No. 9649482:


 


c.             In connection with the Meadowmere-Northshore Mequon,
Ozaukee County, Wisconsin property, an 
Estoppel Certificate in the form approved by Fannie Mae, that addresses
the issues, shared maintenance costs, liens and other obligations granted
within that certain Meadowmere-Northshore, Mequon, Wisconsin Maintenance
Agreement,  dated June 26, 1996, and recorded in Book 987,
page 318.


 


ARTICLE 9

NEGATIVE COVENANTS OF BORROWER


 


Borrower agrees and covenants with Lender that, at all times during the
Term of this Agreement:


 


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Section 9.01.                                       Other
Activities.


 


(a)           No
Targeted Entity (other than Key Principal)  shall amend
its Organizational Documents in any material respect, including without limitation
the allocation of decision-making rights among the members and partners,
without the prior written consent of Lender;


 


(b)           No
Targeted Entity shall dissolve or liquidate in whole or in part;


 


(c)           Borrower
shall not use, or permit to be used, any Mortgaged Property for any uses or
purposes other than as a Seniors Housing Facility and ancillary uses consistent
with Seniors Housing Facilities.


 


Section 9.02.                                       Liens.


 


Borrower shall not create, incur, assume or suffer to exist any Lien on
Borrower’s interest in any Mortgaged Property or any part of any Mortgaged
Property, except the Permitted Liens.


 


Section 9.03.                                       Indebtedness.


 


Borrower shall not incur or be obligated at any time with respect to
any Indebtedness (other than the Term Loan). 
Neither Borrower nor any owner of Borrower shall incur any
“indebtedness,” or issue any equity secured by a pledge of the membership
interests in Borrower or any owner of Borrower (i.e., “mezzanine debt”)
or by a pledge of the cash flow of Borrower or issue any preferred equity.


 


Section 9.04.                                       Principal
Place of Business.


 


Borrower shall not change its principal place of business, state of
formation, legal name or the location of its books and records, each as set
forth in the Certificate of Borrower, without first giving thirty (30) days’
prior written notice to Lender.


 


Section 9.05.                                       Condominiums.


 


Borrower shall not submit any Mortgaged Property to a condominium
regime during the Term of this Agreement.


 


Section 9.06.                                       Restrictions
on Distributions.


 


Borrower shall not make any distributions of any nature or kind
whatsoever to the owners of its Ownership Interests as such if, at the time of
such distribution, a Potential Event of Default or an Event of Default has
occurred and remains uncured, provided, however, this provision shall not be
construed so as to prevent Borrower, only to the extent that Key Principal
does not have sufficient cash available from any other source and proof of same
is remitted to Lender, from
making such distributions from its Net Operating Income (after giving effect to the payment of all amounts
due and owing to Lender) as are necessary to permit Key Principal to make 


 


35

















 


distributions required to
maintain Key Principal’s taxation as a “real estate investment trust” under the
Internal Revenue Code.


 


Section 9.07.                                       Confidentiality
of Certain Information.


 


Borrower shall not disclose any terms, conditions, underwriting
requirements or underwriting procedures of this Agreement or any of the Loan Documents;
provided, however, that such confidential information may be disclosed (A) as
required by law or pursuant to generally accepted accounting procedures, (B) to
officers, directors, employees, agents, partners, attorneys, accountants,
engineers and other consultants of Borrower who need to know such information,
provided such Persons are instructed to treat such information confidentially, (C) to
any regulatory authority having jurisdiction over Borrower, (D) in
connection with any filings with the Securities and Exchange Commission or
other Governmental Authorities, or (E) to any other Person to which such
delivery or disclosure may be necessary or appropriate (1) in compliance
with any law, rule, regulation or order applicable to Borrower, or (2) in
response to any subpoena or other legal process or information investigative
demand.


 


Section 9.08.                                       Changes
to Licenses, Permits.


 


Borrower shall not and shall cause the Operator not to, without the
prior written consent of the Lender, amend, modify or otherwise change the
Licenses or Permits to add Skilled Nursing Units at any Mortgaged
Property.  Borrower will comply with the
Level of Care Diversity Requirements. 
Notwithstanding the foregoing, Lender may agree with Borrower to amend
the Licenses and Permits to add Skilled Nursing Units at a Mortgaged Property
or to modify the Level of Care Diversity Requirement, if the addition of
Skilled Nursing Units or the change in acuity level improves the Collateral
Pool based on factors that are consistent with Lender’s Underwriting
Requirements, are consistent with market demand and result in increased Net
Operating Income or increased value of the Mortgaged Property.


 


Section 9.09.                                       Medicare/
Medicaid.


 


Borrower further covenants and agrees that it shall not permit more
than 20% of its effective gross income from the Mortgaged Property to be
derived from units relying on Medicaid payments.  If more than 20% of effective gross income
from the Mortgaged Property becomes derived from units relying on Medicaid
payments, the Borrower shall diligently and expeditiously take all reasonable
steps necessary to bring the Mortgaged Property into compliance with the
preceding sentence to the extent permissible by applicable law or regulation.


 


Section 9.10.                                       No
Change in Minimum Rent.


 


The allocation of Minimum Rent among the Mortgaged Properties as set
forth in Schedule 1 hereto (as such Minimum Rent may be adjusted as provided in
Section 3.1.1(c) of the Operating Lease) shall not be changed,
modified and/or supplemented without the prior written consent of Lender.


 


36
















 


Section 9.11.                                       Accounts.


 


Borrower and IDOT Guarantors agree not to (i) permit their own
funds to be deposited into any account in which any Person has a security
interest, pledge or lien; and (ii) allow or suffer any Operator from
depositing its own funds generated from or relating to any Mortgaged Property
into any account in which any Person has a security interest, pledge or lien.


 


ARTICLE 10

FEES


 


Section 10.01.                                Origination
Fees.


 


Origination Fee.  Borrower shall pay to Lender on or before the
Initial Closing Date an origination fee (“Initial Origination Fee”)
equal to $2,564,670, 50 basis points (.50%) multiplied by the Term Loan
and a Review Fee equal to $512,934, 10 basis points (.10%) multiplied by
the Term Loan.


 


Section 10.02.                                Due
Diligence Fees.


 


(a)           Initial
Due Diligence Fees.  Borrower has paid to Lender non-refundable due
diligence fees (“Initial Due Diligence Fees”) with respect to each
Initial Mortgaged Property.  All Initial
Due Diligence Fees, third party costs and out-of-pocket fees and expenses
incurred by Lender and Fannie Mae shall be paid by Borrower on the Initial
Closing Date (or, if the proposed Initial Mortgaged Properties do not become
part of the Collateral Pool, on demand).  Any portion of the Initial Due
Diligence Fee paid to Lender not actually used by Lender to cover reasonable
due diligence expenses shall be promptly refunded to Borrower.


 


(b)           Additional
Due Diligence Fees for Additional Collateral.  Borrower shall pay to
Lender non-refundable additional due diligence fees (the “Additional
Collateral Due Diligence Fees”) with respect to each proposed Substitute
Mortgaged Property, in an amount equal to $18,000 and a deposit for third-party
reports per Mortgaged Property, as applicable, which represents the estimated
cost for due diligence expenses.  All
Additional Collateral Due Diligence Fees, third party costs and out-of-pocket
fees and expenses incurred by Lender and Fannie Mae shall be paid by Borrower
on the applicable Closing Date (or if the relevant proposed Substitute Mortgaged
Property, does not become part of a Collateral Pool, on demand) for the
Substitute Mortgaged Property.  Any
portion of the Additional Collateral Due Diligence Fees paid to Lender and not
actually used by Lender to cover reasonable due diligence expenses shall be
promptly refunded to Borrower.


 


Section 10.03.                                Legal
Fees and Expenses.


 


(a)           Initial
Legal Fees.  Borrower shall pay, or
reimburse Lender for, all out-of-pocket third party legal fees and expenses
incurred by Lender and by Fannie Mae in connection with the preparation, review
and negotiation of this Agreement and any other Loan Documents executed on the
date of this Agreement, to the extent the Initial Due Diligence Fee does not
cover such fees and expenses.


 


37

















 


(b)           Fees
and Expenses Associated with Requests. 
Borrower shall pay, or reimburse Lender for, all reasonable
out-of-pocket third party costs and expenses incurred by Lender, including the
out-of-pocket legal fees and expenses incurred by Lender in connection with the
preparation, review and negotiation of all documents, instruments and
certificates to be executed and delivered in connection with each request
pertaining to this Agreement, the performance by Lender of any of its obligations
with respect to the request, the satisfaction of all conditions precedent to
Borrower’s rights or Lender’s obligations with respect to the request, and all
transactions related to any of the foregoing, including the cost of title
insurance premiums and applicable recordation and transfer taxes and charges
and all other reasonable costs and expenses in connection with a request
pertaining to this Agreement.  The
obligations of Borrower under this subsection shall be absolute and
unconditional, regardless of whether the transaction requested in the request
actually occurs.  Borrower shall pay such
costs and expenses to Lender on the Closing Date for the request, or, as the
case may be, after demand by Lender when Lender determines that such request
will not close.


 


Section 10.04.                                Failure
to Close any Request.


 


If Borrower makes a Request and fails to close on the Request for any
reason other than the default by Lender, then Borrower shall pay to Lender and
Fannie Mae all damages incurred by Lender and Fannie Mae in connection with the
failure to close.


 


ARTICLE 11

EVENTS OF DEFAULT


 


Section 11.01.                                Events
of Default.


 


Each of the following events shall constitute an “Event of Default”
under this Agreement, whatever the reason for such event and whether it shall
be voluntary or involuntary, or within or without the control of Borrower or be
effected by operation of law or pursuant to any judgment or order of any court
or any order, rule or regulation of any Governmental Authority:


 


(a)           the
occurrence of a default under any Loan Document beyond the cure period, if any,
set forth therein or an Event of Default under and as defined in any Loan
Document; or


 


(b)           the
failure by Borrower or IDOT Guarantor to pay when due any amount payable by
Borrower under any Note, any Security Instrument, this Agreement or any other
Loan Document, including any fees, costs or expenses; or


 


(c)           the
failure by Borrower or IDOT Guarantor to perform or observe any covenant
contained in Sections 8.02, 8.07, 8.12, 8.13, 8.14,
8.16, 8.17, 8.18, 8.19, 8.20, 8.21, 8.22,
8.25, 8.26, 8.27 and Article 9; or


 


(d)           any
warranty, representation or other written statement made by or on behalf of any
Targeted Entity contained in this Agreement, any other Loan Document or in any 


 


38

















 


instrument
furnished in compliance with or in reference to any of the foregoing, is false
or misleading in any material respect on any date when made or deemed made; or


 


(e)           (i)            any Targeted Entity shall (A) commence
a voluntary case (or, if applicable, or joint case) under any Chapter of the
Bankruptcy Code (as now or hereafter in effect) or otherwise, (B) file a
petition seeking to take advantage of any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, debt adjustment, winding up
or composition or adjustment of debts, (C) consent to or fail to contest
in a timely and appropriate manner any petition filed against it in an
involuntary case under such bankruptcy laws or other laws, (D) apply for
or consent to, or fail to contest in a timely and appropriate manner, the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of a substantial part of its property, domestic or
foreign, (E) admit in writing its inability to pay, or generally not be
paying, its debts as they become due, (F) make a general assignment for
the benefit of creditors, (G) assert that Borrower or Key Principal
(solely with respect to the Guaranty) has no liability or obligations under
this Agreement or any other Loan Document to which it is a party; or (H) take
any action for the purpose of effecting any of the foregoing; or


 


(ii)           a
case or other proceeding shall be commenced against any Targeted Entity in any
court of competent jurisdiction seeking (A) relief under the Federal
bankruptcy laws (as now or hereafter in effect) or under any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization,
winding upon or composition or adjustment of debts, or (B) the appointment
of a trustee, receiver, custodian, liquidator or the like of any Targeted
Entity or of all or a substantial part of the property, domestic or foreign, of
any Targeted Entity and any such case or proceeding shall continue undismissed
or unstayed for a period of sixty (60) consecutive calendar days, or any order
granting the relief requested in any such case or proceeding against any
Targeted Entity (including an order for relief under such Federal bankruptcy
laws) shall be entered; or


 


(iii)          any
Targeted Entity files an involuntary petition against Borrower under any
Chapter of the Bankruptcy Code or under any other bankruptcy, insolvency,
reorganization, arrangement or readjustment of debt, dissolution, liquidation
or similar proceeding relating to Borrower or IDOT Guarantor under the laws of
any jurisdiction.


 


(f)            both
(i) an involuntary petition under any Chapter of the Bankruptcy Code is
filed against Borrower or IDOT Guarantor or Borrower or IDOT Guarantor directly
or indirectly becomes the subject of any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution, liquidation or
similar proceeding relating to it under the laws of any jurisdiction, or in
equity, and (ii) any Targeted Entity has acted in concert or conspired
with such creditors of Borrower or IDOT Guarantor (other than Lender) to cause
the filing thereof.


