ex107212.htm


    EX-10.72.12

    
 

    LOAN
AGREEMENT

     

    


    THIS LOAN AGREEMENT (this
“Agreement”) is made as of December 19, 2008, by and among EMERIVENT BRADENTON
LLC, a Delaware limited liability company (“Emerivent
Bradenton”),  EMERIVENT BRIGHTON LLC, a Delaware limited liability
company (“Emerivent Brighton”)(Emerivent Bradenton and Emerivent Brighton,
together with their respective successors and assigns, the “Borrowers”, and
individually, a “Borrower”), and CAPMARK BANK, a Utah industrial bank (together
with its successors and assigns, the “Lender”).

     

    RECITALS

     

    A.           Borrowers
have requested that Lender make two (2) loans to Borrowers in the aggregate
principal sum of $19,700,000.

     

    B.           Lender
has agreed to make such loans on the terms and conditions hereinafter set
forth.

     

    AGREEMENT

     

    NOW, THEREFORE, it is hereby
agreed as follows:

     

    ARTICLE
I

     

    DEFINITIONS,
ACCOUNTING PRINCIPLES, UCC TERMS.

     

    1.1 As used
in this Agreement, the following terms shall have the following meanings unless
the context hereof shall otherwise indicate:

     

    “Accounts” means any rights of
Borrowers and/or Lessee (as applied to Lessee, solely as any of the below relate
to or arise out of the operation of the Facility), respectively, if any, and
arising from the operation of the Facility to payment for goods sold or leased
or for services rendered, not evidenced by an Instrument, including, without
limitation, (a) all accounts arising from the operation of the Facility, (b) all
moneys and accounts held by Lender pursuant to Section 4.14 of this Agreement,
and (c) all rights to payment from Medicare or Medicaid programs, or similar
state or federal programs, boards bureaus or agencies and rights to payment from
patients, residents, private insurers, and others arising from the operation of
the Facility, including rights to payment pursuant to Reimbursement
Contracts.  Accounts shall include the proceeds thereof (whether cash
or noncash, moveable or immoveable, tangible or intangible) received from the
sale, exchange, transfer, collection or other disposition or substitution
thereof.

     

    “Actual Management Fees” means
actual management fees paid or incurred in connection with operation of the
Facility.

     

    “Affiliate” shall mean, with
respect to any Person, (a) each Person that controls, is controlled by or
is under common control with such Person, (b) each Person that, directly or
indirectly, owns or controls, whether beneficially or as a trustee, guardian or
other fiduciary, any of the Stock of such Person such that such ownership or
control allows such Person to control or

     


    
      
         


      

      
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    materially
affect the course of management of the owned or controlled Person, and
(c) each of such Person’s officers, directors, members, joint venturers and
partners.

     

    “Assignment of Leases and Rents”
shall mean that certain Assignment of Leases and Rents executed by each
Borrower in favor of Lender of even date herewith.

     

    “Assignment of Licenses”
means, collectively, those certain Assignments of Licenses, Permits and
Contracts executed by Borrower and Lessee to and for the benefit of
Lender.

     

    “Assumed Management Fees”
means assumed management fees of five percent (5%) of net patient revenues of
the Facility (after Medicaid and Medicare contractual adjustments, if
any).

     

    “Bradenton Note” means that
certain Promissory Note of even date herewith in the principal amount of
$5,112,500 payable by Emerivent Bradenton to the order of Lender.

     

    “Bradenton Property” means the
real estate located in Bradenton, Manatee County, Florida, which is more
particularly described in Exhibit “A” hereto,
upon which the Bradenton Facility is located, and which, concurrent with the
Closing Date, will be owned by Emerivent Bradenton.

     

    “Brighton Note” means that
certain Promissory Note of even date herewith in the principal amount of
$14,587,500 payable by Emerivent Brighton to the order of Lender.

     

    “Brighton Property” means the
real estate located in Brighton, Livingston County, Michigan, which is more
particularly described in Exhibit “A” hereto,
upon which the Brighton Facility is located, and which, concurrent with the
Closing Date, will be owned by Emerivent Brighton.

     

    “Business Day” means a day,
other than Saturday or Sunday and legal holidays, when the Lender is open for
business.

     

    “Closing Date” means the date
on which all or any part of the Loan is disbursed by Lender to or for the
benefit of Borrower.

     

    “Collateral” means,
collectively, either or both of Borrowers' and/or Lessee’s right, title and
interest, respectively, if any, in the Property, Improvements, Equipment, Rents,
Accounts, General Intangibles, Instruments, Inventory, Money, Permits (to the
full extent assignable), Reimbursement Contracts, and all Proceeds, all whether
now owned or hereafter acquired, and including replacements, additions,
accessions, substitutions, and products thereof and thereto, and all other
property which is or hereafter may become subject to a Lien in favor of Lender
as security for any of the Loan Obligations.

     

    “Commitment Letter” means the
commitment letter issued by Lender to Borrowers dated of even date
herewith.

     

    “Debt Service Coverage Ratio”
means a ratio in which the first number is the sum of aggregate “net pre-tax
income” of Lessee and Borrowers from usual operations of the

     


    
      
         


      

      
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    Facilities
as set forth in the financial statements provided to Lender (without deduction
for Actual Management Fees, if any, or management expenses, if any, paid or
incurred in connection with the operation of the Facility), calculated based
upon the preceding three (3) months, plus Loan interest expense or Facility
lease expense to the extent deducted in determining net income and non-cash
expenses or allowances for depreciation and amortization of the Facility for
such period, less Assumed
Management Fees for such period and the second number is the sum of principal
and interest on the Loans, assuming a twenty-five (25) year amortization
schedule at the Note Rate (as defined in the Note), for said three (3) month
period.  In calculating “net pre-tax income,” Extraordinary Income and
Extraordinary Expenses shall be excluded.

     

    “Default” means the occurrence
or existence of any event which, but for the giving of notice or expiration of
time or both, would constitute an Event of Default.

     

    “Default Rate” has the meaning
given to that term in the Notes.

     

    “Emeritus” means Emeritus
Corporation, a publicly-traded company organized under the laws of the State of
Washington.

     

    “Environmental Permit” means
any permit, license, or other authorization issued under any Hazardous Materials
Law with respect to any activities or businesses conducted on or in relation to
the Property and/or the Improvements.

     

    “Equipment” means all beds,
linen, televisions, carpeting, telephones, cash registers, computers, lamps,
glassware, rehabilitation equipment, restaurant and kitchen equipment, and other
fixtures and equipment of Borrower located on, attached to or used or useful in
connection with any of the Property or the Facility and all renewals and
replacements thereof and substitutions therefor; provided, however, that with
respect to any items which are leased, if any, for the benefit of the Facility
and not owned by Borrower, the Equipment shall include the leasehold interest
only of Borrower together with any options to purchase any of said items and any
additional or greater rights with respect to such items which Borrower may
hereafter acquire.

     

    “Event of Default” means any
“Event of Default” as defined in Article VII hereof.

     

    “Exhibit” means an Exhibit to
this Agreement, unless the context refers to another document, and each such
Exhibit shall be deemed a part of this Agreement to the same extent as if it
were set forth in its entirety wherever reference is made thereto.

     

    “Extraordinary Income and
Extraordinary Expenses” means material items of a character significantly
different from the typical or customary business activities of Borrower and/or
Lessee, as applicable, which would not be expected to recur frequently and which
would not be considered as recurring factors in any evaluation of the ordinary
operating processes of Borrower’s and/or Lessee’s respective businesses, and
which would be treated as extraordinary income or extraordinary expenses under
GAAP.

     

    “Facilities” means the
facility known as “Summerville at Bradenton”, presently a 106-unit licensed
assisted living facility located on the Bradenton Property (herein,
sometimes

     


    
      
         


      

      
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    referred
to as the “Bradenton Facility”), and the facility known as “Summerville at
Brighton”, presently a 149-unit licensed assisted living facility located on the
Brighton Property (herein, sometimes referred to as the “Brighton Facility”), as
they may now or hereafter exist, together with any other general or specialized
care facilities, if any (including any subacute, and/or any healthcare related
and/or any assisted living facility), now or hereafter operated on the Property,
and, individually, a “Facility”.

     

    “GAAP” means, as in effect
from time to time, generally accepted accounting principles consistently applied
as promulgated by the American Institute of Certified Public
Accountants.

     

    “General Intangibles” means
all intangible personal property of Borrowers and/or Lessee, respectively, if
and as applicable, arising out of or connected with the Property or the
Facilities and all renewals and replacements thereof and substitutions therefor
(other than Accounts, Rents, Instruments, Inventory, Money, Permits, and
Reimbursement Contracts), including, without limitation, things in action,
contract rights and other rights to payment of money.

     

    “Governmental Authority” means
any board, commission, department or body of any municipal, county, state or
federal governmental unit, or any subdivision of any of them, that has or
acquires jurisdiction over the Property and/or the Improvements or the use,
operation or improvement of the Property.

     

    “Guarantor” means
Emeritus.

     

    “Guaranty Agreement” means
that certain Payment and Performance Guaranty Agreement of even date herewith
made by Guarantor to Lender.

     

    “Hazardous Materials” means
petroleum and petroleum products and compounds containing them, including
gasoline, diesel fuel and oil; explosives; flammable materials; radioactive
materials; polychlorinated biphenyls (“PCBs”) and compounds containing them;
lead and lead-based paint; asbestos or asbestos-containing materials in any form
that is or could become friable; underground storage tanks, whether empty or
containing any substance; any substance the presence of which on the Property is
prohibited by any federal, state or local authority; any substance that requires
special handling; and any other material or substance now or in the future
defined as a “hazardous substance,” “hazardous material,” “hazardous waste,”
“toxic substance,” “toxic pollutant,” “contaminant,” or “pollutant” within the
meaning of any Hazardous Materials Law.

     

    “Hazardous Materials Laws”
means all federal, state, and local laws, ordinances and regulations and
standards, rules, policies and other governmental requirements, administrative
rulings and court judgments and decrees in effect now or in the future and
including all amendments, that relate to Hazardous Materials and apply to
Borrower or to the Property and/or the Improvements.  Hazardous
Materials Laws include, but are not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the
Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water
Act, 33

     


    
      
         


      

      
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    U.S.C.
Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, and their state analogs.

     

    “Immediate Repair Escrow
Agreements” means those certain Immediate Repair Escrow Agreements of
even date herewith by and between each Borrower and Lender.

     

    “Improvements” means all
buildings, structures and improvements of every nature whatsoever now or
hereafter situated on the Property, including, but not limited to, all gas and
electric fixtures, radiators, heaters, engines and machinery, boilers, ranges,
elevators and motors, plumbing and heating fixtures, carpeting and other floor
coverings, water heaters, awnings and storm sashes, and cleaning apparatus which
are or shall be attached to the Property or said buildings, structures or
improvements.

     

    “Indebtedness” means any (a)
obligations for borrowed money, (b) obligations, payment for which is being
deferred by more than thirty (30) days, representing the deferred purchase price
of property other than accounts payable arising in connection with the purchase
of goods, services, inventory, equipment or other personal property customary in
the trade and in the ordinary course of Borrowers’ and/or Lessee’s business and
the operation of the Facilities for its intended purpose, (c) obligations,
whether or not assumed, secured by Liens or payable out of the proceeds or
production from the Accounts and/or property now or hereafter owned or acquired,
and (d) the amount of any other obligation (including obligations under
financing leases) which would be shown as a liability on a balance sheet
prepared in accordance with GAAP.

     

    “Instruments” means all
instruments, chattel paper, documents or other writings obtained from or in
connection with the operation of the Property or the construction and operation
of the Facility (including, without limitation, all ledger sheets, computer
records and printouts, data bases, programs, books of account, trademarks or
trade names, utility contracts, maintenance and service contracts, and files
relating thereto).

     

    “Inventory” means all
inventories of food, beverages and other comestibles held by Borrowers and/or
Lessee, respectively, if and as applicable for sale or use at or from the
Property or the Facilities, and soap, paper supplies, medical supplies, drugs
and all other such goods, wares and merchandise held by Borrowers and/or Lessee,
respectively, if and as applicable for sale to or for consumption by guests,
patients or residents of the Property or either Facility and all such other
goods returned to or repossessed by Borrowers.

     

    “Lease Agreement” means that
certain Lease Agreement between Emerivent Bradenton and Lessee dated of even
date herewith, whereby Lessee has leased the Bradenton Facility.

     

    “Lessee” means Summerville at
Golden Pond LLC, a Delaware limited liability company, or any successor lessee
approved by Lender, which approval shall not be unreasonably withheld subject to
the terms hereof.

     

    “Lessee’s SNDA” means that
certain Subordination, Attornment and Non-Disturbance Agreement of even date
herewith by and among Emerivent Bradenton, Lessee and Lender.

     


    
      
         


      

      
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    “Lien” means any voluntary or
involuntary mortgage, security deed, deed of trust, lien, pledge, assignment,
security interest, title retention agreement, financing lease, levy, execution,
seizure, judgment, attachment, garnishment, charge, lien or other encumbrance of
any kind, including those contemplated by or permitted in this Agreement and the
other Loan Documents.

     

    “Loans” means, jointly, the
two (2) loans in the aggregate principal sum of $19,700,000 made by Lender to
Borrowers as of the date hereof, and, individually, a “Loan”.

     

    “Loan Documents” means,
collectively, this Agreement, the Assignment of Leases and Rents, the Notes, the
Guaranty Agreement, the Lessee’s SNDA, the Mortgage and the Immediate Repair
Escrow Agreements, together with any and all other documents executed by
Borrower, Emeritus or others, evidencing, securing or otherwise relating to the
Loan.

     

    “Loan Obligations” means the
aggregate of all principal and interest owing from time to time under the Note
and all expenses, charges and other amounts from time to time owing under the
Note, this Agreement, or the other Loan Documents and all covenants, agreements
and other obligations from time to time owing to, or for the benefit of, Lender
pursuant to the Loan Documents.

     

    “Maturity Date” means January
1, 2012.

     

    “Medicaid” means that certain
program of medical assistance, funded jointly by the federal government and the
States, for impoverished individuals who are aged, blind and/or disabled, and/or
members of families with dependent children, which program is more fully
described in Title XIX of the Social Security Act (42 U.S.C. §§ 1396 et seq.) and the regulations
promulgated thereunder.

     

    “Medicare” means that certain
federal program providing health insurance for eligible elderly and other
individuals, under which physicians, hospitals, skilled nursing homes, home
health care and other providers are reimbursed for certain covered services they
provide to the beneficiaries of such program, which program is more fully
described in Title XVIII of the Social Security Act (42 U.S.C. §§ 1395 et seq.) and the regulations
promulgated thereunder.

     

    “Money” means all monies,
cash, rights to deposit or savings accounts or other items of legal tender
obtained from or for use in connection with Borrowers’ ownership of the Property
and/or Lessee’s operation of the Facility.

     

    “Mortgage” means jointly those
certain two (2) Mortgage, Security Agreement and Fixture Filings, of even date
herewith from the Borrowers in favor of or for the benefit of Lender and
covering each Borrower’s respective Property.

     

    “Notes” means the Bradenton
Note and the Brighton Note, and, individually, the “Note”.

