Document:

ex105610masterlease3hcri0609.htm

EX-10.56.10

    MASTER
LEASE AGREEMENT

    

    (MASTER
LEASE #3)

    

    

    BETWEEN

    

    

    HEALTH
CARE REIT, INC.

    

    

    HCRI DRUM
HILL PROPERTIES, LLC

    

    

    HCRI FAIRMONT
PROPERTIES, LLC

    

    

    HCRI KIRKLAND
PROPERTIES, LLC

    

    

    AND

    

    

    EMERITUS
CORPORATION

    

    

    

    

    

    JUNE
10, 2009

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    TABLE OF
CONTENTS

    

      
        	
                SECTION

              	 
      	 
      	
                PAGE

              
	
                ARTICLE
      1:  LEASED PROPERTY, TERM AND DEFINITIONS

              	 
      	 
      	
                2

              
	 
      	
                1.1

              	
                Leased
      Property

              	
                2

              
	 
      	
                1.2

              	
                Indivisible
      Lease.

              	
                2

              
	 
      	
                1.3

              	
                Term

              	
                2

              
	 
      	
                1.4

              	
                Definitions

              	
                2

              
	 
      	
                1.5

              	
                Landlord
      As Agent

              	
                11

              
	 
      	
                1.6

              	
                [RESERVED]

              	
                11

              
	 
      	
                1.7

              	
                Termination
      of Existing Leases

              	
                11

              
	
                ARTICLE
      2:  RENT

              	 
      	 
      	
                11

              
	 
      	
                2.1

              	
                Base
      Rent

              	
                11

              
	 
      	
                2.2

              	
                Base
      Rent Adjustments.

              	
                12

              
	 
      	 
      	
                2.2.1     Base
      Rent Adjustments - Additional Investment Advances

              	
                12

              
	 
      	
                2.3

              	
                General
      Additional Rent

              	
                12

              
	 
      	
                2.4

              	
                Place
      of Payment of Rent

              	
                12

              
	 
      	
                2.5

              	
                Net
      Lease

              	
                12

              
	 
      	
                2.6

              	
                No
      Termination, Abatement, Etc

              	
                12

              
	 
      	
                2.7

              	
                Transaction
      Fee

              	
                13

              
	
                ARTICLE
      3:  IMPOSITIONS AND UTILITIES

              	 
      	 
      	
                13

              
	 
      	
                3.1

              	
                Payment
      of Impositions

              	
                13

              
	 
      	
                3.2

              	
                Definition
      of Impositions

              	
                14

              
	 
      	
                3.3

              	
                Escrow
      of Impositions

              	
                14

              
	 
      	
                3.4

              	
                Utilities

              	
                15

              
	 
      	
                3.5

              	
                Discontinuance
      of Utilities

              	
                15

              
	 
      	
                3.6

              	
                Business
      Expenses

              	
                15

              
	 
      	
                3.7

              	
                Permitted
      Contests

              	
                15

              
	
                ARTICLE
      4:  INSURANCE

              	 
      	 
      	
                16

              
	 
      	
                4.1

              	
                Property
      Insurance

              	
                16

              
	 
      	
                4.2

              	
                Liability
      Insurance

              	
                17

              
	 
      	
                4.3

              	
                Builder's
      Risk Insurance

              	
                17

              
	 
      	
                4.4

              	
                Insurance
      Requirements

              	
                18

              
	 
      	
                4.5

              	
                Replacement
      Value

              	
                18

              
	 
      	
                4.6

              	
                Blanket
      Policy

              	
                18

              
	 
      	
                4.7

              	
                No
      Separate Insurance

              	
                18

              
	 
      	
                4.8

              	
                Waiver
      of Subrogation

              	
                19

              
	 
      	
                4.9

              	
                Mortgages

              	
                19

              
	 
      	
                4.10

              	
                Escrows

              	
                19

              
	
                ARTICLE
      5:  INDEMNITY

              	 
      	 
      	
                19

              
	 
      	
                5.1

              	
                Tenant's
      Indemnification

              	
                19

              

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        	
                SECTION

              	 
      	 
      	
                PAGE

              
	 
      	 
      	
                5.1.1     Notice
      of Claim

              	
                20

              
	 
      	 
      	
                5.1.2     Survival
      of Covenants

              	
                20

              
	 
      	 
      	
                5.1.3     Reimbursement
      of Expenses

              	
                20

              
	 
      	
                5.2

              	
                Environmental
      Indemnity; Audits

              	
                20

              
	 
      	
                5.3

              	
                Limitation
      of Landlord's Liability

              	
                21

              
	
                ARTICLE
      6:  USE AND ACCEPTANCE OF PREMISES

              	 
      	 
      	
                21

              
	 
      	
                6.1

              	
                Use
      of Leased Property

              	
                21

              
	 
      	
                6.2

              	
                Acceptance
      of Leased Property

              	
                21

              
	 
      	
                6.3

              	
                Conditions
      of Use and Occupancy

              	
                22

              
	
                ARTICLE
      7:  MAINTENANCE AND MECHANICS' LIENS

              	 
      	 
      	
                22

              
	 
      	
                7.1

              	
                Maintenance

              	
                22

              
	 
      	
                7.2

              	
                Required
      Alterations

              	
                23

              
	 
      	
                7.3

              	
                Mechanic's
      Liens

              	
                23

              
	 
      	
                7.4

              	
                Replacements
      of Fixtures and Landlord's Personal Property

              	
                23

              
	
                ARTICLE
      8:  DEFAULTS AND REMEDIES

              	 
      	 
      	
                24

              
	 
      	
                8.1

              	
                Events
      of Default

              	
                24

              
	 
      	
                8.2

              	
                Remedies

              	
                25

              
	 
      	
                8.3

              	
                Right
      of Set Off

              	
                28

              
	 
      	
                8.4

              	
                Performance
      of Tenant's Covenants

              	
                29

              
	 
      	
                8.5

              	
                Late
      Payment Charge

              	
                29

              
	 
      	
                8.6

              	
                Default
      Rent

              	
                29

              
	 
      	
                8.7

              	
                Attorneys'
      Fees

              	
                30

              
	 
      	
                8.8

              	
                Escrows
      and Application of Payments

              	
                30

              
	 
      	
                8.9

              	
                Remedies
      Cumulative

              	
                30

              
	 
      	
                8.10

              	
                Waivers

              	
                30

              
	 
      	
                8.11

              	
                Obligations
      Under the Bankruptcy Code

              	
                30

              
	
                ARTICLE
      9:  DAMAGE AND DESTRUCTION

              	 
      	 
      	
                31

              
	 
      	
                9.1

              	
                Notice
      of Casualty

              	
                31

              
	 
      	
                9.2

              	
                Substantial
      Destruction

              	
                31

              
	 
      	
                9.3

              	
                Partial
      Destruction

              	
                32

              
	 