 


(g)           if
any provision of this Agreement or any other Loan Document or the lien and
security interest purported to be created hereunder or under any Loan Document
shall at any time for any reason cease to be valid and binding in accordance
with its terms on Borrower or IDOT Guarantor or Key Principal, or shall be
declared to be null and void, or the validity or 


 


39

















 


enforceability hereof or thereof or the validity or
priority of the lien and security interest created hereunder or under any other
Loan Document shall be contested by any Targeted Entity seeking to establish
the invalidity or unenforceability hereof or thereof, or Borrower or IDOT
Guarantor or Key Principal (only with respect to the Guaranty) shall deny that
it has any further liability or obligation hereunder or thereunder; or


 


(h)           (i) the
execution by Borrower or IDOT Guarantor of a chattel mortgage or other security
agreement on any materials, fixtures or articles used in the construction or
operation of the improvements located on any Mortgaged Property or on articles
of personal property located therein (other than in connection with any
Permitted Liens), or (ii) if any such materials, fixtures or articles are
purchased pursuant to any conditional sales contract or other security
agreement or otherwise so that the Ownership thereof will not vest
unconditionally in Borrower or IDOT Guarantor free from encumbrances, or (iii) if
Borrower or IDOT Guarantor does not furnish to Lender upon request the
contracts, bills of sale, statements, receipted vouchers and agreements, or any
of them, under which Borrower or IDOT Guarantor claim title to such materials,
fixtures, or articles; or


 


(i)            the
failure by Borrower or IDOT Guarantor to comply with any requirement of any
Governmental Authority by the shorter of (A)  the time period required by
such Governmental Authority and (B) within thirty (30) days after written
notice of such requirement shall have been given to Borrower or IDOT Guarantor
by such Governmental Authority; provided that, if action is commenced and
diligently pursued by Borrower or IDOT Guarantor within such thirty (30) days,
then Borrower or IDOT Guarantor shall have an additional thirty (30) days to
comply with such requirement; or


 


(j)            a
dissolution or liquidation for any reason (whether voluntary or involuntary) of
any Targeted Entity; or


 


(k)           any
judgment against Borrower or IDOT Guarantor, any attachment or other levy
against any portion of Borrower’s assets with respect to a claim or claims in
an amount in excess of  $250,000 in
the aggregate remains unpaid, unstayed on appeal undischarged, unbonded, not
fully insured or undismissed for a period of ninety (90) days; or any judgment
against Key Principal, any attachment or other levy against any portion of Key
Principal assets with respect to a claim or claims in an amount in excess of
$1,000,000;


 


(l)            the
failure by Borrower, IDOT Guarantor or Key Principal to perform or observe any
material term, covenant, condition or agreement hereunder, other than as
contained in subsections (a) through (k) above, within thirty (30)
days after receipt of notice from Lender identifying such failure, provided
such period shall be extended for up to sixty (60) additional days if in
Lender’s judgment such default is susceptible to cure and Borrower, in the
discretion of Lender, is diligently pursuing a cure of such default within
sixty (60)  days after receipt of notice from
Lender; or


 


(m)          the
occurrence of a default under any Supplemental Loan beyond the cure period, if
any, set forth therein or an event of default under and as defined in the
Supplemental Loan Documents.


 


40

















 


Notwithstanding anything
to the contrary herein or in the other Loan Documents, if an Event of Default
shall occur hereunder or under another Loan Document because a representation,
warranty, affirmative covenant, negative covenant or other provision hereunder
or thereunder shall be breached or violated which in Lender’s judgment is
specifically and exclusively with respect to a particular Mortgaged Property,
such Event of Default shall be deemed cured, upon Borrower’s or IDOT Guarantor’s
satisfaction of conditions, as the case may be, set forth in Sections 3.04 and
6.05 relating to the release of such Mortgaged Property from the Collateral
Pool within 30 days of the Event of Default. 
The existence of such cure right by the Borrower or IDOT Guarantor, as
the case may be, shall not in any way limit or restrict Lender’s right to
exercise any and all remedies set forth in Article 12; provided, however,
if the Borrower releases such Mortgaged Property pursuant to Sections 3.04 and
6.05 as described in the preceding sentence and at the time of such release no
other Event of Default has occurred and is continuing, Lender shall cease
exercising its remedies and discontinue any proceedings it may have initiated
and the parties shall be restored to their former positions and rights
hereunder.


 


Section 11.02.                                Tenant-Triggered
Defaults.


 


Except as provided in the next paragraph,
notwithstanding anything herein or in any other Loan Document to the contrary, (i) an
Event of Default by the Operator under the Sub-Lease or an Event of Default by
the Master Tenant under the Operating Lease, (ii) an Event of Default by
the Operator or Master Tenant under any Subordination Assignment and Security
Agreement, or (iii) an Event of Default under any Loan Document directly
caused solely on account of the action or inaction of the Operator or Master
Tenant (a “Tenant Triggered Default”), will not be an Event of Default under
any Loan Document provided that within seven (7) Business Days of Borrower
having actual knowledge of such Tenant Triggered Default occurring Borrower
presents a written plan of action (setting forth the cause of the default, the
specific steps Borrower will take to remedy the default and the timetable for
implementing such remedy) (the “Plan”) and Lender approves such Plan or a
modified Plan within fifteen (15) Business Days of the presentation to it of
such Plan or such default is otherwise cured prior to Lender responding to such
Plan.  A Plan may include the release or
substitution of one or more Mortgaged Properties, so long as the requirements
for a release or substitution set forth in this Agreement are satisfied.  Lender’s decision to accept or reject a Plan
will not be made in an arbitrary and capricious manner.  For purposes of this Section 11.02,
without limiting the scope of the meaning of Borrower’s having actual
knowledge, Borrower will automatically and immediately be deemed to have actual
knowledge:


 


(i) of written public disclosure;


 


(ii) of the breach by Operator or Master Tenant
of any obligation which is scheduled to be performed by or on a particular date
(such as the payment of rent); or


 


(iii) in the event that Key Principal or REIT
Management Research LLC or its successors and assigns has actual knowledge.


 


The prior paragraph will not be applicable to any Event of Default
under the Sub-Lease or Operating Lease or any Loan Document or Supplemental
Loan or to any Event of Default by 


 


41

















 


the Operator or Master Tenant under any Subordination
Assignment and Security Agreement relating to (i) the failure to pay any
obligations due and owing under any Loan Document; (ii) the failure to pay
taxes or other Impositions, (iii) the failure to purchase and maintain
required insurance coverage, (iv) the liquidation or dissolution of the
Operator or Master Tenant, (v) the revocation or  termination of any License necessary to the
operation of any Mortgaged Property as a Seniors Housing Facility, (vi) the
cancellation of any utility services, (vii) an assignment by Master Tenant
of its right, title and interest under the Operating Lease or Sub-Lease, (viii) an
assignment by the Operator of its right, title and interest under the
Sub-Lease, (ix) a failure to use any Mortgaged Property as a Seniors
Housing Facility and any uses incidental thereto, (x) the failure to
transfer licenses as required under each Subordination Assignment and Security
Agreement and Section 8.25 of this Agreement, or (xi) compliance with
obligations under the Completion Repair and Security Agreement relating to the
completion of immediate repairs.  In the
event Master Tenant or Operator breaches any obligation under the Sub-Lease,
Operating Lease or Subordination Assignment and Security Agreement relating to
the creation of any encumbrance or lien on (A) any collateral pledged by
Master Tenant or Operator to Lender (B) any leasehold interest in the
Mortgaged Property or (C) the Collateral, upon Borrower having actual
knowledge of such breach, Borrower will, within 30 days cause such encumbrance
or lien to be released of record, bonded or otherwise remedied to Lender’s
satisfaction and failure to do so will be an Event of Default.


 


If Lender consents to the Plan, an Event of Default will occur if
Borrower fails to diligently implement the Plan in the judgment of Lender
within the agreed-upon time period set forth in the Plan.  If Lender does not respond to the Plan within
fifteen (15) Business Days it will be deemed rejected.  If Lender rejects the Plan, and if the Tenant
Triggered Default is property specific and pertains to no more than five (5) Mortgaged
Properties within any quarterly period, Borrower will have 3 Business Days from
the date of rejection to inform Lender if it will release the impacted property
from the Collateral Pool in a manner which complies with the release
requirements set forth in Sections 3.03, 3.04 and 6.05 within thirty (30) days
of the rejection.  Thereafter, the
Borrower may also substitute a property into the Collateral Pool in a manner
which complies with the substitution requirements set forth in Section 3.05,
3.06, 3.07 and 6.06.  If Borrower (i) fails
to inform the Lender within such 3 Business Day period that it will release or
substitute the impacted property; (ii) informs Lender it will not release
or substitute the impacted property; or (iii) fails to release the
impacted property within such thirty (30) day period in accordance with the
requirements of this Section, an Event of Default under the Loan Documents will
occur.


 


ARTICLE 12

REMEDIES


 


Section 12.01.                                Remedies;
Waivers.


 


Upon the occurrence of an Event of Default, Lender may do any one or
more of the following (without presentment, protest or notice of protest, all
of which are expressly waived by Borrower):


 


42

















 


(a)           by
written notice to Borrower, to be effective upon dispatch, terminate the Term
Loan and declare the principal of, and interest on, the Term Loan and all other
sums owing by Borrower to Lender under any of the Loan Documents forthwith due
and payable, whereupon the Term Loan will terminate and the principal of, and
interest on, the Term Loan and all other sums owing by Borrower to Lender under
any of the Loan Documents will become forthwith due and payable.


 


(b)           Lender
shall have the right to pursue any other remedies available to it under any of
the Loan Documents.


 


(c)           Lender
shall have the right to pursue all remedies available to it at law or in
equity, including obtaining specific performance and injunctive relief.


 


Section 12.02.                                Waivers;
Rescission of Declaration.


 


Lender shall have the right, to be exercised in its complete
discretion, to waive any breach hereunder (including the occurrence of an Event
of Default), by a writing setting forth the terms, conditions, and extent of
such waiver signed by Lender and delivered to Borrower.  Unless such writing expressly provides to the
contrary, any waiver so granted shall extend only to the specific event or
occurrence which gave rise to the waiver and not to any other similar event or
occurrence which occurs subsequent to the date of such waiver.  This provision shall not be construed to
permit the waiver of any condition to a Request otherwise provided for herein.


 


Section 12.03.                                Reserved.


 


Section 12.04.                                No
Remedy Exclusive.


 


Unless otherwise expressly provided, no remedy herein conferred upon or
reserved is intended to be exclusive of any other available remedy, but each
remedy shall be cumulative and shall be in addition to other remedies given
under the Loan Documents or existing at law or in equity.


 


Section 12.05.                                No
Waiver.


 


No delay or omission to exercise any right or power accruing under any
Loan Document upon the happening of any Event of Default or Potential Event of
Default shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time
and as often as may be deemed expedient.


 


Section 12.06.                                No
Notice.


 


To entitle Lender to exercise any remedy reserved to Lender in this
Article, it shall not be necessary to give any notice, other than such notice
as may be required under the applicable provisions of this Agreement or any of
the other Loan Documents.


 


43

















 


ARTICLE 13

INSURANCE, REAL ESTATE TAXES AND REPLACEMENT RESERVES


 


Section 13.01.                                Insurance
and Real Estate Taxes.


 


Borrower shall (unless waived by Lender by separate agreement)
establish funds for taxes, insurance premiums and certain other charges for
each Mortgaged Property in accordance with Section 7(a) of the
Security Instrument for each Mortgaged Property.


 


(a)           Insurance
and Tax Escrow; Waiver.  Borrower
shall establish funds for taxes, insurance premiums and certain other charges
for each Mortgaged Property in accordance with Section 7(a) of the
Security Instrument for each Mortgaged Property.  Notwithstanding the foregoing, so long as no
Event of Default has occurred and subject to Section 13.01(a) below,
Lender hereby waives the obligations of Borrower under Section 7(a) of
each Security Instrument with respect to the escrow of premiums for insurance
and taxes (the “Required Escrow Payments”).  During any period in which the obligation to
pay the Required Escrow Payments has been waived pursuant to this Section 13.01,
Borrower shall:  (i) pay taxes, (ii) pay
insurance premiums with respect to the insurance policy meeting the
requirements of the Security Instrument for each Mortgaged Property, (iii) not
later than fifteen (15) days prior to the expiration date of such policy send Lender
copies of quotes received by Borrower which set forth the gross pre-tax
premiums for new or renewal insurance policies, complete information on who may
provide the insurance and to whom the premiums will be due (iv) not later
than five (5) Business Days prior to the expiration date of such policy
send Lender copies of binding quotes received by Borrower which set forth the
gross pre-tax premiums for new or renewal insurance policies, complete
information on who is providing the insurance and to whom the premiums are due,
evidence of Borrower’s acceptance of such quotes or renewals, and certified
copies of evidence of insurance effective on or prior to the expiration date of
the old existing policy, (v) not later than seven (7) days after the
then-current expiration date of the insurance policy, send Lender paid receipts
or other documentation satisfactory to Lender evidencing that the premiums for
such new or renewal insurance policies have been paid, (vi) send Lender
invoices and canceled checks, or other documentation satisfactory to Lender,
evidencing payment of such taxes within sixty (60) days after such taxes are
due and payable, (vii) provide to Lender written proof at least fifteen
(15) days prior to the then-current expiration date of the insurance policy,
certified by the insurance provider, that such policy has been extended for a
period of at least one (1) year, and (viii) include all payments of
insurance premiums and taxes in its monthly and annual property income and
expense data.


 


(b)           Revocation
of Waiver.  Lender’s waiver of the
Required Escrow Payments shall, at the option of Lender, be revoked upon the
occurrence of any of the following events:


 


(i)            the occurrence of
an Event of Default; or


 


(ii)           Borrower shall fail
to perform its obligations under Section 13.01(a).


 


44

















 


(iii)          failure by Borrower
to (A) participate in a blanket insurance policy that complies with Fannie
Mae’s insurance requirements and (B) annually furnish signed insurance binders
to Lender within fifteen (15) days prior to the insurance renewal date.


 


(c)           Upon
Lender’s revocation of its waiver of the Required Escrow Payments, Borrower’s
obligations under Section 7(a) of each of the Security Instruments
shall immediately be reinstated.


 


Section 13.02.                                Replacement
Reserves.


 


Borrower shall execute a Replacement Reserve Agreement for the
Mortgaged Properties and shall (unless waived by Lender) make all deposits for
replacement reserves in accordance with the terms of the Replacement Reserve
Agreement.


 


Section 13.03.                                Completion/Repair
Reserves.


 


Borrower shall execute a Completion/Repair and Security Agreement for
the Mortgaged Properties and shall (unless waived by Lender) make all deposits
for reserves in accordance with the terms of the Completion/Repair and Security
Agreement.


 


ARTICLE 14

LIMITS ON PERSONAL LIABILITY


 


Section 14.01.                                Personal
Liability to Borrower.