     

    “OFAC List” means the list of
specially designated nationals and blocked persons subject to financial
sanctions that is maintained by the U.S. Treasury Department, Office of Foreign
Assets Control and any other similar list maintained by the U.S.
Treasury

     


    
      
         


      

      
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    Department,
Office of Foreign Assets Control pursuant to any Requirements of Law, including,
without limitation, trade embargo, economic sanctions, or other prohibitions
imposed by Executive Order of the President of the United States.  The
OFAC List currently is accessible through the internet website
www.treas.gov/ofac/t11sdn.pdf.

     

    “O&M Program” means a
written program of operations and maintenance established or approved in writing
by Lender relating to any Hazardous Materials in, on or under the Property or
Improvements.

     

    “Permits” means all licenses,
permits and certificates used or necessary in connection with the ownership,
operation, use or occupancy of the Property and/or the Facilities (as may be
possessed by either Borrower or Lessee, as applicable), including, without
limitation, business licenses, state health department licenses, food service
licenses, licenses to conduct business, certificates of need and all such other
permits, licenses and rights, obtained from any governmental, quasi-governmental
or private person or entity whatsoever concerning ownership, operation, use or
occupancy.

     

    “Permitted Encumbrances” has
the meaning given to that term in Section 5.2 hereof.

     

    “Person” means any natural
person, firm, trust, corporation, partnership, limited liability company, trust
and any other form of legal entity.

     

    “Proceeds” means all awards,
payments, earnings, royalties, issues, profits, liquidated claims, and proceeds
(including proceeds of insurance and condemnation or any conveyance in lieu
thereof) from the sale, conversion (whether voluntary or involuntary), exchange,
transfer, collection, loss, damage, condemnation, disposition, substitution or
replacement of any of the Collateral.

     

    “Property” means the Bradenton
Property and the Brighton Property, jointly.

     

    “Reimbursement Contracts”
means all third party reimbursement contracts for the Facility which are now or
hereafter in effect with respect to residents or patients qualifying for
coverage under the same, including, if any and as applicable, Medicare, Medicaid
and private insurance agreements, and any successor program or other similar
reimbursement program and/or private insurance agreements.

     

    “Rents” means all rent and
other payments of whatever nature from time to time payable pursuant to the
Lease Agreement or any successor lease of the Property and Facility, or for
retail space or other space at the Property (including, without limitation,
rights to payment earned under leases for space in the Improvements for the
operation of ongoing retail businesses, if any, such as newsstands, barbershops,
beauty shops, physicians’ offices, pharmacies and specialty shops), by either or
both of Borrower and Lessee.

     

    “Requirements of Law” means
(a) the organizational documents of an entity, and (b) any law, regulation,
ordinance, code, decree, treaty, ruling or determination of an arbitrator, court
or other Governmental Authority, or any Executive Order issued by the President
of the United States, in each case applicable to or binding upon such Person or
to

     


    
      
         


      

      
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    which
such Person, any of its property or the conduct of its business is subject
including, without limitation, laws, ordinances and regulations pertaining to
the zoning, occupancy and subdivision of real property.

     

    “Single Purpose Entity” means
a Person that complies with the requirements of Section 5.4.

     

    “Stock” shall mean all shares,
options, warrants, general or limited partnership interests, membership
interests, participations or other equivalents (regardless of how designated) in
a corporation, limited liability company, partnership or any equivalent entity,
whether voting or nonvoting, including, without limitation, common stock,
preferred stock, or any other “equity security” (as such term is defined in Rule
3a11-1 of the General Rules and Regulations promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as
amended).

     

    1.2 Singular
terms shall include the plural forms and vice versa, as applicable, of the terms
defined.

     

    1.3 Terms
contained in this Agreement shall, unless otherwise defined herein or unless the
context otherwise indicates, have the meanings, if any, assigned to them by the
Uniform Commercial Code in effect in the State of Illinois.

     

    1.4 All
accounting terms used in this Agreement shall be construed in accordance with
GAAP, except as otherwise specified.

     

    1.5 All
references to other documents or instruments shall be deemed to refer to such
documents or instruments as they may hereafter be extended, renewed, modified,
or amended and all replacements and substitutions therefor.

     

    1.6 All
references herein to “Medicaid” and “Medicare” shall be deemed to include any
successor program thereto.

     

    ARTICLE
II

     

    TERMS
OF THE LOAN

     

    2.1 The
Loans.  Borrowers have agreed to borrow the Loans from Lender,
and Lender has agreed to make the Loans to Borrowers, subject to each Borrower’s
compliance with and observance of the terms, conditions, covenants, and
provisions of this Agreement and the other Loan Documents, and Borrowers have
made the covenants, representations, and warranties herein and therein as a
material inducement to Lender to make the Loans.

     

    2.2 Security
for the Loan.  The Loans will be evidenced, secured and
guaranteed by the Loan Documents and the Collateral.

     

    2.3 Limitation
on Interest.  All agreements
between Borrowers and Lender, whether now existing or hereafter arising and
whether written or oral, are hereby limited so that in no contingency, whether
by reason of acceleration of the maturity of any indebtedness governed hereby or
otherwise, shall the interest contracted for, charged or received by Lender
exceed the

     


    
      
         


      

      
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    maximum
amount permissible under applicable law.  If, from any circumstance
whatsoever, interest would otherwise be payable to Lender in excess of the
maximum lawful amount, the interest payable to Lender shall be reduced to the
maximum amount permitted under applicable law; and, if from any circumstance
Lender shall ever receive anything of value deemed interest by applicable law in
excess of the maximum lawful amount, an amount equal to any excessive interest
shall be applied to the reduction of the principal of the Loan and not to the
payment of interest, or, if such excessive interest exceeds the unpaid balance
of principal of the Loan, such excess shall be refunded to the applicable
Borrower.  All interest paid or agreed to be paid to Lender shall, to
the extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full period until payment in full of the principal of the
Loan (including the period of any renewal or extension thereof) so that interest
thereon for such full period shall not exceed the maximum amount permitted by
applicable law.  This paragraph shall control all agreements between
Borrowers and Lender.

     

    ARTICLE
III

     

    BORROWER’S
REPRESENTATIONS AND WARRANTIES

     

    To induce
Lender to enter into this Agreement, and to make the Loans to Borrowers, each
Borrower, with respect to its Loan and its Facility, represents and warrants to
Lender as follows:

     

    3.1 Existence,
Power and Qualification.  Borrower is a duly organized and
validly existing limited liability company, has the power to own its properties
and to carry on its business as is now being conducted, and is duly qualified to
do business and is in good standing in every jurisdiction in which the character
of the properties owned by it or in which the transaction of its business makes
its qualification necessary.

     

    3.2 Power and
Authority.  Borrower has full power and authority to borrow the
indebtedness evidenced by their respective Note and to incur the Loan
Obligations provided for herein, all of which have been authorized by all proper
and necessary action.  All consents, approvals authorizations, orders
or filings of or with any court or governmental agency or body, if any, required
for the execution, delivery and performance of the Loan Documents by the
Borrower have been obtained or made.

     

    3.3 Due
Execution and Enforcement.  Each of the Loan Documents to which
Borrower is a party constitutes a valid and legally binding obligation of
Borrower, enforceable in accordance with its respective terms (except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium, or other laws relating to the rights of creditors
generally and by general principles of equity) and does not violate, conflict
with, or constitute any default under any law, government regulation, decree,
judgment, Borrower’s certificate of formation or operating agreement, as
applicable, or any other agreement or instrument binding upon
Borrower.

     

    3.4 Single
Purpose Entity.  Borrower is a Single Purpose
Entity.

     

    3.5 Pending
Matters.

     

    (a) Operations; Financial
Condition.  No action or investigation is pending or, to the
best of Borrower’s knowledge, threatened before or by any court or
administrative agency

     


    
      
         


      

      
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    which
might result in any material adverse change in the financial condition,
operations or prospects of Borrower or any lower reimbursement rate under the
Reimbursement Contracts.  To the best of Borrower’s knowledge,
Borrower is not in violation of any agreement, the violation of which would
reasonably be expected to have a material adverse effect on its business or
assets, and Borrower is not in violation of any order, judgment, or decree of
any court, or any statute or governmental regulation to which it is
subject.

     

    (b) Property
Improvements.  There are no proceedings pending, or, to the
best of Borrower’s knowledge, threatened, to acquire through the exercise of any
power of condemnation, eminent domain or similar proceeding any part of the
Property, the Improvements or any interest therein, or to enjoin or similarly
prevent or restrict the use of the Property or the operation of the Facility in
any manner.  None of the Improvements is subject to any unrepaired
casualty or other damage.

     

    3.6 Financial
Statements Accurate.  All financial statements heretofore or
hereafter provided by Borrower are and will be true and complete in all material
respects as of their respective dates and fairly present or will fairly present
the respective financial condition of Borrower, and there are or will be no
material liabilities, direct or indirect, fixed or contingent, as of the
respective dates of such statements which are not reflected or will not be
reflected therein or in the notes thereto or in a written certificate delivered
with such statements.  The financial statements of Borrower delivered
to Lender prior to the Closing Date have been prepared in accordance with
GAAP.  There has been no material adverse change in the financial
condition or operations of Borrower since the dates of such statements except as
fully disclosed in writing with the delivery of such
statements.  Borrower will make all good faith efforts to cause Lessee
to comply with this provision such that all financial statements of the
operations of the Facility heretofore or hereafter provided to Lender by Lessee
are and will be true and complete in all material respects as of their
respective dates.

     

    3.7 Compliance
with Facility Laws.  The Bradenton Facility is duly licensed as
an assisted living facility at the licensed unit capacity set forth in the
definition of Facilities in Section 1.1 under the applicable laws of the state
where the respective Property is located and is currently operated as an
assisted living facility.  The Brighton Facility operates as an
unlicensed facility.  The Brighton Facility has recently been advised
by the Michigan Bureau of Children and Adult Licensing that it will need to make
some changes to the manner in which food services are provided to the residents
of the Brighton Facility in order to maintain such unlicensed status. The
necessary changes at the Brighton Facility level are in process and shall be
completed no later than May 1, 2009.  Borrower and/or Lessee are the
lawful owners of all Permits for the Facility, including, without limitation,
any certificate of need, if applicable, which Permits (a) are in full force
and effect, (b) constitute all of the permits, licenses and certificates
required for the use, operation and occupancy thereof, (c) have not been
pledged as collateral for any other loan or Indebtedness, and (d) are held
free from restrictions or any encumbrance which would materially adversely
affect the use or operation of the Facility.  Borrower and Lessee as
well as the operation of the Facility are in compliance in all material respects
with the applicable provisions of the laws, rules, regulations and published
interpretations to which the Facility is subject.   To the best
of Borrower’s knowledge, no waivers of any laws, rules, regulations, or
requirements (including, but not limited to, minimum foot requirements per bed)
are required for the Facility to operate at the current licensed unit
capacity.  All Reimbursement Contracts, if any,

     


    
      
         


      

      
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    are in
full force and effect, as required, with respect to the Facility, and Borrower
and Lessee are in good standing with all the respective entities governing such
Permits and Reimbursement Contracts.  Borrower and Lessee are current
in the payment of all so-called provider specific taxes (if any) or other
assessments with respect to such Reimbursement Contracts.  Borrower
will maintain (or will cause Lessee to maintain as the case may be) (without
allowing to lapse) the certificate of need, if applicable, and any required
Permits.  In the event Lender acquires the Facility through
foreclosure or otherwise, neither Lender nor a subsequent manager, a subsequent
lessee or any subsequent purchaser (through foreclosure or otherwise) must
obtain a certificate of need prior to applying for and receiving a license to
operate the Facility; provided that no changes in applicable law or regulation
occur subsequent to the Closing Date.

     

    3.8 Maintain
Unit Capacity.  Neither Borrower nor Lessee has granted to any
third party the right to reduce the number of licensed beds in the Facility or
to apply for approval to transfer the right to any and all of the licensed
Facility units to any other location.

     

    3.9 Medicare
and Medicaid Compliance.  The Facility does not participate in
and is not certified to participate in Medicare.  Further, the
Brighton Facility does not participate in and is not certified to participate in
Medicaid.  The Bradenton Facility is certified to participate in
Medicaid.

     

    3.10 Third-Party
Payors.  To the best of Borrower’s knowledge, there is no
threatened or pending revocation, suspension, termination, probation,
restriction, limitation, or nonrenewal affecting Borrower, Lessee or the
Facility or any participation or provider agreement with any third-party payor,
including, if applicable, Medicare, Medicaid, Blue Cross and/or Blue Shield, and
any other private commercial insurance managed care and employee assistance
program (such programs, the “Third-Party Payors’ Programs”) to which Borrower or
Lessee presently is subject.  All Medicare, Medicaid (if applicable)
and private insurance cost reports and financial reports submitted by Borrower
or Lessee are and will be materially accurate and complete and have not been and
will not be misleading in any material respects.  No cost reports for
the Facility remain “open” or unsettled, except as in the ordinary course of
operations of the Facility or as otherwise disclosed.

     

    3.11 Governmental
Proceedings and Notices.  Neither Borrower nor Lessee nor the
Facility is currently the subject of any proceeding by any governmental agency,
and no notice of any violation has been received from a governmental agency that
would, directly or indirectly, or with the passage of time:

     

    (a) Have a
material adverse impact on Lessee’s ability to accept and/or retain patients or
result in the imposition of a fine, a sanction, a lower rate certification or a
lower reimbursement rate for services rendered to eligible
patients;

     

    (b) Modify,
limit or annul or result in the transfer, suspension, revocation or imposition
of probationary use of any of the Permits; or

     

    (c) Affect
Lessee’s continued participation in any Third-Party Payors’ Programs, or any
successor programs thereto, if any, at current rate certifications.

     


    
      
         


      

      
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    3.12 Physical
Plant Standards.  The Facility and the use thereof complies in
all material respects with all applicable local, state and federal building
codes, fire codes, health care, nursing facility and other similar regulatory
requirements (the “Physical Plant Standards”), and no waivers of Physical Plant
Standards exist at the Facility.

     

    3.13 Pledges
of Receivables.  Neither Borrower nor Lessee has pledged its
Accounts as collateral security for any loan or Indebtedness other than, if
applicable, the Loan.

     

    3.14 Payment
of Taxes and Property Impositions.  Borrower has filed all
federal, state, and local tax returns which it is required to file and has paid,
or made adequate provision for the payment of, all taxes which are shown
pursuant to such returns or are required to be shown thereon or to assessments
received by Borrower.  All such returns are complete and accurate in
all respects.  Borrower has paid or made adequate provision for the
payment of all applicable water and sewer charges, ground rents (if applicable)
and Taxes (as defined in the Mortgage) with respect to the
Property.

     

    3.15 Title to
Collateral.  Each of Borrower and Lessee, respectively, if and
as applicable, has good and marketable title to all of the Collateral, subject
to no lien, mortgage, pledge, encroachment, zoning violation, or encumbrance,
except Permitted Encumbrances (specifically including special exceptions
reflected in Lender’s title insurance policy insuring the Mortgage), which do
not and will not materially interfere with the security intended to be provided
by the Mortgage or the current use or operation of the Property and the
Improvements or the current ability of the Facility to generate net operating
income sufficient to service the Loan.  All Improvements situated on
the Property are situated wholly within the boundaries of the
Property.

