Second Restated Loan Agreement




SECOND
AMENDED AND RESTATED LOAN AGREEMENT







BETWEEN







HEALTHCARE
REALTY TRUST INCORPORATED







AND







EMERITUS
CORPORATION







MARCH
3, 2005













1084704.12























TABLE
OF CONTENTS




 

ARTICLE
1: PURPOSE AND DEFINITIONS 5

 

 

1.1 Purpose 5

 

 

1.2 Definitions 5

 

 

1.3 Incorporation
of Amendments 8

 

 

1.4 Exhibits 8

 

 

ARTICLE
2: LOAN AND LOAN DOCUMENTS 8

 

 

2.1 Obligation
to Lend 8

 

 

2.2 Obligation
to Repay 8

 

 

2.2.1 Term of
the Loan 8

 

 

2.2.2 Interest
and Payments 8

 

 

2.3 Use of
Proceeds 8

 

 

2.4 Loan
Expenses 8

 

 

2.5 Accrued
Interest Payment 8

 

 

2.6 Insurance
Certificate 9

 

 

2.7 Closing 9

 

 

2.8 Post-Closing 9

 

 

ARTICLE
3: CONDITIONS PRECEDENT TO DISBURSEMENT 9

 

 

3.1 Conditions
Precedent to Initial Disbursement 9

 

 

3.1.1 Legal
Opinion 9

 

 

3.1.2 Lender’s
Documents 9

 

 

3.1.3 Organizational
Documents 9

 

 

3.1.4 Financial
Statements 10

 

 

3.1.5 No
Default 10

 

 

3.1.6 Loan
Purchase 10

 

 

3.1.7 Estoppel
Letters 10

 

 

ARTICLE
4: BORROWER’S REPRESENTATIONS AND WARRANTIES 10

 

 

4.1 Organization
and Good Standing 10

 

 

4.2 Power and
Authority 10

 

 

4.3 Enforceability 10

 

 

4.4 No
Violation 10

 

 

4.5 No
Litigation 11

 

 

4.6 Financial
Statements 11

 

 

4.7 Reports,
Statements and Copies 11

 

 

4.8 No
Default 12

 

 

4.9 ERISA 12

 

 

4.10 Chief
Executive Office 12

 

 

4.11 Affirmation
of Additional Representations and Warranties 12

 

 

4.12 Note
Payments in Advance 12

 

 

4.13 Obligations
for Facility Improvements 12

 

 

4.14 No
Adverse Changes 12

 

 

4.15 Compliance 12

 

 

4.16 Environmental
Matters 13

 

 

ARTICLE
5: AFFIRMATIVE COVENANTS 13

 

 

5.1 Perform
Obligations 13

 

 

5.2 Documents
and Information 13

 

 

5.2.1 Furnish
Documents 13

 

 

5.2.2 Furnish
Information 13

 

 

5.2.3 Further
Assurances and Information 14

 

 

5.2.4 Material
Communications 14

 

 

5.2.5 Requirements
for Financial Statements 14

 

 

5.3 Broker’s
Commission 14

 

 

5.4 Existence 14

 

 

5.5 Financial
Covenants 14

 

 

ARTICLE
6: NEGATIVE COVENANTS 15

 

 

ARTICLE
7: DEFAULT AND REMEDIES 15

 

 

7.1 Event of
Default 15

 

 

7.2 Remedies
on Default 16

 

 

7.2.1 Acceleration 16

 

 

7.2.2 Foreclosure 16

 

 

7.2.3 Assumption
of Lease 16

 

 

7.2.4 Default
Under Other Leases 17

 

 

7.2.5 Other
Remedies 17

 

 

7.2.6 Waiver 17

 

 

ARTICLE
8: MISCELLANEOUS 17

 

 

8.1 Advances
by Lender 17

 

 

8.2 No
Novation 17

 

 

8.3 Construction
of Rights and Remedies and Waiver of Notice and Consent 18

 

 

8.3.1 Applicability 18

 

 

8.3.2 Waiver of
Notices and Consent to Remedies 18

 

 

8.3.3 Cumulative
Rights 18

 

 

8.3.4 Extension
or Modification of Loan 18

 

 

8.3.5 Right to
Select Security 18

 

 

8.3.6 Forbearance
Not a Waiver 18

 

 

8.3.7 No
Waiver 18

 

 

8.3.8 No
Continuing Waivers 18

 

 

8.3.9 Approval
Not a Waiver 19

 

 

8.3.10 No
Release 19

 

 

8.4 Assignment 19

 

 

8.4.1 Assignment
by Lender 19

 

 

8.4.2 Assignment
by Borrower 19

 

 

8.5 Notices 19

 

 

8.6 Entire
Agreement 19

 

 

8.7 Severability 20

 

 

8.8 Captions
and Headings 20

 

 

8.9 Governing
Law 20

 

 

8.10 Binding
Effect 20

 

 

8.11 Modification 20

 

 

8.12 Construction
of Agreement 20

 

 

8.13 Counterparts 20

 

 

8.14 No
Third-Party Beneficiary Rights 20

 

 

8.15 Lender’s
Authority to Furnish Copies of Loan Documents 20

 

 

8.16 Lender
Merely a Lender 21

 

 

8.16.1 No
Agency 21

 

 

8.16.2 No
Obligation to Pay 21

 

 

ARTICLE
9: SECURITY 21

 

 

9.1 Secured
by Mortgage 21

 

 

9.2 Venue 21

 

 

9.2 Oral
Agreements 21

 

 

9.4 Impairment
of Leases 21

 

 

9.5 Notices
Under Any Lease 22

 

 

9.6 Claims
Against Prior Lender 22

 

 

9.7 Demolitions
or Alterations of Facilities 22

 

 

9.8 Substitution
and Addition of Facilities Securing Loan 22

 

 

9.9 Indemnity 23

 

 

9.10 Inconsistencies
with Intercreditor Agreement 23

 

 




 




 




 







1084704.12 























SECOND
AMENDED AND RESTATED

LOAN
AGREEMENT

 

THIS
SECOND AMENDED AND RESTATED LOAN AGREEMENT (“Agreement”) is made and entered
into effective as of March 3, 2005 (the “Effective Date”) between EMERITUS
CORPORATION, a
corporation organized under the laws of the State of Washington (the
“Borrower”), having its chief executive office at 3131 Elliott Avenue, Suite
500, Seattle, Washington, 98121, and HEALTHCARE
REALTY TRUST INCORPORATED, a
corporation organized under the laws of the State of Maryland (the “Lender”),
having an address of 3310 West End Avenue, Suite 400, Nashville, Tennessee,
37203.

 

R
E C I T A L S:

 

A. HEALTH
CARE REIT, INC., a
corporation organized within the laws of the State of Delaware (“HCN”), having
an address of One SeaGate, Suite 1500, P.O. Box 1475, Toledo, Ohio 43603,
purchased four certain properties for a purchase price of $39,700,000.00 and
leased said properties to Borrower pursuant to a Master Lease Agreement dated
March 28, 2002, and HCN provided a line of credit to Borrower in the maximum
amount of $6,800,000.00 (“Original Loan”), subject to the terms and conditions
of a Loan Agreement dated effective as of April 1, 2002.

 

 

B. HCN
subsequently purchased 19 additional properties for a purchase price of
$110,000,000.00 and leased said properties to Borrower by amending and restating
the Master Lease Agreement. HCN agreed to increase the Original Loan by an
amount equal to $11,500,000.00 (“Additional Loan”) and to consolidate two
additional loans made on August 28, 2003 in the amount of $3,100,000.00 and
$4,400,000.00 for a total of $25,800,000.00 (collectively, the “Loan”) subject
to the terms of that certain Amended and Restated Loan Agreement, dated as of
September 30, 2003.

 

 

C. The Loan
is secured by first priority leasehold deeds of trust (each, a “Mortgage”) from
Borrower to HCN on the interest of Borrower as Tenant in twenty six (26)
assisted living facilities (each a “Facility”). Twenty three (23) of the
Facilities are leased pursuant to that certain Amended and Restated Master Lease
Agreement dated as of September 30, 2003 between Borrower and HCN (the “Master
Lease Facilities”).

 

 

D. HCN has
sold the Loan to Lender, and has assigned to Lender all of the Mortgages and all
additional collateral securing the Loan pursuant to that certain Loan Purchase
Agreement between HCN and Lender of even date herewith.

 

 

E. Borrower
leases certain other facilities from Lender, as landlord, (each, an “Additional
HRT Facility”) pursuant to separate lease agreements (each, an “Existing HRT
Lease”).

 

 

F. The
principal balance of the Loan has been reduced to Nineteen Million Four Hundred
Sixty Six Thousand Four Hundred Eighty Four and 86/100 Dollars ($19,466,484.86);
upon execution of this Agreement, Lender shall advance additional funds to
Borrower, and, as a result, the principal balance of the Loan shall be increased
back up to Twenty One Million Four Hundred Twenty Six Thousand Dollars
($21,426,000.00). Lender and Borrower have agreed to modify, amend, and restate
the terms and conditions of the Loan, as hereinafter set forth.