 


Except as otherwise provided in this Article 14, Borrower shall
have no personal liability under the Loan Documents for the repayment of any
Indebtedness or for the performance of any other Obligations of Borrower under
the Loan Documents, and Lender’s only recourse for the satisfaction of the
Indebtedness and the performance of such Obligations shall be Lender’s exercise
of its rights and remedies with respect to the Mortgaged Properties and any
other Collateral held by Lender as security for the Indebtedness.


 


(a)           Exceptions
to Limits on Personal Liability. 
Borrower shall be personally liable to Lender for the repayment of the
Term Loan and other amounts due under the Loan Documents equal to any loss,
expense, cost, liability or damage suffered by Lender as a result of or in any
manner relating to (i) failure of Borrower to pay to Lender upon demand
after an Event of Default all Rents received by Borrower to which Lender is
entitled under Section 3(a) of the Security Instrument encumbering
the Mortgaged Property and the amount of all security deposits held by Borrower
from tenants then in residence; (ii) failure of Borrower to apply all
insurance proceeds, condemnation proceeds or security deposits from tenants as
required by the Security Instrument encumbering the Mortgaged Property; (iii) failure
of such Borrower to comply with its obligations under the Loan Documents with
respect to the delivery of books and records and financial statements; (iv) fraud
or written material misrepresentation by Borrower or any officer, director,
partner, member or employee of Borrower in connection with the application for
or creation of the Obligations or any request for any action or consent by
Lender; or (v) failure to apply Rents, first, to the payment of reasonable
operating expenses and then to amounts (“Debt 


 


45

















 


Service Amounts”)
payable under the Loan Documents (except that Borrower will not be personally
liable (1) to the extent that Borrower lacks the legal right to direct the
disbursement of such sums because of a bankruptcy, receivership or similar
judicial proceeding, or (2) with respect to Rents of a Mortgaged Property
that are loaned to an Affiliate in the ordinary course of implementing Key
Principal’s cash management system or distributed in any Calendar Quarter if
Borrower has paid all operating expenses and Debt Service Amounts for that
Calendar Quarter) or (vi) a failure to satisfy any and all indemnification
obligations contained in Section 8.26 herein or (vii) a failure to
satisfy any and all indemnification obligations contained in Section 52(j) of
the Security Instrument covering the Mortgaged Property known as Foulk Manor
North located in Wilmington, Delaware or (viii) a failure to satisfy any
and all indemnification obligations contained in Section 4(j) of the
Security Instrument covering the Mortgaged Property known as Brookside located
in Louisville, Kentucky.  For purposes of
this subsection (a), the term “Rents” shall have the meaning given to
such term in the Security Instrument.


 


(b)           Full
Recourse.  Borrower shall be
personally liable to Lender for the payment and performance of all Obligations
upon the occurrence of any of the following Events of Default:  (i) Borrower acquisition of any property
or operation of any business not permitted by Section 8.22 of this
Agreement; or (ii) a Transfer that is an Event of Default under Section 8.12
or 8.13 of this Agreement; or (iii) a failure to satisfy any and all
indemnification obligations contained in Section 18 of any Security
Instrument or (iv) a Bankruptcy Event.


 


(c)           As
used in this Subsection, the term “Bankruptcy Event” means any one or
more of the following events:


 


(A)                              Borrower
(i) commences a voluntary case (or, if applicable, a joint case) under any
chapter of the Bankruptcy Code or otherwise or consents to or fails to contest
in a timely and appropriate manner any petition filed against it in an
involuntary case under any chapter of the Bankruptcy Code or otherwise, (ii) institutes
(by petition, application, answer, consent or otherwise) any other bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt, dissolution,
liquidation or similar proceeding relating to it under the laws of any
jurisdiction, (iii) makes a general assignment for the benefit of
creditors, (iv) applies for, consents to or acquiesces in the appointment
of any receiver, liquidator, custodian, sequestrator, trustee or similar
officer for it or for all or any substantial part of the Mortgaged Properties
or (v) admits in writing its inability to pay its debts generally as they
mature.


 


(B)                                Borrower,
any Affiliate of Borrower, any Guarantor or any Affiliate of Guarantor, Key
Principal or any affiliate of Key Principal files an involuntary petition
against Borrower under any chapter of the Bankruptcy Code or under any other
bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to Borrower under the
laws of any jurisdiction.


 


46
















 


(C)                                Both
(1) an involuntary petition under any chapter of the Bankruptcy Code is
filed against Borrower, or Borrower directly or indirectly becomes the subject
of any bankruptcy, insolvency, reorganization, arrangement, readjustment of
debt, dissolution, liquidation or similar proceeding relating to it under the
laws of any jurisdiction, or in equity, and (ii) Borrower, any Affiliate
of Borrower, any Guarantor or any Affiliate of Guarantor or Key Principal or
any affiliate of Key Principal has acted in concert or conspired with such
creditors of Borrower (other than Fannie Mae or Lender) to cause the filing
thereof.


 


(d)           Miscellaneous.  To the extent that Borrower has personal
liability under this Section, or Key Principal has liability under the
Guaranty, such liability shall be joint and several and Lender may exercise its
rights against Borrower or Key Principal personally without regard to whether
Lender has exercised any rights against the Mortgaged Property or any other
security, or pursued any rights against any guarantor, or pursued any other
rights available to Lender under the Loan Documents or Applicable Law.  For purposes of this Article, the term “Mortgaged
Property” shall not include any funds that (i) have been applied by
Borrower as required or permitted by the Loan Documents prior to the occurrence
of an Event of Default, or (ii) are owned by Borrower and which Borrower
was unable to apply as required or permitted by the Loan Documents because of a
bankruptcy, receivership, or similar judicial proceeding.


 


Section 14.02.                                Preferences,
Fraudulent Conveyances, Etc.


 


If Lender is required to refund, or voluntarily refunds, any payment
received from Borrower because such payment is or may be avoided, invalidated,
declared fraudulent, set aside or determined to be void or voidable as a
preference, fraudulent conveyance, impermissible setoff or a diversion of trust
funds under the bankruptcy laws or for any similar reason, including without
limitation any judgment, order or decree of any court or administrative body
having jurisdiction over Borrower or any of its property, or upon or as a
result of the appointment of a receiver, intervenor, custodian or conservator
of, or trustee or similar officer for, Borrower or any substantial part of its
property, or otherwise, or any statement or compromise of any claim effected by
Lender with Borrower or any other claimant (a “Rescinded Payment”), then Borrower’s liability to Lender shall
continue in full force and effect, with the same effect and to the same extent
as if the Rescinded Payment had not been received by Lender, notwithstanding
the cancellation or termination of any of the Loan Documents, and regardless of
whether Lender contested the order requiring the return of such payment.  In addition, Borrower shall pay, or reimburse
Lender for, all expenses (including all reasonable attorneys’ fees, court costs
and related disbursements) incurred by Lender in the defense of any claim that
a payment received by Lender in respect of all or any part of the Obligations
must be refunded.  The provisions of this
Section 14.02 shall survive the termination of the Loan Documents
and any satisfaction and discharge of Borrower by virtue of any payment, court
order or any federal or state law.


 


47

















 


ARTICLE 15

MISCELLANEOUS PROVISIONS


 


Section 15.01.                                Counterparts.


 


To facilitate execution, this Agreement may be executed in any number
of counterparts.  It shall not be
necessary that the signatures of, or on behalf of, each party, or that the
signatures of all persons required to bind any party, appear on each
counterpart, but it shall be sufficient that the signature of, or on behalf of,
each party, appear on one (1) or more counterparts.  All counterparts shall collectively constitute
a single agreement.  It shall not be
necessary in making proof of this Agreement to produce or account for more than
the number of counterparts containing the respective signatures of, or on
behalf of, all of the parties hereto.


 


Section 15.02.                                Amendments,
Changes and Modifications.


 


This Agreement may be amended, changed, modified, altered or terminated
only by written instrument or written instruments signed by all of the parties
hereto.


 


Section 15.03.                                Payment
of Costs, Fees and Expenses.


 


In addition to the payments required by Section 10.03 of
this Agreement, Borrower shall pay within 30 days after delivery of written
notice from Lender, all reasonable third party out-of-pocket fees, costs,
charges or expenses (including the reasonable fees and expenses of attorneys,
accountants and other experts) incurred by Lender in connection with:


 


(a)           Any
amendment, consent or waiver to this Agreement or any of the Loan Documents
(whether or not any such amendments, consents or waivers are entered into).


 


(b)           Defending
or participating in any litigation arising from actions by third parties and
brought against or involving Lender with respect to (i) any Mortgaged
Property, (ii) any event, act, condition or circumstance in connection
with any Mortgaged Property or (iii) the relationship between Lender and
Borrower and Key Principal in connection with this Agreement or any of the
transactions contemplated by this Agreement.


 


(c)           The
administration or enforcement of, or preservation of rights or remedies under,
this Agreement or any other Loan Documents or in connection with the
foreclosure upon, sale of or other disposition of any Collateral granted
pursuant to the Loan Documents.


 


(d)           Any
disclosure documents, including the reasonable fees and expenses of Lender’s
attorneys and accountants.


 


Borrower shall also pay within 30 days after written
notice from Lender, any transfer taxes, documentary taxes, assessments or
charges made by any governmental authority by reason of the execution,
delivery, filing, recordation, performance or enforcement of any of the Loan
Documents or the Term Loan.  However,
Borrower will not be obligated to pay any franchise, excise, estate,
inheritance, income, excess profits or similar tax on Lender.  Any attorneys’ fees and expenses payable by
Borrower pursuant to this Section shall be recoverable separately from and
in addition to any other amount included in such judgment, and such obligation
is intended 


 


48

















 


to be severable from the other provisions of this
Agreement and to survive and not be merged into any such judgment.  Any amounts payable by Borrower pursuant to
this Section, with interest thereon if not paid when due, shall become additional
indebtedness of Borrower secured by the Loan Documents.  Such amounts shall bear interest from the
date such amounts are due until paid in full at the weighted average, as
determined by Lender, of the interest rates in effect from time to time for the
Term Loan unless collection from Borrower of interest at such rate would be
contrary to Applicable Law, in which event such amounts shall bear interest at
the highest rate which may be collected from Borrower under Applicable
Law.  The provisions of this Section are
cumulative with, and do not exclude the application and benefit to Lender of,
any provision of any other Loan Document relating to any of the matters covered
by this Section.


 


Section 15.04.                                Payment
Procedure.


 


All payments to be made to Lender pursuant to this Agreement or any of
the Loan Documents shall be made in lawful currency of the United States of
America and in immediately available funds by wire transfer to an account
designated by Lender before 1:00 p.m. (Eastern Standard Time) on the date
when due.


 


Section 15.05.                                Payments
on Business Days.


 


In any case in which the date of payment to Lender or the expiration of
any time period hereunder occurs on a day which is not a Business Day, then
such payment or expiration of such time period need not occur on such date but
may be made on the next succeeding Business Day with the same force and effect
as if made on the day of maturity or expiration of such period, except that
interest shall continue to accrue for the period after such date to the next
Business Day.


 


Section 15.06.                                Choice
of Law; Consent to Jurisdiction; Waiver of Jury Trial.


 


NOTWITHSTANDING ANYTHING IN THE NOTES, THE SECURITY DOCUMENTS OR ANY OF
THE OTHER LOAN DOCUMENTS TO THE CONTRARY, EACH OF THE TERMS AND PROVISIONS, AND
RIGHTS AND OBLIGATIONS OF BORROWER UNDER THIS AGREEMENT AND THE NOTES AND
BORROWER UNDER THE OTHER LOAN DOCUMENTS, SHALL BE GOVERNED BY, INTERPRETED,
CONSTRUED AND ENFORCED PURSUANT TO AND IN ACCORDANCE WITH THE LAWS OF THE
DISTRICT OF COLUMBIA (EXCLUDING THE LAW APPLICABLE TO CONFLICTS OR CHOICE OF LAW)
EXCEPT TO THE EXTENT OF PROCEDURAL AND SUBSTANTIVE MATTERS RELATING ONLY TO (i) THE
CREATION, PERFECTION AND FORECLOSURE OF LIENS AND SECURITY INTERESTS, AND
ENFORCEMENT OF THE RIGHTS AND REMEDIES, AGAINST THE MORTGAGED PROPERTIES, WHICH
MATTERS SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION IN WHICH THE
MORTGAGED PROPERTY IS LOCATED, (ii) THE PERFECTION, THE EFFECT OF
PERFECTION AND NON-PERFECTION AND FORECLOSURE OF SECURITY INTERESTS ON PERSONAL
PROPERTY, WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION
DETERMINED BY THE CHOICE OF LAW PROVISIONS OF THE UNIFORM COMMERCIAL CODE
IN EFFECT FOR THE 


 


49

















 