     

    3.16 Priority
of Mortgage.  The Mortgage constitutes a valid first lien
against the real and personal property described therein, prior to all other
liens or encumbrances, including those which may hereafter accrue, excepting
only “Permitted Encumbrances”.

     

    3.17 Location
of Chief Executive Offices.  The location of Borrower’s
principal place of business and chief executive office is set forth on Exhibit “B”
hereto.

     

    3.18 Disclosure.  All
information furnished or to be furnished by Borrower to Lender in connection
with the Loan or any of the Loan Documents, is, or will be at the time the same
is furnished, accurate and correct in all material respects and complete insofar
as completeness may be necessary to provide Lender with true and accurate
knowledge of the subject matter.

     

    3.19 Trade
Names.  Neither Borrower nor the Facilities, which operate
under the trade names “Summerville at Brighton” and “Summerville at Bradenton”
(which formerly operated as “Golden Pond Assisted Living”), have changed their
names, been known by any other name, or been a party to a merger, reorganization
or similar transaction.

     

    3.20 ERISA.  As
of the date hereof and throughout the term of this Agreement,

     

    (a) Borrower
is not an “employee benefit plan,” as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), subject to Title I
of

     


    
      
         


      

      
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    ERISA,
and none of the assets of Borrower constitute “plan assets” (within the meaning
of Department of Labor Regulation Section 2510.3-101) of one or more such plans,
and

     

    (b) Borrower
is not a “governmental plan” within the meaning of Section 3(32) of ERISA, and
transactions by or with Borrower are not be subject to state statutes regulating
investments of, and fiduciary obligations with respect to, governmental
plans.

     

    (c) The
execution and delivery of the Loan Documents and the borrowing of indebtedness
hereunder do not constitute a non-exempt prohibited transaction under Section
406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended
(the “Code”).

     

    3.21 Ownership.  The
ownership interests of the Persons comprising Borrower and each of the
respective interests in Borrower are correctly and accurately set forth on Exhibit “C”
hereto.

     

    3.22 Compliance
With Applicable Laws.  The Facility and its operations and the
Property comply in all material respects with all covenants and restrictions of
record and applicable laws, ordinances, rules and regulations, including,
without limitation, the Americans with Disabilities Act and the regulations
thereunder, and all laws, ordinances, rules and regulations relating to zoning,
setback requirements and building codes and there are no waivers of any building
codes currently in existence for the Facility; provided, however, the Brighton
Facility has recently been advised by the Michigan Bureau of Children and Adult
Licensing that it will need to make some changes to the manner in which food
services are provided to the residents of the Brighton Facility in order to
lawfully maintain such unlicensed status.

     

    3.23 Solvency.  Borrower
is solvent for purposes of 11 U.S.C. §548, and the borrowing of the Loan will
not render Borrower insolvent for purposes of 11 U.S.C. §548.

     

    3.24 Lease
Agreement.  As of the Closing Date, the Lease Agreement will be
in full force and effect and, there are no defaults (either monetarily or
non-monetarily) by Emerivent Bradenton or, to the best of Emerivent Bradenton’s
knowledge, Lessee thereunder.

     

    3.25 Other
Indebtedness.  Neither Borrower nor Lessee has any outstanding
Indebtedness, secured or unsecured, direct or contingent (including any
guaranties), other than (a) the Loan, and (b) indebtedness which represents
trade payables or accrued expenses incurred in the ordinary course of business
of owning and operating the Property; provided that, for purposes of this
representation, Lessee’s representation relates solely to Indebtedness related
to or arising out of the Property, the Facility or Lessee’s operation of the
same; no other debt will be secured (senior, subordinate or pari passu) by the
Property.

     

    3.26 Other
Obligations.  Borrower has no material financial obligation
under any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which Borrower is a party or by which Borrower or the Property
is otherwise bound, other than obligations incurred in the ordinary course of
the ownership of the Property and other than obligations under the Mortgage and
the other Loan Documents.

     

    3.27 Fraudulent
Conveyances.  Borrower (a) has not entered into this Agreement
or any of the other Loan Documents with the actual intent to hinder, delay, or
defraud any creditor,

     


    
      
         


      

      
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    and
(b) has received reasonably equivalent value in exchange for its
obligations under the Loan Documents.  Giving effect to the
transactions contemplated by the Loan Documents, the fair saleable value of
Borrower’s assets exceeds and will, immediately following the execution and
delivery of the Loan Documents, be greater than Borrower’s probable liabilities,
including the maximum amount of its contingent liabilities or its debts as such
debts become absolute and mature.  Borrower’s assets do not and,
immediately following the execution and delivery of the Loan Documents will not,
constitute unreasonably small capital to carry out its business as conducted or
as proposed to be conducted.  Borrower does not intend to, and does
not believe that it will, incur debts and liabilities (including, without
limitation, contingent liabilities and other commitments) beyond its ability to
pay such debts as they mature (taking into account the timing and amounts to be
payable on or in respect of obligations of Borrower).

     

    3.28 Representations
and Warranties.  Borrower agrees that its representations and
warranties and covenants contained herein are true and correct as of the date
hereof and shall survive the making of the Loan and the assignment and delivery
of the Loan to any participant of the Loan.

     

    3.29 Use of
Loan Proceeds.  The Loan is primarily for commercial or
business purposes and is not primarily for personal, family or household
purposes.

     

    3.30 No Change
in Facts or Circumstances.  All information in any application
for the Loan submitted to Lender (the “Loan Application”) and in all financial
statements, rent rolls, reports, certificates and other documents submitted in
connection with the Loan Application are complete and accurate in all material
respects.  There has been no material adverse change in any fact or
circumstance that would make any such information incomplete or
inaccurate.

     

    3.31 Fraud and
Abuse.

     

    (a)           Anti-Kickback
Law.  After consultation with counsel concerning the federal
anti-kickback law (42 U.S.C.A. SEC. 1320a-7b(b)), neither Borrower nor its agent
have offered or given any remuneration or thing of value to any person to
encourage referral to the facility nor has Borrower or its agent solicited or
received any remuneration or thing of value in exchange for Borrower’s agreement
to make referrals or to purchase goods or services for the
Facility.

     

    (b)           Relationships.  No
physician or other healthcare practitioner has an ownership interest in Borrower
or the Facility or any material ownership interest in Lessee.

     

    3.32 No
Illegal Activity as Source of Funds.  No portion of the
Collateral has been or will be purchased, improved, equipped or furnished with
proceeds of any illegal activity.

     

    3.33 Compliance
with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering
Laws.   Borrower, and to the best of Borrower's knowledge,
after having made diligent inquiry, (a) each Person owning an interest of 20% or
more in Borrower, (b) Guarantor,  and (c) Lessee: (i) is
not currently identified on OFAC List, and (ii) is not a Person with whom a
citizen of the United States is prohibited to engage in transactions by any
trade embargo, economic sanction, or other prohibition of United States law,
regulation, or Executive Order of the President of the United
States.  Borrower has implemented procedures, and will
consistently

     


    
      
         


      

      
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    apply
those procedures throughout the term of the Loan, to ensure the foregoing
representations and warranties remain true and correct during the term of the
Loan.

     

    


    ARTICLE
IV

     

    AFFIRMATIVE
COVENANTS OF BORROWER

     

    Each
Borrower, with respect only to its Loan and its Facility (except for Section
4.14, which shall be tested collectively), agrees with and covenants unto the
Lender that until the Loan Obligations have been paid in full, it
shall:

     

    4.1 Payment
of Loan/Performance of Loan Obligations.  Duly and punctually
pay or cause to be paid the principal and interest of the respective Note when
and as due in accordance with its terms and the applicable provisions regarding
the same and duly and punctually pay and perform or cause to be paid or
performed all Loan Obligations hereunder and under the other Loan Documents when
and as due and in accordance with the applicable terms and provisions of the
same.

     

    4.2 Maintenance
of Existence.  Maintain its existence as a limited liability
company, and, in each jurisdiction in which the character of the property owned
by it or in which the transaction of its business makes qualification necessary,
maintain good standing.

     

    4.3 Maintenance
of Single Purpose.  Maintain its existence as a Single Purpose
Entity.

     

    4.4 Accrual
and Payment of Taxes.  During each fiscal year, make accurate
provision for the payment of all current tax liabilities of all kinds
(including, without limitation, federal and state income taxes, franchise taxes,
payroll taxes, and Taxes (as defined in the Mortgage)), all required withholding
of income taxes of employees, all required old age and unemployment
contributions, and all required payments to employee benefit plans, and pay the
same when they become due.

     

    4.5 Insurance.  Maintain,
and/or cause Lessee, as applicable, to maintain, at the respective expense of
the obtaining party, the following insurance coverages and policies with respect
to the Collateral and the Facility, which coverages and policies must be
acceptable to Lender’s insurance consultant in its commercially reasonable
discretion:

     

    (a) Comprehensive
“all risk” or “special” cause of loss insurance, including coverage for
windstorms and hail, in an amount equal to 100% of the full replacement cost of
the Facility, which replacement cost shall be determined by the “Insurable
Value” or “Cost Approach to Value” reflected in the most recent Lender approved
appraisal for the Facility, without deduction for depreciation.  Such
insurance shall also include (i) agreed insurance amount endorsement waiving all
co-insurance provisions, and (ii) an “Ordinance or Law Coverage” endorsement if
the Facility or the use thereof shall constitute a legal non-conforming
structure or use.

     

    (b) Commercial
general liability insurance against claims for sexual harassment abuse of
residents and/or patients, personal injury, bodily injury, death or property
damage, in or

     


    
      
         


      

      
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    about the
Facility to be on a so-called “occurrence” basis for at least $1,000,000.00 per
occurrence and $3,000,000.00 in the aggregate with a $10,000,000.00 umbrella
coverage.

     

    (c) Professional
liability insurance against claims for personal injury, bodily injury or death,
in or about the Facility to be on a so-called “occurrence” basis for at least
$1,000,000.00 per occurrence and $5,000,000.00 in the aggregate.

     

    (d) Business
interruption income insurance for the Facility in an amount equal to 100% of the
net income plus carrying costs and extraordinary expenses of the Facility for a
period of eighteen (18) months as projected by Lender, containing a 180-day
extended period of indemnity endorsement.

     

    (e) Flood
Hazard insurance if any portion of the Improvements is located in a “flood zone
area,” as identified in the Federal Register by the Federal Emergency Management
Agency as a 100-year flood zone or “special flood hazard area” and in which
flood insurance is available.  In lieu thereof, Lender will accept
proof, satisfactory to it in its sole discretion, that the Improvements are not
within the boundaries of a designated area.

     

    (f) Workers’
compensation insurance, if applicable and required by state law, subject to
applicable state statutory limits, and employer’s liability insurance with a
limit of $1,000,000.00 per accident and per disease per employee with respect to
the Facility.

     

    (g) Comprehensive
boiler and machinery insurance, including property damage coverage and time
element coverage in an amount equal to 100% of the full replacement cost,
without deduction for depreciation, of the Facility housing the machinery, if
steam boilers, pipes, turbines, engines or any other pressure vessels are in
operation with respect to the Facility.  Such insurance coverage shall
include a “joint loss” clause if such coverage is provided by an insurance
carrier other than that which provides the comprehensive “all risk” insurance
described above.

     

    (h) During
the period of any construction and/or renovation of capital improvements with
respect to the Facility or any new construction at the Facility, builder’s risk
insurance for any improvements under construction and/or renovation, including,
without limitation, costs of demolition and increased cost of construction or
renovation, in an amount equal the amount of the general contract plus the value
of any existing purchase money financing for improvements and materials stored
on or off the Property, including “soft cost” coverage.

     

    (i) If the
Facility is located in a seismically active area or an area prone to geologic
instability and mine subsidence, Lender may require an inspection by a qualified
structural or geological engineer satisfactory to Lender, and at Borrower’s
expense.  The Facility must be structurally and geologically sound and
capable of withstanding normal seismic activity or geological
movement.  Lender reserves the right to require earthquake insurance
or Maximum Probable Loss insurance on a case by case basis in amounts determined
by Lender.

     

    (j) Such
other insurance coverages as may be deemed necessary at any time during the term
of the Loan and as shall be provided within such time periods as Lender may
determine, in each case, in its commercially reasonable discretion.

     


    
      
         


      

      
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    All
insurance policies shall have a term of not less than one year and shall be in
the form and amount and with deductibles as, from time to time, shall be
acceptable to Lender in its commercially reasonable discretion.  All
such policies shall provide for loss payable solely to Lender and shall contain
a standard “non-contributory mortgagee” endorsement or its equivalent relating,
among other things, to recovery by Lender notwithstanding the negligent or
willful acts or omissions of Borrower and notwithstanding (i) occupancy or
use of the Facility for purposes more hazardous than those permitted by the
terms of such policy, (ii) any foreclosure or other action taken by Lender
pursuant to the Mortgage upon the occurrence of an Event of Default thereunder,
or (iii) any change in title or ownership of the Facility.

     

    All
insurance policies must be written by an admitted carrier licensed in the State
in which the Facility is located and such insurance carrier must have a
long-term senior debt rating of at least “A” by Standard and Poor’s Rating
Service; provided, that if the initial principal balance of the Loan is in
excess of $25,000,000.00, such insurance carrier must have a long-term senior
debt rating of at least “AA” by Standard & Poor’s Rating
Service.

     

    All
liability insurance policies (including, but not limited to, general liability,
professional liability and any applicable blanket and/or umbrella policies) must
name “Capmark Finance, Inc. and its successors and/or assigns” as additional
insureds, and all property insurance policies must name “Capmark Finance, Inc.
and its successors and/or assigns” as the named mortgage holder entitled to all
insurance proceeds.  Lender shall have the right, without Borrower’s
consent, by notice to the insurance company, to change the additional insured
and named mortgagee endorsements in connection with any sale of the
Loan.

     

    All
insurance policies for the above-required insurance must provide for thirty (30)
days prior written notice of cancellation to Lender.

     

    Policies,
certificates of the same, or binders, together with evidence of the above
required insurance on ACORD Form 27 or its equivalent, must be submitted to
Lender prior to setting the interest rate on the Loan.

     

    With
respect to insurance policies which require payment of premiums annually, not
less than thirty (30) days prior to the expiration dates of the insurance
policies obtained pursuant to this Agreement, Borrower shall pay such amount,
except to the extent Lender is escrowing sums therefor pursuant to the Loan
Documents.  Not less than thirty (30) days prior to the expiration
dates of the insurance policies obtained pursuant to this Agreement, originals
or certified copies of renewals of such policies (or certificates evidencing
such renewals) bearing notations evidencing the payment of premiums or
accompanied by other evidence satisfactory to Lender of such payment, which
premiums shall not be paid by Borrower through or by any financing arrangement,
shall be delivered by Borrower or Lessee, as applicable, to Lender at the
address set forth in Section 8.7 hereof.  Borrower shall not and shall
cause Lessee to not carry separate insurance, concurrent in kind or form or
contributing in the event of loss, with any insurance required under this
Section 4.5 and related to the Property, Facility and/or operations of the
same.  If the limits of any policy required hereunder are reduced or
eliminated due to a covered loss, Borrower or Lessee, as applicable, shall pay
the additional premium, if any, in order to have the original limits of
insurance reinstated, or Borrower or Lessee, as applicable, shall purchase new
insurance in the same type and amount that existed immediately prior to the
loss.