 

 

NOW,
THEREFORE, in consideration of the mutual covenants and the premises contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as
follows:

 

ARTICLE
1: PURPOSE AND DEFINITIONS

 

1.1 Purpose. The
purpose of this Agreement is to amend and restate the terms and conditions of
the Loan.

 

 

1.2 Definitions. Except
as otherwise expressly provided, [i] the terms defined in this section have the
meanings assigned to them in this section and include the plural as well as the
singular; [ii] all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles as of the time applicable; and [iii] the words “herein”, “hereof”,
and “hereunder” and similar words refer to this Agreement as a whole and not to
any particular section.

 

 

“Affiliate”
means any person, corporation, partnership, limited liability company, trust, or
other legal entity that, directly or indirectly, controls, or is controlled by,
or is under common control with Borrower. “Control” (and the correlative
meanings of the terms “controlled by” and “under common control with”) means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity. “Affiliate” includes,
without limitation, Texas-ESC. An Affiliate of Borrower shall specifically
exclude Columbia Pacific Management, Inc., or any Affiliate thereof, Holiday
Retirement Corporation, or any Affiliate thereof, and Alterra Healthcare
Corporation, or any Affiliate thereof, but only prior to the date of Borrower’s
acquisition thereof. An
Affiliate of Borrower and Texas-ESC shall specifically exclude [i] Saratoga
Partners IV, L.P. (“Saratoga”), [ii] Senior Healthcare Partners, LLC,
[iii] Columbia Pacific Management, Inc., [iv] Holiday Retirement
Corporation, [v] Alterra Healthcare Corporation, but only prior to the date
of Borrower’s acquisition thereof, and [vi] any Affiliate of any of the
entities listed in clauses [i] through [vi].

 

 

“Affiliate
Obligation” means all indebtedness and obligations of Borrower and any Affiliate
to Lender or any Lender Affiliate now existing or hereafter arising, including,
without limitation, obligations arising under the Lease Documents and the
Existing HRT Leases, indebtedness evidenced by promissory notes, lease
agreements, guaranties or otherwise and obligations under such indebtedness
documents and all other documents executed by Borrower or any Affiliate in
connection therewith, and any extensions, modifications, substitutions or
renewals thereof.

 

 

“Annual
Financial Statements” means for Borrower, the audited balance sheet and
statement of income of Borrower for the most recent fiscal year.

 

 

“Borrower”
means Emeritus Corporation, a corporation organized under the laws of the State
of Washington, its successors and permitted assigns.

 

 

“Borrower’s
Organizational Documents” means the Articles of Incorporation of Borrower
certified by the Secretary of State of the state of organization, as amended to
date, and the Bylaws of Borrower certified by Borrower, as amended to
date.

 

 

“Business
Day” means any day which is not a Saturday or Sunday or a public holiday under
the laws of the United States of America or the State of Ohio.

 

 

“Closing”
means the closing of the second amendment and restatement of the
Loan.

 

 

“Commitment”
means the non-binding letter of understanding dated January 27, 2005 between
HCN, Lender, and Borrower.

 

 

“Effective
Date” means the date of this Agreement.

 

 

“Event of
Default” has the meaning set forth in §7.1.

 

 

“Facility”
means each skilled nursing, assisted living or retirement facility leased to
Borrower pursuant to a Lease.

 

 

“Financial
Statements” means the annual, quarterly and year-to-date financial statements of
Borrower submitted to Lender prior to Closing.

 

 

“HCN
Diligence” has the meaning set forth in §4.7.

 

 

“Lease”
means the Master Lease. The term Lease shall also include individually and
collectively any “Substitute Lease” or “New HRT Lease” as described in Section
9.8.

 

 

“Lease
Documents” means each Lease and all other documents executed by Borrower in
connection with each Lease, each as amended from time to time.

 

 

“Leased
Property” means individually and collectively all real property subject to any
Lease.

 

 

“Lender”
means Healthcare Realty Trust Incorporated, its successors and
assigns.

 

 

“Lender
Affiliate” means any person, corporation, partnership, limited liability
company, trust or other legal entity that, directly or indirectly, controls or
is controlled by, or is under common control with Lender. “Control” (and the
correlative meanings of the terms “controlled by” and “under common control
with”) means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such entity. 

 

 

“Lender
Diligence” has the meaning set forth in §4.7.

 

 

“Loan”
means the loan to Borrower now held by Lender in the amount of the Loan Amount
and secured by the Mortgage.

 

 

“Loan
Amount” means $19,466,484.86, increased hereby to $21,426,000.00.

 

 

“Loan
Documents” means [i] this Agreement; [ii] the Second Amended and Restated Note,
of even date herewith, made by Borrower, payable to the order of Lender; [iii]
any other documents and instruments executed by Borrower in connection with the
Loan for the benefit of Lender, and [iv] to the extent expressly assigned to and
assumed by Lender, any other documents and instruments executed by Borrower in
connection with the Loan for the benefit of HCN, each as amended from time to
time. 

 

 

“Loan
Expenses” means all reasonable costs and expenses incurred by Lender in
investigating, purchasing and administering the Loan, including but not limited
to, [i] reasonable attorneys’ and paralegals’ fees and costs; reasonable travel,
transportation, food, and lodging costs and expenses incurred by Lender and
Lender’s attorneys and paralegals; [ii] leasehold mortgage title insurance
premiums for title insurance policies obtained by Lender; [iii] recording fees
and/or indebtedness or similar taxes imposed upon the sale of the Loan or the
recordation of any of the closing documents; and [iv] cost of opinions of
counsel required by Lender in connection therewith.

 

 

“Material
Obligation” means [i] any indebtedness in excess of $250,000.00 secured by a
security interest in or a lien, deed of trust or mortgage on any Facility (or
any part thereof, including any Personal Property) and any agreement relating
thereto; [ii] any obligation or agreement that is material to the construction
or operation of the Facility or that is material to Borrower’s business or
financial condition and where a breach thereunder, if not cured within any
applicable cure period, would have a material adverse affect on the financial
condition of Borrower or the results of operations at the Facility; [iii] any
unsecured indebtedness or lease of Borrower that has an outstanding principal
balance or obligation of at least $1,000,000.00 and any agreement relating
thereto; and [vi] any indebtedness or lease of Borrower or of any other party
that has been guaranteed by Borrower, that has an outstanding principal balance
or obligation of at least $250,000.00.

 

 

“Master
Lease” means the Amended and Restated Master Lease Agreement dated September 30,
2003 by which HCN leased
each Facility to Borrower, as amended from time to time, including the Insurance
Waiver (as defined in Section 2.6 below), as referenced in the preamble of this
Agreement. 

 

 

“Mortgage”
means individually and collectively the Amended and Restated Leasehold
Mortgage/Deed of Trust, Security Agreement, Assignment of Leases and Rents,
Financing Statement and Fixture Filing granted by Borrower to HCN dated as of
September 30, 2003, as subsequently assigned by HCN to Lender, together with any
other mortgages or deeds of trust entered into by Borrower or any affiliate to
secure the Loan, including any prior indebtedness included in the Loan. Without
limitation, the term of “Mortgage” shall include any leasehold mortgage granted
by Borrower to Lender in order to encumber its leasehold interest under a
Substitute Lease as security for the Loan.

 

 

“Note”
means the Second Amended and Restated Note of even date made by Borrower in
favor of Lender for a principal amount equal to the Loan Amount, and any
extensions, modifications, substitutions or renewals thereof.

 

 

“Periodic
Financial Statements” means for Borrower, the unaudited balance sheet and
statement of income of Borrower for the most recent month and
quarter.

 

 

“Personal
Property” means any tangible or intangible personal property owned by Borrower
in connection with any Lease or the operation of any Facility, which property is
assigned, pledged or otherwise conveyed as security for the Loan.

 

 

“State”
means the State of Ohio.

 

 

“Texas-ESC”
means Texas-ESC-Lubbock, L.P., a Washington limited partnership.

 

 

1.3 Incorporation
of Amendments. The
definition of any agreement, document, or instrument set forth in this Agreement
or in any other Loan Document shall be deemed to incorporate all amendments,
modifications, and renewals thereof and all substitutions and replacements
therefor.

 

 

1.4 Exhibits. The
following exhibits are attached hereto and incorporated herein:

 

Exhibit
A: Pending
Litigation

Exhibit
B: Documents
to be Delivered

Exhibit
C: Borrower’s
Certificate

Exhibit
D: Deposits
and Additional Collateral

Exhibit
E: Post-Closing
Checklist




ARTICLE
2: LOAN AND LOAN DOCUMENTS

 

2.1 The
Loan. The
indebtedness of Borrower to Lender for the Loan is evidenced by the Note. Lender
has the right but not the obligation to make any further advance to Borrower,
including, without limitation, any Contingent Payment Advance as described in
Article 17 of the Master Lease.