JURISDICTION IN WHICH THE BORROWER IS ORGANIZED.  BORROWER AGREES THAT ANY CONTROVERSY ARISING
UNDER OR IN RELATION TO THE NOTES, THE SECURITY DOCUMENTS (OTHER THAN THE
SECURITY INSTRUMENTS) OR ANY OTHER LOAN DOCUMENT SHALL BE, EXCEPT AS OTHERWISE
PROVIDED HEREIN, LITIGATED IN THE DISTRICT OF COLUMBIA.  THE LOCAL AND FEDERAL COURTS AND AUTHORITIES
WITH JURISDICTION IN THE DISTRICT OF COLUMBIA SHALL, EXCEPT AS OTHERWISE
PROVIDED HEREIN, HAVE JURISDICTION OVER ALL CONTROVERSIES WHICH MAY ARISE
UNDER OR IN RELATION TO THE LOAN DOCUMENTS, INCLUDING THOSE CONTROVERSIES
RELATING TO THE EXECUTION, JURISDICTION, BREACH, ENFORCEMENT OR COMPLIANCE WITH
THE NOTES, THE SECURITY DOCUMENTS (OTHER THAN THE SECURITY INSTRUMENTS) OR ANY
OTHER ISSUE ARISING UNDER, RELATING TO, OR IN CONNECTION WITH ANY OF THE LOAN
DOCUMENTS.  BORROWER IRREVOCABLY CONSENTS
TO SERVICE, JURISDICTION, AND VENUE OF SUCH COURTS FOR ANY LITIGATION ARISING
FROM THE NOTES, THE SECURITY DOCUMENTS OR ANY OF THE OTHER LOAN DOCUMENTS, AND
WAIVES ANY OTHER VENUE TO WHICH IT MIGHT BE ENTITLED BY VIRTUE OF DOMICILE,
HABITUAL RESIDENCE OR OTHERWISE.  NOTHING
CONTAINED HEREIN, HOWEVER, SHALL PREVENT LENDER FROM BRINGING ANY SUIT, ACTION
OR PROCEEDING OR EXERCISING ANY RIGHTS AGAINST BORROWER AND AGAINST THE
COLLATERAL IN ANY OTHER JURISDICTION. 
INITIATING SUCH SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY
OTHER JURISDICTION SHALL IN NO EVENT CONSTITUTE A WAIVER OF THE AGREEMENT
CONTAINED HEREIN THAT THE LAWS OF THE DISTRICT OF COLUMBIA SHALL GOVERN THE
RIGHTS AND OBLIGATIONS OF BORROWER AND LENDER AS PROVIDED HEREIN OR THE
SUBMISSION HEREIN BY BORROWER TO PERSONAL JURISDICTION WITHIN THE DISTRICT OF
COLUMBIA.  BORROWER AND LENDER EACH (I) COVENANTS
AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING UNDER
ANY OF THE LOAN DOCUMENTS TRIABLE BY A JURY AND (II) WAIVES ANY RIGHT TO
TRIAL BY JURY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST.  THIS WAIVER IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A
JURY TRIAL WOULD OTHERWISE ACCRUE. 
FURTHER, BORROWER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF
LENDER (INCLUDING, BUT NOT LIMITED TO, LENDER’S COUNSEL) HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, TO BORROWER THAT LENDER WILL NOT SEEK TO ENFORCE THE
PROVISIONS OF THIS SECTION. THE FOREGOING PROVISIONS WERE KNOWINGLY, WILLINGLY
AND VOLUNTARILY AGREED TO BY BORROWER UPON CONSULTATION WITH INDEPENDENT LEGAL
COUNSEL SELECTED BY BORROWER’S FREE WILL.


 


Section 15.07.                                Severability.


 


In the event any provision of this Agreement or in any other Loan
Document shall be held invalid, illegal or unenforceable in any jurisdiction,
such provision will be severable from 


 


50

















 


the remainder hereof as to such jurisdiction and the
validity, legality and enforceability of the remaining provisions will not in
any way be affected or impaired in any jurisdiction.


 


Section 15.08.                                Notices.


 


(a)           Manner
of Giving Notice.  Each notice,
direction, certificate or other communication hereunder (in this Section referred
to collectively as “notices” and singly as a “notice”) which any
party is required or permitted to give to the other party pursuant to this
Agreement shall be in writing and shall be deemed to have been duly and
sufficiently given if:


 


(i)            personally
delivered with proof of delivery thereof (any notice so delivered shall be
deemed to have been received at the time so delivered);


 


(ii)           sent by Federal
Express (or other similar reputable overnight courier) designating morning
delivery (any notice so delivered shall be deemed to have been received on the
Business Day it is delivered by the courier);


 


(iii)          sent by telecopier
or facsimile machine which automatically generates a transmission report that
states the date and time of the transmission, the length of the document
transmitted, and the telephone number of the recipient’s telecopier or
facsimile machine (to be confirmed with a copy thereof sent in accordance with
paragraphs (i) or (ii) above within two Business Days) (any notice so
delivered shall be deemed to have been received (1) on the date of
transmission, if so transmitted before 5:00 p.m. (local time of the
recipient) on a Business Day, or (2) on the next Business Day, if so
transmitted on or after 5:00 p.m. (local time of the recipient) on a
Business Day or if transmitted on a day other than a Business Day);


 


addressed to the parties as follows:


 


	
  As to Borrower:

  	
  SNH FM Financing LLC

  
	
   

  	
  400 Centre Street

  
	
   

  	
  Newton, MA 02548

  
	
   

  	
  Attention:

  	
  David J. Hegarty,
  President

  
	
   

  	
  Telecopy:

  	
  (617) 796-8349

  
	
   

  	
   

  
	
  with a copy to:

  	
  Sullivan Worcester, LLP

  
	
   

  	
  One Post Office Square

  
	
   

  	
  Boston, MA 02109

  
	
   

  	
  Attention:

  	
  Warren Heilbronner

  
	
   

  	
  Telecopy:

  	
  (617) 338-2880

  
	
   

  	
   

  
	
  As to Lender:

  	
  Citibank, N.A.

  
	
   

  	
  325
  E. Hillcrest Drive, Suite 160

  
	
   

  	
  Thousand
  Oaks, CA 91360

  
	
   

  	
   

  
	
   

  	
  Attention:

  	
  Asset Management

  
	
   

  	
  Telecopy:

  	
  (805)
  557-0924

  



 


51

















 


	
   

  	
  Citibank, N.A.

  
	
   

  	
  390
  Greenwich St., 2nd Floor

  
	
   

  	
  New
  York, NY  10013

  
	
   

  	
   

  
	
    

  	
  Attention:

  	
  Middle Office

  
	
   

  	
  Telecopy:

  	
  (212) 723-8951

  
	
   

  	
   

  
	
  As to Fannie Mae:

  	
  Fannie Mae

  
	
   

  	
  3900 Wisconsin Avenue,
  N.W.

  
	
   

  	
  Washington, D.C.
  20016-2899

  
	
   

  	
  Attention:

  	
  Vice President for

  
	
   

  	
   

  	
  Multifamily Asset
  Management

  
	
   

  	
  Telecopy No.:

  	
  (301) 280-2064

  
	
   

  	
   

  
	
  with a copy to:

  	
  Arent Fox LLP

  
	
   

  	
  1675 Broadway

  
	
   

  	
  New York, NY 10019

  
	
   

  	
  Attention:

  	
  David L.
  Dubrow, Esq.

  
	
   

  	
  Telecopy No.:

  	
  (212) 484-3990

  



 


(b)           Change
of Notice Address.  Any party may, by
notice given pursuant to this Section, change the person or persons and/or
address or addresses, or designate an additional person or persons or an
additional address or addresses, for its notices, but notice of a change of
address shall only be effective upon receipt. 
Each party agrees that it shall not refuse or reject delivery of any
notice given hereunder, that it shall acknowledge, in writing, receipt of the
same upon request by the other party and that any notice rejected or refused by
it shall be deemed for all purposes of this Agreement to have been received by
the rejecting party on the date so refused or rejected, as conclusively
established by the records of the U.S. Postal Service, the courier service or
facsimile.


 


Section 15.09.                                Further
Assurances and Corrective Instruments.


 


(a)           Further
Assurances.  To the extent permitted
by law, the parties hereto agree that they shall, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such supplements hereto and such further instruments as Lender or Borrower may
reasonably request and as may be required in the opinion of Lender or its
counsel to effectuate the intention of or facilitate the performance of this
Agreement or any Loan Document.


 


(b)           Further
Documentation.  Without limiting the
generality of subsection (a), in the event any further documentation or
information is required by Lender to correct patent mistakes in the Loan
Documents, materials relating to the Title Insurance Policies or the funding of
the Term Loan, Borrower shall provide, or cause to be provided to Lender, at
Borrower’s cost 


 


52

















 


and expense, such
documentation or information.  Borrower
shall execute and deliver to Lender such documentation, including but not
limited to any amendments, corrections, deletions or additions to the Notes,
the Security Instruments or the other Loan Documents as is reasonably required
by Lender.


 


(c)           Compliance
with Investor Requirements.  Without
limiting the generality of subsection (a), Borrower shall comply with the
reasonable requirements of Lender to enable Lender to sell the MBS backed by a
Fixed Loan.


 


Section 15.10.                                Term
of this Agreement.


 


This Agreement shall continue in effect until the Termination Date.


 


Section 15.11.                                Assignments;
Third-Party Rights.


 


No Borrower shall assign this Agreement, or delegate any of its
obligations hereunder, without the prior written consent of Lender.  Lender may assign its rights and/or
obligations under this Agreement separately or together, without Borrower’s
consent, only to Fannie Mae or other entity if such assignment is made with the
intent that such entity will further assign such rights to Fannie Mae, but may
not delegate its obligations under this Agreement unless it first receives
Fannie Mae’s written approval.  Lender
shall first assign its rights under this Agreement separately or together,
without Borrower’s consent, to Fannie Mae. 
Upon assignment to Fannie Mae, Fannie Mae shall be permitted to further
assign its rights under this Agreement separately or together, without
Borrower’s consent.


 


Section 15.12.                                Headings.


 


Article and Section headings used herein are for convenience
of reference only, are not part of this Agreement and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Agreement.


 


Section 15.13.                                General
Interpretive Principles.


 


For purposes of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires, (i) the terms defined in
Appendix I and elsewhere in this Agreement have the meanings assigned to them
in this Agreement and include the plural as well as the singular, and the use
of any gender herein shall be deemed to include the other genders; (ii) accounting
terms not otherwise defined herein have the meanings assigned to them in
accordance with GAAP; (iii) references herein to “Articles,” “Sections,”
“subsections,” “paragraphs” and other subdivisions without reference to a
document are to designated Articles, Sections, subsections, paragraphs and
other subdivisions of this Agreement; (iv) a reference to a subsection
without further reference to a Section is a reference to such subsection
as contained in the same Section in which the reference appears, and this rule shall
also apply to paragraphs and other subdivisions; (v) a reference to an Exhibit or
a Schedule without a further reference to the document to which the Exhibit or
Schedule is attached is a reference to an Exhibit or Schedule to this
Agreement; (vi) the words “herein,” “hereof,” “hereunder” and other words
of similar import 


 


53

















 


refer to this Agreement as a whole and not to any
particular provision; and (vii) the word “including” means “including, but
not limited to.”


 


Section 15.14.                                Interpretation.


 


The parties hereto acknowledge that each party and their respective
counsel have participated in the drafting and revision of this Agreement and the
Loan Documents.  Accordingly, the parties
agree that any rule of construction that disfavors the drafting party
shall not apply in the interpretation of this Agreement and the Loan Documents
or any amendment or supplement or exhibit hereto or thereto.


 


Section 15.15.                                Standards
for Decisions, Etc.


 


Unless otherwise provided herein, if Lender’s approval is required for
any matter hereunder, such approval may be granted or withheld in Lender’s sole
and absolute discretion.  Unless
otherwise provided herein, if Lender’s designation, determination, selection,
estimate, action or decision is required, permitted or contemplated hereunder,
such designation, determination, selection, estimate, action or decision shall
be made in Lender’s sole and absolute discretion.


 


Section 15.16.                                Decisions
in Writing.


 


Any approval, designation, determination, selection, action or decision
of Lender or Borrower must be in writing to be effective.


 


Section 15.17.                                Requests.


 


Borrower may submit up to a total of six (6) Requests per Calendar
Year.


 


Section 15.18.                                Conflicts
Between Agreements.


 


Any terms and conditions contained in this Agreement that may also be
contained in another Loan Document are not, to the extent reasonably
practicable, to be construed to be in conflict with each other but rather is
construed as duplicative, confirming, additional, or cumulative
provisions.  To the extent that, in the
interpretation of this Agreement, any ultimate conflict between the terms and
conditions of this Agreement and those set forth in another Loan Document is
determined to exist, the terms and conditions of this Agreement are to control.


 


IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.


 


(Signatures appear on following pages)


 


54

















 


	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  SNH FM Financing LLC, a
  Delaware limited

  liability company

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David J. Hegarty

  
	
   

  	
  Name:

  	
  David J. Hegarty

  
	
   

  	
  Title:

  	
  President

  



 


S-1

















 


	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  Citibank, N.A., a national
  banking association

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kathy Millhouse

  
	
   

  	
  Name:

  	
  Kathy Millhouse

  
	
   

  	
  Title:

  	
  Vice President

  



 


S-2

















 


ACKNOWLEDGED AND AGREED TO BY IDOT GUARANTOR


 


 


	
   

  	
  SNH FM Financing Trust, a
  Maryland real estate

  investment trust

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David J. Hegarty

  
	
   

  	
  Name:

  	
  David J. Hegarty

  
	
   

  	
  Title:

  	
  President

  



 


S-3

















 


ACKNOWLEDGED AND AGREED TO BY IDOT GUARANTOR


 


 


	
   

  	
  Ellicott City Land I, LLC, a
  Delaware limited

  liability company

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David J. Hegarty

  
	
   

  	
  Name:

  	
  David J. Hegarty

  
	
   

  	
  Title:

  	
  President

  



 


S-4
















 


EXHIBIT A


 


Schedule of Initial Mortgaged Properties, Initial
Allocable


Loan Amounts and Initial Valuations


 


 

















 


EXHIBIT B


 


Confirmation of Guaranty


 


 

















 


EXHIBIT C


 


Compliance Certificate


 


 

















 


EXHIBIT D-1


 


Borrower Organizational Certificate


 


 

















 


EXHIBIT D-2


 


Guarantor Organizational Certificate


 


 

















 


EXHIBIT E


 


Reserved


 


 

















 


EXHIBIT F


 


Reserved


 


 

















 


EXHIBIT G


 


Reserved


 


 

















 


EXHIBIT H


 


Reserved


 


 

















 


EXHIBIT I


 


Request


 


 

















 


EXHIBIT J


 


Confirmation of Obligations


 


 

















 


EXHIBIT K


 


Reserved


 


 

















 


EXHIBIT L


 


Reserved


 


 

















 


EXHIBIT M


 


Reserved


 


 

















 


EXHIBIT N


 


Reserved


 


 

















 


EXHIBIT O


 


Disclosure Schedule


 


 

















 


EXHIBIT P


 


Letter of Credit


 


 

















 


EXHIBIT Q-1


 


Bank Legal Opinion (Foreign)


 


 

















 


EXHIBIT Q-2


 


Bank Legal Opinion (Domestic)


 


 

















 


EXHIBIT R


 


Form of Rent Roll


 


 

















 


EXHIBIT S


 


Expansion Guaranty


 


 

















 


EXHIBIT T


 


Expansion Security Agreement


 


 

















 


SCHEDULE 1


 


Minimum Rent Payments


 


Certain
Schedules and Exhibits to this agreement have been omitted and will be
furnished supplementally to the Securities and Exchange Commission upon
request.