     


    
      
         


      

      
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    If
Borrower fails to maintain and deliver or cause Lessee to maintain and deliver
to Lender the original policies or certificates of insurance required by this
Agreement, Lender may, at its option, upon prior written notice to Borrower and
Lessee procure such insurance and Borrower shall pay or, as the case may be,
reimburse Lender for, all premiums thereon promptly, upon demand by Lender, with
interest thereon at the Default Rate from the date paid by Lender to the date of
repayment and such sum shall constitute a part of the Loan
Obligations.

     

    The
insurance required by this Agreement may, at the option of Borrower, be effected
by blanket and/or umbrella policies issued to Borrower, Lessee or to another
Affiliate of Borrower covering the Facility and the properties of such
Affiliate; provided that, in each case, the policies otherwise comply with the
provisions of this Agreement and allocate to the Facility, from time to time,
the coverage specified by this Agreement, without possibility of reduction or
coinsurance by reason of, or damage to, any other property (real or personal)
named therein.  If the insurance required by this Agreement shall be
effected by any such blanket or umbrella policies, Borrower shall furnish to
Lender original policies or certified copies thereof, with schedules attached
thereto showing the amount of the insurance provided under such policies which
is applicable to the Facility.

     

    Neither
Lender nor its agents or employees shall be liable for any loss or damage
insured by the insurance policies required to be maintained under this
Agreement; it being understood that (a) Borrower or Lessee, as applicable,
shall look solely to its insurance company for the recovery of such loss or
damage, (b) such insurance company shall have no rights of subrogation
against Lender, its agents or employees, and (c) Borrower shall use or
cause Lessee to use, as applicable, its commercially reasonable efforts to
procure from such insurance company a waiver of subrogation rights against
Lender.  If, however, such insurance policies do not provide for a
waiver of subrogation rights against Lender (whether because such a waiver is
unavailable or otherwise), then Borrower hereby agrees, to the extent permitted
by law and to the extent not prohibited by such insurance policies, to waive its
rights of recovery, if any, against Lender, its agents and employees, whether
resulting from any damage to the Facility, any liability claim in connection
with the Facility or otherwise.  If any such insurance policy shall
prohibit Borrower from waiving such claims, then Borrower must obtain from such
insurance company a waiver of subrogation rights against Lender.

     

    Borrower
appoints Lender as Borrower’s attorney-in-fact, which appointment shall be
deemed irrevocable and coupled with an interest, to cause the issuance of an
endorsement of any insurance policy to bring Borrower into compliance herewith
and, as limited above, at Lender’s sole option, to make any claim for, receive
payment for, and execute and endorse any documents, checks or other instruments
in payment for loss, theft, or damage covered under any such insurance policy;
provided, however, that in no event will Lender be liable for failure to collect
any amounts payable under any insurance policy.

     

    Subject
to the terms of any forbearance letter issued by Lender in connection with the
Loan, Borrower appoints Lender as Borrower’s attorney-in-fact to cause the
issuance of an endorsement of any insurance policy to bring Borrower into
compliance herewith and, as limited above, at Lender’s sole reasonable option,
to make any claim for, receive payment for, and execute and endorse any
documents, checks or other instruments in payment for loss, theft,
or

     


    
      
         


      

      
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    damage
covered under any such insurance policy; provided, however, that in no event
will Lender be liable for failure to collect any amounts payable under any
insurance policy.

     

    4.6 Proceeds
of Insurance or Condemnation.  If, after damage to or
destruction of or condemnation of the Collateral (or any part thereof), the net
Proceeds of insurance or condemnation (after payment of Lender’s reasonable
costs and expenses in connection with the administration thereof)
are:

     

    (a) less than
Two Hundred Fifty Thousand Dollars ($250,000.00), Lender shall deliver such
proceeds to Borrower to be applied within thirty (30) days thereafter to the
repair, restoration and replacement by Borrower of the Improvements, Equipment
and Inventory damaged, destroyed or taken,

     

    or

     

    (b) Two
Hundred Fifty Thousand Dollars ($250,000.00) or more and Lender agrees, at its
option, to make such net Proceeds available to Borrower, Lender shall make such
net Proceeds available to Borrower on the following terms:

     

    (i) The
aggregate amount of all such Proceeds shall not exceed the aggregate amount of
all such Loan Obligations;

     

    (ii) At the
time of such loss or damage and at all times thereafter while Lender is holding
any portion of such Proceeds, there shall exist no Default or Event of
Default;

     

    (iii) The
Improvements, Equipment, and Inventory to which loss or damage has resulted
shall be capable of being restored to its preexisting condition and utility in
all material respects with a value equal to or greater than that which existed
prior to such loss or damage and such restoration shall be capable of being
completed prior to the earlier to occur of (i) the expiration of business
interruption insurance as determined by an independent inspector or (ii) the
Maturity Date;

     

    (iv) Within
thirty (30) days from the date of such loss or damage Borrower shall have given
Lender a written notice electing to have the Proceeds applied for such
purpose;

     

    (v) Within
sixty (60) days following the date of notice under the preceding subparagraph
(iv) and prior to any Proceeds being disbursed to Borrower, Borrower shall have
provided to Lender all of the following:

     

    (A) complete
plans and specifications for restoration, repair and replacement of the
Improvements, Equipment and Inventory damaged to the condition, utility and
value required by (iii) above,

     

    (B) if loss
or damage exceeds Fifty Thousand Dollars ($50,000), fixed-price or guaranteed
maximum cost bonded construction contracts for completion of the repair and
restoration work in accordance with such plans and specifications,

     


    
      
         


      

      
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    (C) builder’s
risk insurance for the full cost of construction with Lender named under a
standard mortgagee loss-payable clause

     

    (D) such
additional funds as in Lender’s reasonable opinion are necessary to complete
such repair, restoration and replacement, and

     

    (E) copies of
all permits and licenses necessary to complete the work in accordance with the
plans and specifications;

     

    (vi) Lender
may, at Borrower’s expense, retain an independent inspector to review and
approve plans and specifications and completed construction and to approve all
requests for disbursement, which approvals shall be conditions precedent to
release of Proceeds as work progresses;

     

    (vii) No
portion of such Proceeds shall be made available by Lender for architectural
reviews or for any other purposes which are not directly attributable to the
cost of repairing, restoring or replacing the Improvements, Equipment and
Inventory to which a loss or damage has occurred unless the same are covered by
such insurance;

     

    (viii) Borrower
shall diligently pursue such work and shall complete such work prior to the
earlier to occur of the expiration of business interruption insurance or the
Maturity Date;

     

    (ix) Each
disbursement by Lender of such Proceeds and deposits shall be funded subject to
conditions and in accordance with disbursement procedures which a commercial
construction lender would typically establish in the exercise of sound banking
practices and shall be made only upon receipt of disbursement requests on an AIA
G702/703 form (or similar form approved by Lender) signed and certified by
Borrower and, if required by Lender, its architect and general contractor with
appropriate invoices and lien waivers as required by Lender; and

     

    (x) Lender
shall have a first lien on and security interest in all building materials and
completed repair and restoration work and in all fixtures and equipment acquired
with such Proceeds, and Borrower shall execute and deliver such mortgages, deeds
of trust, security agreements, financing statements and other instruments as
Lender shall request to create, evidence, or perfect such lien and security
interest.

     

    In the
event and to the extent that such Proceeds are not required to be used for the
repair, restoration and replacement of the Improvements, Equipment and Inventory
to which a loss or damage has occurred, or, if the conditions set forth herein
for such application are otherwise not satisfied, then Lender shall be entitled
without notice to or consent from Borrower to apply such Proceeds, or the
balance thereof, at Lender’s option either (a) to the full or partial payment or
prepayment of the Loan Obligations (without premium) in the manner aforesaid or
(b) to the repair, restoration and/or replacement of all or any part of such
Improvements, Equipment and Inventory to which a loss or damage has
occurred.  Any excess Proceeds after such application by Lender shall
be paid to Borrower.

     


    
      
         


      

      
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    4.7 Financial
and Other Information.  Provide Lender, and cause Guarantor and
Lessee to provide to Lender, at its address set forth in Section 8.7 and at 2801
Highway 280 South, Suite 305, Birmingham, AL 35223, the following financial
statements and information on a continuing basis during the term of the
Loan:

     

    (a) Within
ninety (90) days after the end of each fiscal year of Borrower, unaudited
financial statements prepared in accordance with GAAP by a nationally recognized
accounting firm or independent certified public accounting firm acceptable to
the Lender, which statements shall include a balance sheet and a statement of
income and expenses for the year then ended.

     

    (b) Within
one hundred twenty (120) days after the end of each fiscal year of Emeritus,
audited financial statements of Emeritus prepared in accordance with GAAP by a
nationally recognized accounting firm or independent certified public accounting
firm acceptable to Lender, in its commercially reasonable discretion, which
statements shall include a balance sheet and a statement of income and expenses
for the year then ended.  In lieu of its obligations hereunder,
Emeritus may submit to Lender, upon its filing thereof, a copy of its Form 10-K
as filed with the United States Securities and Exchange Commission.

     

    (c) Within
forty-five (45) days after the end of each of the first three (3) fiscal
quarters, and within ninety (90) days after the end of the fourth fiscal quarter
of the Facility, unaudited interim financial statements of the operations of the
Facility, certified as true and correct in all material respects by a financial
officer of Lessee, prepared in accordance with GAAP, which statements shall
include a balance sheet, statement of income and expenses and occupancy
information for the quarter then ended.  Such statements of the
Facility shall be accompanied by the Summary of Financial Statements and Census
Data attached hereto as Exhibit
“D”.

     

    (d) Within
forty-five (45) days after the end of each of the first three (3) fiscal
quarters of Emeritus, financial statements of Emeritus, including a balance
sheet and a statement of income and expenses for the quarter then ended, which
shall be satisfied by providing a copy of Form 8-K as filed by Emeritus with the
United States Securities and Exchange Commission.

     

    (e) If
requested by Lender, within thirty (30) days after the filing deadline, as may
be extended from time to time, copies of all federal, state and local tax
returns of Borrower and Emeritus, together with all supporting documentation and
required schedules.

     

    (f) If and to
the extent applicable, within twenty (20) days after filing or receipt, all
Medicaid cost reports and any amendments thereto filed with respect to the
Facility and all responses, audit reports, or other inquiries with respect to
such cost reports.

     

    (g) If and to
the extent applicable, within twenty (20) days after receipt, copies of all
licensure and certification survey reports and statements of deficiencies (with
plans of correction attached thereto).

     

    (h) If and to
the extent applicable, within ten (10) days after receipt, a copy of the
“Medicaid Rate Calculation Worksheet” (or the equivalent thereof) from the
applicable agency.

     


    
      
         


      

      
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    (i) If and to
the extent applicable, within ten (10) days of receipt, a statement of the
number of resident days for which the Facility has received the Medicare default
rate for any applicable period.  For purposes herein, “default rate”
shall have the meaning ascribed to it in that certain applicable Medicare rate
notification letter prepared in connection with any review or survey of the
Facility.

     

    (j) Within
three (3) days after receipt, any and all notices (regardless of form) from any
and all licensing and/or certifying agencies, including but not limited to, that
the Facility’s license is being downgraded to a substandard category, revoked or
suspended, or that action is pending or being considered to downgrade to a
substandard category, revoke or suspend the Facility’s license or
certification.

     

    (k) If
requested by Lender, evidence of payment by Borrower or Lessee of any applicable
provider bed taxes or similar taxes.

     

    (l) If
requested by Lender, within forty-five (45) days after the end of each June and
December, and more frequently if requested by Lender, an aged accounts
receivable report for the Facility in sufficient detail to show amounts due from
each class of resident-mix, if applicable (i.e., private,
Medicare, Medicaid and V.A.), by the account age classifications of 30 days, 60
days, 90 days, 120 days, and over 120 days.

     

    (m) Until the
average daily occupancy of the Facility reaches eighty-five percent (85%) for
three (3) consecutive months, within thirty (30) days after the end of each
month, a certified rent roll for the Facility and monthly unaudited financial
statements of the operations of the Facility, certified as true and correct in
all material respects by a financial officer of Lessee, prepared in accordance
with GAAP, which statements shall include a balance sheet, statement of income
and expenses and occupancy information for the month then ended.

     

    Lender
reserves the right to require that the annual and/or quarterly financial
statements of Borrower and Emeritus be audited and prepared by a nationally
recognized accounting firm or independent certified public accounting firm
acceptable to Lender, in its commercially reasonable discretion, at their
respective sole cost and expense, if (i) an Event of Default exists, (ii) if
required by internal policy or by any investor in any securities backed in whole
or in part by the Loan or any rating agency rating such securities, or (iii) if
Lender has reasonable grounds to believe that the unaudited financial statements
do not accurately represent the financial condition of Borrower or Guarantor, as
the case may be.

     

    Lender
further reserves the right to require such other financial information of
Borrower, Emeritus, Lessee and/or the Facility, at
such other times (including monthly or more frequently) as it shall deem
reasonably necessary.  All financial statements must be in the form
and detail as Lender shall from time to time reasonably request in
writing.

     

    4.8 Compliance
Certificate.  At the time of
furnishing the quarterly operating statements required under the foregoing
section, furnish to Lender a compliance certificate in the form attached hereto
as Exhibit “E”
executed by the chief financial officer of the Borrower and the Lessee,
respectively, as applicable.

     


    
      
         


      

      
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    4.9 Books and
Records.  Keep and maintain at all times at the Facility or the
Lessee’s offices, and upon Lender’s request shall make available at the
Facility, complete and accurate books of account and records (including copies
of supporting bills and invoices) adequate to reflect correctly the results of
the operation of the Facility, and copies of all written contracts, subleases
(if any), and other instruments which affect the Property, which books, records,
contracts, leases (if any) and other instruments shall be subject to examination
and inspection at any reasonable time by Lender (upon reasonable advance notice,
which for such purposes only may be given orally, except in the case of an
emergency or following an Event of Default, in which case no advance notice
shall be required); provided, however, that if an Event of Default has occurred
and is continuing, Borrower shall deliver to Lender upon written demand all
books, records, contracts, subleases (if any) and other instruments relating to
the Facility or its operation and Borrower authorizes Lender to obtain a credit
report on Borrower at any time.

     

    4.10 Payment
of Indebtedness.  Duly and punctually pay or cause to be paid
all other Indebtedness now owing or hereafter incurred by Borrower in accordance
with the terms of such Indebtedness, except such Indebtedness owing to those
other than Lender which is being contested in good faith and with respect to
which any execution against properties of Borrower has been effectively stayed
and for which reserves and collateral for the payment and security thereof have
been established as determined by Lender in its sole discretion.

     

    4.11 Records
of Accounts.  Maintain all records, including records
pertaining to the Accounts of Borrower, at the chief executive office of Borrower as set forth
in this Agreement.