 

 

2.2 Obligation
to Repay.
Borrower shall repay the Loan in accordance with the terms of the Note and the
other Loan Documents.

 

 

2.2.1 Term
of the Loan. The
term of the Loan will expire on the Maturity Date set forth in the
Note.

 

 

2.2.2 Interest
and Payments.
Borrower shall make payments in accordance with the Note at the rate set forth
in the Note.

 

 

2.3 Use of
Proceeds. The
Loan proceeds have been used by Borrower in connection with a Facility and such
other uses as Borrower deemed appropriate.

 

 

2.4 Loan
Expenses. At the
Closing, Borrower shall pay or reimburse Lender for any Loan Expenses incurred
by Lender up to the Effective Date, except that Lender shall be responsible for
paying its own attorneys’ fees and costs incurred to review all due diligence
information furnished by HCN or Borrower to Lender. Within 30 days after receipt
of an invoice therefor, Borrower shall reimburse Lender for any subsequent Loan
Expenses incurred by Lender. 

 

 

2.5 Accrued
Interest Payment. If
Borrower fails to pay all accrued interest on the Loan within 10 days after any
monthly due date set forth in the Note, whether due to inadequate cash flow of
any Facility or otherwise, Lender may, at its option, advance additional Loan
proceeds to pay the accrued interest.

 

 

2.6 Insurance
Certificate. At
Closing, the Borrower shall deliver to Lender certificates of all insurance
policies required under the Mortgage, which certificates shall name Lender as
additional insured on all liability policies and as Mortgagee on all property
and casualty policies with loss payable to Lender except as otherwise agreed
between Lender and HCN pursuant to the Intercreditor Agreement. Lender
acknowledges that Borrower maintains a self insurance plan which has been
accepted by HCN notwithstanding the requirements under the Lease Documents, the
Mortgage and the other documents evidencing and securing the Loan in favor of
HCN (the “Insurance Waiver”). Insurance coverages which satisfy HCN under the
foregoing documents shall be deemed to comply with requirements of the Loan
Documents. 

 

 

2.7 Closing. The
Closing of the second amendment and restatement of the Loan shall occur as of
the Effective Date. Lender may elect to close by exchanging executed
counterparts of one or more of the Loan Documents and other closing documents by
mail or a national courier service, or by telecopier followed by exchanging
documents by mail or national courier service.

 

 

2.8 Post-Closing. Within
ten (10) days after Closing, Borrower shall furnish to Lender any documents or
information required under this Agreement that were not furnished to Borrower at
or prior to Closing, all in form and substance reasonably satisfactory to
Lender; or if, by reason of the nature of such document or information the same
cannot be delivered within the said ten (10) days, Borrower fails to proceed
with diligence reasonably satisfactory to Lender after receipt of notice to cure
the same or, in any event, fails to cure such default within twenty (20) days
after receipt of the notice, the same shall constitute a material default under
the Loan. 

 

ARTICLE
3: CONDITIONS PRECEDENT TO DISBURSEMENT

 

3.1 Conditions
Precedent to Initial Disbursement.
Lender’s obligation to amend and restate the Loan as set forth herein shall be
conditioned upon satisfaction of the following conditions
precedent:

 

 

3.1.1 Legal
Opinion.
Borrower shall have delivered to Lender an opinion of its primary outside
counsel, and, to the extent reasonably required by Lender, opinions of local
counsel, each in form and substance reasonably satisfactory to
Lender.

 

 

3.1.2 Lender’s
Documents.
Borrower shall have delivered to Lender fully executed originals of the Loan
Documents to which Borrower is a party.

 

 

3.1.3 Organizational
Documents.
Borrower shall have delivered to Lender copies of Borrower’s Organizational
Documents, in form and substance reasonably satisfactory to Lender, and
Borrower’s resolutions authorizing the Loan Documents to which Borrower is a
party, certified by Borrower to be true and complete and not revoked or amended
since the respective dates thereof. 

 

 

3.1.4 Financial
Statements.
Borrower shall have delivered to Lender the Financial Statements, all in form
and substance reasonably satisfactory to Lender. 

 

3.1.5 No
Default. Except
as set forth in those certain Estoppel Certificates of even date herewith
executed by Borrower for the benefit of Lender and Fidelity National Title
Insurance Company (the “Estoppel Certificates”), no uncured Event of Default
shall have occurred under the Loan Documents, any Lease, any Existing HRT Lease,
or any event which with the giving of notice or the passage of time, or both,
would constitute such an Event of Default.

 

3.1.6 Loan
Purchase. Lender
shall have completed its purchase of the Loan from HCN on terms satisfactory to
Lender.

 

 

3.1.7 Estoppel
Certificates. Lender
shall have received from HCN such estoppel certificates as Lender may reasonably
require with respect to the Loan and the Leases, together with the Estoppel
Certificates from Borrower.

 

ARTICLE
4: BORROWER’S REPRESENTATIONS AND WARRANTIES

 

Borrower
hereby makes the following representations and warranties, as of the Effective
Date, unless an earlier date is specified, then as of such date, to Lender and
acknowledges that Lender is purchasing, amending and restating the Loan in
reliance upon such representations and warranties. Borrower’s representations
and warranties shall survive the Closing and, except as specifically provided
below, shall continue in full force and effect until Borrower has repaid the
Loan in full and performed all other obligations under the Loan
Documents.

 

 

4.1 Organization
and Good Standing.
Borrower is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Washington.

 

 

4.2 Power
and Authority.
Borrower has the power and authority to execute, deliver, and perform Borrower’s
obligations under the Loan Documents to which it is a party and has taken all
requisite action to authorize the execution, delivery and performance of
Borrower’s obligations under such documents.

 

 

4.3 Enforceability. The
Loan Documents to which Borrower is a party constitute valid and binding
obligations of Borrower, enforceable in accordance with their terms except as
such enforceability may be limited by creditors rights laws and general
principles of equity.

 

 

4.4 No
Violation. The
execution, delivery and performance of the Loan Documents to which Borrower is a
party and the consummation of the transactions contemplated thereby [i] do not
conflict with and will not conflict with, and do not result and will not result
in a breach of Borrower’s Organizational Documents; [ii] except as set
forth in the Estoppel Certificates, do not conflict with and will not conflict
with, and do not result and will not result in a breach of, or constitute or
will constitute a default (or an event which, with or without notice or lapse of
time, or both, would constitute a default) under any of the terms, conditions or
provisions of any agreement or other instrument or obligation to which Borrower
is a party or by which its assets are bound; and [iii] do not violate and will
not violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Borrower.

 

 

4.5 No
Litigation. As of
the Effective Date and except as disclosed on Exhibit
A, [i] to
the best of Borrower’s knowledge there are no actions, suits, proceedings or
investigations by any governmental agency or regulatory body pending against
Borrower or any existing Facility; [ii] Borrower has not received notice of any
threatened actions, suits or proceeding or investigations against Borrower or
any existing Facility at law or in equity, or before any governmental board,
agency or authority which, if determined adversely to Borrower, would materially
and adversely affect an existing Facility or title to a Facility (or any part
thereof), the right to operate a Facility as presently operated, or the
financial condition of Borrower; [iii] there are no unsatisfied or outstanding
judgments against Borrower or any existing Facility; [iv] there is no labor
dispute materially and adversely affecting the operation or business conducted
by Borrower or any existing Facility; and [v] Borrower does not have knowledge
of any facts or circumstances which might reasonably form the basis for any such
action, suit, or proceeding.

 

 

4.6 Financial
Statements. Subject
to any new information set forth in the Estoppel Certificates which could have a
material adverse effect on the financial condition of Borrower, Borrower has
furnished Lender with true, correct and complete copies of the Financial
Statements. The Financial Statements fairly present the financial position of
Borrower as of the respective dates and the results of operations for the
periods then ended in conformance with generally accepted accounting principles
applied on a basis consistent with prior periods. The Financial Statements are
true, complete and correct and, as of the Effective Date, no material adverse
change has occurred since the furnishing of such statements and information. As
of the Effective Date, the Financial Statements and other information do not
contain any material untrue statement or omission of a material fact and are not
misleading in any material respect. Borrower is solvent, and no bankruptcy,
insolvency, or similar proceeding is pending or contemplated by or, to the best
of its knowledge, against Borrower.  