 


 
















 


APPENDIX I


 


DEFINITIONS


 


For all purposes of the Agreement, the following terms shall have the
respective meanings set forth below:


 


“Acquiring Person” means a “person” or “group of persons” within
the meaning of Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended.


 


“Additional Collateral Due Diligence Fees”
means the due diligence fees paid by Borrower to Lender with respect to each
Substitute Mortgaged Property, as set forth in Section 10.02(b).


 


“Adjustable Rate” means in connection with the Variable Facility
Note.


 


“Affiliate” means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control
with, that Person.  For the purposes of
this definition, “control” (including with correlative meanings, the terms
“controlling,” “controlled by” and “under common control with”), as applied to
any Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management (other than property management)
and policies of that Person, whether through the ownership of voting
securities, partnership interests or by contract or otherwise.


 


“Aggregate Lease Payment Debt Service Coverage Ratio” means, for
any specified date, the ratio (expressed as a percentage) of —


 


(a)           the
aggregate of the Lease Payments for the Mortgaged Properties for the preceding
number of months as determined pursuant to the Underwriting Requirements


 


to


 


(b)           the
Facility Debt Service on the specified date.


 


“Aggregate Loan to Value Ratio” means, for any specified date,
the ratio (expressed as a percentage) of—


 


(a)           the
amount of the Term Loan Outstanding and Supplemental Loan Outstanding on the
specified date,


 


to


 


I-1

















 


(b)           the
aggregate of the Valuations most recently obtained prior to the specified date
for all of the Mortgaged Properties.


 


“Aggregate NOI Debt Service Coverage Ratio” means, for any
specified date, the ratio (expressed as a percentage) of—


 


(a)           the
aggregate of the Net Operating Income for the Mortgaged Properties for the
preceding number of months as determined pursuant to the Underwriting
Requirements


 


to


 


(b)           the
Facility Debt Service on the specified date.


 


“Agreement” means this Master Credit Facility Agreement, as it
may be amended, restated, supplemented or otherwise modified from time to time,
including all Recitals and Exhibits to the Agreement, each of which is hereby
incorporated into the Agreement by this reference.


 


“Allocable Loan Amount” means the portion of the Term Loan
allocated to a particular Mortgaged Property by Lender in accordance with the
Agreement.  The initial Allocable Loan
Amount (“Initial Allocable Loan Amount”) for each of the Initial Mortgaged
Properties is as set forth in Exhibit A to the Agreement.


 


“Alzheimer/Dementia Units” shall mean all such units that are
licensed to and operate as Alzheimers or dementia care units in a Seniors
Housing Facility.


 


“Amortization Period” means a period of thirty (30) years.


 


“Applicable Law” means (a) all applicable provisions of all
constitutions, statutes, rules, regulations and orders of all governmental
bodies, all Governmental Approvals and all orders, judgments and decrees of all
courts and arbitrators, (b) all zoning, building, environmental and other
laws, ordinances, rules, regulations and restrictions of any Governmental
Authority affecting the ownership, management, use, operation, maintenance or
repair of any Mortgaged Property, including the Americans with Disabilities Act
(if applicable), the Fair Housing Amendment Act of 1988 and Hazardous Materials
Laws (as defined in the Security Instrument), (c) any building permits or
any conditions, easements, rights-of-way, covenants, restrictions of record or
any recorded or unrecorded agreement affecting or concerning any Mortgaged
Property including planned development permits, condominium declarations, and
reciprocal easement and regulatory agreements with any Governmental Authority, (d) all
laws, ordinances, rules and regulations, whether in the form of rent
control, rent stabilization or otherwise, that limit or impose conditions on
the amount of rent that may be collected from the units of any Mortgaged
Property, and (e) requirements of insurance companies or similar
organizations, affecting the operation or use of any Mortgaged Property or the
consummation of the transactions to be effected by the Agreement or any of the
other Loan Documents.


 


I-2

















 


“Appraisal” means an appraisal of a Seniors Housing Facility
conforming to the requirements of Lender for similar loans anticipated to be
sold to Fannie Mae and accepted by Lender.


 


“Appraised Value” means the value set forth in an Appraisal.


 


“Assignment of Lease Guaranty” means that certain Assignment of
Lease Guaranty dated the date hereof among Borrower, IDOT Guarantor, Lender and
Five Star Quality Care, Inc.


 


“Assignment of Leases and Rents” means an Assignment of Leases
and Rents, required by Lender and satisfying Lender’s requirements, as the same
may be amended, restated, modified or supplemented from time to time.


 


“Assisted Living Units” shall mean all such units that are
licensed to and operate as Assisted Living care units in a Seniors Housing
Facility.


 


“Bankruptcy Code” means Title 11 of the United States Code
entitled “Bankruptcy” as now and hereafter in effect, or any successor statute.


 


“Bankruptcy Event” shall have the meaning set forth in Section 14.01(b).


 


“Borrower” means SNH FM Financing LLC, a Delaware limited
liability company, together with its permitted successors and assigns.


 


“Business Day” means a day on which Fannie Mae and Servicer is
open for business.


 


“Calendar Quarter” means, with respect to any year, any of the
following three month periods:  (a) January-February-March;
(b) April-May-June; (c) July-August-September; and (d) October-November-December.


 


“Calendar Year” means the 12-month period from the first day of January to
and including the last day of December, and each 12-month period thereafter.


 


“Capitalization Rate” means, for each Mortgaged Property, a
capitalization rate selected by Lender for use in determining the Valuations,
which rate is determined as set forth in Section 2.01(b).


 


“Cash Equivalents” means


 


(a)           securities
issued or fully guaranteed or insured by the United States Government or any
agency thereof and backed by the full faith and credit of the United States
having maturities of not more than twelve (12) months from the date of
acquisition (for the purposes of this
definition, agency securities shall mean “Government Securities” within the
meaning of the Investment Act of 1940 or Section 1.860G-2(a)(8)(1) of
the Treasury Regulations); and


 


I-3

















 


(b)           certificates
of deposit, time deposits, demand deposits, eurodollar time deposits,
repurchase agreements, reverse repurchase agreements, or bankers’ acceptances,
having in each case a term of not more than twelve (12) months, issued by
any commercial bank having membership in the FDIC, or by any U.S. commercial
lender (or any branch or agency of a non-U.S. bank licensed to conduct business
in the U.S.) having combined capital and surplus of not less than $100,000,000
whose short-term securities are rated at least A-1 by S&P or P-1 by
Moody’s; and


 


(c)           commercial
paper of an issuer rated at least A-1 by S&P or P-1 by Moody’s and in
either case having a term of not more than twelve (12) months.


 


“Certificate of Borrower” means that certain
Master Certificate of Borrower executed by the Borrower as of the date hereof,
and which must be executed and delivered by the Borrower to Lender from time to
time in accordance with the terms of this Agreement, the form of which
certificate shall be the same or substantially similar to which the Borrower
executes as of the date hereof.


 


“Certificate of IDOT Guarantor” means those certain Certificates
of Guarantor executed by the IDOT Guarantor as of the date hereof, and which
must be executed and delivered by the IDOT Guarantor to Lender from time to
time in accordance with the terms of this Agreement, the form of which
certificate shall be the same or substantially similar to which the IDOT
Guarantor executes as of the date hereof.


 


“Change of Control” means the earliest to occur
of: (a) the date on which an Acquiring Person becomes (by acquisition,
consolidation, merger or otherwise), directly or indirectly, the beneficial
owner of more than twenty five percent (25%) of the total ownership interest of
any Targeted Entity then outstanding, or (b) the replacement (other than
solely by reason of retirement at age sixty or older, death or disability) of
more than fifty percent (50%) (or such lesser percentage as is required for
decision-making by the board of directors or an equivalent governing body) of
the members of the board of directors (or an equivalent governing body) of any
Targeted Entity over a one-year period from the directors who constituted such
board of directors at the beginning of such period and such replacement shall
not have been approved by a vote of at least a majority of such board of
directors of any Targeted Entity then still in office who either were members
of such board of directors at the beginning of such one-year period or whose
election as members of the board of directors was previously so approved (it
being understood and agreed that in the case of any entity governed by a
trustee, board of managers, or other similar governing body, the foregoing
clause (b) shall apply thereto by substituting such governing body and the
members thereof for the board of directors and members thereof, respectively)
or (c) the board of trustees of Key Principal does not consist of at least
two trustees that are directors, employees or officers of REIT Management & Research LLC
or the business management agreement between Key Principal and REIT Management &
Research LLC is terminated or (d) the board of directors or board of
trustees of Borrower or any member of Borrower does not consist of at least a
controlling majority of directors, employees or officers of REIT Management & Research LLC.


 


I-4

















 


“Closing Date” means the Initial Closing Date and each date
after the Initial Closing Date on which the funding or other transaction
requested in a Request is required to take place.


 


“Collateral” means the Mortgaged Properties and other collateral
from time to time or at any time encumbered by the Security Instruments, or any
other property securing Borrower’s obligations under the Loan Documents.


 


“Collateral Assignment of Guaranty Agreement” shall mean that
certain Collateral Assignment of Guaranty Agreement dated the date hereof among
SNH FM Financing LLC, SNH FM Financing Trust, Ellicott City Land I, LLC and
Citibank, N.A.


 


“Collateral Pool” means all of the Collateral.


 


“Compliance Certificate” means a certificate of Borrower
substantially in the form of Exhibit C to the Agreement.


 


“Completion/Repair and Security Agreement” means a Master
Completion/Repair and Security Agreement required by Lender and satisfying
Lender’s requirements, as the same may be amended, restated, modified or
supplemented from time to time.


 


“Confirmation of Guaranty” means a confirmation of the Guaranty
and the IDOT Guaranty executed by Guarantor and IDOT Guarantor, respectively,
in connection with any Request after the Initial Closing, substantially in the
form of Exhibit B to the Agreement.


 


“Confirmation of Obligations” means a Confirmation of
Obligations delivered in connection with the addition of a Substitute Mortgaged
Property to the Collateral Pool or a release of a Release Mortgaged Property
from the Collateral Pool, dated as of the Closing Date for each such addition,
signed by Borrower and Key Principal, pursuant to which Borrower and Key
Principal confirm their obligations under the Loan Documents substantially in
the form of Exhibit J to the Agreement.


 


“Controlled” (or any variation of such term) of one entity (the
“controlled entity”) by another (the “controlling entity”) means
that the controlling entity has the power and authority, directly or
indirectly, to direct or cause the direction of the management and policies of
the controlled entity, by contract or otherwise.


 


“Controlled Group” means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Internal Revenue Code.


 


“Debt Service Amounts” shall have the meaning set forth in Section 14.01(a).


 


“Disclosure Schedule” means that certain Disclosure Schedule
attached hereto as Exhibit O.


 


“DUS Guide” means the Fannie Mae Delegated Underwriting and
Servicing Guide in its present form and as amended, modified, supplemented or
reissued from time to time (all 


 


I-5

















 


references to Parts, Chapters, Sections and other
subdivisions of the DUS Guide shall be deemed references to (i) the Parts,
Chapters, Sections and other subdivisions in effect on the date of the DUS
Guide and (ii) any successor provisions to such Parts, Chapters, Sections
and other subdivisions.


 


“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended from time to time, and the regulations
promulgated thereunder.


 


“Event of Default” means any event defined to be an “Event of
Default” under Article 11.


 


“Event of Default has occurred and is continuing” shall mean
that an Event of Default has occurred which has not been cured to the
satisfaction of Lender, provided however, that nothing shall be construed to
require Lender to accept any cure, or grant any cure period not otherwise
provided for in this Agreement.


 


“Expansion Guaranty” means that certain Expansion Guaranty,
attached hereto as Exhibit S, as it may be amended, restated,
supplemented or otherwise modified from time to time.


 


“Expansion Security Agreement” means that certain Expansion
Security Agreement, attached hereto as Exhibit T, as it may be
amended, restated, supplemented or otherwise modified from time to time.


 


“Facility Debt Service” means —


 


For use in determining
the Aggregate NOI Debt Service Coverage Ratio, for purposes of determining
compliance with the Release Coverage and LTV Tests and the Substitution
Coverage and LTV Tests, and for other ongoing monitoring purposes, and in
connection with the underwriting of any substitution or release, the sum of:


 


(i)                                     the
amount of interest and principal amortization, during the preceding number of
months as determined pursuant to the Underwriting Requirements, with respect to
the Term Loan Outstanding and Supplemental Loan Outstanding (if any) on the
specified date, except that, for these purposes:


 


(A)                              the
Variable Loan shall be deemed to require level monthly payments of principal
and interest at an interest rate equal to the Cap Rate (the Cap Rate is 9.415%,
the maximum Adjustable Rate set forth in the Variable Facility Note) in an
amount necessary to fully amortize the original principal amount of the
Variable Loan over the Amortization Period, with such amortization to commence
on the first day of the twelve (12) month period; and


 


(B)                                each
variable rate Supplemental Loan shall be deemed to require level monthly
payments of principal and interest at an interest rate equal to that 


 


I-6

















 


rate
which is calculated in accordance with the Underwriting Requirements then in
effect; and


 


(C)                                the
Fixed Loan and each fixed rate Supplemental Loan shall require level monthly
payments of principal and interest (at the Interest Rate as set forth in the
Fixed Facility Note or the interest rate as set forth in the note evidencing
such Supplemental Loan) in an amount necessary to fully amortize the original
principal amount of the Fixed Loan and Supplemental Loan over the Amortization
Period, with such amortization to commence on the first day of the period
determined pursuant to the Underwriting Requirements.