     

    4.12 Conduct
of Business.  Conduct, or, if applicable, cause Lessee to conduct, the
operation of the Facility at all times in a manner consistent with (or better
than) the level of operation of the Facility as of the date hereof, including
without limitation, the following:

     

    (a) to
maintain the standard of care for the patients of the Facility at all times at a
level necessary to ensure quality care for the patients of the Facility in
accordance with customary and prudent industry standards;

     

    (b) to
operate the Facility in a prudent manner and in compliance with applicable laws
and regulations relating thereto and cause all Permits, Reimbursement Contracts,
and any other agreements necessary for the use and operation of the Facility or
as may be necessary for participation in applicable reimbursement programs to
remain in effect without reduction in the number of licensed beds or units
authorized for use in any applicable reimbursement programs;

     

    (c) to
maintain sufficient Inventory and Equipment of types and quantities at the
Facility to enable Borrower or Lessee, if applicable, adequately to perform
operations of the Facility;

     

    (d) to keep
all Improvements and Equipment located on or used or useful in connection with
the Facility in good repair, working order and condition, reasonable wear and
tear excepted, and from time to time make all needed and proper repairs,
renewals, replacements, additions, and improvements thereto to keep the same in
good operating condition;

     

    (e) to
maintain sufficient cash in the operating accounts of the Facility in order to
satisfy the working capital needs of the Facility; and

     


    
      
         


      

      
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    (f) to keep
all required Permits current and in full force and effect.

     

    4.13 Periodic
Surveys.  Furnish or cause Lessee, if applicable, to furnish to
Lender within twenty (20) days of receipt a copy of any applicable licensing
agency survey or report and any statement of deficiencies and/or any other
report indicating that any action is pending or being considered to downgrade
the Facility to a substandard category, and within the time period required by
the particular agency for furnishing a plan of correction also furnish or cause
to be furnished to Lender a copy of the plan of correction generated from such
survey or report for the Facility, and correct or cause to be corrected any
deficiency, the curing of which is a condition of continued licensure or for
full participation in any applicable reimbursement program pursuant to any
Reimbursement Contract for existing patients or for new patients to be admitted
with such coverage, by the date required for cure by such agency (plus
extensions granted by such agency).

     

    4.14 Debt
Service Coverage Requirements.

     

    (a) Achieve,
by the quarter ending December 31, 2010, and maintain thereafter throughout the
term, and within forty-five (45) days after the end of each fiscal quarter of
Borrowers, provide evidence to Lender of the achievement of, the following Debt
Service Coverage Ratio until the Loans are paid in full:  a Debt
Service Coverage Ratio after deduction of Assumed Management Fees, of not less
than 1.25 to 1.0 until the Loans are paid in full.

     

    (b) If
Borrowers fail to achieve or provide evidence of achievement of the Debt Service
Coverage Ratio, Borrowers may deposit with Lender, at Borrower’s option within
fifteen (15) days of such failure, additional cash or other liquid collateral in
an amount which, when added to the first number of the Debt Service Coverage
Ratio, would have resulted in the noncomplying Debt Service Coverage Ratio
having been satisfied.  If after Borrowers have deposited such
additional cash or liquid collateral, Borrowers again fail to achieve or provide
evidence of the achievement of the Debt Service Coverage Ratio requirement set
forth above and such failure continues for two (2) consecutive quarters,
Borrowers may deposit with Lender, at Borrowers’ option within fifteen (15) days
of such failure, additional cash or other liquid collateral (with credit for
amounts currently being held by Lender pursuant to the foregoing sentence), in
an amount which, if the same had been applied on the first (1st) day of the
first quarter for which such noncompliance of the Debt Service Coverage Ratio
occurred to reduce the outstanding principal indebtedness of the Loans, would
have resulted in the noncomplying Debt Service Coverage Ratio having been
satisfied.  Any additional cash or liquid collateral deposited by a
Borrower hereunder in order to achieve the required Debt Service Coverage Ratio
and cure any existing default with respect thereto will be held by Lender in a
standard custodial account and shall constitute additional Collateral for the
Loan Obligations and an “Account” as defined in this Agreement, and, upon the
occurrence of an Event of Default, may be applied by Lender, in such order and
manner as Lender may elect, to the reduction of the Loan
Obligations.  Borrowers shall not be entitled to any interest earned
on such additional Collateral.  Provided that there is no outstanding
Default or Event of Default, such additional Collateral which has not been
applied to the Loan Obligations will be released by Lender at such time as
Borrowers provide Lender with evidence that the required Debt Service Coverage
Ratio outlined above has been achieved and maintained (without regard to any
cash deposited pursuant to this Section 4.14) for two (2) consecutive fiscal
quarters.

     


    
      
         


      

      
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    4.15 Capital
Expenditures.  Maintain (or cause Lessee to maintain, as the
case may be) the Facility in good condition and make or cause Lessee to make
minimum capital expenditures for the Facility in each fiscal year in the amount
of $350 per unit (or such higher amount as may be recommended in Lender’s
inspection report) or the appropriate prorated amount for any partial fiscal
year (which capital expenditures may include those necessary for ordinary
repairs and routine maintenance), and within forty-five (45) days of the end of
such fiscal year, provide commercially reasonable evidence thereof to
Lender.  In the event that Borrower or Lessee shall fail to meet such
expenditure requirement, Borrower shall, upon Lender’s written request,
immediately establish and maintain a capital expenditures reserve fund with
Lender equal to the difference between the required amount per unit and the
amount per unit actually spent by Borrower.  Borrower grants to Lender
a right of setoff against all moneys in the capital expenditures reserve fund,
and Borrower shall not permit any other Lien to exist upon such
fund.  The proceeds of such capital expenditures reserve fund will be
disbursed monthly upon Lender’s receipt of commercially reasonable evidence that
Borrower has caused to be made the required capital
expenditures.  Upon Borrower’s or Lessee’s failure to adequately
maintain the Facility in good condition, Lender may, but shall not be obligated
to, make such capital expenditures and may apply the moneys in the capital
expenditures reserve fund for such purpose.  To the extent there are
insufficient moneys in the capital expenditures reserve fund for such purposes,
all funds advanced by Lender to make such capital expenditures shall constitute
a portion of the Loan Obligations, shall be secured by the Mortgage and shall
accrue interest at the Default Rate until paid.  Upon an Event of
Default, Lender may apply any moneys in the capital expenditures reserve fund to
the Loan Obligations, in such order and manner as Lender may
elect.  For any partial fiscal year during which the Loan is
outstanding, the required expenditure amount shall be prorated by multiplying
the total of the required amount per unit by a fraction, the numerator of which
is the number of days during such year for which all or part of the Loan is
outstanding and the denominator of which is the number of days in such
year.  During the term of the Loan, Lender may, from time to time,
engage a professional building inspector to conduct an inspection of the
Facility.  If the inspector’s report indicates that repairs or
replacements are necessary over and above the $350 per unit requirement in this
paragraph, then Lender shall require a non-interest bearing escrow fund to
ensure completion of such necessary repairs or replacements.  The
amount of any repair escrow shall be 125% of the estimated cost of repairs as
determined by the inspector and Lender.  Lender also shall require an
agreement satisfactory to Lender which will provide for completion of the
repairs and/or replacements and the attendant disbursement of the escrow
funds.  All commercially reasonable fees and costs associated with the
inspection, report and subsequent inspections (if required) shall be paid by
Borrower.

     

    4.16 Updated
Appraisals.  For so long as the Loan remains outstanding, if
any Event of Default shall occur hereunder, or if, in Lender’s commercially
reasonable judgment, a material depreciation in the value of the Property shall
have occurred, then in any such event, Lender, may cause the Property to be
appraised by an appraiser selected by Lender, and in accordance with Lender’s
appraisal guidelines and procedures then in effect, and Borrower agrees to
cooperate in all respects with such appraisals and furnish to the appraisers all
requested information regarding the Property and the
Facility.  Borrower agrees to pay all reasonable costs incurred by
Lender in connection with such appraisal which costs shall be secured by the
Mortgage and shall accrue interest at the Default Rate until paid.

     


    
      
         


      

      
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    4.17 Comply
with Covenants and Laws.  Comply and/or cause Lessee to comply,
as applicable, in all material respects, with all applicable covenants and
restrictions of record and all laws, ordinances, rules and regulations and keep
and/or cause Lessee to keep, as applicable, the Facility and the Property in
compliance with all applicable laws, ordinances, rules and regulations,
including, without limitation, the Americans with Disabilities Act and
regulations promulgated thereunder, and laws, ordinances, rules and regulations
relating to zoning, health, building codes, setback requirements, and keep
and/or cause Lessee to keep, as applicable, the Permits for the Facility in full
force and effect.

     

    4.18 Taxes and
Other Charges.  Subject to Borrower’s right to contest the same
as set forth in Section 9(c) of the Mortgage, pay all taxes, assessments,
charges, claims for labor, supplies, rent, and other obligations which, if
unpaid, might give rise to a Lien against property of Borrower, except Liens to
the extent permitted by this Agreement.

     

    4.19 Commitment
Letter.  Provide all items and pay all amounts required by the
Commitment Letter. If any term of the Commitment Letter shall conflict with the
terms of this Agreement, this Agreement shall govern and control.  As
to any matter contained in the Commitment Letter, and as to which no mention is
made in this Agreement or the other Loan Documents, the Commitment Letter shall
continue to be in effect and shall survive the execution of this Agreement and
all other Loan Documents.

     

    4.20 Certificate.  Upon
Lender’s written request, furnish Lender with a certificate stating that
Borrower has complied with and is in compliance with all terms, covenants and
conditions of the Loan Documents to which Borrower is a party and that there
exists no Default or Event of Default or, if such is not the case, that one or
more specified events have occurred, and that the representations and warranties
contained herein are true and correct with the same effect as though made on the
date of such certificate.

     

    4.21 Notice of
Fees or Penalties.  Immediately notify Lender, upon Borrower’s
actual knowledge thereof, of the assessment by any state or any health or
licensing agency of any fines or penalties against Borrower, Lessee, or the
Facility.

     

    4.22 Lease
Agreement.  Emerivent Bradenton shall:

     

    (a) Maintain
the Lease Agreement in full force and effect and timely perform all of its
obligations thereunder and not permit the termination or amendment of the Lease
Agreement unless the prior written consent of Lender is first obtained (which
consent will not be unreasonably withheld or delayed); provided, however, that
Lender’s prior consent shall not be required for termination of the Lease
Agreement in the event of emergency situations (i.e., termination of
the Facility’s license;

     

    (b) In the
event that proceedings are instituted to terminate the Facility’s license,
immediately engage oversight management services from a management company
reasonably acceptable to the Lender; and

     

    (c) In the
event that bankruptcy or insolvency proceedings are instituted by or against
Lessee, Borrower shall (to the extent permitted by the applicable bankruptcy
court having

     


    
      
         


      

      
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    jurisdiction
over such proceedings), upon written instruction received from Lender, terminate
the Lease Agreement.

     

    4.23 Loan
Closing Certification.  Immediately
notify Lender in writing, in the event any representation or warranty contained
in that certain Loan Closing Certification of even date herewith, executed by
Borrower for the benefit of Lender, becomes untrue or there shall have been any
material adverse change in any such representation or warranty.

     

    4.24 Compliance
with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering
Laws. Borrower
shall comply with all Requirements of Law relating to money laundering,
anti-terrorism, trade embargos and economic sanctions, now or hereafter in
effect.  Upon Lender's request from time to time during the term of
the Loan, Borrower shall certify in writing to Lender that Borrower's
representations, warranties and obligations under Sections 3.32 and 3.33 and
this Section 4.24 remain true and correct and have not been
breached.  Borrower shall immediately notify Lender in writing if any
of such representations, warranties or covenants are no longer true or have been
breached or if Borrower has a reasonable basis to believe that they may no
longer be true or have been breached.  In connection with such an
event, Borrower shall comply with all Requirements of Law and directives of
Governmental Authorities and, at Lender's request, provide to Lender copies of
all notices, reports and other communications exchanged with, or received from,
Governmental Authorities relating to such an event.  Borrower shall
also reimburse Lender any expense incurred by Lender in evaluating the effect of
such an event on the Loan and Lender's interest in the collateral for the Loan,
in obtaining any necessary license from Governmental Authorities as may be
necessary for Lender to enforce its rights under the Loan Documents, and in
complying with all Requirements of Law applicable to Lender as the result of the
existence of such an event and for any penalties or fines imposed upon Lender as
a result thereof.

     

    4.25 Immediate
Repair Escrow.  Pursuant to the
Immediate Repair Escrow Agreements, establish and maintain the immediate repairs
escrow with Lender and complete those certain repairs required by Lender and set
forth on Exhibit
“F” attached hereto.

     

    4.26 Brighton
Facility Food Services Status.  Borrower shall
make the necessary changes to the manner in which food services are provided to
the residents of the Brighton Facility in order to maintain unlicensed status
with the Michigan Bureau of Children and Adult Licensing, which changes are in
process and shall be completed no later than May 1,
2009.   Borrower shall deliver to Lender satisfactory evidence
that all such required changes have occurred prior to May 1, 2009.

     

    ARTICLE
V

     

    NEGATIVE
COVENANTS OF BORROWER

     

    Until the
Loan Obligations have been paid in full, Borrower shall not, with respect to
itself, its Loan or its Facility:

     

    5.1 Assignment
of Licenses and Permits.  Assign or transfer, or permit Lessee
to assign or transfer, any of its interest in any Permits or Reimbursement
Contracts (including rights to payment thereunder) pertaining to the Facility,
or assign, transfer, or remove or permit any other person to assign, transfer,
or remove any records pertaining to the Facility including,

     


    
      
         


      

      
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    without
limitation, patient records, medical and clinical records (except for removal of
such patient records as directed by the patients owning such records and except
as may be required by applicable law, regulation and/or judicial or
administrative order), without Lender’s prior written consent, which consent may
be granted or refused in Lender’s sole discretion.

     

    5.2 No Liens;
Exceptions.  Create, incur, assume or suffer to exist any Lien
upon or with respect to the Facility or any of its properties, rights, income or
other assets relating thereto, including, without limitation, the Collateral,
whether now owned or hereafter acquired, other than the following permitted
Liens (“Permitted Encumbrances”):

     

    (a) Liens at
any time existing in favor of the Lender,

     

    (b) Inchoate
Liens arising by operation of law for the purchase of labor, services,
materials, equipment or supplies, provided payment shall not be delinquent and,
if such Lien is a lien upon any of the Property or Improvements, such Lien must
be fully disclosed to Lender and bonded off and removed from the Property and
Improvements, within thirty (30) days of its creation, in a manner satisfactory
to Lender,

     

    (c) Liens
incurred in the ordinary course of business in connection with workers’
compensation, unemployment insurance or other forms of governmental insurance or
benefits, or to secure performance of tenders, statutory obligations, leases and
contracts (other than for money borrowed or for credit received with respect to
property acquired) entered into in the ordinary course of business as presently
conducted or to secure obligations for surety or appeal bonds, and

     

    (d) Liens for current year’s taxes,
assessments or governmental charges or levies provided payment thereof shall not
be delinquent.