 

 

4.7 Reports,
Statements and Copies. All
existing reports, statements, certificates, title information, surveys,
inspection reports, environmental assessments, and other data previously
furnished by or on behalf of Borrower to HCN in connection with the Loan, or the
transactions contemplated thereunder, and all representations and warranties
made therein, or in any certificate or other instrument delivered in connection
therewith, are true and correct in all material respects as of the date the same
were originally prepared or made and, to the knowledge of Borrower remain true
and accurate as of the Effective Date (collectively, the “HCN Diligence”). All
current reports, statements, certificates, title information, surveys,
inspection reports, environmental assessments, and other data furnished by or on
behalf of Borrower to Lender in connection with the Loan Documents, or the
transactions contemplated thereunder, and all representations and warranties
made therein, or in any certificate or other instrument delivered in connection
therewith (collectively, the “Lender Diligence”), are true and correct in all
material respects as of the Effective Date, neither the Lender Diligence nor, to
the knowledge of Borrower, the HCN diligence, fails to state any material fact
or circumstance necessary to make the statements contained therein, in light of
the circumstances under which they are made, not misleading as of the date of
such reports, statements or certificates or other data subject to any new
information contained on the Estoppel Certificates. The copies of all agreements
and instruments submitted to Lender by Borrower are true, correct and complete
copies and include all material amendments and modifications of such agreements.


 

 

4.8 No
Default. As of
the Effective Date, except as set forth on the Estoppel Certificates, there is
no existing Event of Default by Borrower under the Loan Documents, under any
Lease, or under any Existing HRT Lease, and Borrower has no knowledge that any
event has occurred which, with the giving of notice or the passage of time, or
both, would constitute or result in such an Event of Default.

 

 

4.9 ERISA. All
plans [as defined in §402l(a) of the Employee Retirement Income Security Act of
1974 as amended or supplemented from time to time (“ERISA”)] for which Borrower
is an “employer” or a “substantial employer” [as defined in §§3(5) and
4001(a)(2) of ERISA, respectively] are in compliance with ERISA and the
regulations and published interpretations thereunder. To the extent Borrower
maintains a qualified defined benefit pension plan: [i] there exists no
accumulated funding deficiency; [ii] no reportable event and no prohibited
transaction has occurred; [iii] no lien has been filed or threatened to be filed
by the Pension Benefit Guaranty Corporation established pursuant to Subtitle A
of Title IV of ERISA; and [iv] Borrower has not been deemed to be a
..substantial-employer as of the Effective Date. 

 

 

4.10 Chief
Executive Office.
Borrower maintains its chief executive office and its books and records at the
address set forth in the introductory paragraph of this Agreement.

 

 

4.11 Affirmation
of Additional Representations and Warranties. In
addition to the specific representations and warranties set forth in this
Agreement, and without limiting any such representations and warranties,
Borrower also affirms to Lender that all representations and warranties set
forth in the Lease Documents, the Mortgage, and all of the Loan Documents are
true, complete and accurate as of the Effective Date to the extent the foregoing
are deemed updated with respect to the matters set forth in the Estoppel
Certificates. 

 

 

4.12 Note
Payments in Advance.
Borrower has made no payments due under the Loan Documents more than thirty (30)
days in advance. Accrued interest has been paid through January 31,
2005.

 

 

4.13 Obligations
for Facility Improvements.
Borrower does not owe any third parties any amounts for labor or materials
furnished in connection with the improvement of any Facilities except for
amounts due for repairs made in the ordinary course of business which are not
past due.

 

 

4.14 No
Adverse Changes. Since
September 30, 2003, there have been no adverse changes in the environmental
condition of any Facility, the title to any Facility, any matters which a
current ALTA/ACSM Land Title Survey of any Facility might reflect, or any
significant casualty loss, condemnation or conveyance affecting any
Facility.

 

 

4.15 Compliance.
Borrower and each Facility are, to the best knowledge of Borrower, in compliance
with all requirements of law with respect to which non-compliance could
adversely impact the financial condition of Borrower or the operation of any
Facility.

 

 

4.16 Environmental
Matters. Without
limiting any of the representations and warranties set forth above, Borrower
represents and warrants that (i) each Facility is in compliance with all
applicable Environmental Laws (as defined in the Mortgage); (ii) to the
knowledge of Borrower, there have been no releases or threatened releases of
Hazardous Materials (as defined in the Mortgage) on, from, or under any
Facility, except in compliance with all Environmental Laws; (iii) to the
knowledge of Borrower, no Hazardous Materials have been, are, or will be used,
generated, stored or disposed of at any Facility, except in full compliance with
all Environmental Laws; (iv) to the knowledge of Borrower, asbestos has not been
and will not be used in the construction of any Facility; (v) to the knowledge
of Borrower, no permit has been required from the Environmental Protection
Agency or any similar federal, state or local governmental agency for the use or
maintenance of any Facility; (vi) to the knowledge of Borrower, any underground
storage tanks located on any Facility have been and currently are being operated
in compliance with all applicable Environmental Laws; (vii) to the knowledge of
Borrower, any closure, abandonment in place, or removal of any underground
storage tank on or from any Facility has been performed in compliance with
applicable Environmental Laws, and has not resulted in any release contaminating
any Facility which has not been remediated fully in compliance with applicable
Environmental Laws; (viii) to the knowledge of Borrower, no summons, citation or
inquiry has been made by any party demanding any right of recovery for payment
or reimbursement for costs incurred under CERCLA or any other Environmental
Laws, and no Facility is subject to any liens for any such costs; and (ix) to
the knowledge of Borrower, environmental conditions at each of the Facilities
have not changed in any adverse manner since September 30, 2003.

 

ARTICLE
5: AFFIRMATIVE COVENANTS

 

5.1 Perform
Obligations.
Borrower shall in accordance with the terms of the Loan Documents and the Lease
Documents perform in all material respects all of its obligations under the Loan
Documents and the Lease Documents. 

 

 

5.2 Documents
and Information.

 

 

5.2.1 Furnish
Documents.
Borrower shall periodically during the term of the Loan deliver to Lender the
Annual Financial Statements, Periodic Financial Statements and other documents
described on Exhibit
B within
the specified time periods. With each delivery of Annual Financial Statements
and Periodic Financial Statements to Lender, Borrower shall also deliver to
Lender a certificate signed by the Chief Financial Officer of Borrower in the
form of Exhibit
C.

 

 

5.2.2 Furnish
Information.
Borrower shall [i] promptly supply Lender with such information concerning its
financial condition, affairs and property, as Lender may reasonably request from
time to time hereafter; [ii] promptly notify Lender in writing of any condition
or event that constitutes a breach or event of default of any term, condition,
warranty, representation, or provisions of any Loan Document or any other
Material Obligation, and of any material adverse change in its financial
condition; [iii] maintain a standard and modern system of accounting; [iv]
permit Lender or any of its agents or representatives to have access to and to
examine all of its books and records regarding the financial condition of the
Facility at any time or times hereafter during business hours and on reasonable
advance notice subject to any applicable state or federal laws governing
confidentiality of patient or employee records; and [v] permit Lender to copy
and make abstracts from any and all of said books and records subject to any
applicable state or federal laws governing confidentiality of patient and
employee records.

 

 

5.2.3 Further
Assurances and Information.
Borrower shall, on request of Lender from time to time, execute, deliver, and
furnish such documents as may be reasonably necessary to consummate fully the
transactions contemplated under this Agreement. Within 10 Business Days after a
request from Lender, Borrower shall provide to Lender such additional
information in Borrower’s control or possession regarding Borrower or Borrower’s
financial condition as Lender, or any existing or proposed creditor of Lender,
or any auditor or underwriter of Lender, may reasonably require from time to
time, including, without limitation, a current Borrower’s Certificate in the
form of Exhibit
C. 

 

 

5.2.4 Material
Communications.
Borrower shall transmit to Lender, within five Business Days after receipt
thereof, any material communication affecting any existing Facility, the Loan
Documents or the Lease Documents, and Borrower will promptly respond to Lender’s
inquiry with respect to such information. Borrower shall promptly notify Lender
in writing after Borrower has actual knowledge of any threatened or existing
litigation or proceeding against, or investigation of, Borrower or any Facility
that may affect the right to operate a Facility or title to a Facility or
Lender’s interest therein. 

 

 

5.2.5 Requirements
for Financial Statements.
Borrower shall meet the following requirements in connection with the
preparation of the financial statements: [i] all audited financial statements
shall be prepared in accordance with generally accepted accounting principles
consistently applied; [ii] all unaudited financial statements shall be prepared
in a manner substantially consistent with prior audited and unaudited financial
statements submitted to Lender; [iii] all financial statements shall fairly
present the financial condition and performance for the relevant period in all
material respects; [iv] the audited financial statements shall include all notes
to the financial statements and a complete schedule of contingent liabilities
and transactions with Affiliates; and [v] the audited financial statements shall
contain an unqualified opinion to the extent set forth in the
Lease.

 

 

5.3 Broker’s
Commission.
Borrower shall indemnify Lender from claims of brokers arising by the execution
hereof or the consummation of the transactions contemplated hereby and from
expenses incurred by Lender in connection with any such claims (including
reasonable attorneys’ fees). 

 

 

5.4 Existence.
Borrower shall maintain its existence to the extent and in accordance with the
provisions set forth in each Lease. 

 

 

5.5 Lease
Covenants.
Borrower shall comply with the financial covenants, and all other affirmative
covenants applicable to Borrower as set forth in each Lease. 