      	
                9.4

              	
                Restoration

              	
                32

              
	 
      	
                9.5

              	
                Insufficient
      Proceeds

              	
                33

              
	 
      	
                9.6

              	
                Not
      Trust Funds

              	
                33

              
	 
      	
                9.7

              	
                Landlord's
      Inspection

              	
                33

              
	 
      	
                9.8

              	
                Landlord's
      Costs

              	
                33

              
	 
      	
                9.9

              	
                No
      Rent Abatement

              	
                33

              
	
                ARTICLE
      10:  CONDEMNATION

              	 
      	 
      	
                34

              
	 
      	
                10.1

              	
                Total
      Taking

              	
                34

              
	 
      	
                10.2

              	
                Partial
      Taking

              	
                34

              
	 
      	
                10.3

              	
                Condemnation
      Proceeds Not Trust Funds

              	
                34

              

      

      
        
           

        

        
          (ii)

          
            

          

        

        
           

        

      

      
        	
                SECTION

              	 
      	 
      	
                PAGE

              
	
                ARTICLE
      11:  TENANT'S PROPERTY

              	 
      	 
      	
                35

              
	 
      	
                11.1

              	
                Tenant's
      Property

              	
                35

              
	 
      	
                11.2

              	
                Requirements
      for Tenant's Property

              	
                35

              
	
                ARTICLE
      12:  RENEWAL OPTIONS

              	 
      	 
      	
                36

              
	 
      	
                12.1

              	
                Renewal
      Options

              	
                36

              
	 
      	
                12.2

              	
                Effect
      of Renewal

              	
                36

              
	
                ARTICLE
      13:  RIGHT OF FIRST OPPORTUNITY

              	 
      	 
      	
                37

              
	 
      	
                13.1

              	
                Right
      of First Opportunity

              	
                37

              
	 
      	 
      	
                13.1.1     Fair
      Market Value

              	
                38

              
	 
      	
                13.2

              	
                [RESERVED]

              	
                40

              
	
                ARTICLE
      14:  NEGATIVE COVENANTS

              	 
      	 
      	
                40

              
	 
      	
                14.1

              	
                No
      Debt

              	
                40

              
	 
      	
                14.2

              	
                No
      Liens

              	
                40

              
	 
      	
                14.3

              	
                No
      Guaranties

              	
                40

              
	 
      	
                14.4

              	
                No
      Transfer

              	
                40

              
	 
      	
                14.5

              	
                No
      Dissolution

              	
                40

              
	 
      	
                14.6

              	
                Subordination
      of Payments to Affiliates

              	
                41

              
	 
      	
                14.7

              	
                Change
      of Location or Name

              	
                41

              
	
                ARTICLE
      15:  AFFIRMATIVE COVENANTS

              	 
      	 
      	
                41

              
	 
      	
                15.1

              	
                Perform
      Obligations

              	
                41

              
	 
      	
                15.2

              	
                Proceedings
      to Enjoin or Prevent Construction

              	
                41

              
	 
      	
                15.3

              	
                Documents
      and Information

              	
                42

              
	 
      	 
      	
                15.3.1     Furnish
      Documents

              	
                42

              
	 
      	 
      	
                15.3.2     Furnish
      Information

              	
                42

              
	 
      	 
      	
                15.3.3     Further
      Assurances and Information

              	
                42

              
	 
      	 
      	
                15.3.4     Material
      Communications

              	
                42

              
	 
      	 
      	
                15.3.5     Requirements
      for Financial Statements

              	
                43

              
	 
      	
                15.4

              	
                Compliance
      With Laws

              	
                43

              
	 
      	
                15.5

              	
                Broker's
      Commission

              	
                43

              
	 
      	
                15.6

              	
                Existence
      and Change in Ownership

              	
                43

              
	 
      	
                15.7

              	
                Financial
      Covenants

              	
                44

              
	 
      	 
      	
                15.7.1     Definitions

              	
                44

              
	 
      	 
      	
                15.7.2     Coverage
      Ratio

              	
                44

              
	 
      	
                15.8

              	
                Facility
      Licensure and Certification

              	
                44

              
	 
      	 
      	
                15.8.1     Notice
      of Inspection

              	
                44

              
	 
      	 
      	
                15.8.2     Material
      Deficiencies

              	
                45

              
	 
      	
                15.9

              	
                Transfer
      of License and Facility Operations

              	
                45

              
	 
      	 
      	
                15.9.1     Licensure

              	
                45

              
	 
      	 
      	
                15.9.2     Facility
      Operations

              	
                45

              
	 
      	
                15.1

              	
                Bed
      Operating Rights

              	
                46

              
	 
      	
                15.11

              	
                Power
      of Attorney

              	
                46

              
	 
      	
                15.12

              	
                Information
      and Images

              	
                46

              

      

      
        
           

        

        
          (iii)

          
            

          

        

        
           

        

      

      
        	
                SECTION

              	 
      	 
      	
                PAGE

              
	
                ARTICLE
      16:  ALTERATIONS, CAPITAL IMPROVEMENTS, AND
SIGNS

              	 
      	 
      	
                47

              
	 
      	
                16.1

              	
                Prohibition
      on Alterations and Improvements

              	
                47

              
	 
      	
                16.2

              	
                Approval
      of Alterations

              	
                47

              
	 
      	
                16.3

              	
                Permitted
      Alterations

              	
                47

              
	 
      	
                16.4

              	
                Requirements
      for Permitted Alterations

              	
                47

              
	 
      	
                16.5

              	
                Ownership
      and Removal of Permitted Alterations

              	
                48

              
	 
      	
                16.6

              	
                Minimum
      Qualified Capital Expenditures

              	
                48

              
	 
      	
                16.7

              	
                Signs

              	
                48

              
	
                ARTICLE
      17:  CONTINGENT PAYMENT

              	 
      	 
      	
                49

              
	 
      	
                17.1

              	
                Contingent
      Payment

              	
                49

              
	
                ARTICLE
      18:  ASSIGNMENT AND SALE OF LEASED PROPERTY

              	 
      	 
      	
                49

              
	 
      	
                18.1

              	
                Prohibition
      on Assignment and Subletting

              	
                49

              
	 
      	
                18.2

              	
                Requests
      for Landlord's Consent to Assignment, Sublease or Management
      Agreement

              	
                49

              
	 
      	
                18.3

              	
                Agreements
      with Residents

              	
                50

              
	 
      	
                18.4

              	
                Sale
      of Leased Property

              	
                50

              
	 
      	
                18.5

              	
                Assignment
      by Landlord

              	
                51

              
	
                ARTICLE
      19:  HOLDOVER AND SURRENDER

              	 
      	 
      	
                51

              
	 
      	
                19.1

              	
                Holding
      Over

              	
                51

              
	 
      	
                19.2

              	
                Surrender

              	
                51

              
	 