     

    5.3 Merger,
Consolidation, Etc.  Except as otherwise provided in the
Mortgage, consummate any merger, consolidation or similar transaction of
Borrower, or sell, assign, lease or otherwise dispose of substantially all of
its assets (whether now or hereafter acquired), without the prior written
consent of Lender, which consent may be granted or refused in Lender’s sole
discretion.

     

    5.4 Maintain Single-Purpose
Entity Status.

     

    (a) Engage in
any business or activity other than the ownership, maintenance, and operations,
pursuant to the Lease, as applicable, of the Property, and activities incidental
thereto;

     

    (b) Acquire
or own any material assets other than (i) the Property and the improvements
located thereon, and (ii) such incidental machinery, equipment, fixtures and
other personal property as may be necessary for the operation of the Property
for its intended purpose as contemplated herein;

     

    (c) Merge
into or consolidate with any Person or dissolve, terminate or liquidate in whole
or in part, transfer or otherwise dispose of all or substantially all of its
assets (except as permitted in the Loan Documents) or change its legal
structure, without in each case Lender’s consent;

     


    
      
         


      

      
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    (d) Without
the prior written consent of Lender, amend, modify, terminate or fail to comply
with the provisions of its certificate of formation and/or limited liability
company operating agreement, as either of the same may be further amended or
supplemented, if such amendment, modification, termination or failure to comply
would adversely affect its status as a Single Purpose Entity or its ability to
perform its obligations hereunder, under the Note or any other document
evidencing or securing the Loan;

     

    (e) Own any
subsidiary or make any investment in, any Person without the consent of
Lender;

     

    (f) Commingle
its funds or assets with assets of, or pledge its assets with or for, any of its
general partners, members, shareholders, Affiliates, principals or any other
Person, except as permitted under the Loan Documents;

     

    (g) Incur any
debt, secured or unsecured, direct or contingent (including guaranteeing any
obligation), other than the Loan and trade payables incurred in the ordinary
course of business, payable within 90 days of the date incurred, based on
historical amounts;

     

    (h) Fail to
maintain its records, books of account and bank accounts separate and apart from
those of its general partners, members, shareholders, principals and Affiliates,
the Affiliates of any of its general partners, members, shareholders,
principals, and any other Person;

     

    (i) Except
for the Lease, enter into any contract or agreement with any of its general
partners, members, shareholders, principals or Affiliates, or the Affiliates of
any of its general partners, members, shareholders, principals except upon terms
and conditions that are intrinsically fair and substantially similar to those
that would be available on an arms-length basis with third parties;

     

    (j) Seek its
dissolution or winding up in whole, or in part;

     

    (k) 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 of its general
partners, members, shareholders, principals and Affiliates, the Affiliates of
any of its general partners, members, shareholders, principals or any other
Person;

     

    (l) Hold
itself out to be responsible for the debts of another Person or pay another
Person’s liabilities out of its own funds, except as expressly provided in the
Loan Documents;

     

    (m) Make any
loans or advances to any third party, including any of its general partners,
members, shareholders, principals or Affiliates, or the Affiliates of any of its
general partners, members, shareholders, principals, except as provided or
allowed in the Loan Documents;

     

    (n) Fail to
have prepared and filed its own tax returns, to the extent required by
applicable law;

     

    (o) Fail
either to hold itself out to the public as a legal Person separate and distinct
from any other Person or to conduct its business solely in its own name, in
order not (i)

     


    
      
         


      

      
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    to
mislead others as to the identity with which such other party is transacting
business, or (ii) to suggest that it is responsible for the debts of any third
party (including any of its members or Affiliates, or any general partner,
member, principal or Affiliate thereof) except as provided or allowed in the
Loan Documents; or

     

    (p) Fail to
maintain adequate capital for the normal obligations reasonably foreseeable in a
business of its size and character and in light of its contemplated business
operations.

     

    5.5 Change of
Business.  Make any material change in the nature of its
business as it is being conducted as of the date hereof.

     

    5.6 Changes
in Accounting.  Change its methods of accounting, unless such
change is permitted by GAAP, and provided such change does not have the effect
of curing or preventing what would otherwise be an Event of Default or Default
had such change not taken place.

     

    5.7 ERISA.

     

    (a) Agree to,
enter into or consummate any transaction which would render it unable to confirm
that (i) it is not an “employee benefit plan” as defined in Section 3(32) of
ERISA, which is subject to Title I of ERISA, or a “governmental plan” within the
meaning of Section 3(32) of ERISA; (ii) it is not subject to state statutes
regulating investments and fiduciary obligations with respect to governmental
plans; and (iii) less than twenty-five percent (25%) of each of its outstanding
class of equity interests are held by “benefit plan investors” within the
meaning of 29 C.F.R. § 2510.3-101(f)(2);

     

    (b) Engage in
a non-exempt prohibited transaction described in Section 406 of ERISA or Section
4975 of the Code, as such sections relate to Borrower, or in any transaction
that would cause any obligation or action taken or to be taken hereunder (or the
exercise by Lender of any of its rights under the Loan Documents) to be a
non-exempt prohibited transaction under ERISA.

     

    5.8 Transactions
with Affiliates.  Enter into any transaction with a Person
which is an Affiliate of Borrower other than in the ordinary course of its
business and on fair and reasonable terms no less favorable to Borrower, than
those they could obtain in a comparable arms-length transaction with a Person
not an Affiliate; provided that, Lender agrees that for the purposes of the Loan
Documents, the Lease satisfies the foregoing conditions.

     

    5.9 Transfer
of Ownership Interests.  Permit Emeritus to reduce its
ownership interest in Borrower unless the written consent of the Lender is first
obtained, which consent may be granted or refused in Lender’s sole
discretion.

     

    5.10 Change of
Use.  Alter or change the use of the Facility or permit any
management agreement for the Facility other than the Lease Agreement or enter
into any operating lease for the Facility (other than the Lease Agreement),
unless Borrower first notifies Lender and provides Lender a copy of the proposed
lease agreement or management agreement, obtains Lender’s written consent
thereto, which consent may be withheld in Lender’s sole

     


    
      
         


      

      
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    discretion,
and obtains and provides Lender with a subordination agreement in form
satisfactory to Lender, as determined by Lender in its sole discretion, from
such manager or lessee subordinating to all rights of Lender.

     

    5.11 Place of
Business.  Change its chief executive office or its principal
place of business without first giving Lender at least thirty (30) days prior
written notice thereof and promptly providing Lender such information and
amendatory financing statements as Lender may request in connection
therewith.

     

    5.12 Acquisitions.  Directly
or indirectly, purchase, lease, manage, own, operate, or otherwise acquire any
property or other assets (or any interest therein) which are not used in
connection with the operation of the Facility.

     

    5.13 Dividends,
Distributions and Redemptions.  Except as hereinafter provided
or as otherwise consented to by Lender in writing, declare or pay any
distributions to its shareholders, members or partners, as applicable, or
purchase, redeem, retire, or otherwise acquire for value, any ownership
interests in Borrower now or hereafter outstanding, return any capital to its
shareholders, members or partners as applicable, or make any distribution of
assets to its shareholders, members or partners, as applicable.

     

    5.14 Indebtedness.  Incur,
create, assume or permit to exist any indebtedness or liability on account of
deposits or advances or any indebtedness or liability for borrowed money, or any
other indebtedness or liability evidenced by notes, bonds, debentures or similar
obligations, except (a) indebtedness evidenced by the Note, and any of the other
Loan Obligations, and/or (b) in the event of Borrower’s assumption of the
responsibility for the operations of the Facility, indebtedness incurred in the
ordinary course of business.

     

    


    ARTICLE
VI

     

    ENVIRONMENTAL
HAZARDS

     

    6.1 Prohibited
Activities and Conditions.  Except for matters covered by a
written program of operations and maintenance approved in writing by Lender (an
“O&M Program”) or matters described in Section 6.2, no Borrower shall cause
or permit any of the following:

     

    (a) The
presence, use, generation, release, treatment, processing, storage (including
storage in above ground and underground storage tanks), handling, or disposal-of
any Hazardous Materials in, on or under the Property or any Improvements in
violation of applicable Hazardous Materials Laws;

     

    (b) The
transportation of any Hazardous Materials to, from, or across the Property in
violation of applicable Hazardous Materials Laws,

     

    (c) Any
occurrence or condition on the Property or in the Improvements or any other
property of Borrower that is adjacent to the Property, which occurrence or
condition is or may be in violation of Hazardous Materials Laws; or

     


    
      
         


      

      
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    (d) Any
violation of or noncompliance with the terms of any Environmental Permit with
respect to the Property, the Improvements or any property of Borrower that is
adjacent to the Property.

     

    The
matters described in clauses (a) through (d) above are referred to collectively
in this Article VI as “Prohibited Activities and Conditions” and individually as
a “Prohibited Activity and Condition.”

     

    6.2 Exclusions.  Notwithstanding
any other provision of Article VI to the contrary, “Prohibited Activities and
Conditions” shall not include the safe and lawful use and storage of quantities
of (a) pre-packaged supplies, medical waste, Hazardous Materials, cleaning
materials and petroleum products customarily used in the operation and
maintenance of comparable facilities, (b) cleaning materials, personal grooming
items and other items sold in pre-packaged containers for consumer use and used
by occupants of the Facility, and (c) petroleum products used in the operation
and maintenance of motor vehicles from time to time located on the Property’s
parking areas, so long as all of the foregoing are used, stored, handled,
transported and disposed of in compliance with Hazardous Materials
Laws.

     

    6.3 Preventive
Action.  Each Borrower shall take all appropriate steps
(including the inclusion of appropriate provisions in any Leases approved by
Lender which are executed after the date of this Agreement) to prevent its
employees, agents, contractors, tenants and occupants of the Facility from
causing or permitting any Prohibited Activities and Conditions.

     

    6.4 O & M
Program Compliance.  If an O&M Program has been established
with respect to Hazardous Materials, each Borrower shall comply in a timely
manner with, and cause all employees, agents, and contractors of Borrower and
any other persons present on the Property to comply with the O&M
Program.  All costs of performance of Borrower’s obligations under any
O&M Program shall be paid by Borrower, and Lender’s out-of-pocket costs
incurred in connection with the monitoring and review of the O&M Program and
Borrower’s performance shall be paid by Borrower upon demand by
Lender.  Any such out-of-pocket costs of Lender which Borrower fails
to pay promptly shall become an additional part of the Loan
Obligations.

     

    6.5 Borrower’s
Environmental Representations and Warranties.  Each Borrower
represents and warrants to Lender that, except as previously disclosed by
Borrower to Lender in writing:

     

    (a) Borrower
has not at any time caused or permitted any Prohibited Activities and
Conditions;

     

    (b) To
Borrower’s knowledge, no Prohibited Activities and Conditions exist or have
existed;

     

    (c) The
Property and the Improvements do not now contain any underground storage tanks,
and, to the best of Borrower’s knowledge, the Property and the Improvements have
not contained any underground storage tanks in the past.  If there is
an underground storage tank located on the Property or the Improvements which
has been previously disclosed by Borrower to Lender in writing, that tank
complies with all requirements of Hazardous Materials Laws;

     


    
      
         


      

      
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    (d) Borrower
has complied with all Hazardous Materials Laws, including all requirements for
notification regarding releases of Hazardous Materials relating to the
Property.  Without limiting the generality of the foregoing, Borrower
has obtained all Environmental Permits required for the operation of the
Property and the Improvements in accordance with Hazardous Materials Laws now in
effect and all such Environmental Permits are in full force and
effect.  To the best of Borrower’s knowledge, no event has occurred
with respect to the Property and/or Improvements that constitutes, or with the
passing of time or the giving of notice would constitute, noncompliance with the
terms of any Environmental Permit;

     

    (e) There are
no actions, suits, claims or proceedings pending or, to the best of Borrower’s
knowledge, threatened that involves the Property and/or the Improvements and
allege, arise out of, or relate to any Prohibited Activity, and
Condition;

     

    (f) Borrower
has not received written any complaint, order, notice of violation or other
communication from any Governmental Authority with regard to air emissions,
water discharges, noise emissions or Hazardous Materials, or any other
environmental, health or safety matters affecting the Property, the Improvements
or any other property of Borrower that is adjacent to the
Property.  The representations and warranties in this Article VI shall
be continuing representations and warranties that shall be deemed to be made by
Borrower throughout the term of the Loan evidenced by the Note, until the Loan
Obligations have been paid in full.

     

    6.6 Notice of
Certain Events.  Each Borrower shall promptly notify Lender in
writing of any and all of the following that may occur:

     

    (a) Borrower’s
discovery of any Prohibited Activity and Condition;

     

    (b) Borrower’s
receipt of or actual knowledge of any complaint, order, notice of violation or
other communication from any Governmental Authority or other person with regard
to present, or future alleged Prohibited Activities and Conditions or any other
environmental, health or safety matters affecting the Property, the Improvements
or any other property of Borrower that is adjacent to the Property;
or

     

    (c) Any
representation or warranty in this Article VI which becomes untrue at any time
after the date of this Agreement.

     

    Any such
notice given by Borrower shall not relieve Borrower of, or result in a waiver
of, any obligation under this Agreement, the Note, or any of the other Loan
Documents.

     

    6.7 Costs of
Inspection.  Borrowers shall pay promptly the reasonable costs
of any environmental inspections, tests or audits required by Lender in
connection with any foreclosure or deed in lieu of foreclosure, or, if required
by Lender, as a condition of Lender’s consent to any “Transfer” (as defined in
the Mortgage), or required by Lender following a commercially reasonable
determination by Lender that Prohibited Activities and Conditions may
exist.  Any such costs incurred by Lender (including the reasonable
fees and out-of-pocket costs of attorneys and technical consultants whether
incurred in connection with any judicial or administrative process or otherwise)
which Borrower fails to pay promptly shall become an additional part of the Loan
Obligations.

     


    
      
         


      

      
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    6.8 Remedial
Work.  If any investigation, site monitoring, containment,
clean-up, restoration or other remedial work (“Remedial Work”) is necessary to
comply with any Hazardous Materials Law or order of any Governmental Authority
that has or acquires jurisdiction over the Property, the Improvements or the
use, operation or improvement of the Property under any Hazardous Materials Law,
Borrower shall, by the earlier of (a) the applicable deadline required by
Hazardous Materials Law or (b) thirty (30) days after notice from Lender
demanding such action, begin performing the Remedial Work, and thereafter
diligently prosecute it to completion, and shall in any event complete such work
by the time required by applicable Hazardous Materials Law.  If
Borrower fails to begin on a timely basis or diligently prosecute any required
Remedial Work, Lender may, at its option, cause the Remedial Work to be
completed, in which case Borrower shall reimburse Lender on demand for the cost
of doing so.  Any reimbursement due from Borrower to Lender shall
become part of the Loan Obligations.

     

    6.9 Cooperation
with Governmental Authorities.  Each Borrower shall cooperate
with any inquiry by any Governmental Authority and shall comply with any
governmental or judicial order which arises from any alleged Prohibited Activity
and Condition.  Notwithstanding the foregoing, Borrower shall be
entitled to challenge in good faith the validity, scope or extent of any such
governmental or judicial order.