 

ARTICLE
6: NEGATIVE COVENANTS

 

Until the
Loan has been paid in full, Borrower covenants and agrees that Borrower shall
comply with each Negative Covenant applicable to Borrower as set forth in the
Master Lease and in all other Leases. 

 

ARTICLE
7: DEFAULT AND REMEDIES

 

7.1 Event
of Default. Any one
or more of the following events shall constitute an “Event of Default”
hereunder:

 

 

7.1.1 Borrower
fails to pay any installment on the Note or any other monetary obligation
payable by Borrower under the Loan Documents within 10 days after such payment
is due.

 

 

7.1.2 Borrower
fails to comply with any covenant set forth in §§5.4, 5.5 or Article 6 of this
Agreement and such failure continues beyond all applicable grace, notice and/or
cure periods. 

 

 

7.1.3 Borrower
fails to observe and perform any other covenant, condition or agreement under
the Loan Documents to be performed by Borrower and [i] such failure continues
for a period of 30 days after written notice thereof is given to the Borrower by
the Lender; or [ii] if, by reason of the nature of such default the same cannot
be remedied within the said 30 days, Borrower fails to proceed with diligence
reasonably satisfactory to Lender after receipt of the notice to cure the same
or, in any event, fails to cure such default within 60 days after receipt of the
notice. The foregoing notice and cure provisions do not apply to any Event of
Default otherwise specifically described in any other subsection of
§7.1.

 

 

7.1.4 [i] The
filing by Borrower of a petition under 11 U.S.C. or the commencement of a
bankruptcy or similar proceeding by Borrower; [ii] the failure by Borrower
within 60 days to dismiss an involuntary bankruptcy petition or other
commencement of a bankruptcy, reorganization or similar proceeding against
Borrower, or to lift or stay any execution, garnishment or attachment of such
consequences as will impair its ability to carry on its operation at a Facility;
[iii] the entry of an order for relief under 11 U.S.C. in respect of Borrower;
[iv] any assignment by Borrower for the benefit of its creditors; [v] the entry
by Borrower into an agreement of composition with its creditors; [vi] the
approval by a court of competent jurisdiction of a petition applicable to
Borrower in any proceeding for its reorganization instituted under the
provisions of any state or federal bankruptcy, insolvency, or similar laws; or
[vii] appointment by final order, judgment or decree of a court of competent
jurisdiction of a receiver of the whole or any substantial part of the
properties of Borrower (provided such receiver shall not have been removed or
discharged within 60 days of the date of his qualification).

 

 

7.1.5 [i] Any
receiver, administrator, custodian or other person takes possession or control
of all or part of any Facility and continues in possession for 60 days; [ii] any
writ against all or part of any Facility is not released within 60 days; [iii]
any final judgment is rendered against all or part of any Facility or Borrower
which affects all or part of a Facility for the payment of money in excess of
$250,000.00 (exclusive of judgment amounts covered by insurance) which is
undismissed for 60 days (except as otherwise provided in this Agreement) or such
longer period during which execution of the same shall have been stayed,
appealed therefrom and cause the execution thereof to be stayed during such
appeal; [iv] all or a substantial part of the assets of Borrower are attached,
seized, subjected to a writ or distress warrant, or are levied upon, or come
into the possession of any receiver, trustee, custodian, or assignee for the
benefit of creditors and are not released within 60 days; [v] Borrower is
enjoined, restrained, or in any way prevented by court order, or any proceeding
is filed or commenced seeking to enjoin, restrain, or in any way prevent
Borrower from conducting all or a substantial part of its business or affairs;
or [vi] except as otherwise permitted hereunder, a final notice of lien, levy,
or assessment is filed of record with respect to all or any part of a Facility
and is not dismissed within 30 days.

 

 

7.1.6 Any
material representation or warranty made by Borrower in the Loan Documents, any
security for the Loan, or any report, certificate, application, financial
statement or other instrument furnished by Borrower pursuant hereto or thereto
shall prove to be false, misleading or incorrect in any material respect as of
the date made.

 

 

7.1.7 [i]
Borrower or any Affiliate defaults on any indebtedness, Existing HRT Lease, or
other obligation to Lender or any Lender Affiliate; or [ii] Borrower defaults on
any Material Obligation, and any applicable grace or cure period with respect to
default under such indebtedness, obligation or agreement described in clauses
(i) and (ii) above expires without such default having been cured. This
provision applies to all such indebtedness, obligations and agreements as they
may be amended, modified, extended, or renewed from time to time.

 

 

7.1.8 Borrower
defaults on any material provision of any Lease, and such default is not cured
within any applicable grace or cure period.

 

 

7.2 Remedies
on Default.
Whenever any Event of Default occurs, Lender may, in addition to any other
remedies under the Loan Documents, at law or in equity, take any one or more of
the following remedial steps concurrently or successively:

 

 

7.2.1 Acceleration. Lender
may declare the Loan to be immediately due and payable, without presentment of
any kind, demand, notice of dishonor, protest or other notice of any kind, all
of which Borrower hereby waives.

 

 

7.2.2 Foreclosure. Lender
may foreclose on any and all collateral securing the Loan including the interest
of Borrower under the Leases, as encumbered by the Mortgage. The proceeds of
foreclosure shall secure all obligations of the Borrower to Lender under the
Loan Documents, under the Existing HRT Leases, and under any New HRT
Leases.

 

 

7.2.3 Assumption
of Lease.
Pursuant to and in accordance with the provisions of the Intercreditor
Agreement, Lender may elect to assume all rights, title, and interest of
Borrower under the Lease without terminating the Mortgage, and may thereafter
assign or sublet the Leased Property or any portions thereof. If Lender elects
to assume the Lease, at the option of Lender, Borrower agrees either [i] to
sublet the Leased Property from Lender under an arrangement pursuant to which
cash flow, after operating expenses, rent due to the Landlord, taxes, insurance,
and a reasonable management fee, shall be applied to the obligations of Borrower
to Lender under the Loan Documents, or, [ii] to manage the Leased Property
pursuant to a management agreement with Lender pursuant to which Lender would
pay Borrower a reasonable management fee to manage the operations of the Leased
Property. Should Lender elect to assume all rights, title and interest of
Borrower under the Lease, to enter into a sublease with Borrower or a management
agreement with Borrower, and should, in any such event, Borrower refuse to
execute commercially reasonably documents required by Lender (including, without
limitation an assignment of lease, a sublease, or a management agreement), then
Lender shall be entitled to a temporary restraining order granting possession of
the Leased Property to Lender, and injunctive relief immediately requiring
Borrower to execute such documents. Should Lender enter into a sublease or
management agreement as provided above, and during the term of such agreement
EBITDARM coverage for the Leased Property falls below 1.0 to 1.0 for a period of
three consecutive calendar months following the assumption. Lender shall have
the right to terminate the sublease or management agreement. In no event shall
the assumption of the lease by HRT release Borrower or any of its affiliates
from any liability or obligation under the Lease to HCN.

 

 

7.2.4 Default
Under Other Leases. Lender
may elect to declare an Event of Default under any Existing HRT Lease, any New
HRT Lease (defined below), any Substitute Lease (defined below), and any other
lease then in effect between HRT or any Affiliate of HRT, as Landlord, and
Emeritus or any Affiliate of Emeritus, as Tenant. In such event, no further
notices or cure periods shall be required under any such leases, notwithstanding
any provisions to the contrary contained therein.

 

 

7.2.5 Other
Remedies. Lender
may take whatever action at law or in equity as may appear necessary or
desirable to collect any monies then due and/or thereafter to become
due.

 

 

7.2.6 Waiver. Without
waiving any prior or subsequent Event of Default, Lender may waive any Event of
Default or, with or without waiving any Event of Default, remedy any
default.

 

ARTICLE
8: MISCELLANEOUS

 

8.1 Advances
by Lender. At any
time and from time to time, Lender may incur and/or pay and/or advance costs or
expenses: [i] which Lender is authorized or has the right (but not necessarily
the obligation) to incur or may incur under any Loan Document or any law; [ii]
in exercising any right or remedy provided under any Loan Document or in taking
any action which Lender is authorized to take under any Loan Document; [iii]
which are required to be paid by Borrower under any Loan Document or Lease
Document, but which Borrower fails to pay upon demand; or [iv] from which
Borrower is required to hold Lender harmless under any Loan Document, but from
which Borrower fails to hold Lender harmless. Any costs, expenses, or advances
incurred or paid by Lender shall become part of the Loan and, upon demand, shall
be paid to Lender together with interest thereon at the Default Rate (as defined
in the Note) from the date of disbursement by Lender.

 

 

8.2 No
Novation. This
Agreement does not constitute a novation of any of the prior promissory notes,
loan agreements, or security documents evidencing or securing the indebtedness
which is currently included in the Loan or any prior modifications or
restatements thereof. This Agreement constitutes an amendment and restatement of
the remaining balance of the same indebtedness evidenced and secured by such
prior documents, together with an additional advance under the terms of this
Agreement.