      	
                19.3

              	
                Indemnity

              	
                51

              
	
                ARTICLE
      20:  [RESERVED]

              	 
      	 
      	
                52

              
	
                ARTICLE
      21:  QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT AND ESTOPPEL
      CERTIFICATES

              	 
      	 
      	
                52

              
	 
      	
                21.1

              	
                Quiet
      Enjoyment

              	
                52

              
	 
      	
                21.2

              	
                Subordination

              	
                52

              
	 
      	
                21.3

              	
                Attornment

              	
                52

              
	 
      	
                21.4

              	
                Estoppel
      Certificates

              	
                53

              
	
                ARTICLE
      22:  REPRESENTATIONS AND WARRANTIES

              	 
      	 
      	
                54

              
	 
      	
                22.1

              	
                Organization
      and Good Standing

              	
                54

              
	 
      	
                22.2

              	
                Power
      and Authority

              	
                54

              
	 
      	
                22.3

              	
                Enforceability

              	
                54

              
	 
      	
                22.4

              	
                Government
      Authorizations

              	
                54

              
	 
      	
                22.5

              	
                [RESERVED]

              	
                54

              
	 
      	
                22.6

              	
                Condition
      of Facility

              	
                54

              
	 
      	
                22.7

              	
                Compliance
      with Laws

              	
                54

              
	 
      	
                22.8

              	
                No
      Litigation

              	
                55

              
	 
      	
                22.9

              	
                Consents

              	
                55

              
	 
      	
                22.1

              	
                No
      Violation

              	
                55

              
	 
      	
                22.11

              	
                Reports
      and Statements

              	
                55

              
	 
      	
                22.12

              	
                ERISA

              	
                56

              

      

      
        
           

        

        
          (iv)

          
            

          

        

        
           

        

      

      
        	
                SECTION

              	 
      	 
      	
                PAGE

              
	 
      	
                22.13

              	
                Chief
      Executive Office

              	
                56

              
	 
      	
                22.14

              	
                Other
      Name or Entities

              	
                56

              
	 
      	
                22.15

              	
                Parties
      in Possession

              	
                56

              
	 
      	
                22.16

              	
                Access

              	
                56

              
	 
      	
                22.17

              	
                Utilities

              	
                56

              
	 
      	
                22.18

              	
                Condemnation
      and Assessments

              	
                56

              
	 
      	
                22.19

              	
                Zoning

              	
                57

              
	 
      	
                22.2

              	
                [RESERVED]

              	
                57

              
	 
      	
                22.21

              	
                Environmental
      Matters

              	
                57

              
	 
      	
                22.22

              	
                Leases
      and Contracts

              	
                57

              
	 
      	
                22.23

              	
                No
      Default

              	
                58

              
	 
      	
                22.24

              	
                Tax
      Status

              	
                58

              
	
                ARTICLE
      23:  [RESERVED]

              	 
      	 
      	
                58

              
	
                ARTICLE
      24:  SECURITY INTEREST

              	 
      	 
      	
                58

              
	 
      	
                24.1

              	
                Collateral

              	
                58

              
	 
      	
                24.2

              	
                Additional
      Documents

              	
                59

              
	 
      	
                24.3

              	
                Notice
      of Sale

              	
                59

              
	 
      	
                24.4

              	
                Recharacterization

              	
                59

              
	
                ARTICLE
      25:  MISCELLANEOUS

              	 
      	 
      	
                59

              
	 
      	
                25.1

              	
                Notices

              	
                59

              
	 
      	
                25.2

              	
                Advertisement
      of Leased Property

              	
                60

              
	 
      	
                25.3

              	
                Entire
      Agreement

              	
                60

              
	 
      	
                25.4

              	
                Severability

              	
                60

              
	 
      	
                25.5

              	
                Captions
      and Headings

              	
                60

              
	 
      	
                25.6

              	
                Governing
      Law

              	
                60

              
	 
      	
                25.7

              	
                Memorandum
      of Lease

              	
                60

              
	 
      	
                25.8

              	
                Waiver

              	
                60

              
	 
      	
                25.9

              	
                Binding
      Effect

              	
                60

              
	 
      	
                25.1

              	
                No
      Offer

              	
                61

              
	 
      	
                25.11

              	
                Modification

              	
                61

              
	 
      	
                25.12

              	
                Landlord's
      Modification

              	
                61

              
	 
      	
                25.13

              	
                No
      Merger

              	
                61

              
	 
      	
                25.14

              	
                Laches

              	
                61

              
	 
      	
                25.15

              	
                Limitation
      on Tenant's Recourse

              	
                61

              
	 
      	
                25.16

              	
                Construction
      of Lease

              	
                62

              
	 
      	
                25.17

              	
                Counterparts

              	
                62

              
	 
      	
                25.18

              	
                Custody
      of Escrow Funds

              	
                62

              
	 
      	
                25.19

              	
                Landlord's
      Status as a REIT

              	
                62

              
	 
      	
                25.2

              	
                Exhibits

              	
                62

              
	 
      	
                25.21

              	
                WAIVER
      OF JURY TRIAL

              	
                62

              
	 
      	
                25.22

              	
                CONSENT
      TO JURISDICTION

              	
                62

              
	 
      	
                25.23

              	
                Attorney's
      Fees and Expenses

              	
                63

              
	 
      	
                25.24

              	
                Survival

              	
                63

              
	 
      	
                25.25

              	
                Time

              	
                63

              
	 
      	
                25.26

              	
                Subtenant

              	
                63

              

      

      
        
           

        

        
          (v)

          
            

          

        

        
           

        

      

    

    

    
      	
              SCHEDULE 1:

            	
              INITIAL
      RENT SCHEDULE

            

    

     

    
      	
              EXHIBIT A:

            	
              LEGAL
      DESCRIPTIONS

            

    

     

    
      	
              EXHIBIT B:

            	
              PERMITTED
      EXCEPTIONS

            

    

     

    
      	
              EXHIBIT C:

            	
              FACILITY
      INFORMATION

            

    

     

    
      	
              EXHIBIT D:

            	
              LANDLORD’S
      PERSONAL PROPERTY

            

    

     

    
      	
              EXHIBIT E:

            	
              DOCUMENTS
      TO BE DELIVERED

            

    

     

    
      	
              EXHIBIT F:

            	
              TENANT’S
      CERTIFICATE AND FACILITY FINANCIAL
REPORTS

            

    

     

    
      	
              EXHIBIT G:

            	
              GOVERNMENT
      AUTHORIZATIONS TO BE OBTAINED; ZONING
PERMITS

            

    

     

    
      	
              EXHIBIT H:

            	
              PENDING
      LITIGATION

            

    

     

    
      	
              EXHIBIT I:

            	
              LIST
      OF LEASES AND CONTRACTS

            

    

     

    
      	
              EXHIBIT J:

            	
              WIRE
      TRANSFER INSTRUCTIONS

            