     

    6.10 Indemnity.

     

    (a) Borrower
shall hold harmless, defend and indemnify (i) Lender, (ii) any prior owner or
holder of the Note, (iii) the officers, directors, partners, agents,
shareholders, employees and trustees of any of the foregoing, and (iv) the
heirs, legal representatives, successors and assigns of each of the foregoing
(together, the “Indemnitees”) against all proceedings, claims, damages, losses,
expenses, penalties and costs (whether initiated or sought by any Governmental
Authority or private parties), including fees and out of pocket expenses of
attorneys and expert witnesses, investigatory fees, and remediation costs,
whether incurred in connection with any judicial or administrative process or
otherwise, arising directly or indirectly from any of the
following:

     

    (A) Any
breach of any representation or warranty of Borrower in this
Article VI;

     

    (B) Any
failure by Borrower to perform any of its obligations under this Article
VI;

     

    (C) The
existence or alleged existence of any Prohibited Activity and
Condition;

     

    (D) The
presence or alleged presence of Hazardous Materials in, on, or around under the
Property, the Improvements or any property of Borrower that is adjacent to the
Property; or

     

    (E) Actual or
alleged violation of any Hazardous Materials Law.

     


    
      
         


      

      
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    (b) Counsel
selected by Borrower to defend Indemnitees shall be subject to the reasonable
approval of those Indemnitees.  Notwithstanding anything contained
herein, any Indemnitee may elect to defend any claim or legal or administrative
proceeding at Borrower’s reasonable expense if such Indemnitee has reason to
believe that its interests are not being adequately represented or diverge from
other interests being represented by such counsel (but Borrower shall be
obligated to bear the expense of at most only one such separate
counsel).  Nothing contained herein shall prevent an Indemnitee from
employing separate counsel in any such action at any time and participating in
the defense thereof at its own expense.

     

    (c) Borrower
shall not, without the prior written consent of those Indemnitees who are named
as parties to a claim or legal or administrative proceeding (a “Claim”) settle
or compromise the Claim if the settlement (i) results in the entry of any
judgment that does not include as an unconditional term the delivery by the
claimant or plaintiff to Lender of a written release of those Indemnitees,
reasonably satisfactory in form and substance to Lender; or (ii) may materially
and adversely affect any Indemnitee, as determined by such Indemnitee in its
sole discretion.

     

    (d) The
liability of Borrower to indemnify the Indemnitees shall not be limited or
impaired by any of the following, or by any failure of Borrower or Guarantor to
receive notice of or consideration for any of the following:

     

    (i) Any
amendment or modification of any Loan Document;

     

    (ii) Any
extensions of time for performance required by any of the Loan
Documents;

     

    (iii) The
accuracy or inaccuracy of any representations and warranties made by Borrower
under this Agreement or any other Loan Document;

     

    (iv) The
release of Borrower or any other person, by Lender or by operation of law, from
performance of any obligation under any of the Loan Documents;

     

    (v) The
release or substitution in whole or in part of any security for the Loan
Obligations; and

     

    (vi) Lender’s
failure to properly perfect any lien or security interest given as security for
the Loan Obligations.

     

    (e) Borrower
shall, at its own cost and expense, do all of the following:

     

    (i) Pay or
satisfy any judgment or decree that may be entered against any Indemnitee or
Indemnitees in any legal or administrative proceeding incident to any matters
against which Indemnitees are entitled to be indemnified under this Article VI,
subject to Borrower’s right to lawfully defend and challenge the
same;

     


    
      
         


      

      
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    (ii) Reimburse
Indemnitees for any reasonable expenses paid or incurred in connection with any
matters against which Indemnitees are entitled to be indemnified under this
Article VI; and

     

    (iii) Reimburse
Indemnitees for any and all reasonable expenses, including fees and costs of
attorneys and expert witnesses, paid or incurred in connection with the
enforcement by Indemnitees of their rights under this Article VI, or in
monitoring and participating in any legal or administrative
proceeding.

     

    (f) In any
circumstances in which the indemnity under this Article VI applies, Lender may
employ its own legal counsel and consultants to prosecute, defend or negotiate
any claim or legal or administrative proceeding and Lender, with the prior
written consent of Borrower (which shall not be unreasonably withheld, delayed
or conditioned) may settle or compromise any action or legal or administrative
proceeding.  Borrower shall reimburse Lender upon demand for all
reasonable costs and expenses incurred by Lender, including all reasonable costs
of settlements entered into in good faith, and the reasonable fees and out of
pocket expenses of such attorneys and consultants.

     

    (g) The
provisions of this Article VI shall be in addition to any and all other
obligations and liabilities that Borrower may have under the applicable law or
under the other Loan Documents, and each Indemnitee shall be entitled to
indemnification under this Article VI without regard to whether Lender or that
Indemnitee has exercised any rights against the Property and/or the Improvements
or any other security, pursued any rights against any guarantor, or pursued any
other rights available under the Loan Documents or applicable law.  If
Borrower consists of more than one Person or entity, the obligation of those
Persons or entities to indemnify the Indemnitees under this Article VI shall be
joint and several.  The obligations of Borrower to indemnify the
Indemnitees under this Article VI shall survive any repayment or discharge of
the Loan Obligations, any foreclosure proceeding, any foreclosure sale, any
delivery of any deed in lieu of foreclosure, and any release of record of the
lien of the Mortgage.

     

    ARTICLE
VII

     

    EVENTS
OF DEFAULT AND REMEDIES

     

    7.1 Events of
Default.  The occurrence of any one or more of the following
shall constitute an “Event of Default” hereunder:

     

    (a) The
failure by either Borrower to pay any installment of principal, interest, or
other payments required under a Note, the Mortgage or any other Loan Document on
the day same becomes due after the expiration of any applicable cure
period;

     

    (b) Either
Borrower’s violation of any covenant set forth in Article V hereof;

     

    (c) Either
Borrower’s failure to deliver or cause to be delivered the financial statements
and information set forth in Section 4.7 above within the times required and
such failure is not cured within thirty (30) days following Lender’s written
notice to Borrower thereof;

     


    
      
         


      

      
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    (d) The
failure of either Borrower properly and timely to perform or observe any
covenant or condition set forth in this Agreement (other than those specified in
this Section 7.1) or any other Loan Documents which is susceptible of being
cured and is not cured within any applicable cure period as set forth herein or
in such other Loan Document or, if no cure period is specified therefor, is not
cured within thirty (30) days of Lender’s notice to Borrower of such Default;
provided, however, that if such Default cannot be cured within such thirty (30)
day period, such cure period shall be extended for an additional sixty (60)
days, as long as Borrower is diligently and in good faith prosecuting said cure
to completion;

     

    (e) The
filing by either Borrower or Lessee or Guarantor of a voluntary petition, or the
adjudication of any of the aforesaid Persons, or the filing by any of the
aforesaid Persons of any petition or answer seeking or acquiescing, in any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief for itself under any present or future federal, state or other
statute, law or regulation relating to bankruptcy, insolvency or other relief
for debtors, or if any of the aforesaid Persons should seek or consent to or
acquiesce in the appointment of any trustee, receiver or liquidator for itself
or of all or any substantial part of its property or of any or all of the rents,
revenues, issues, earnings, profits or income thereof, or the mailing of any
general assignment for the benefit of creditors or the admission in writing by
any of the aforesaid Persons of its inability to pay its debts generally as they
become due;

     

    (f) The entry
by a court of competent jurisdiction of an order, judgment, or decree approving
a petition filed against either Borrower, Guarantor or Lessee which such
petition seeks any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future federal,
state or other statute, law or regulation relating to bankruptcy, insolvency, or
other relief for debtors, which order, judgment or decree remains unvacated and
unstayed for an aggregate of sixty (60) days (whether or not consecutive) from
the date of entry thereof, or the appointment of any trustee, receiver or
liquidator of any of the aforesaid Persons or of all or any substantial part of
its properties or of any or all of the rents, revenues, issues, earnings,
profits or income thereof which appointment shall remain unvacated and unstayed
for an aggregate of sixty (60) days (whether or not consecutive);

     

    (g) Unless
otherwise permitted hereunder or under any other Loan Documents, the sale,
transfer, lease, assignment, or other disposition, voluntarily or involuntarily,
of the Collateral, or any material part thereof, or, except for Permitted
Encumbrances as described in Section 5.2 above, any further encumbrance of the
Collateral, unless the prior written consent of Lender is obtained, which
consent may be withheld in Lender’s commercially reasonable
discretion;

     

    (h) Any
certificate, statement, representation, warranty or audit heretofore or
hereafter furnished by or on behalf of Borrower or Lessee or Guarantor pursuant
to or in connection with this Agreement (including, without limitation,
representations and warranties contained herein or in any Loan Documents) or as
an inducement to Lender to make the Loan to Borrower, (i) proves to have
been false in any material respect at the time when the facts therein set forth
were stated or certified, (ii) proves to have omitted any substantial
contingent or unliquidated liability or claim against Borrower, Guarantor or
Lessee, or (iii)  on the date of execution of this Agreement there shall
have been any materially adverse change in any of the

     


    
      
         


      

      
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    acts
previously disclosed by any such certificate, statement, representation,
warranty or audit, which change shall not have been disclosed to Lender in
writing at or prior to the time of such execution;

     

    (i) The
failure of Borrower to correct, or to cause Lessee to correct, within the time
deadlines set by any applicable licensing agency, any deficiency which would
result in the following actions by such agency with respect to the
Facility:

     

    (i) a
termination of any Reimbursement Contract or any Permit; or

     

    (ii) a ban on
new admissions.

     

    (j) Borrower,
Lessee, or the Facility should be assessed fines or penalties by any state or
any health or licensing agency having jurisdiction over such Persons or the
Facility in excess of $150,000;

     

    (k) A final
non-appealable judgment shall be rendered by a court of law or equity against
Borrower or Lessee or Guarantor in excess of $250,000, and the same shall remain
undischarged for a period of thirty (30) days, unless such judgment is either
(i) fully covered by collectible insurance and such insurer has within such
period acknowledged such coverage in writing, or (ii) although not fully covered
by insurance, enforcement of such judgment has been effectively stayed, such
judgment is being contested or appealed by appropriate proceedings and Borrower
or Lessee or Guarantor as the case may be, has established reserves adequate for
payment in the event such Person is ultimately unsuccessful in such contest or
appeal and evidence thereof is provided to Lender;

     

    (l) The
occurrence of any materially adverse change in the financial condition or
prospects of Borrower, Guarantor, or Lessee or the existence of any other
condition which, in Lender’s reasonable determination, constitutes a material
impairment of any such Person’s ability to operate the Facility or of such
Person’s ability to perform their respective obligations under the Loan
Documents, which is not remedied within thirty (30) days after written notice;
or

     

    (m)  The
failure of Guarantor to maintain either or both the Minimum Liquidity Covenant
and the Fixed Charge Coverage Ratio, as such terms are defined in Sections 16
and 17, respectively, of the Guaranty Agreement.

     

    Notwithstanding
anything in this Section, all requirements of notice shall be deemed eliminated
if Lender is prevented from declaring an Event of Default by bankruptcy or other
applicable law.  The cure period, if any, shall then run from the
occurrence of the event or condition of Default rather than from the date of
notice.

     

    7.2 Remedies.  Upon
the occurrence of any one or more of the foregoing Events of Default, Lender
may, at its option:

     

    (a) Declare
the entire unpaid principal of the Loan Obligations to be, and the same shall
thereupon become, immediately due and payable, without presentment, protest or
further demand or notice of any kind, all of which are hereby expressly waived;
and/or

     


    
      
         


      

      
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    (b) Proceed
to protect and enforce its rights by action at law (including, without
limitation, bringing suit to reduce any claim to judgment), suit in equity and
other appropriate proceedings including, without limitation, for specific
performance of any covenant or condition contained in this Agreement;
and/or

     

    (c) Exercise
any and all rights and remedies afforded by the laws of the United States, the
states in which any of the Property or other Collateral is located or any other
appropriate jurisdiction as may be available for the collection of debts and
enforcement of covenants and conditions such as those contained in this
Agreement and the Loan Documents; and/or

     

    (d) Exercise
the rights and remedies of setoff and/or banker’s lien against the interest of
Borrower in and to every account and other property of Borrower which is in the
possession of Lender or any Person who then owns a participating interest in the
Loan, to the extent of the full amount of the Loan; and/or

     

    (e) Exercise
its rights and remedies pursuant to any other Loan Documents.

     

    ARTICLE
VIII

     

    MISCELLANEOUS

     

    8.1 Waiver.  No
remedy conferred upon, or reserved to, a party in this Agreement or any of the
other Loan Documents is intended to be exclusive of any other remedy or
remedies, and each and every remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing in law or in
equity. Exercise of or omission to exercise any right of a party hereto shall
not affect any subsequent right of a party to exercise the same.  No
course of dealing between Borrower and Lender or any delay on a party’s part in
exercising any rights shall operate as a waiver of any of such party’s
rights.  No waiver of any Default under this Agreement or any of the
other Loan Documents shall extend to or shall affect any subsequent or other
then existing Default or shall impair any rights, remedies or powers of either
party hereto.

     

    8.2 Costs and
Expenses.  Each Borrower will bear all taxes, fees and expenses
(including actual reasonable attorneys’ fees and expenses of counsel for Lender)
in connection with its Loan, the Note, the preparation of this Agreement and the
other Loan Documents (including any amendments hereafter made), and in
connection with any modifications thereto and the recording of any of the Loan
Documents.  If, at any time, a Default occurs or Lender becomes a
party to any suit or proceeding in order to protect its interests or priority in
any collateral for any of the Loan Obligations or its rights under this
Agreement or any of the Loan Documents, or if Lender is made a party to any suit
or proceeding by virtue of the Loan, this Agreement or any Collateral and as a
result of any of the foregoing, the Lender employs counsel to advise or provide
other representation with respect to this Agreement, or to collect the balance
of the Loan Obligations, or to take any action in or with respect to any suit or
proceeding relating to this Agreement, any of the other Loan Documents, any
Collateral, Borrower, Guarantor or Lessee, or to protect, collect, or liquidate
any of the security for the Loan Obligations, or attempt to enforce any security
interest or lien granted to the Lender by any of the Loan Documents, then in any
such events, all of the actual reasonable attorney’s fees arising from such
services, including attorneys’ fees for preparation of litigation and in any
appellate or bankruptcy

     


    
      
         


      

      
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    proceedings,
and any reasonable expenses, costs and charges relating thereto shall constitute
additional obligations of Borrower to Lender payable on demand of the
Lender.  Without limiting the foregoing, Borrower has undertaken the
obligation for payment of, and shall pay, all recording and filing fees, revenue
or documentary stamps or taxes, intangibles taxes, and other taxes, expenses and
charges payable in connection with this Agreement, any of the Loan Documents,
the Loan Obligations, or the filing of any financing statements or other
instruments required to effectuate the purposes of this Agreement, and should
Borrower fail to do so, Borrower agrees to reimburse Lender for the amounts paid
by Lender, together with penalties or interest, if any, incurred by Lender as a
result of underpayment or nonpayment.  Such amounts shall constitute a
portion of the Loan Obligations, shall be secured by the Mortgage and shall bear
interest at the Default Rate (as defined in the Note) from the date advanced
until repaid.