 

 

8.3 Construction
of Rights and Remedies and Waiver of Notice and Consent.

 

 

8.3.1 Applicability. The
provisions of this §8.3 shall apply to all rights and remedies provided by any
Loan Document or by law or equity.

 

 

8.3.2 Waiver
of Notices and Consent to Remedies. Unless
otherwise expressly provided herein, any right or remedy may be pursued without
notice to or further consent of Borrower, both of which Borrower
waives.

 

 

8.3.3 Cumulative
Rights. Each
right or remedy under the Loan Documents is distinct from but cumulative to each
other right or remedy provided in the Loan Documents and may be exercised
independently of, concurrently with, or successively to any other such rights
and remedies.

 

 

8.3.4 Extension
or Modification of Loan. No
extension of time for or modification of amortization of the Loan shall release
the liability or bar the availability of any right or remedy against Borrower or
any successor in interest, and Lender shall not be required to commence
proceedings against Borrower or any successor or to extend time for payment or
otherwise to modify amortization of the Loan secured by this Agreement by reason
of any demand by Borrower or any successor. 

 

 

8.3.5 Right
to Select Security. Lender
has the right to proceed at its election against all security or against any
item or items of such security from time to time, and no action against any item
or items of security shall bar subsequent actions against any item or items of
security.

 

 

8.3.6 Forbearance
Not a Waiver. No
forbearance in exercising any right or remedy shall operate as a waiver thereof;
no forbearance in exercising any right or remedy on any one or more occasion
shall operate as a waiver thereof on any further occasion; and no single or
partial exercise of any right or remedy shall preclude any other exercise
thereof or the exercise of any other right or remedy.

 

 

8.3.7 No
Waiver. Failure
by Lender to insist upon the strict performance of any of the covenants and
agreements herein set forth or to exercise any rights or remedies upon default
by Borrower hereunder shall not be considered or taken as a waiver or
relinquishment for the future of the right to insist upon and to enforce by
mandamus or other appropriate legal or equitable remedy strict compliance by
Borrower with all of the covenants and conditions hereof, or of the rights to
exercise any such rights or remedies, if such default by Borrower is continued
or repeated, or of the right to recover possession of the Facility by reason
thereof. To the extent permitted by law, any two or more of such rights or
remedies may be exercised at the same time.

 

 

8.3.8 No
Continuing Waivers. If any
covenant or agreement contained in the Loan Documents is breached by Borrower
and thereafter waived by Lender, such waiver shall be limited to the particular
breach so waived and shall not be deemed to waive any other breach hereunder. No
waiver shall be binding unless it is in writing and signed by Lender. No course
of dealing between Lender and Borrower, nor any delay nor omission on the part
of Lender in exercising any rights under the Loan Documents, shall operate as a
waiver.

 

 

8.3.9 Approval
Not a Waiver.
Lender’s review and approval of any contracts relating to a Facility shall not
constitute a waiver by Lender of any of the terms or requirements of the Loan
Documents which may conflict with any provision of any such
contracts.

 

 

8.3.10 No
Release.
Borrower and any other person now or hereafter obligated for the payment or
performance of all or any part of the Note shall not be released from paying and
performing under the Note by reason of [i] the failure of Lender to comply with
any request of Borrower (or of any other person so obligated), to take action to
enforce any of the provisions of the Loan Documents, or [ii] the release,
regardless of consideration, of the obligations of any person liable for payment
or performance of the Note, or any part thereof, or [iii] any agreement or
stipulation extending the time of payment or modifying the terms of the Note,
and in the event of such agreement or stipulation, Borrower and all such other
persons shall continue to be liable under such documents, as amended by such
agreement or stipulation, unless expressly released and discharged in writing by
Lender.

 

 

8.4 Assignment.

 

 

8.4.1 Assignment
by Lender. Lender
may assign, negotiate, pledge, or transfer this Agreement, the Note and all
other Loan Documents to any third party or parties for any purpose and, in case
of such assignment, the rights and remedies of Lender shall be enforceable
against Borrower by such party or parties with the same force and effect and to
the same extent as the same would have been enforceable by Lender but for such
assignment. 

 

 

8.4.2 Assignment
by Borrower.
Borrower shall not assign or attempt to assign its rights nor delegate its
obligations under this Agreement.

 

 

8.5 Notices.
Borrower and Lender hereby agree that all notices, demands, requests, and
consents (hereinafter “notices”) given pursuant to the terms of this Agreement
shall be in writing, shall be addressed to the addresses set forth in the
introductory paragraph of this Agreement and shall be served by [i] personal
delivery; [ii] certified mail, return receipt requested; [iii] nationally
recognized overnight courier; or [iv] by facsimile, provided that a copy thereof
is mailed by certified mail promptly thereafter. All notices shall be deemed to
be given upon the earlier of actual receipt (provided, that in the case of
facsimiles, any facsimile received after 5:00 p.m. local time shall be deemed
received on the next Business Day) or three days after deposit in the United
States mail or one Business Day after deposit with the overnight courier. Any
notices meeting the requirements of this Section shall be effective, regardless
of whether or not actually received. Lender and Borrower may change their notice
address at any time by giving the other party notice of such
change.

 

 

8.6 Entire
Agreement. This
Agreement, the other Loan Documents, the Lease Documents, and Existing HRT
Leases, and the other documents referred to herein constitute the entire
agreement between Borrower and Lender with respect to the subject matter hereof
and supersedes all prior negotiations, discussions or writings with respect
thereto. No representations, warranties, and agreements have been made by Lender
except as set forth in such documents. If there is any conflict between the
terms and provisions of the Commitment and the terms of this Agreement, this
Agreement shall govern.

 

 

8.7 Severability. If any
term or provision of this Agreement is held or deemed by Lender to be invalid or
unenforceable, such holding shall not affect the remainder of this Agreement and
the same shall remain in full force and effect.

 

 

8.8 Captions
and Headings. The
captions and headings are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this Agreement or
the intent of any provision thereof.

 

 

8.9 Governing
Law. This
Agreement shall be governed by and construed under the laws of the
State.

 

 

8.10 Binding
Effect. This
Agreement will be binding upon and inure to the benefit of the successors and
permitted assigns of Lender and Borrower.

 

 

8.11 Modification. This
Agreement may only be modified by a writing signed by both Lender and Borrower.
All references to this Agreement, whether in this Agreement or in any other
document or instrument, shall be deemed to incorporate all amendments,
modifications, and renewals of this Agreement made after the date hereof. If
Borrower requests Lender’s consent to any change in ownership, merger or
consolidation of Borrower, any assumption of the Loan, or any modification of
the Loan Documents, Borrower shall provide Lender all relevant information and
documents sufficient to enable Lender to evaluate the request. In connection
with any such request, Borrower shall pay Lender’s actual reasonable attorney’s
fees and expenses and other reasonable out-of-pocket expenses incurred in
connection with Lender’s evaluation of Borrower’s request, the preparation of
any documents and amendments, the subsequent amendment of any documents between
Lender and its collateral pool lenders (if applicable), and all related
matters.

 

 

8.12 Construction
of Agreement. This
Agreement has been prepared by Lender and its professional advisors and reviewed
by Borrower and its professional advisors. Lender, Borrower and their advisors
believe that this Agreement is the product of all their efforts, it expresses
their agreement, and that it shall not be interpreted in favor of either Lender
or Borrower or against either Lender or Borrower merely because of their efforts
in preparing it.

 

 

8.13 Counterparts. This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original hereof.

 

 

8.14 No
Third-Party Beneficiary Rights. No
person not a party to this Agreement, a successor party or an assignee of a
party shall have or enjoy any rights hereunder, and all third-party beneficiary
rights are expressly negated. 

 

 

8.15 Lender’s
Authority to Furnish Copies of Loan Documents. Lender
may exhibit or furnish the Loan Documents or copies thereof to any potential
transferee of the Loan (whether such transfer is absolute or collateral), to any
governmental or regulatory authority in connection with any legal,
administrative or regulatory proceedings requiring the disclosure of the terms
of the Loan Documents, to Lender’s attorneys, auditors and underwriters, and to
any other person or entity for which there is a legitimate business purpose for
such disclosure.

 

 

8.16 Lender
Merely a Lender.

 

 

8.16.1 No
Agency. Lender
is not and will not be in any way the agent for or trustee of Borrower. Lender
does not intend to act in any way for or on behalf of Borrower in disbursing the
proceeds of the Loan. Lender does not intend to be and is not and will not be
responsible for the completion of any improvements erected or to be erected upon
the land; the payment of bills or any other details in connection with the land
and improvements; any plans and specifications prepared in connection with the
land and improvements; or Borrower’s relations with any contractors,
subcontractors, materialmen, or laborers performing work or supplying materials
for the land and improvements.

 

 

8.16.2 No
Obligation to Pay. This
Agreement is not to be construed by Borrower or anyone furnishing labor,
materials, or any other work or product for improving any Facility as an
agreement upon the part of Lender to assure that anyone will be paid for
furnishing such labor, materials, or any other work or product. Borrower shall
be solely responsible for such payments.