 


“Fannie Mae” means the body corporate duly
organized under the Federal National Mortgage Association Charter Act, as
amended, 12 U.S.C. §1716 et  seq. and duly organized and existing
under the laws of the United States.


 


“Fees” means Additional Collateral Due Diligence Fees, Initial
Due Diligence Fees, Initial Origination Fee, Release Fee, Substitution Fee, LOC
Fee and any and all other fees specified in the Agreement.


 


“First Anniversary” means the date that is one year after the
Initial Closing Date.


 


“Fixed Loan” means the loan in the amount of $307,760,000
evidenced by the Fixed Facility Note.


 


“Fixed Facility Note” means a promissory note (together with all
schedules, riders, allonges, addenda, renewals, extensions, amendments and
modifications thereto) which will be issued by Borrower to Lender, concurrently
with the funding of the Fixed Loan on the Initial Closing Date.


 


“GAAP” means generally accepted accounting principles in the
United States in effect from time to time, consistently applied.


 


“General Conditions” shall have the meaning set forth in Article 6.


 


“Geographical Diversification Requirements” shall mean that as
the result of the release or substitution of a Mortgaged Property (i) the
aggregate Allocable Loan Amount allocated to Mortgaged Properties in any one
state does not increase by 5% or more from the percentages set forth below and (ii) the
Allocable Loan Amount associated with the Mortgaged Properties located in any
two states shall not exceed 40% of the Outstanding principal balance of the
Term Loan:


 


I-7

















 


	
  State

  	
   

  	
  Percentage of Allocable

  Loan Amount

  	
   

  
	
  CA

  	
   

  	
  14.87

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  TX

  	
   

  	
  18.60

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  KY

  	
   

  	
  6.06

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  NM

  	
   

  	
  5.40

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  OH

  	
   

  	
  3.76

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  IN

  	
   

  	
  5.01

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  FL

  	
   

  	
  7.77

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  AZ

  	
   

  	
  6.56

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  MA

  	
   

  	
  4.38

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  KS

  	
   

  	
  4.12

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  MD

  	
   

  	
  9.50

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  DE

  	
   

  	
  1.50

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  GA

  	
   

  	
  1.88

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  VA

  	
   

  	
  8.01

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  NC

  	
   

  	
  1.71

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  WI

  	
   

  	
  0.87

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  100.00

  	
  %

  



 


“Governmental Approval” means an authorization, permit, consent,
approval, license, registration or exemption from registration or filing with,
or report to, any Governmental Authority.


 


“Governmental Authority” means any court, board, agency,
commission, office or authority of any nature whatsoever for any governmental
unit (federal, state, county, district, municipal, city or otherwise) whether
now or hereafter in existence.


 


“Gross Revenues” means, for any specified period, with respect
to any Seniors Housing Facility, all income in respect of such Seniors Housing
Facility as reflected on the certified operating statement for such specified
period as adjusted to exclude unusual income (e.g. temporary or nonrecurring
income), income not allowed by Lender for similar loans anticipated 


 


I-8

















 


to be sold to Fannie Mae (e.g. interest income,
furniture income, etc.), and the value of any unreflected concessions.


 


“Guarantor” means the Key Principal, IDOT Guarantor and any
Person that becomes a guarantor and provides a Guaranty in connection with the
Obligations under this Agreement.


 


“Guaranty” means the Guaranty executed by Key Principal
guaranteeing the obligations set forth in Section 14.01(a)(vi), as the same may be amended,
restated, modified or supplemented from time to time.


 


“Hazardous Substance Activity” means, with respect to any
Mortgaged Property, any storage, holding, existence, release, spill, leaking,
pumping, pouring, injection, escaping, deposit, disposal, dispersal, leaching,
migration, use, treatment, emission, discharge, generation, processing,
abatement, removal, disposition, handling or transportation of any Hazardous
Materials (as defined in the Security Instrument) from, under, into or on such
Mortgaged Property in violation of Hazardous Materials Laws (as defined in the
Security Instrument), including the discharge of any Hazardous Materials
emanating from such Mortgaged Property in violation of Hazardous Materials Laws
through the air, soil, surface water, groundwater or property and also
including the abandonment or disposal of any barrels, containers and other
receptacles containing any Hazardous Materials from or on such Mortgaged
Property in violation of Hazardous Materials Laws, in each case whether sudden
or nonsudden, accidental or nonaccidental.


 


“IDOT Guarantor” means SNH FM Financing Trust, a Maryland real
estate investment trust and Ellicott City Land I, LLC, a Delaware limited
liability company.


 


“IDOT Guaranty” means each Guaranty executed by the IDOT
Guarantor as the same may be amended, restated, modified or supplemented from
time to time.


 


“Impositions” means, with respect to any Mortgaged Property, all
(1) water and sewer charges which, if not paid, may result in a lien on
all or any part of the Mortgaged Property, (2) premiums for fire and other
hazard insurance, rent loss insurance and such other insurance as Lender may
require under any Security Instrument, (3) Taxes, and (4) amounts for
other charges and expenses which Lender at any time reasonably deems necessary
to protect the Mortgaged Property, to prevent the imposition of liens on the
Mortgaged Property, or otherwise to protect Lender’s interests.


 


“Indebtedness” means, with respect to any Person, as of any
specified date, without duplication, all:


 


(a)           indebtedness
of such Person for borrowed money or for the deferred purchase price of
property or services (other than (i) current trade liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices, and (ii) for construction of improvements to property, if such
person has a non-contingent contract to purchase such property);


 


I-9

















 


(b)           other
indebtedness of such Person that is evidenced by a note, bond, debenture or
similar instrument;


 


(c)           obligations
of such Person as lessee under any lease of property, real or personal, which
obligations are required by GAAP to be capitalized on a balance sheet of the
lessee or to be otherwise disclosed as such in a note to such balance sheet;


 


(d)           obligations
of such Person in respect of acceptances (as defined in Article 3 of the
Uniform Commercial Code of the District of Columbia) issued or created for the
account of such Person;


 


(e)           liabilities
secured by any Lien on any property owned by such Person even though such
Person has not assumed or otherwise become liable for the payment of such
liabilities; and


 


(f)            as
to any Person (“guaranteeing person”), any obligation of (a) the
guaranteeing person or (b) another Person (including any bank under any
letter of credit) to induce the creation of a primary obligation (as defined
below) with respect to which the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case
guaranteeing, or in effect guaranteeing, any indebtedness, lease, dividend or
other obligation (“primary obligations”) of any third person (“primary
obligor”) in any manner, whether directly or indirectly, including any
obligation of the guaranteeing person, whether or not contingent, to (1) purchase
any such primary obligation or any property constituting direct or indirect
security therefor, (2) advance or supply funds for the purchase or payment
of any such primary obligation or to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or solvency of
the primary obligor, (3) purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, or (4) otherwise assure or hold harmless the owner of any such
primary obligation against loss in respect of the primary obligation, provided,
however, that the term “Contingent Obligation” shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business.  The amount of any Contingent
Obligation of any guaranteeing person shall be deemed to be the lesser of (i) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made and (ii) the maximum
amount for which such guaranteeing person may be liable pursuant to the terms
of the instrument embodying such Contingent Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may be
liable are not stated or determinable, in which case the amount of such
Contingent Obligation shall be such guaranteeing person’s maximum reasonably
anticipated liability in respect thereof as determined by such person in good
faith.


 


“Indemnification
Agreement Regarding Taxes” means that certain Indemnification Agreement
Regarding Taxes executed by IDOT Guarantor, Borrower and Key Principal on the
Initial Closing Date.


 


I-10
















 


“Independent Living Units” shall mean all such units that are
licensed to and operate as Independent Living care units in a Seniors Housing
Facility.


 


“Initial Closing Date” means the date of the Agreement.


 


“Initial Due Diligence Fees” shall have the meaning set forth in
Section 10.02(a).


 


“Initial Mortgaged Properties” means the Seniors Housing
Facilities described on Exhibit A to the Agreement and which
represent the Seniors Housing Facilities which are made part of the Collateral
Pool on the Initial Closing Date.


 


“Initial Origination Fee” shall have the meaning set forth in Section 10.01(a).


 


“Initial Security Instruments” means the Security Instruments
covering the Initial Mortgaged Properties.


 


“Initial Valuation” means, when used with reference to specified
Collateral, the Valuation initially performed for the Collateral as of the date
on which the Collateral was added to the Collateral Pool.  The Initial Valuation for each of the Initial
Mortgaged Properties is as set forth in Exhibit A to the Agreement.


 


“Insurance Policy” means, with respect to a Mortgaged Property,
the insurance coverage and insurance certificates evidencing such insurance
required to be maintained pursuant to the Security Instrument encumbering the
Mortgaged Property.


 


“Internal Revenue Code” means the Internal Revenue Code of 1986,
as amended.  Each reference to the
Internal Revenue Code shall be deemed to include (a) any successor
internal revenue law and (b) the applicable regulations whether final,
temporary or proposed.


 


“Key Principal” means Senior Housing Properties Trust, a
Maryland real estate investment trust.


 


“Lease” means any lease, any sublease or sub-sublease, license,
concession or other agreement (whether written or oral and whether now or
hereafter in effect) pursuant to which any Person is granted a possessory
interest in, or right to use or occupy all or any portion of any space in any
Mortgaged Property, and every modification, amendment or other agreement
relating to such lease, sublease, sub-sublease or other agreement entered into
in connection with such lease, sublease, sub-sublease or other agreement, and
every guarantee of the performance and observance of the covenants, conditions
and agreements to be performed and observed by the other party thereto, any residency,
occupancy, admission and care agreements pertaining to residents of the
Mortgaged Property and any Operating Lease.


 


“Lease Payment” means for any specified period for any Mortgage
Property, the rental payments (including but not limited to payments defined as
“Rent”, “Additional Rent” and/or “Minimum Rent” in the Operating Lease but
should not include payments that are reimbursed to landlord by tenant if even
such amounts are treated as “Rent”, “Additional Rent” under an 


 


I-11

















 


Operating Lease) made by Master Tenant as
tenant/lessee to Borrower as landlord/lessor pursuant to the terms of the
Operating Lease.


 


“Lease Payment Debt Service Coverage Ratio” means, for any
Mortgaged Property, for any specified date, the ratio (expressed as a
percentage) of —


 


(a)           the
Lease Payments for the subject Mortgaged Property for the preceding number of
months as determined pursuant to the Underwriting Requirements


 


to


 


(b)           the
Facility Debt Service on the specified date, assuming, for the purpose of
calculating the Facility Debt Service for this definition, that the amount of
the Term Loan Outstanding shall be the Allocable Loan Amount and the amount of
the Supplemental Loan Outstanding  shall
be the Supplemental Allocable Loan Amount, in each case for the subject
Mortgaged Property.


 


“Lender” means Citibank, N.A. and, after the assignment to
Fannie Mae, means Fannie Mae and its successors and assigns for all purposes of
this Agreement except that “Lender” shall continue to mean Citibank, N.A. or
any replacement Person designated by Fannie Mae in relation to all obligations
under this Agreement including the obligation to make any Supplemental Loans.


 


“Letter of Credit” means a letter of credit issued by an LOC Bank
satisfactory to Fannie Mae naming Fannie Mae as beneficiary, in form and
substance as attached hereto as Exhibit P.


 


“Level of Care Diversity Requirements” means that the seniors
housing units of the Mortgaged Properties shall conform on a Collateral Pool
basis with the following percentage requirements:


 


Independent Living Units — minimum 51%;


 


Assisted Living Units — maximum 35%;


 


Alzheimer/Dementia Units — maximum 10%; and


 


Skilled Nursing Units — maximum 13%.


 


“Licenses” means any operating license,
certificates of occupancy, health department licenses, food service licenses,
certificates of need, business licenses, permits, registrations, certificates,
authorizations, approvals, and similar documents required by applicable laws
and regulations for the operation of the Mortgaged Property as a Seniors
Housing Facility, including replacements and additions thereto.


 


“Lien” means any mortgage, deed of trust, deed to secure debt,
security interest or other lien or encumbrance (including both consensual and
non-consensual liens and encumbrances).


 


I-12

















 


“Liquidity” means, at any time, the amount of cash and Cash
Equivalents owned by a Person.


 


“Loan Document Taxes” shall have the meaning set forth in Section 8.10.


 


“Loan Documents” means the Agreement, the Notes, the Security
Documents, the Guaranty, the IDOT Guaranty, the Certificate of IDOT Guarantor,
the Indemnification Agreement Regarding Taxes, Collateral Assignment of
Guaranty Agreement, Expansion Security Agreement, if any, Expansion Guaranty,
if any and all documents executed by Borrower, IDOT Guarantor or Key Principal
pursuant to the General Conditions set forth in Section 6.01 of the
Agreement and any other documents executed by Borrower, IDOT Guarantor or Key
Principal from time to time in connection with the Agreement or the
transactions contemplated by the Agreement.


 


“Loan to Value Ratio” means, for a Mortgaged Property, for any
specified date, the ratio (expressed as a percentage) of —


 


(a)           the
Allocable Loan Amount and the Supplemental Allocable Loan Amount of the subject
Mortgaged Property on the specified date,


 


to


 


(b)           the
Valuation most recently obtained prior to the specified date for the subject
Mortgaged Property.


 


“LOC Bank” means any financial institution issuing the Letter of
Credit and meeting the requirements set forth in Section 6.12(a).


 


“Margin” has the definition set forth in the Variable Facility
Note or the note evidencing a Supplemental Loan, as applicable.


 


“Master Tenant” means, FVE FM Financing, Inc., corporation
organized under the laws of Maryland, and its successors and assigns or any
other Master Tenant under the Operating Lease of all the Mortgaged Properties
approved in writing by Lender.