    

     

    
      
         

      

      
        (vi)

        
          

        

      

      
         

      

    

    MASTER
LEASE AGREEMENT

    (Master
Lease #3)

    

    

    THIS MASTER LEASE AGREEMENT
(“Lease”) is made effective as of June 10, 2009 (the “Effective Date”) by
and among Health Care REIT,
Inc., a corporation organized under the laws of the State of Delaware
(“HCRI” and a “Landlord” as further defined in §1.4 below), having its principal
office located at One SeaGate, Suite 1500, P.O. Box 1475, Toledo,
Ohio 43603-1475, HCRI DRUM HILL PROPERTIES,
LLC, a limited liability company organized under the laws of the State of
Delaware (“HCRI-Drum Hill” and a “Landlord” as further defined in §1.4 below),
having its principal office located at One SeaGate, Suite 1500, P.O.
Box 1475, Toledo, Ohio 43603-1475, HCRI FAIRMONT PROPERTIES,
LLC, a limited liability company organized under the laws of the State of
Delaware (“HCRI-Fairmont” and a “Landlord” as further defined in §1.3 below),
having its principal office located at One SeaGate, Suite 1500, P.O.
Box 1475, Toledo, Ohio 43603-1475, HCRI KIRKLAND PROPERTIES,
LLC, a limited liability company organized under the laws of the State of
Delaware (“HCRI-Kirkland” and a “Landlord” as further defined in §1.4 below),
having its principal office located at One SeaGate, Suite 1500, P.O.
Box 1475, Toledo, Ohio 43603-1475, and Emeritus Corporation, a
corporation organized under the laws of the State of Washington (“Tenant”),
having its chief executive office located at 3131 Elliott Avenue,
Suite 500, Seattle, Washington 98121.

     

    R
E C I T A L S

     

    A. Effective
as of September 29, 2003, HCRI-Drum Hill, HCRI-Fairmont and HCRI-Kirkland
and certain Affiliates of Tenant entered into three separate Lease Agreements
regarding the “Leased Property” as defined herein (as amended, the “Existing
Leases”).

     

    B. Concurrently
with the execution of the Existing Leases, HCRI, certain Landlord Affiliates,
Tenant and certain Affiliates of Tenant entered into a Master Lease Roll Up
Agreement (as amended, the “Roll Up Agreement”), pursuant to which the Existing
Leases were to be terminated and the Leased Property included in a Master Lease
upon the payoff of a certain outstanding loan.

     

    C. The
payoff anticipated by the Roll Up Agreement has occurred as of the Effective
Date.

     

    D. Landlord
desires to lease the Leased Property, as hereinafter defined, to Tenant and
Tenant desires to lease the Leased Property from Landlord upon the terms set
forth in this Lease.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    NOW, THEREFORE, Landlord and Tenant
agree as follows:

     

    ARTICLE
1:  LEASED PROPERTY, TERM AND DEFINITIONS

     

    1.1           Leased
Property.  Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord the Leased Property, subject, however, to the Permitted
Exceptions and subject to the terms and conditions of this Lease.

     

    1.2           Indivisible
Lease.  This Lease constitutes one indivisible lease of the
entire Leased Property.  The Leased Property constitutes one economic
unit and the Base Rent and all other provisions, including, but not limited to,
the provisions concerning the Contingent Payment Advance, have been negotiated
and agreed to based on a lease of all of the Leased Property as a single,
composite, inseparable transaction and would have been materially different had
separate leases or a divisible lease been intended.  Except as
expressly provided herein for specific, isolated purposes (and then only to the
extent expressly otherwise stated), all provisions of this Lease shall apply
equally and uniformly to all the Leased Property as one unit and any Event of
Default under this Lease is an Event of Default as to the entire Leased
Property.  The parties intend that the provisions of this Lease shall
at all times be construed, interpreted and applied so as to carry out their
mutual objective to create a single indivisible lease of all the Leased Property
and, in particular but without limitation, that for purposes of any assumption,
rejection or assignment of this Lease under the Bankruptcy Code, this is one
indivisible and non-severable lease and executory contract dealing with one
legal and economic unit which must be assumed, rejected or assigned as a whole
with respect to all (and only all) the Leased Property covered
hereby.  The parties agree that the existence of more than one
Landlord under this Lease does not affect the indivisible, non-severable nature
of this Lease. The parties may amend this Lease from time to time to include one
or more additional Facility Properties as part of the Leased Property and such
future addition to the Leased Property shall not in any way change the
indivisible and non-severable nature of this Lease and all of the foregoing
provisions shall continue to apply in full force.

     

    1.3           Term.  The
initial term (“Initial Term”) of this Lease commenced on the Effective Date and
expires at 12:00 Midnight Eastern Time on September 30, 2018 (the
“Expiration Date”); provided, however, that Tenant has an option to renew the
Lease pursuant to Article 12.

     

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

     

    “ADA” means the federal statute
entitled Americans with Disabilities Act, 42 U.S.C. §12101, et seq.

     

                          “Affiliate”
means any person, corporation, partnership, limited liability company, trust, or
other legal entity that, directly or indirectly, controls, or is controlled by,
or is under

     

    
      
         

      

      
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    common
control with Tenant.  “Control” (and the correlative meanings of the
terms “controlled by” and “under common control with”) means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such entity.  An Affiliate of Tenant shall
specifically exclude [i] Saratoga Partners IV, L.P. (“Saratoga”);
[ii] Daniel R. Baty; [iii] Columbia Pacific Management, Inc.;
[iv] Apollo Advisors, Inc.; and [v] any Affiliate of any of the
entities listed in clauses [i] through [iv].

     

    
                      “Affiliate
Lease” means each lease now or hereafter made between Landlord or any Landlord
Affiliate and Tenant or any Affiliate (except this Lease), as amended, modified,
extended or renewed from time to time.

     

    “Affiliate Tenant” means each tenant
under an Affiliate Lease.

     

                          “Amended
Commencement Date” means the Amended Effective Date if such date is the first
day of a month, and if it is not, the first day of the first month following the
Amended Effective Date.

     

    “Amended
Effective Date” means the Amendment Effective Date set forth in the introductory
paragraph of an amendment to this Lease.

     

    “Annual Company Budget” means Company’s
projection of its financial statement for the next fiscal year (or the 12-month
rolling forward period, if applicable), which shall include the balance sheet,
statement of income, statement of cash flows, statement of shareholders’ equity
and statement of capital expenditures for the applicable period.

     

    “Annual Facility Budget” means Tenant’s
projection of the Facility Financial Statement for the next fiscal year (or the
12-month rolling forward period, if applicable).

     

    “Annual Financial Statements” means
[i] for Tenant, an audited balance sheet, statement of income, and
statement of cash flows for the most recent fiscal year on a consolidated basis
and [ii] for each Facility, an unaudited Facility Financial Statement for
the most recent fiscal year.