 

ARTICLE
9: ADDITIONAL PROVISIONS IN CONNECTION WITH SECOND AMENDMENT AND RESTATEMENT


 

9.1 Secured
by Mortgage. The
Loan shall be secured by all real property and other collateral described in the
Mortgage, including any Personal Property assigned or pledged thereunder. The
Loan shall also be secured by any deposits, letters of credit, or other
collateral for the Loan previously provided to the holder of the Loan. All such
additional collateral is listed on Exhibit
D attached
hereto and incorporated herein by reference. A schedule of all Personal Property
for each Facility shall also be provided by Borrower to Lender, and updated from
time to time, at Lender’s request. Borrower shall execute such UCC financing
statements and other documents as Lender may reasonably require to perfect any
security interest granted in the Mortgage or otherwise to secure the performance
of Borrower’s obligations hereunder.

 

 

9.2 Venue. Any
actions for enforcement of the Loan Documents shall be brought in courts located
in the Middle District of Tennessee, which is the location of the chief
executive offices of Lender.

 

 

9.3 Oral
Agreements. ORAL
AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FOREBEAR FROM
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER THE LAWS OF THE STATE OF
WASHINGTON.

 

 

9.4 Impairment
of Leases.
Borrower will not agree to the modification of any Lease, the termination of any
Lease, or the application of any insurance proceeds or condemnation proceeds
with respect to any Facility without the prior written consent of Lender, not to
be unreasonably withheld. Borrower irrevocably assigns to Lender Borrower’s
right to treat any Lease as terminated under 11 U.S.C. Section 365 (h)(1)(A)(i)
or any comparable provision of law, including Borrower’s right to exercise any
option to reject or terminate the Lease any right of Borrower to object to any
sale of any Facility or any interest in any Facility and under Section 11 U.S.C.
363, or otherwise, in any bankruptcy or insolvency proceeding affecting Borrower
or any Lease. This assignment of Borrower’s rights is absolute and shall last
until such time as the Loan has been fully satisfied and the Mortgage has been
released. At such time, Borrower’s rights under the applicable bankruptcy or
insolvency laws shall automatically vest in Borrower.

 

 

9.5 Notices
Under Any Lease.
Borrower will promptly furnish Lender with copies of any notices received from
the landlord of any Lease with respect to the condition of any Facility, the
existence or possibility of any default under the Lease, or the potential
termination of the Lease. Lender shall have the right to cure any defaults under
any Lease, at Borrower’s expense. 

 

 

9.6 Claims
Against Prior Lender.
Borrower has no claims against HCN or any other rights of offset against the
Note, counterclaims, or any defenses against payment obligations under the Note
arising prior to the Effective Date. Borrower waives the right to any such
claims of offset, counterclaims, or defenses, known or unknown.

 

 

9.7 Demolitions
or Alterations of Facilities.
Borrower will not make or permit any demolitions or material alterations of any
improvements located at any Facilities without the prior written consent of
Lender, not to be unreasonably withheld; except as otherwise required or
permitted without Landlord’s consent under the Lease documents in which case
Lender’s consent shall not be required. 

 

 

9.8 Substitution
and Addition of Facilities Securing Loan. Subject
to the prior written consent of Lender, which consent shall not be unreasonably
withheld, the Mortgage of a particular Lease may be released and replaced with
new collateral upon request by Borrower as follows: (i) Borrower may grant a
leasehold mortgage in favor of Lender on its interest with respect to a
substitute facility (“Substitute Facility”) under a substitute lease
(“Substitute Lease”) with equal or better economics (not leased from Lender) or
(ii) Borrower, or an affiliate, as Tenant, and Lender, or an affiliate, as
Landlord, may enter into one or more new leases for additional Facilities (each
a “New HRT Lease”). In determining whether or not to give such consent to
substitution of collateral, Lender may consider commercially reasonably factors
including, without limitation, occupancy rates, debt service coverage ratios,
total revenues, total expenses, and EBITDA for the proposed Substitute Facility,
as well as the value that a New HRT Lease would contribute to the existing
Lender/Borrower portfolio. Borrower shall pay all attorneys’ fees and other
costs of Lender incurred in connection with consideration of the proposed
substitution of collateral. If Lender agrees to the substitution of collateral,
then a Mortgage shall be provided for the Substitute Lease in the same form as
the Mortgage encumbering the replaced Facility, and all representations and
warranties contained in this Agreement with respect to Facilities shall be
deemed to be effective with respect to the Mortgage of the Substitute Lease and
the Substitute Facility as of the effective date of the substituted Mortgage. On
such date, the existing Mortgage which is being replaced will be released of
record. All costs incurred in connection with the substitution of collateral
transaction will be paid by Borrower, including, without limitation, attorneys’
fees, costs of title insurance, survey, environmental assessment, property
condition reports, and similar commercial loan items as may be reasonably
required by Lender.

 

 

Should a
new lease of a Facility be added by Borrower and HCN as a new Master Lease
Facility under the Master Lease, then Borrower shall simultaneously grant to
Lender a Leasehold Mortgage on the new lease on the same terms and conditions as
are provided herein.

 

 

9.9 Indemnity.
Borrower shall indemnify Lender and hold Lender harmless for any claims, losses,
expenses (including reasonable attorneys’ fees and consultant fees),
liabilities, or other losses incurred as a result of the breach of any
representations, warranties, or covenants contained in the Loan
Documents.

 

 

9.10 Inconsistencies
with Intercreditor Agreement. This
Agreement is subject to the Intercreditor Agreement. In the event that the
provisions of this Agreement are inconsistent with the provisions of the
Intercreditor Agreement, the right of Lender to enforce this Agreement shall be
subject to the terms of the Intercreditor Agreement.

 

CONSENT
TO JURISDICTION

 

Borrower
hereby irrevocably submits to and consents to the non-exclusive jurisdiction and
venue of any state or federal court having jurisdiction over Davidson County,
Tennessee for any action or proceeding to enforce or defend any matter arising
from or related to this Agreement, the Note, or any other Loan Document.
Borrower hereby irrevocably waives, to the fullest extent Borrower may
effectively do so, the defense of an inconvenient forum to the maintenance of
any such action or proceeding in Davidson County, Tennessee. Borrower agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in any other jurisdiction by suit on a judgment or in any other
manner provided by law. Borrower and any guarantor agree not to institute any
legal action or proceeding against Lender or any director, officer, employee,
agent or property of Lender concerning any manner arising out of or relating to
this Agreement, the Note or any loan document other than in a state or federal
court having jurisdiction over Davidson County, Tennessee, or if such court
lacks subject matter or in personam jurisdiction, such action or proceeding may
be brought in any court which has such jurisdiction. Borrower hereby consents to
service of process by Lender in any manner and in any jurisdiction permitted by
law. Nothing herein shall affect or impair Lender’s right to serve legal process
in any manner permitted by law, or Lender’s right to bring any action proceeding
against Borrower or the property of Borrower or any guarantor in the courts of
any other jurisdiction. 

 

 

TO THE
FULLEST EXTENT PERMITTED BY LAW, BORROWER AND LENDER, AND ANY GUARANTOR, HEREBY
KNOWINGLY AND VOLUNTARILY WAIVE THE RIGHT TO A JURY TRIAL IN ANY ACTION,
PROCEEDING, OR COUNTER CLAIMS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
NOTE, OR ANY LOAN DOCUMENT.

 

 

(Signatures
on following page)

 

 




 





1084704.12 




















 




 

 

IN
WITNESS WHEREOF, Lender and Borrower have executed and delivered this Agreement
effective as of the Effective Date.

 

 




 


	
       

      LENDER:

       
	
      HEALTHCARE
      REALTY TRUST INCORPORATED

       

	 	
       

      By:
      /s/ John M. Bryant, Jr.    

       

	 	
      Title:
      Senior
      Vice President and General Counsel     

       

	
       

      BORROWER:

       
	
       

      EMERITUS
      CORPORATION

       

	 	
       

      By:
      /s/ William M. Shorten     

       

	
      Tax
      I.D. No.      

       
	
      Title:
      Director
      of Real Estate Finance 

       




 




 





1084704.12 




















EXHIBIT
A: PENDING LITIGATION








	
      General

	 
	
      California
      Public Interest Research Group
      filed an in early 2004 against Senior Housing Operators an others
      in
      the State of California to recover move-in or pre-admission
      fees

	 
	
      Professional
      Liability

	 
	
      Village
      Oaks Conway, FL- 2002 Liability Claim reserved at
  $150,000

	 
	
      Memorial
      Oaks, TX- 2003 Liability Claim reserved at $150,000

	 
	
      Ofczarzak
      v. Emeritus Corporation,
      Kingsley
      Place Oakwell Farms, TX- 2003 Liability Claim Verdict for $1.5 million
      compensatory and $18.0 million of punitive damages

	 
	
      Village
      Oaks Orange Park, FL- 2003 Liability Claim reserved at
      $150,000

	 
	
      Loyalton
      of Rockford, IL- 2004 Liability reserved at $500,000

	 
	
      The
      Terrace, CA- 2004 
      Liability Claim reserved at $250,000

	 
	
      Loyalton
      of Rancho Solano, CA, Liability claim reserved at
  $150,000.