     

    8.3 Performance
of Lender.  At its option, upon Borrower’s failure to do so,
Lender may make any payment or do any act on Borrower’s behalf that Borrower or
others are required to do to remain in compliance with this Agreement or any of
the other Loan Documents, and Borrower agrees to reimburse Lender, on demand,
for any payment made or expense incurred by Lender pursuant to the foregoing
authorization, including, without limitation, reasonable attorneys’ fees, and
until so repaid any sums advanced by Lender shall constitute a portion of the
Loan Obligations, shall be secured by the Mortgage and shall bear interest at
the Default Rate (as defined in the Note) from the date advanced until
repaid.

     

    8.4 Indemnification.  Each
Borrower shall, at its sole cost and expense, protect, defend, indemnify and
hold harmless the Indemnified Parties from and against any and all claims,
suits, liabilities (including, without limitation, strict liabilities), actions,
proceedings, obligations, debts, damages, losses, costs, expenses, diminutions
in value, fines, penalties, charges, fees, expenses, judgments, awards, amounts
paid in settlement, punitive damages, foreseeable and unforeseeable
consequential damages, of whatever kind or nature (including but not limited to
reasonable attorneys’ fees and other costs of defense) imposed upon or incurred
by or asserted against Lender by reason of (a) ownership of the Note, the
Mortgage, the Property or any interest therein or receipt of any Rents (as
defined in the Mortgage), (b) any amendment to, or restructuring of, the Loan
Obligations and/or any of the Loan Documents, (c) any and all lawful action that
may be taken by Lender in connection with the enforcement of the provisions of
the Mortgage or the Note or any of the other Loan Documents, whether or not suit
is filed in connection with same, or in connection with Borrower, Lessee,
Guarantor, and/or any partner, joint venturer, member or shareholder thereof
becoming a party to a voluntary or involuntary federal or state bankruptcy,
insolvency or similar proceeding, (d) any accident, injury to or death of
persons or loss of or damage to property occurring in, on or about the Property,
the Improvements or any part thereof or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways, (e) any use,
nonuse or condition in, on or about the Property, the Improvements or any part
thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent
parking areas, streets or ways, (f) any failure on the part of Borrower, Lessee
or Guarantor to perform or comply with any of the terms of this Agreement or any
of the other Loan Documents, (g) any claims by any broker, person or entity
claiming to have participated in arranging the making of the Loan evidenced by
the Note, (h) any failure of the Property to be in compliance with any
applicable laws, (i) any and all claims and demands whatsoever which may be
asserted against Lender by reason of any alleged obligations or undertakings on
its part to perform or discharge any of the terms, covenants, or
agreements

     


    
      
         


      

      
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    contained
in the Lease Agreement or any replacement or renewal thereof or substitution
therefore, except for such claims and demands that arise solely from Lender’s
intentional misconduct or gross negligence, (j) performance of any labor or
services or the furnishing of any materials or other property with respect to
the Property, the Improvements or any part thereof, (k) the failure of any
Person to file timely with the Internal Revenue Service an accurate Form 1099-b,
statement for recipients of proceeds from real estate, broker and barter
exchange transactions, which may be required in connection with the Mortgage, or
to supply a copy thereof in a timely fashion to the recipient of the proceeds of
the transaction in connection with which the Loan is made, (l) any
misrepresentation made to Lender in this Agreement or in any of the other Loan
Documents, (m) any tax on the making and/or recording of the Mortgage, the Note
or any of the other Loan Documents, (n) the violation of any requirements of the
Employee Retirement Income Security Act of 1974, as amended, (o) any fines or
penalties assessed or any corrective costs incurred by Lender if the Facility or
any part of the Property is determined to be in violation of any covenants,
restrictions of record, or any applicable laws, ordinances, rules or
regulations, or (p) the enforcement by any of the Indemnified Parties of the
provisions of this Section 8.4.  Any amounts payable to Lender by
reason of the application of this Section 8.4 shall become immediately due and
payable, and shall constitute a portion of the Loan Obligations, shall be
secured by the Mortgage and shall accrue interest at the Default Rate (as
defined in the Note).  The obligations and liabilities of Borrower
under this Section 8.4 shall survive any termination, satisfaction, assignment,
entry of a judgment of foreclosure or exercise of a power of sale or delivery of
a deed in lieu of foreclosure of the Mortgage.  For purposes of this
Section 8.4, the term “Indemnified Parties” means Lender and any Person who is
or will have been involved in the origination of the Loan, any Person who is or
will have been involved in the servicing of the Loan, any Person in whose name
the encumbrance created by the Mortgage is or will have been recorded, any
Person who may hold or acquire or will have held a full or partial interest in
the Loan (including, without limitation, any investor in any securities backed
in whole or in part by the Loan) as well as the respective directors, officers,
shareholder, partners, members, employees, agents, servants, representatives,
contractors, subcontractors, affiliates, subsidiaries, participants, successors
and assigns of any and all of the foregoing (including, without limitation, any
other Person who holds or acquires or will have held a participation or other
full or partial interest in the Loan or the Property, whether during the term of
the Mortgage or as a part of or following a foreclosure of the Loan and
including, without limitation, any successors by merger, consolidation or
acquisition of all or a substantial portion of Lender’s assets and
business).

     

    8.5 Headings.  The
headings of the Sections of this Agreement are for convenience of reference
only, are not to be considered a part hereof, and shall not limit or otherwise
affect any of the terms hereof.

     

    8.6 Survival
of Covenants.  All covenants, agreements, representations and
warranties made herein and in certificates or reports delivered pursuant hereto
shall be deemed to have been material and relied on by Lender, notwithstanding
any investigation made by or on behalf of Lender, and shall survive the
execution and delivery to Lender of the Note and this Agreement.

     

    8.7 Notices,
etc.  Any notice or other communication required or permitted
to be given by this Agreement or the other Loan Documents or by applicable law
shall be in writing

     


    
      
         


      

      
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    and shall
be deemed received (a) on the date delivered, if sent by hand delivery (to the
person or department if one is specified below) with receipt acknowledged by the
recipient thereof, (b) three (3) Business Days following the date deposited in
U.S. mail, certified or registered, with return receipt requested, or (c) one
(1) Business Day following the date deposited with Federal Express or other
national overnight carrier, and in each case addressed as follows:

     

    If to
Borrower:

     

    Emeritus
Corporation

    3131 Elliott Avenue, #500

    Seattle, WA 98121

    Attention:                                Eric
Mendelsohn, Director of

    Real Estate and Business Legal
Affairs

    


    With a
copy to:

    


    Pircher,
Nichols & Meeks

    900 North
Michigan Ave, Suite 1050

    Chicago,
IL 60611

    Attention: Real Estate Notices
(JDL/MJK)

     

    If to
Lender:

     

    Capmark
Bank

    6955
Union Park Center, Suite 330

    Midvale,
Utah 84047

    


    with a
copy to:

     

    Kay K.
Bains, Esq.

    Bradley
Arant Rose & White LLP

    1819
Fifth Avenue North

    Birmingham,
Alabama 35203

    


    Either
party may change its address to another single address by notice given as herein
provided, except any change of address notice must be actually received in order
to be effective.

     

    8.8 Benefits.  All
of the terms and provisions of this Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and
assigns.  No Person other than Borrower or Lender shall be entitled to
rely upon this Agreement or be entitled to the benefits of this
Agreement.

     

    8.9 Participation.  Borrower
acknowledges that Lender may, at its option, sell participation interests in the
Loan or to other participating banks or Lender may (but shall not be obligated
to) assign its interest in the Loan to its affiliates, or to other assignees
(the “Assignee”) to be included as a pool of properties to be financed in a
proposed Real Estate Mortgage Investment Conduit (REMIC) but any such assignment
to a REMIC shall require Borrower’s

     


    
      
         


      

      
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    consent,
not to be unreasonably withheld, conditioned or delayed.  Borrower
agrees with each present and future participant in the Loan or Assignee of the
Loan that if an Event of Default should occur, each present and future
participant or Assignee shall have all of the rights and remedies of Lender with
respect to any deposit due from Borrower.  The execution by a
participant of a participation agreement with Lender, and the execution by
Borrower of this Agreement, regardless of the order of execution, shall evidence
an agreement between Borrower and said participant in accordance with the terms
of this Section.  If the Loan is assigned to the Assignee, the
Assignee will engage an underwriter (the “Underwriter”), who will be responsible
for the due diligence, documentation, preparation and execution of certain
documents required in connection with the offering of interests in the
REMIC.  Borrower agrees that if Lender assigns its interest in the
Loan to the Assignee for inclusion in the REMIC, with Borrower’s consent as
required herein, Borrower agrees to provide the Assignee with such information
as may be reasonably required by the Underwriter in connection therewith or by
an investor in any securities backed in whole or in part by the Loan or any
rating agency rating such securities.  Borrower irrevocably waives any
and all right it may have under applicable law to prohibit such disclosure,
including, but not limited to, any right of privacy, and consents to the
disclosure of such information to the Underwriter, to potential investors in the
REMIC, and to such rating agencies. Notwithstanding anything in this Agreement
or any other Loan Document to the contrary, Borrowers shall not be required to
“gross-up” payments for United States withholding taxes to any Assignee or
Person treated, for United States federal income tax purposes, as the owner of
the assets of an Assignee if such Assignee is a disregarded entity for United
States federal income tax purposes, that is not organized under the laws of the
United States of America or a state thereof (a “Non-U.S. Entity”), and such
Non-U.S. Entity fails to establish an exemption from United States withholding
taxes.  Lender may sell the Loan, interests in the Loan, issue
securities backed by or evidencing ownership of the Loan in one or more public
or private offerings and/or further tranche the Loan and/or create multiple
notes at any time without Borrower’s consent.  Lender currently
intends to retain the rights to service the Loan.

     

    8.10 Supersedes
Prior Agreements; Counterparts.  This Agreement and the
instruments referred to herein supersede and incorporate all representations,
promises, and statements, oral or written, made by Lender in connection with the
Loan.  This Agreement may not be varied, altered, or amended except by
a written instrument executed by an authorized officer of the
Lender.  This Agreement may be executed in any number of counterparts,
each of which, when executed and delivered, shall be an original, but such
counterparts shall together constitute one and the same instrument.

     

    8.11 Loan
Agreement Governs.  The Loan is governed by the terms and
provisions set forth in this Loan Agreement and the other Loan Documents and in
the event of any irreconcilable conflict between the terms of the other Loan
Documents and the terms of this Loan Agreement, the terms of this Loan Agreement
shall control; provided, however, in the event there is any apparent conflict
between any particular term or provision which appears in both this Loan
Agreement and the other Loan Documents and it is possible and reasonable for the
terms of both this Loan Agreement and the Loan Documents to be performed or
complied with then notwithstanding the foregoing both the terms of this Loan
Agreement and the other Loan Documents shall be performed and complied
with.

     


    
      
         


      

      
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    8.12 CONTROLLING
LAW.  THE PARTIES HERETO AGREE THAT THE VALIDITY,
INTERPRETATION, ENFORCEMENT AND EFFECT OF THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS AND THE
PARTIES HERETO SUBMIT (AND WAIVE ALL RIGHTS TO OBJECT) TO NON-EXCLUSIVE PERSONAL
JURISDICTION IN THE STATE OF ILLINOIS, FOR THE ENFORCEMENT OF ANY AND ALL
OBLIGATIONS UNDER THE LOAN DOCUMENTS EXCEPT THAT IF ANY SUCH ACTION OR
PROCEEDING ARISES UNDER THE CONSTITUTION, LAWS OR TREATIES OF THE UNITED STATES
OF AMERICA, OR IF THERE IS A DIVERSITY OF CITIZENSHIP BETWEEN THE PARTIES
THERETO, SO THAT IT IS TO BE BROUGHT IN A UNITED STATES DISTRICT COURT, IT SHALL
BE BROUGHT IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
ILLINOIS OR ANY SUCCESSOR FEDERAL COURT HAVING ORIGINAL
JURISDICTION.

     

    8.13 WAIVER OF JURY
TRIAL.  BORROWER AND LENDER HEREBY WAIVE ANY RIGHT THAT EITHER
OR BOTH MAY HAVE TO A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND,
ACTION OR CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY RELATED TO THIS
AGREEMENT OR THE LOAN, OR (B) IN ANY WAY CONNECTED WITH OR PERTAINING OR RELATED
TO OR INCIDENTAL TO ANY DEALINGS OF LENDER AND/OR BORROWER WITH RESPECT TO THE
LOAN DOCUMENTS OR IN CONNECTION WITH THIS AGREEMENT OR THE EXERCISE OF EITHER
PARTY’S RIGHTS AND REMEDIES UNDER THIS AGREEMENT OR OTHERWISE, OR THE CONDUCT OR
THE RELATIONSHIP OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES WHETHER
NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE.  BORROWER AGREES THAT LENDER MAY FILE A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY, AND
BARGAINED AGREEMENT OF BORROWER IRREVOCABLY TO WAIVE ITS RIGHTS TO TRIAL BY JURY
AS AN INDUCEMENT TO LENDER TO MAKE THE LOAN, AND THAT, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, ANY DISPUTE OR CONTROVERSY WHATSOEVER (WHETHER OR NOT
MODIFIED HEREIN) BETWEEN BORROWER AND LENDER SHALL INSTEAD BE TRIED IN A COURT
OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

     

    8.14 Reasonable
Discretion.  As applied to
this Agreement and the Loan Documents,  Lender shall be deemed to have
exercised reasonable discretion or shall be deemed to have given its reasonable
consent if Lender's actions are consistent with the standard of care that Lender
employs in connection with its exercise of rights and remedies with other
borrowers and loans of similar structure, size, complexity and number of
facilities.

     

    


    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

     


    
      
         


      

      
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    IN WITNESS WHEREOF, Borrower
and Lender have caused this Agreement to be properly executed, by their
respective duly authorized representatives, as of the date first above
written.

     

    


    BORROWERS:

    


    EMERIVENT
BRADENTON LLC, a Delaware limited liability company

    


    
      	
               
      

            	
              By:  Summerville
      Senior Living, Inc., a Delaware
corporation

            


    

    Its:   Sole
Member

    


    


    By:  /s/ Eric
Mendelsohn

    


    Name:                      Eric
Mendelsohn

    


    
      	
               
      

            	
              Title:

            	
              Senior
      Vice President Corporate
Development

            


    

    


    


    


    EMERIVENT
BRIGHTON LLC, a Delaware limited liability company

    


    
      	
               
      

            	
              By:  Summerville
      Senior Living, Inc., a Delaware
corporation

            


    

    Its:   Sole
Member

    


    


    By:  /s/ Eric
Mendelsohn                                                      

    


    Name:                      Eric
Mendelsohn

    


    
      	
               
      

            	
              Title:

            	
              Senior
      Vice President Corporate
Development

            


    


    
      
         


      

      
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    WITNESS:                                                                           LENDER:

    


    
      	
               
      

            	
              CAPMARK
      BANK, a Utah industrial bank

            


    

    


    


    


    /s/ Peggy
Scarborough                                                                By:           /s/ James C.
Thompson                                                      (Seal)

    


    Name:                      Peggy
Scarborough                                                      Its:           Authorized
Signer

    


    


     

    


     


    
      
         


      

      
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