     

    “Average Daily Census” means the number
determined by dividing the total resident days for a Facility during a specific
month by the actual number of days contained in that month.

     

    “Bankruptcy Code” means the United
States Bankruptcy Code set forth in 11 U.S.C. §101 et. seq., as
amended from time to time.

     

    “Base Price” means an amount equal to
the greater of [i] Total Investment Amount; or [ii] the sum of
[a] the Total Investment Amount plus [b] 50% of the difference between
the Fair Market Value at the time of the option exercise and the sum of
[I] the Investment Amount and [II] $3,300,000.00 less any Contingent
Payment Advance.

     

    “Base Rent” has the meaning set forth
in §2.1, as increased from time to time pursuant to §2.2.

     

    
      
         

      

      
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    “Business Day” means any day other than
a Saturday, Sunday, or national holiday.

     

    “CERCLA” means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended from
time to time.

     

    “Closing” means the closing of the
lease of the Leased Property to Tenant.

     

    “Collateral” has the meaning set forth
in §24.1.

     

    “Commencement Date” means July 1,
2009.

     

    “Commitment” means the Commitment
Letter for the Existing Leases dated March 5, 2002, as modified by the
letter dated March 31, 2003.

     

    “Company” means Tenant.

     

    “Contingent Payment Advance” means any
advance of funds by Landlord to Tenant pursuant to Article 17.

     

    “Contingent Payment Amount” means any
payment by Landlord pursuant to the terms of this Lease.

     

    “CPI” means the United States
Department of Labor, Bureau of Labor Statistics Revised Consumer Price Index for
All Urban Consumers (1982-1984=100), U.S. City Average, All Items, or, if that
index is not available at the time in question, the index designated by such
Department as the successor to such index, and if there is no index so
designated, an index for an area in the United States that most closely
corresponds to the entire United States, published by such Department, or if
none, by any other instrumentality of the United States.

     

    “Default Rent” has the meaning set
forth in §8.6.

     

    “Denominator Amount” has the meaning
set forth in §15.7.1.

     

    “Disbursing Agreement” means any
Construction Disbursing Agreement between Landlord and Tenant setting forth the
terms and conditions pursuant to which Landlord shall make Contingent Payments
to or for the benefit of Tenant for certain Project Improvements and any
amendments thereto or substitutions and replacements therefore.

     

    “Effective Date” means June 10,
2009.

     

    “Environmental Laws” means all federal,
state, and local laws, ordinances and policies the purpose of which is to
protect human health and the environment, as amended from time to time,
including, but not limited to, [i] CERCLA; [ii] the Resource
Conservation and Recovery Act; [iii] the Hazardous Materials Transportation
Act; [iv] the Clean Air Act; [v] Clean Water Act; [vi] the Toxic
Substances Control Act; [vii] the Occupational Safety and Health Act;
[viii] the Safe Drinking Water Act; and [ix] analogous state laws and
regulations.

     

    
      
         

      

      
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    “Event of Default” has the meaning set
forth in §8.1.

     

    “Expiration Date” has the meaning set
forth in §1.3.

     

    “Facility” means each facility located
on a portion of the Land, including the Facility Property associated with such
Facility.  References in this Lease to “the Facility” shall mean each
Facility individually unless expressly stated otherwise.

     

    “Facility Financial Statement” means a
financial statement for each Facility which shall include the balance sheet,
statement of income, statement of cash flows, statement of shareholders’ equity,
occupancy census data (including payor mix), statement of capital expenditures
and a comparison of the actual financial data versus the Annual Facility Budget
for the applicable period.

     

    “Facility Name” means the name under
which a Facility has done business during the Term.  The Facility Name
in use by each Facility on the Effective Date is set forth on the attached
Exhibit C.

     

    “Facility Property” means the portion
of the Land on which a Facility is located, the legal description of which is
set forth beneath the applicable Facility Name on Exhibit A, the
Improvements on such portion of the Land, the Related Rights with respect to
such portion of the Land, and Landlord’s Personal Property with respect to such
Facility.

     

    “Facility State” means the State in
which a respective Facility is located.

     

    “Facility States” means, collectively,
the States in which the Leased Property is located.

     

    “Facility Uses” means the uses relating
to the operation of a Facility as a facility of the type and operating the
number of beds and units set forth on Exhibit C with respect to such
Facility.

     

    “Fair Market Value” has the meaning set
forth in §13.1.1.

     

    “Financial Statements” means
[i] the annual, quarterly and year to date financial statements of Tenant;
and [ii] any operating statements that were submitted to Landlord prior to
the Effective Date.

     

    “Fixtures” means all permanently
affixed equipment, machinery, fixtures and other items of real and/or personal
property (excluding Landlord’s Personal Property), including all components
thereof, now and hereafter located in, on or used in connection with, and
permanently affixed to or incorporated into the Improvements, including, without
limitation, all furnaces, boilers, heaters, electrical equipment, heating,
plumbing, lighting, ventilating, refrigerating, incineration, air and water
pollution control, waste disposal, air-cooling and air-conditioning systems and
apparatus, sprinkler systems and fire and theft protection equipment, built-in
oxygen and vacuum systems, towers and other devices for the transmission of
radio, television and other signals, all of which, to the greatest extent
permitted by law, are

     

    
      
         

      

      
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    hereby
deemed by the parties hereto to constitute real estate, together with all
replacements, modifications, alterations and additions thereto.

     

    “General Additional Rent” has the
meaning set forth in §2.3.

     

    “Government Authorizations” means all
permits, licenses, approvals, consents, and authorizations required to comply
with all Legal Requirements, including, but not limited to, [i] zoning
permits, variances, exceptions, special use permits, conditional use permits,
and consents; [ii] the permits, licenses, provider agreements and approvals
required for licensure and operation of each Facility in accordance with its
respective Facility Uses and, if applicable, certified as a provider under the
federal Medicare and state Medicaid programs; [iii] environmental,
ecological, coastal, wetlands, air, and water permits, licenses, and consents;
[iv] curb cut, subdivision, land use, and planning permits, licenses,
approvals and consents; [v] building, sign, fire, health, and safety
permits, licenses, approvals, and consents; and [vi] architectural reviews,
approvals, and consents required under restrictive covenants.

     

    “Guarantor” means each Subtenant,
individually and collectively.

     

    “Guaranty” means the Unconditional and
Continuing Lease Guaranty dated as of the Effective Date, executed by Guarantor,
as guarantor, in favor of Landlord, to guarantee payment and performance of the
Lease Obligations and any amendments thereto or substitutions or replacements
therefor.