	 
	
      Beckett
      Meadows, TX-2005 Professional Liability Claim reserved at
      $250,000

	 
	
      Employment
      Practices 

	 
	
      Borrower
      is subject to certain employment practice claims on the date hereof
      but
      none of the foregoing would materially
      and adversely affect the operation or business conducted by Borrower or
      any existing Facility 

	 
	
      Governmental
      and Regulatory Proceedings

	 
	
      Borrower
      is subject to certain actions,
      proceedings and investigations by governmental agencies and regulatory
      bodies on the date hereof but
      none of the foregoing would materially and adversely affect Borrower’s
      right to operate any Facility as it is presently
  operated



















1084704.12 


























EXHIBIT
B: DOCUMENTS TO BE DELIVERED

 

Borrower
shall deliver each of the following documents to Lender no later than the date
specified for each document:

 

 

1. Annual
Financial Statement of Borrower - within 90 days after the end of each fiscal
year.

 

 

2. Periodic
Financial Statement of Borrower - within 45 days after the end of each quarter
and 30 days after the end of each month.

 

 

3. Borrower’s
Certificate - with each delivery of Borrower’s financial
statements.

 

 

4. Federal
tax returns of Borrower - within 15 days after the filing of the return. If the
filing date is extended, also provide a copy of the extension application within
15 days after filing.

 

 




 










1084704.12 























EXHIBIT
C: BORROWER’S CERTIFICATE

 

Report
Period: Commencing       and
ending    

 

Loan: $_______________
Indebtedness owed by Emeritus Corporation (“Borrower”) to Healthcare Realty
Trust, Incorporated (“Lender”)

 

Borrower
hereby certifies to Lender to the best of its knowledge as follows:

 

1. The
attached [specify audited or
unaudited and
annual or
quarterly, and if
consolidated, so
state] financial statements of Borrower [i] have been prepared in accordance
with generally accepted accounting principles consistently applied; [ii] have
been prepared in a manner substantially consistent with prior financial
statements submitted to Lender; and [iii] fairly present the financial condition
and performance of Borrower in all material respects.

 

 

2. To the
best of my knowledge, Borrower was in compliance with all of the provisions of
the Loan Agreement and all other loan documents executed by Borrower in
connection with the Loan at all times during the Report Period, and no default,
or any event which with the passage of time or the giving of notice or both
would constitute a default, has occurred under the Loan.

 

 

Executed
this   day of
    ,
 .

 

 




 

EMERITUS
CORPORATION




 

By:


Name:


Title:


 




 








1084704.12 




















 

EXHIBIT
D: DEPOSITS AND ADDITIONAL COLLATERAL













NONE











1084704.12 




















EXHIBIT
E




POST
CLOSING DELIVERABLES










Post-Closing
Requirements (General)




	1.  	
      Updated
      Insurance Certificates for each location under the Master Lease
      (Fairfield, CA; Paso Robles, CA; Champaign, IL; Hattiesburg, MS;
      Flagstaff, AZ; Phoenix, AZ; Brandon, FL; Ft. Myers, FL; Lakeland, FL;
      Sarasota, FL; Chubbuck, ID; Coeur D’Alene, ID; Pocatello, ID; Hagerstown,
      MD; Tewksbury, MA; Lakewood, NY; Ontario, OR; Anderson, SC; Lubbock, TX;
      Staunton, VA; Bellingham, WA; Federal Way, WA; Moses Lake,
    WA)



 

	2.  	
      Copies
      of Licenses for each location under the Master Lease (Fairfield, CA; Paso
      Robles, CA; Champaign, IL; Hattiesburg, MS; Flagstaff, AZ; Phoenix, AZ;
      Brandon, FL; Ft. Myers, FL; Lakeland, FL; Sarasota, FL; Chubbuck, ID;
      Coeur D’Alene, ID; Pocatello, ID; Hagerstown, MD; Tewksbury, MA; Lakewood,
      NY; Ontario, OR; Anderson, SC; Lubbock, TX; Staunton, VA; Bellingham, WA;
      Federal Way, WA; Moses Lake, WA)



 

	3.  	
      Legal
      Opinion from counsel for Emeritus Corporation



 

	4.  	
      Legal
      Opinion from counsel for Health Care REIT, Inc.



 

	5.  	
      UCC-1
      Financing Statements from Emeritus Corporation and each subtenant under
      the Master Lease to be filed in each entity’s state of
      formation



 

	6.  	
      Assignments
      of Mortgage for each location under the Master Lease (Fairfield, CA; Paso
      Robles, CA; Champaign, IL; Hattiesburg, MS; Flagstaff, AZ; Phoenix, AZ;
      Brandon, FL; Ft. Myers, FL; Lakeland, FL; Sarasota, FL; Chubbuck, ID;
      Coeur D’Alene, ID; Pocatello, ID; Hagerstown, MD; Tewksbury, MA; Lakewood,
      NY; Ontario, OR; Anderson, SC; Lubbock, TX; Staunton, VA; Bellingham, WA;
      Federal Way, WA; Moses Lake, WA)



 

	7.  	
      Leasehold
      Mortgagee’s Title Insurance Policy for each location under the Master
      Lease (Fairfield, CA; Paso Robles, CA; Champaign, IL; Hattiesburg, MS;
      Flagstaff, AZ; Phoenix, AZ; Brandon, FL; Ft. Myers, FL; Lakeland, FL;
      Sarasota, FL; Chubbuck, ID; Coeur D’Alene, ID; Pocatello, ID; Hagerstown,
      MD; Tewksbury, MA; Lakewood, NY; Ontario, OR; Anderson, SC; Lubbock, TX;
      Staunton, VA; Bellingham, WA; Federal Way, WA; Moses Lake,
    WA)



 

	8.  	
      Schedule
      of Personal Property for each Master Leased
location.



 

	9.  	
      Payment
      of Invoice for $1,764.75 to Paranet for UCC-11
searches.



 

	10.  	
      Opinion
      of Waller Lansden Dortch and Davis that the Intercreditor Agreement is
      duly authorized, executed and delivered.



 







1084704.12 


























 

Post-Closing
Requirements (Title Company Requirements)




	1.  	
      Owner’s
      Affidavit, in form satisfactory to Fidelity National Title Insurance
      Company



 

	2.  	
      Gap
      Indemnity, in form satisfactory to Fidelity National Title Insurance
      Company



 

	3.  	
      Corporate
      Resolution of Emeritus Corporation



 

	4.  	
      Corporate
      Resolution of Health Care REIT, Inc.



 

	5.  	
      Washington
      Certificate of Good Standing for Emeritus Corporation (2
      originals)



 

	6.  	
      Certified
      copy of the Articles of Incorporation of Emeritus Corporation from the
      Washington Secretary of State



 

	7.  	
      Copy
      of the By-Laws of Emeritus Corporation, certified by the corporate
      secretary



 

	8.  	
      Certificates
      of Authority for Emeritus Corporation for the following states: Florida,
      Maryland, Virginia, New York



 

	9.  	
      Delaware
      Certificate of Good Standing for Health Care REIT,
Inc.



 

	10.  	
      Massachusetts
      Certificate of Registration (equivalent of good standing certificate) for
      Health Care REIT, Inc.



 

	11.  	
      Estoppel
      of Health Care REIT, Inc. and Emeritus Corporation as to no defaults in
      the Master Lease and in the Note



 

	12.  	
      Surveys
      for the following locations: Flagstaff, AZ; Phoenix, AZ; Brandon, FL; Ft.
      Myers, FL; Lakeland, FL; Sarasota, FL; Hagerstown, MD; Tewksbury, MA;
      Lakewood, NY; Lubbock, TX; Bellingham, WA; Federal Way, WA; Moses Lake,
      WA



 

	13.  	
      No-Change
      Affidavits for each of the following locations: Fairfield, CA; Paso
      Robles, CA; Champaign, IL; Hattiesburg, MS; Flagstaff, AZ; Phoenix, AZ;
      Brandon, FL; Ft. Myers, FL; Lakeland, FL; Sarasota, FL; Chubbuck, ID;
      Coeur D’Alene, ID; Pocatello, ID; Hagerstown, MD; Tewksbury, MA; Lakewood,
      NY; Ontario, OR; Anderson, SC; Lubbock, TX; Staunton, VA; Bellingham, WA;
      Federal Way, WA; Moses Lake, WA



 

	14.  	
      Copies
      of Phase I Environmental Assessment for each of the following locations:
      Fairfield, CA; Paso Robles, CA; Champaign, IL; Hattiesburg,
    MS