 


“Master Tenant’s Authorized Representative” means those persons
duly appointed and identified as such by the Master Tenant, which Authorized
Representative shall initially be the President, any Vice President or the
Treasurer of the Master Tenant (or such other officer of the Master Tenant as
may be designated by any of them), each with the authority to act alone or with
one or more persons, and those persons appointed and identified as such by the
Master Tenant in a writing delivered to Borrower, each with the authority to
act alone or with one or more persons.


 


“Master Tenant/Operator Bankruptcy Event” means any one or more
of the following events:


 


(A)                              Master
Tenant or Operator (i) commences a voluntary case (or, if applicable, a
joint case) under any chapter of the Bankruptcy Code or otherwise or consents
to 


 


I-13

















 


or fails to
contest in a timely and appropriate manner any petition filed against it in an
involuntary case under any chapter of the Bankruptcy Code or otherwise, (ii) institutes
(by petition, application, answer, consent or otherwise) any other bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt, dissolution,
liquidation or similar proceeding relating to it under the laws of any
jurisdiction, (iii) makes a general assignment for the benefit of
creditors, (iv) applies for, consents to or acquiesces in the appointment
of any receiver, liquidator, custodian, sequestrator, trustee or similar
officer for it or for all or any substantial part of the Mortgaged Properties
or (v) admits in writing its inability to pay its debts generally as they
mature.


 


(B)                                Any
Master Tenant or Operator, any Affiliate of Master Tenant or Operator files an
involuntary petition against Master Tenant or Operator under any chapter of the
Bankruptcy Code or under any other bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, liquidation or similar
proceeding relating to Master Tenant or Operator under the laws of any
jurisdiction.


 


(C)                                Both
(1) an involuntary petition under any chapter of the Bankruptcy Code is
filed against Master Tenant or Operator, or Master Tenant or Operator directly
or indirectly becomes the subject of any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution, liquidation or
similar proceeding relating to it under the laws of any jurisdiction, or in
equity, and (ii) any Master Tenant or Operator, any Affiliate of Master
Tenant or Operator has acted in concert or conspired with such creditors of
Master Tenant or Operator (other than Fannie Mae or Lender) to cause the filing
thereof.


 


“Material Adverse Effect” means, with respect to any
circumstance, act, condition or event of whatever nature (including any adverse
determination in any litigation, arbitration, or governmental investigation or
proceeding), whether singly or in conjunction with any other event or events,
act or acts, condition or conditions, or circumstance or circumstances, whether
or not related, a material adverse change in or a materially adverse effect
upon any of (a) the business, operations, property or condition (financial
or otherwise) of Borrower or Key Principal, as applicable, to the extent
specifically referred to in the applicable provision of the applicable Loan
Document, (b) the present or future ability of Borrower to perform the
Obligations for which it is liable, or of Key Principal to perform its
obligations under the Guaranty, as the case may be, to the extent specifically
referred to in the applicable provision of the applicable Loan Document, (c) the
validity, priority, perfection or enforceability of the Agreement or any other
Loan Document or the rights or remedies of Lender under any Loan Document, or (d) the
value of, or Lender’s ability to have recourse against, any Mortgaged Property.


 


“MBS” means a mortgage-backed security issued by Fannie Mae
which is “backed” by a Fixed Loan and has an interest in the Note and the
Collateral Pool securing the Note, which interest permits the holder of the MBS
to participate in the Note and the Collateral Pool to the extent of such Fixed
Loan.


 


I-14

















 


“Moody’s” means Moody’s Investors Service, Inc., a
corporation organized and existing under the laws of the State of Delaware, and
its successors and assigns, if such successors and assigns shall continue to
perform the functions of a securities rating agency.


 


“Mortgaged Properties” means, collectively, the Substitute
Mortgaged Properties, and the Initial Mortgaged Properties, but excluding each
Release Mortgaged Property from and after the date of its release from the
Collateral Pool.


 


“Multiemployer Plan” has the meaning set forth in Section 4001(a)(3) of
ERISA.


 


“Net Operating Income” means, for any specified period, with
respect to any Mortgaged Property, the aggregate net income during such period
equal to Gross Revenues during such period less the aggregate Operating
Expenses during such period.  If a
Mortgaged Property is not owned by a Borrower or an Affiliate of a Borrower for
the entire specified period, the Net Operating Income for the Mortgaged
Property for the time within the specified period during which the Mortgaged
Property was owned by a Borrower or an Affiliate of a Borrower shall be the
Mortgaged Property’s pro forma net operating income determined by Lender in
accordance with the underwriting procedures set forth by Lender for similar
loans anticipated to be sold to Fannie Mae.


 


“Net Worth” means, as of any specified date, for any Person, the
excess of the Person’s assets over the Person’s liabilities, determined in
accordance with GAAP on a consolidated basis, provided that all real property
shall be valued on an undepreciated basis.


 


“NOI Debt Service Coverage Ratio” means, for any Mortgaged
Property, for any specified date, the ratio (expressed as a percentage) of —


 


(a)           the
Net Operating Income for the subject Mortgaged Property for the preceding
number of months as determined pursuant to the Underwriting Requirements


 


to


 


(b)           the
Facility Debt Service on the specified date, assuming, for the purpose of
calculating the Facility Debt Service for this definition, that the amount of
the Term Loan Outstanding shall equal the Allocable Loan Amount and the amount
of the Supplemental Loan Outstanding shall be the Supplemental Allocable Loan
Amount, in each case for the subject Mortgaged Property.


 


“Note” means any Fixed Facility Note and/or any Variable
Facility Note.


 


“Obligations” means the aggregate of the obligations of Borrower
and Key Principal  under the Agreement and the other
Loan Documents.


 


“Operating Expenses” means, for any period,
with respect to any Mortgaged Property, all expenses in respect of such
Mortgaged Property, as determined by Lender based on the certified operating
statement for such specified period as adjusted to provide for the following:


 


I-15

















 


(i) all appropriate types of expenses, including
a management fee, deposits for the replacement reserves (whether funded or
not), and deposits for completion/repair reserves are included in the total
operating expense figure; (ii) upward adjustments to individual line item
expenses to reflect market norms or actual costs and correct any unusually low
expense items, which could not be replicated by a different owner or manager (e.g.,
a market rate management fee will be included regardless of whether or not a
management fee is charged, market rate payroll will be included regardless of
whether shared payroll provides for economies, etc.); and (iii) downward
adjustments to individual line item expenses to reflect unique or aberrant
costs (e.g., non-recurring capital costs, non-operating borrower
expenses, etc.).


 


“Operating Lease” means the Amended and Restated Master Lease
Agreement among SNH FM Financing LLC, SNH FM Financing Trust, Ellicott City
Land I, LLC and FVE FM Financing, Inc. and each other Lease, if any,
related to all the Mortgaged Properties executed by and between Borrower, as
lessor, and Master Tenant, as lessee and approved in writing by Lender and any
Sub-Lease thereunder.


 


“Operator” means, any Operator (including any tenant under a
Sub-Lease) of all the Mortgaged Properties approved in writing by Lender.


 


“Operator Guaranty” means any and all guaranties of Operator’s
and/or Master Tenant’s obligations under the Sub-Lease and/or Operating Lease,
respectively.


 


“Operator’s Authorized Representative” means those persons duly
appointed and identified as such by the Operator, which Authorized
Representative shall initially be the President, any Vice President (including
any Senior Vice President), the Treasurer, the Secretary or any Assistant
Secretary of the Operator (or such other officer of the Operator as may be
designated by any of them), each with the authority to act alone or with one or
more persons, and those persons appointed and identified as such by the
Operator in a writing delivered to Borrower, each with the authority to act
alone or with one or more persons.


 


“Organizational Certificate” means, collectively, certificates
from Borrower and Key Principal to Lender, in the form of Exhibits D-1
and D-2 to the Agreement, certifying as to certain organizational
matters with respect to Borrower and Key Principal.


 


“Organizational Documents” means all certificates, instruments
and other documents pursuant to which an organization is organized or operates,
including but not limited to, (i) with respect to a corporation, its
articles of incorporation and bylaws, (ii) with respect to a limited
partnership, its limited partnership certificate and partnership agreement, (iii) with
respect to a general partnership or joint venture, its partnership or joint
venture agreement and (iv) with respect to a limited liability company,
its articles of organization and operating agreement.


 


“Outstanding” or “outstanding” means, when used in
connection with promissory notes, other debt instruments or the Term Loan or
Supplemental Loan, for a specified date, promissory notes or other debt
instruments which have been issued, to the extent not repaid in full as of the
specified date.


 


I-16

















 


“Ownership Interests” means, with respect to any entity, any
ownership interests in the entity and any economic rights (such as a right to
distributions, net cash flow or net income) to which the owner of such
ownership interests is entitled.


 


“PBGC” means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.


 


“Permits” means all permits, or similar licenses or approvals
issued and/or required by an applicable Governmental Authority or any
Applicable Law in connection with the ownership, use, occupancy, leasing,
management, operation, repair, maintenance or rehabilitation of any Mortgaged
Property or Borrower’s business.


 


“Permitted Liens” means, with respect to a Mortgaged Property, (i) the
exceptions to title to the Mortgaged Property set forth in the Title Insurance
Policy for the Mortgaged Property which are approved by Lender, (ii) the
Security Instrument and the Subordination, Assignment and Security Agreement
encumbering the Mortgaged Property, (iii) any other Liens approved by
Lender or permitted under the terms of the Security Instrument, (iv) mechanics
or materialmen’s liens or judgment liens provided the same is removed or bonded
off to the satisfaction of Lender within thirty (30) days of notice of filing, (v) real
estate taxes and water and sewer and other utility charges that are a lien but
not yet due and payable or that are due and payable but not yet delinquent and (vi) leases
and licenses otherwise permitted under this Agreement (including, without
limitation, the Operating Lease and Sub-lease).


 


“Person” means an individual, an estate, a trust, a corporation,
a partnership, a limited liability company or any other organization or entity
(whether governmental or private).


 


“Plan” means at any time an employee pension benefit plan which
is covered by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Internal Revenue Code and is either (i) maintained
by a member of the Controlled Group for employees of any member of the
Controlled Group or (ii) maintained pursuant to a collective bargaining
agreement or any other agreement under which more than one employer makes
contributions and to which a member of the Controlled Group is then making or
accruing an obligation to make contributions or has within the preceding five (5) plan
years made contributions.


 


“Potential Event of Default” means any event that, with the
giving of notice or the passage of time, or both, would constitute an Event of
Default.


 


“Potential Event of Default has occurred and is continuing”
shall mean that Potential Event of Default has occurred which has not been
cured to the satisfaction of Lender, provided however, that nothing shall be
construed to require Lender to accept any cure, or grant any cure period not
otherwise provided for in this Agreement.


 


“Prohibited Person” means (i) a Person that is the subject
of, whether voluntary or involuntary, any case, proceeding or other action
against such Person under any existing or future law of any jurisdiction
relating to bankruptcy, insolvency, reorganization or relief of debtors, or (ii) any
Person with whom Servicer or Fannie Mae is prohibited from doing business 


 


I-17

















 


pursuant to any law, rule, regulation, judicial
proceeding or administrative directive, or (iii) any Person identified on
the federal “Excluded Parties List System”, the “Specially Designated National
and Blocked Persons List”, the federal “Office of Foreign Assets and Control
list, the U.S. Department of Housing and Urban Development’s Limited Denial of
Participation, HUD Funding Disqualifications and Voluntary Abstentions List”,
or on Fannie Mae’s “Multifamily Applicant Experience Check”, each of which may
be amended from time to time and any successor or replacement thereof, or (iv) a
Person that Fannie Mae determines to be an unacceptable credit risk due to the
aggregate amount of debt such Person owes to Fannie Mae, or (v) a Person
that has caused any unsatisfactory experience of a material nature with Fannie
Mae or Servicer, such as a default, fraud, intentional misrepresentation,
litigation, arbitration or other similar act, or (vi) a Person that is, or
whose senior management has ever been convicted of a felony or held liable for
fraud in a civil or criminal action or (vii) a Person that does not meet
the requirements of Section 61 of the Certificate of Borrower.


 


“Property” means any estate or interest in any kind of property
or asset, whether real, personal or mixed, and whether tangible or intangible.


 


“Rate Change Date”, in connection with a Variable Loan, has the
meaning set forth in the Variable Facility Note.


 


“Release Coverage and LTV Tests” mean, for any specified date,
each of the following financial tests:


 


(a)           The
Aggregate NOI Debt Service Coverage Ratio is not less than 1:95:1 with respect
to the amount of the Fixed Loan and any fixed rate Supplemental Loan, and
1:70:1 with respect to the amount of the Variable Loan and any variable rate
Supplemental Loan;


 


(b)           The
Aggregate Lease Payment Debt Service Coverage Ratio shall not be less than  1:35:1.


 


(c)           The
Aggregate Loan to Value Ratio does not exceed 55 percent (55%).


 


“Release Documents” mean instruments releasing the applicable
Security Instrument and the applicable Subordination, Assignment and Security
Agreement as a Lien on a Mortgaged Property, and UCC-3 Termination Statements
terminating the UCC-1 Financing Statements, and such other documents and
instruments to evidence the release of such Mortgaged Property from the
Collateral Pool.


 


“Release Fee” means with respect to any Release effected in
accordance with Section 3.04(c), a fee in the amount of
$10,000  per Release Mortgaged Property.


 


“Release Mortgaged Property” shall have the meaning set forth in
Section 3.05.


 


“Release Price” shall have the meaning set forth in Section 3.04(c).


 


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“Release Request” means a written request, substantially in the
form of Exhibit T to the Agreement, to obtain a release of
Collateral from the Collateral Pool pursuant to Section 3.04(a).


 


“Remaining Mortgaged Properties” shall have the meaning set
forth in Section 6.05(f).


 


“Rent Roll” means, with respect to any Seniors Housing Facility,
a rent roll prepared and certified by the Operator of the Seniors Housing
Facility, on Fannie Mae Form 4243 or on another form approved by Lender
and containing substantially the same information as Form 4243 requires,
it being acknowledged that the forms attached hereto as Exhibit R
are satisfactory to Lender.