     

    “Hazardous Materials” means any
substance [i] the presence of which poses a hazard to the health or safety
of persons on or about the Land, including, but not limited to, asbestos
containing materials; [ii] which requires removal or remediation under any
Environmental Law, including, without limitation, any substance which is toxic,
explosive, flammable, radioactive, or otherwise hazardous; or [iii] which
is regulated under or classified under any Environmental Law as hazardous or
toxic, including, but not limited to, any substance within the meaning of
“hazardous substance”, “hazardous material”, “hazardous waste”, “toxic
substance”, “regulated substance”, “solid waste”, or “pollutant” as defined in
any Environmental Law.

     

    “HCRI” has the meaning set forth in the
Recitals hereto.

     

    “HCRI-Drum Hill has the meaning set
forth in the Recitals hereto.

     

    “HCRI-Fairmont has the meaning set
forth in the Recitals hereto.

     

    “HCRI-Kirkland has the meaning set
forth in the Recitals hereto.

     

    “HIPDB” means the Healthcare Integrity
and Protection Data Bank maintained by the Department of Health and Human
Services.

     

    “Impositions” has the meaning set forth
in §3.2.

     

    “Improvements” means all buildings,
structures, Fixtures and other improvements of every kind on any portion of the
Land, including, but not limited to, alleys, sidewalks, utility

     

    
      
         

      

      
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    pipes,
conduits and lines (on-site and off-site), parking areas and roadways
appurtenant to such buildings and structures, now or hereafter situated upon any
portion of the Land.

     

    “Initial Term” has the meaning set
forth in §1.3.

     

    “Investment Advance” means any advance
of funds by Landlord to Tenant pursuant to the terms of this Lease.

     

    “Investment Advance Amount” means the
amount of any Investment Advance.

     

    “Investment Amount” is an aggregate
concept and means the sum of the Investment Advance Amounts outstanding at the
applicable time.  As of the Effective Date, the Investment Amount is
as indicated on the Rent Schedule attached as Schedule 1
hereto.

     

    “Land” means the real property
described in Exhibit A attached hereto.

     

    “Landlord” means HCRI, HCRI-Drum Hill,
HCRI-Fairmont and HCRI-Kirkland, individually and collectively, during the time
period that such entity is the fee owner of any portion of the
Land.  If HCRI, HCRI-Drum Hill, HCRI-Fairmont or
HCRI-Kirkland  is no longer a fee owner of the Land, then, from and
after that date, that entity will no longer be a Landlord under the terms hereof
and its successor (whether by assignment or by operation of law) will be a
Landlord under the terms hereof without the need for any amendment to this
document.

     

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

     

    “Landlord’s Personal Property” means
all Personal Property owned by Landlord on the Effective Date and located at the
Facility, including, without limitation, all personal property listed on the
attached Exhibit D, together with any and all replacements thereof, and all
Personal Property that pursuant to the terms of this Lease becomes the property
of Landlord during the Term.

     

    “Lease” means this Master Lease
Agreement, as amended and/or restated from time to time.

     

    “Lease Documents” means this Lease and
all documents executed by Landlord and Tenant relating to this Lease or the
Facility.

     

    “Lease Payments” means the sum of the
Base Rent payments (as increased from time to time) for the applicable
period.

     

    “Lease Year” generally means each
consecutive period of 365 or 366 days throughout the
Term.  However, the first Lease Year commences on the Commencement
Date and expires on September 30, 2010.  Each succeeding Lease
Year begins on October 1 and ends on the next following
September 30.

     

    
      
         

      

      
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    “Leased Property” means all of the
Land, Improvements, Related Rights and Landlord’s Personal
Property.

     

    “Legal Requirements” means all laws,
regulations, rules, orders, writs, injunctions, decrees, certificates,
requirements, agreements, conditions of participation and standards of any
federal, state, county, municipal or other governmental entity, administrative
agency, insurance underwriting board, architectural control board, private
third-party payor, accreditation organization, or any restrictive covenants
applicable to the development, construction, condition and operation of the
Facility by Tenant for the Facility Uses, including, but not limited to,
[i] zoning, building, fire, health, safety, sign, and subdivision
regulations and codes; [ii] certificate of need laws (if applicable);
[iii] licensure to operate as each Facility in accordance with its
respective Facility Uses; [iv] Medicare and Medicaid certification
requirements (if applicable); [v] the ADA; [vi] any Environmental
Laws; and [vii] requirements, conditions and standards for participation in
third-party payor insurance programs (if applicable).

     

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

     

    “Modified Offer” has the meaning set
forth in §13.1.

     

    “Modified Opportunity Notice” has the
meaning set forth in §13.1.

     

    “Negotiation Period” has the meaning
set forth in §13.1.1.1.

     

    “Net Operating Income” means the
pre-tax net income of Tenant or Subtenant plus [i] the amount of the
provision for depreciation and amortization; plus [ii] the amount of the
provision for interest and lease payments, if any; plus [iii] the amount of
the provision for Rent payments; plus [iv] the amount of the provision for
management fees.

     

    “Obligor Group Obligations” means all
payment and performance obligations of Tenant and Subtenant to Landlord or any
Landlord Affiliate, including, but not limited to, all obligations under this
Lease, any loans extended to Tenant or Subtenant by Landlord or any Landlord
Affiliate and all documents executed by Tenant or Subtenant in favor of Landlord
or any Landlord Affiliate in connection with this Lease, any loan or any other
obligation.

     

    “Offer” has the meaning set forth in
§13.1.

     

    
      
         

      

      
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    “Opportunity Notice” has the meaning
set forth in §13.1.

     

    “Opportunity Transaction” has the
meaning set forth in §13.1.

     

    “Organization State” means the State in
which an entity is organized.

     

    “Organizational Documents” means
[i] for a corporation, its Articles of Incorporation certified by the
Secretary of State of the Organization State, as amended to date, and its Bylaws
certified by such entity, as amended to date; [ii] for a partnership, its
Partnership Agreement certified by such entity, as amended to date, and the
Partnership Certificate, certified by the appropriate authority (if applicable),
as amended to date; and [iii] for a limited liability company, its Articles
of Organization certified by the Secretary of State of the Organization State,
as amended to date, and its Operating Agreement certified by such entity, as
amended to date.

     

    “Periodic Financial Statements” means
[i] for Tenant, an unaudited balance sheet and statement of income for the
most recent quarter; and [ii] for the Facility, an unaudited Facility
Financial Statement for the most recent month.

     

    “Permitted Exceptions” means all
easements, liens, encumbrances, restrictions, agreements and other title matters
existing as of the Effective Date, including, without limitation, the exceptions
to title set forth on Exhibit B attached hereto, and any sublease of any
portion of the Leased Property made in complete accordance with
Article 18.

     

    “Permitted Liens” means [i] liens
granted to Landlord; [ii] liens customarily incurred by Tenant or Subtenant
in the ordinary course of business for items not delinquent, including
mechanic’s liens and deposits and charges under worker’s compensation laws;
[iii] liens for taxes and assessments not yet due and payable;
[iv] any lien, charge, or encumbrance which is being contested in good
faith pursuant to this Lease; [v] the Permitted Exceptions; and
[vi] purchase money financing and capitalized equipment leases for the
acquisition of personal property provided, however, that Landlord obtains a
nondisturbance agreement from the purchase money lender or equipment lessor in
form and substance as may be satisfactory to Landlord if the original cost of
the equipment exceeds $250,000.00 per Facility.

     

    “Personal Property” means all
machinery, equipment, furniture, furnishings, movable walls or partitions,
computers (and all associated software), trade fixtures and other personal
property (but excluding consumable inventory and supplies owned by Tenant) used
in connection with the Leased Property, together with all replacements and
alterations thereof and additions thereto, except items, if any, included within
the definition of Fixtures or Improvements.

     

    “Portfolio Cash Flow” has the meaning
set forth in §15.7.1.

     

    “Portfolio Cash Flow Shortfall” has the
meaning set forth in §15.7.1.

     

    “Portfolio Coverage Ratio” has the
meaning set forth in §15.7.1.

     

    
      
         

      

      
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    “Pro Forma Statement” means a financial
forecast for the Facility for the next five-year period prepared in accordance
with the standards for forecasts established by the American Institute of
Certified Public Accountants.

     

    “Protected
Period” has the meaning set forth in §13.1(a).

     

    “Qualified Capital Expenditures” means
the expenditures capitalized on the books of Tenant or Subtenant for any of the
following:  replacement of furniture, fixtures and equipment,
including refrigerators, ranges, major appliances, bathroom fixtures, doors
(exterior and interior), central air conditioning and heating systems (including
cooling towers, water chilling units, furnaces, boilers and fuel storage tanks)
and replacement of siding; roof replacements, including replacements of gutters,
downspouts, eaves and soffits; repairs and replacements of plumbing and sanitary
systems; overhaul of elevator systems; repaving, resurfacing and sealcoating of
sidewalks, parking lots and driveways; repainting of entire building exterior
and normal maintenance and repairs needed to maintain the quality and condition
of the Facility in the market in which it operates, but excluding
Alterations.

     

    “Receivables” means [i] all of
Tenant’s or Subtenant’s rights to receive payment for providing resident care
and services at the Facility as set forth in any accounts, contract rights, and
instruments, and [ii] those documents, chattel paper, inventory proceeds,
provider agreements, participation agreements, ledger sheets, files, records,
computer programs, tapes, and agreements relating to Tenant’s or Subtenant’s
rights to receive payment for providing resident care services at the
Facility.

     

    “Related Rights” means all easements,
rights (including bed operating rights) and appurtenances relating to the Land
and the Improvements.

     

    “Renewal Date” means the first day of
each Renewal Term.

     

    “Renewal Option” has the meaning set
forth in §12.1.

     

    “Renewal Term” has the meaning set
forth in §12.1.

     

    “Rent” means Base Rent, General
Additional Rent and Default Rent.

     

    “Rent Schedule” means the schedule
issued by Landlord to Tenant showing the Base Rent to be paid by Tenant pursuant
to the terms of this Lease, as such schedule is amended from time to time by
Landlord.  The Rent Schedule as of the Effective Date, reflecting the
Base Rent that has been due and payable under the Lease since the Commencement
Date, is attached hereto as Schedule 1.

     

    “Replacement Operator” has the meaning
set forth in §15.9.1.

     

    “Right of First Opportunity Event” has
the meaning set forth in §13.1.

     

    “Right of First Refusal Event” has the
meaning set forth in §13.1.

     

    “Right of First Refusal Notice” has the
meaning set forth in §13.1.

     

    
      
         

      

      
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    “Secured Party” has the meaning set
forth in §24.1.

     

    “Seller” means each person or entity
that conveyed title to a Facility to Landlord.

     

    “Sublease” means, individually and
collectively, the sublease with respect to each Facility between Tenant and
Subtenant, as the same may be amended or modified from time to time with the
consent of Landlord.  References in this Lease to “Sublease” shall
mean each sublease individually and shall relate to the respective Facility to
which such sublease relates unless expressly stated otherwise.

     

    “Subtenant” means the entity identified
on Exhibit C that subleases the Facility from Tenant and is the licensed
operator of its respective Facility as shown on Exhibit C, individually and
collectively.  References in this Lease to “Subtenant” shall mean each
Subtenant individually and shall relate to such Subtenant’s respective Facility
unless expressly stated otherwise.

     

    “Tenant” has the meaning set forth in
the introductory paragraph of this Lease.

     

    “Term” means the Initial Term and each
Renewal Term.

     

    “Total Investment Amount” means the
Investment Amount plus any Contingent Payment Advance.

     

    “Transaction Documents” has the meaning
set forth in §13.1.

     

    1.5           Landlord As
Agent.  With respect to its respective Facility, each HCRI
Landlord appoints HCRI as the agent and lawful attorney-in-fact of such HCRI
Landlord to act for such HCRI Landlord for all purposes and actions of Landlord
under this Lease and the other Lease Documents.  All notices,
consents, waivers and all other documents and instruments executed by HCRI
pursuant to the Lease Documents from time to time and all other actions of HCRI
as Landlord under the Lease Documents shall be binding upon such HCRI
Landlord.  All Rent payable under this Lease shall be paid to
HCRI.

     

    1.6           [RESERVED]

     

    1.7           Termination of Existing
Leases.  As of the Effective Date, the Existing Leases shall be
and hereby are terminated, and HCRI shall cause the Landlord Affiliates party to
the Existing Leases to execute and record memoranda of termination of the
Existing Leases to reflect such termination, and Tenant and Landlord shall
execute and record memoranda of lease to evidence the lease of the Leased
Property under this Lease.

     

    ARTICLE
2:  RENT

     

    2.1           Base
Rent.  Tenant shall pay Landlord base rent (“Base Rent”) in
advance in consecutive monthly installments payable on the first day of each
month during the Term commencing on the Commencement Date.  If the
Effective Date is not the first day of a month, Tenant shall pay Landlord Base
Rent on the Effective Date for the partial month, i.e., for the period
commencing on the Effective Date and ending on the day before the
Commencement

     

    
      
         

      

      
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    Date.  The
Base Rent payable for the Initial Term is as shown on the Rent
Schedule.  The Base Rent for each Renewal Term will be determined in
accordance with §12.2.

     

    2.2           Base Rent
Adjustments

     

    2.2.1           Base Rent Adjustments –
Additional Investment Advances.  If Landlord makes an
Investment Advance after the Effective Date, the Base Rent will be increased
effective on the Investment Advance Date based upon the applicable rate of
return in effect on the Investment Advance Date as set forth on
Schedule 1.  Until Tenant receives a revised Rent Schedule from
Landlord, Tenant shall for each month [i] continue to make installments of
Base Rent according to the Rent Schedule in effect on the day before the
Investment Advance Date; and [ii] within 10 days following Landlord’s
issuance of an invoice, pay the difference between the installment of Base Rent
that Tenant paid to Landlord for such month and the installment of Base Rent
actually due to Landlord for such month as a result of the Investment
Advance.  On the first day of the month following receipt of the
revised Rent Schedule, Tenant shall pay the monthly installment of Base Rent
specified in the revised Rent Schedule.