 


“Replacement Reserve Agreement” means a Master Replacement
Reserve and Security Agreement required by Lender, and satisfying Lender’s  requirements, as the same may be amended,
modified or supplemented from time to time.


 


“Request” means a Release Request and a Substitution Request.


 


“Required Escrow Payments” has the meaning given that term in Section 13.01(a) of
this Agreement.


 


“Rescinded Payment” has the meaning given that term in Section 14.02
of this Agreement.


 


“S&P” shall mean Standard & Poor’s Credit Markets
Services, a division of The McGraw-Hill Companies, Inc., a New York
corporation, and its successors and assigns, if such successors and assigns
shall continue to perform the functions of a securities rating agency.


 


“Security” means a “security” as set forth in Section 2(1) of
the Securities Act of 1933, as amended.


 


“Security Documents” means the Security Instruments, the
Subordination, Assignment and Security Agreements, Assignment of Lease
Guaranty, the Master Replacement Reserve Agreements, the Completion/Repair and
Security Agreement and any other documents executed by Borrower or IDOT
Guarantor from time to time to secure any of Borrower’s obligations under the
Loan Documents as the same may be amended, restated, modified or supplemented
from time to time.


 


“Security Instrument” means, for each Mortgaged Property, a
Multifamily Mortgage, Deed of Trust or Deed to Secure Debt, Assignment of
Leases and Rents and Security Agreement given by a Borrower and each Indemnity
Multifamily Deed of Trust, Assignment of Rent and Security Agreement given by
IDOT Guarantor to or for the benefit of Lender to secure the obligations of
Borrower under the Loan Documents.  With
respect to each Mortgaged Property owned by a Borrower or IDOT Guarantor, the
Security Instrument shall be substantially in the form published by Fannie Mae
for use in the state in which the Mortgaged Property is located.  The amount secured by the Security Instrument
shall be equal to the Term Loan amount.


 


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“Senior Management” means the President and/or Chief Financial
Officer.


 


“Seniors Housing Facility” means a residential housing facility
that qualifies as “housing for older persons” under the Fair Housing Amendments
Act of 1988 and the Housing for Older Persons Act of 1995 comprised of
independent living units, assisted living units and/or Alzheimer’s/dementia
care units, or skilled nursing units, as applicable.


 


“Servicer” means a servicer approved by Fannie Mae, which
initially shall be Citibank, N.A., and any permitted successor or assign.


 


“Single-Purpose” means, with respect to a Person that is any
form of partnership, real estate investment trust or corporation or limited
liability company, that such Person at all times since its formation:


 


(i)            has been a duly
formed and existing partnership, real estate investment trust, corporation or
limited liability company, as the case may be;


 


(ii)           has been duly
qualified in each jurisdiction in which such qualification was at such time
necessary for the conduct of its business;


 


(iii)          has complied with
the provisions of its organizational documents and the laws of its jurisdiction
of formation in all respects;


 


(iv)          has observed all
customary formalities regarding its partnership, real estate investment trust,
limited liability or corporate existence, as the case may be;


 


(v)           has accurately maintained
its income and expense statements, accounting records and other partnership,
real estate investment trust, limited liability company, or corporate documents
separate from those of any other Person;


 


(vi)          has not commingled
its assets or funds with those of any other Person (except that each Operator
may commingle its funds with the funds of the other Operators in which case its
assets and funds will be separately accounted for in the books and records of
the Person in whose name any assets or funds are held);


 


(vii)         has identified
itself in all dealings with creditors (other than trade creditors in the
ordinary course of business and creditors for the construction of improvements
to property on which such Person has a non-contingent contract to purchase such
property) under its own name and as a separate and distinct entity;


 


(viii)        has been adequately
capitalized in light of its contemplated business operations;


 


(ix)           has not assumed,
guaranteed or become obligated for the liabilities of any other Person (except
in connection with the Term Loan or as otherwise contemplated in the Loan
Documents, or the endorsement of negotiable instruments in the ordinary course
of business) or held out its credit as being available to satisfy the
obligations of any other Person;


 


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(x)            has not acquired
obligations or securities of any other Person;


 


(xi)           except as
contemplated under the Operating Lease, and except for deposits and investments
in Cash Equivalents made in the ordinary course of business, has not made loans
or advances to any other Person;


 


(xii)          has not entered
into and was not a party to any transaction with any Affiliate of such Person,
except in the ordinary course of business and on terms which are no less
favorable to such Person than would be obtained in a comparable arm’s-length
transaction with an unrelated third party;


 


(xiii)         has paid the
salaries of its own employees, if any, and maintained a sufficient number of
employees in light of its contemplated business operations (or has entered into
agreements with third parties or Affiliates to provide all required services
that would otherwise be provided by such number of employees in a manner
consistent with (xii) above;


 


(xiv)        has not engaged in
any business or activity other than the leasing, ownership, operation and
maintenance of the Mortgaged Properties, and activities incidental thereto;


 


(xv)         shall not acquire or
own any assets other than (A) the Mortgaged Properties and/or equity
interests in a Person that owns the Mortgaged Properties and (B) such
incidental personal property as may be necessary to conduct the business and
activities permitted under clause (xiv) above;


 


(xvi)        shall not maintain
its assets in such a manner that it will be costly or difficult to segregate,
ascertain or identify its individual assets from those of any other Person;


 


(xvii)       has not failed to
hold itself out to the public as a legal entity separate and distinct from any
other Person or to conduct its business solely in its own name or fail to
correct any known misunderstanding regarding its separate identity;


 


(xviii)      has allocated fairly
and reasonably any overhead for shared office space;


 


(xix)         has not engaged in a
non-exempt prohibited transaction described in Section 406 of ERISA or Section 4975
of the Internal Revenue Code; and


 


(xx)          has complied with
the requirements of Section 33 of the Security Instrument.


 


“Skilled Nursing Units” shall mean all such facilities, beds or
units that are licensed to operate as Skilled Nursing facilities, beds or units
in a Seniors Housing Facility.


 


“Sub-Lease” means each sub-lease entered into pursuant to the
Operating Lease in which the Master Tenant 
is the landlord and the Operator of the Mortgaged Property is the
tenant.


 


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“Subordination, Assignment and Security Agreement” means those
certain Subordination, Assignment and Security Agreements, dated on the Initial
Closing Date and any subsequent Closing Date, as the same may be amended,
restated, modified and supplemented from time to time.


 


“Substitute Collateral” shall have the meaning set forth in Section 3.04(d)(ii).


 


“Substitute Mortgaged Property” shall have the meaning set forth
in Section 3.05.


 


“Substitution” shall have the meaning set forth in Section 3.05(a).


 


“Substitution Coverage and LTV Tests” mean, for any specified
date, each of the following financial tests:


 


(A)                              Each
Mortgaged Property and the Substitute Mortgaged Property meet the following
tests:


 


(i)            If greater than 50% of the units in
a Mortgaged Property consist of Independent Living Units, the NOI Debt Service
Coverage Ratio of such Mortgaged Property will be equal to or greater than the
NOI Debt Service Coverage Ratio which results from calculating the weighted
average of the Independent Living Units, Assisted Living Units and
Alzheimer/Dementia Units based on the following NOI Debt Service Coverage
Ratios:


 


(a)           Independent
Living Units - not less than 1:60:1 with respect to the amount of the Fixed
Loan, and 1:35:1 with respect to the amount of the Variable Loan;


 


(b)           Assisted
Living Units and Alzheimer/Dementia Units - not less than 1:70:1 with respect
to the amount of the Fixed Loan, and 1:45:1 with respect to the amount of the
Variable Loan;


 


(c)           Skilled
Nursing Units -  not less than 1:70:1
with respect to the amount of the Fixed Loan, and 1:45:1 with respect to the
amount of the Variable Loan.


 


or


 


(ii)           If 50% or more of the units in a
Mortgaged Property consist of Assisted Living Units and Alzheimer/Dementia
Units, the NOI Debt Service Coverage Ratio shall not be less than 1:70:1.


 


or


 


(iii)          if the Mortgaged
Property contains any Skilled Nursing Units, the NOI Debt Service Coverage
Ratio shall not be less than 1:70:1.


 


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(B)


 


(i)            The Aggregate Lease Payment Debt
Service Coverage Ratio for the Collateral Pool shall not be less than 1.35:1;


 


(ii)           The Lease Payment Debt Service
Coverage Ratio for each Mortgaged Property and the Substitute Mortgaged Property
shall not be less than 1.20:1.


 


(C)


 


(i)            The Aggregate Loan to Value Ratio
does not exceed 55 percent (55%).


 


“Substitution Fee” means with respect to any Substitution
effected in accordance with Section 3.05, a fee in the sum of: (i) 50
basis points of the Allocable Loan Amount for the Released Mortgaged Property
and (ii) the Release Fee, per Mortgaged Property being released.


 


“Substitution Request” means the written request to add a
Substitute Mortgaged Property to the Collateral Pool pursuant to Section 3.05,
Section 3.06 and Section 3.07.


 


“Supplemental Loan” means such loan given in accordance with the
Fannie Mae Supplemental Loan product.


 


“Supplemental Loan Documents” shall have the meaning set forth
in Section 2.02.


 


“Survey” means the as-built survey
of each Mortgaged Property prepared in accordance with Lender’s requirements
for similar loans that are anticipated to be sold to Fannie Mae.


 


“Targeted Entity” means individually and collectively, Key
Principal, any direct or indirect Subsidiary of Key Principal that is an owner
of Borrower, IDOT Guarantor and Borrower.


 


“Taxes” means all taxes, assessments, vault rentals and other
charges, if any, general, special or otherwise, including all assessments for
schools, public betterments and general or local improvements, which are
levied, assessed or imposed by any public authority or quasi-public authority,
and which, if not paid, will become a lien, on the Mortgaged Properties.


 


“Term Loan” means the Fixed Loan and Variable Loan.


 


“Term of this Agreement” shall be determined as provided in Section 15.10.


 


“Termination Date” means the maturity date for the Term Loan or
at such time as the Term Loan is no longer Outstanding.


 


“Tier Four Loan” means such loans made pursuant
to the Tier Four requirements and guidelines set forth in the DUS Guide.  If the term Tier Four is no longer a term set
forth in the DUS Guide or is defined by Fannie Mae in a document other than the
DUS Guide, a loan underwritten to a requirement which is the lowest loan to
value ratio and highest debt service coverage ratio categorized by Fannie Mae
at the time.


 


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“Title Company” means the title company which provides title
insurance for a Mortgaged Property.


 


“Title Insurance Policies” means the mortgagee’s policies of
title insurance issued by the Title Company from time to time relating to each
of the Security Instruments, conforming to Lender’s requirements for similar
loans anticipated to be sold to Fannie Mae, together with such endorsements,
coinsurance, reinsurance and direct access agreements with respect to such
policies as Lender may, from time to time, consider necessary or appropriate,
including variable credit endorsements, if available, and tie-in endorsements,
if available, and with a limit of liability under the policy (subject to the
limitations contained in sections of the Stipulations and Conditions of the
policy relating to a Determination and Extent of Liability) equal to the Term
Loan amount.


 


“Transfer” means


 


(1)           as used with respect
to ownership interests in a Targeted Entity, (i) a sale, assignment,
pledge, transfer or other disposition of any ownership interest in a Targeted
Entity, or (ii) the issuance or other creation of new ownership interests
in a Targeted Entity, or (iii) a merger or consolidation of Targeted
Entity into another entity or of another entity into Targeted Entity as the
case may be, or (iv) the reconstitution of Targeted Entity from one type
of entity to another type of entity, or (v) the amendment, modification or
any other change in the governing instrument or instruments of Targeted Entity
which has the effect of changing the relative powers, rights, privileges,
voting rights or economic interests of the ownership interests in such Targeted
Entity.


 


(2)           as used with respect
to ownership interests in a Mortgaged Property, (i) a sale, assignment,
lease, pledge, transfer or other disposition (whether voluntary or by operation
of law) of, or the granting or creating of a lien, encumbrance or security
interest in, any estate, rights, title or interest in a Mortgaged Property, or
any portion thereof (other than a Permitted Lien).  Transfer does not include a conveyance of a
Mortgaged Property at a judicial or non-judicial foreclosure sale under any
security instrument or the Mortgaged Property becoming part of a bankruptcy
estate by operation of law under the Bankruptcy Code.


 


“Underwriting Requirements” means Lender’s overall underwriting
requirements for Seniors Housing Facilities in connection with loans
anticipated to be sold to Fannie Mae, pursuant to Fannie Mae’s then current
guidelines, including, without limitation, requirements relating to Appraisals,
physical needs assessments, and environmental site assessments, as such
requirements may be amended, modified, updated, superseded, supplemented or
replaced from time to time.


 


“Valuation” means, for any specified date, with respect to a
Seniors Housing Facility, (a) if an Appraisal of the Seniors Housing
Facility was more recently obtained than a Capitalization Rate for the Seniors
Housing Facility, the Appraised Value of such Seniors Housing Facility, or (b) if
a Capitalization Rate for the Seniors Housing Facility was more recently
obtained than an Appraisal of the Seniors Housing Facility, the value derived
by dividing—


 


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(i)            the Net Operating
Income of such Seniors Housing Facility, by


 


(ii)           the most recent
Capitalization Rate determined by Lender.


 


Notwithstanding the foregoing, any Valuation for a Seniors Housing
Facility calculated for a date occurring before the first anniversary of the
date on which the Seniors Housing Facility becomes a part of the Collateral
Pool shall equal the Appraised Value of such Seniors Housing Facility, unless
Lender determines that changed market or property conditions warrant that the
value be determined as set forth in the preceding sentence.


 


“Variable Loan” means the loan in the principal amount of
$205,174,000 evidenced by the Variable Facility Note.


 


“Variable Facility Note” means the Adjustable Rate Multifamily
Note (together with all schedules, riders allonges, addenda, renewals,
extensions, amendments and modifications thereto), which has been issued by
Borrower to Lender to evidence Borrower’s obligation to repay the Variable
Loan.


 


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