     

    2.3           General
Additional
Rent  In addition to Base Rent, Tenant shall pay all other
amounts, liabilities, obligations and Impositions which Tenant assumes or agrees
to pay under this Lease including any fine, penalty, interest, charge and cost
which may be added for nonpayment or late payment of such items (collectively
the “General Additional Rent”).

     

    2.4           Place of Payment of
Rent.  Tenant shall make all payments of Rent to Landlord by
electronic wire transfer in accordance with the wiring instructions set forth in
Exhibit J attached hereto, subject to change in accordance with other
written instructions provided by Landlord from time to time.

     

                          2.5           Net
Lease.  This Lease shall be deemed and construed to be an
“absolute net lease”, and Tenant shall pay all Rent and other charges and
expenses in connection with the Leased Property throughout the Term, without
abatement, deduction, recoupment or set-off.  Landlord shall have all
legal, equitable and contractual rights, powers and remedies provided either in
this Lease or by statute or otherwise in the case of nonpayment of the
Rent.

     

                          2.6           No Termination, Abatement,
Etc.  Except as otherwise specifically provided in this Lease,
Tenant shall remain bound by this Lease in accordance with its
terms.  Tenant shall not, without the consent of Landlord, modify,
surrender or terminate the Lease, nor seek nor be entitled to any abatement,
deduction, deferment or reduction of Rent, or set-off or recoupment against the
Rent.  Except as expressly provided in this Lease, the obligations of
Landlord and Tenant shall not be affected by reason of [i] any damage to,
or destruction of, the Leased Property or any part thereof from whatever cause
or any Taking (as hereinafter defined) of the Leased Property or any part
thereof; [ii] the lawful or unlawful prohibition of, or restriction upon,
Tenant’s use of the Leased Property, or any part thereof, the interference with
such use by any person, corporation, partnership or other entity, or by reason
of eviction by paramount title; [iii] any claim which Tenant has or might
have against Landlord or by reason of any default or breach of any warranty by
Landlord under this Lease or any other agreement between Landlord and Tenant, or
to which Landlord and Tenant are parties; [iv] any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or

     

    
      
         

      

      
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    other
proceeding affecting Landlord or any assignee or transferee of Landlord; or
[v] any other cause, whether similar or dissimilar to any of the foregoing,
other than a discharge of Tenant from any such obligations as a matter of
law.  Except as otherwise specifically provided in this Lease, Tenant
hereby specifically waives all rights, arising from any occurrence whatsoever,
which may now or hereafter be conferred upon it by law [a] to modify,
surrender or terminate this Lease or quit or surrender the Leased Property or
any portion thereof; or [b] entitling Tenant to any abatement, reduction,
suspension or deferment of the Rent or other sums payable by Tenant
hereunder.  The obligations of Landlord and Tenant hereunder shall be
separate and independent covenants and agreements and the Rent and all other
sums payable by Tenant hereunder shall continue to be payable in all events
unless the obligations to pay the same shall be terminated pursuant to the
express provisions of this Lease or by termination of this Lease other than by
reason of an Event of Default.  Nothing in this §2.6 shall be
construed to limit any right which Tenant may have to bring a separate action
against Landlord for any claim which Tenant may have or allege to have against
Landlord.

     

    2.7           Transaction
Fee.  Tenant has paid transaction fees as required by Landlord
prior to the Effective Date.  There is no transaction fee payable as
of the Effective Date.

     

    ARTICLE
3:  IMPOSITIONS AND UTILITIES

     

    3.1           Payment of
Impositions.  Tenant shall pay, as Additional Rent, all
Impositions that may be levied or become a lien on the Leased Property or any
part thereof at any time (whether prior to or during the Term), without regard
to prior ownership of said Leased Property, before any fine, penalty, interest,
or cost is incurred; provided, however, Tenant may contest any Imposition in
accordance with §3.7.  Tenant shall deliver to Landlord [i] not
more than five days after the due date of each Imposition, copies of the invoice
for such Imposition and the check delivered for payment thereof; and
[ii] not more than 30 days after the due date of each Imposition, a
copy of the official receipt evidencing such payment or other proof of payment
satisfactory to Landlord.  Tenant’s obligation to pay such Impositions
shall be deemed absolutely fixed upon the date such Impositions become a lien
upon the Leased Property or any part thereof.  Tenant, at its expense,
shall prepare and file all tax returns and reports in respect of any Imposition
as may be required by governmental authorities.  Tenant shall be
entitled to any refund due from any taxing authority if no Event of Default
shall have occurred hereunder and be continuing and if Tenant shall have paid
all Impositions due and payable as of the date of the
refund.  Landlord shall be entitled to any refund from any taxing
authority if an Event of Default has occurred and is continuing.  Any
refunds retained by Landlord due to an Event of Default shall be applied as
provided in §8.8.  Landlord and Tenant shall, upon request of the
other, provide such data as is maintained by the party to whom the request is
made with respect to the Leased Property as may be necessary to prepare any
required returns and reports.  In the event governmental authorities
classify any property covered by this Lease as personal property, Tenant shall
file all personal property tax returns in such jurisdictions where it may
legally so file.  Landlord, to the extent it possesses the same, and
Tenant, to the extent it possesses the same, will provide the other party, upon
request, with cost and depreciation records necessary for filing returns for any
property so classified as personal property.  Where Landlord is
legally required to file personal property tax returns, Tenant will be provided
with copies of assessment notices indicating a value in excess of the reported
value in sufficient time for Tenant to file a protest.  Tenant may, at
Tenant’s option and at Tenant’s sole cost and expense, protest, appeal
or

     

    
      
         

      

      
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    institute
such other proceedings as Tenant may deem appropriate to effect a reduction of
real estate or personal property assessments and Landlord, at Tenant’s expense
as aforesaid, shall fully cooperate with Tenant in such protest, appeal, or
other action.  Tenant shall reimburse Landlord for all personal
property taxes paid by Landlord within 30 days after receipt of billings
accompanied by copies of a bill therefor and payments thereof which identify the
personal property with respect to which such payments are
made.  Impositions imposed in respect to the tax-fiscal period during
which the Term terminates shall be adjusted and prorated between Landlord and
Tenant as of the termination date, whether or not such Imposition is imposed
before or after such termination, and Tenant’s obligation to pay its prorated
share thereof shall survive such termination.

     

    3.2           Definition of
Impositions.  “Impositions” means, collectively, [i] taxes
(including, without limitation, all capital stock and franchise taxes of
Landlord imposed by the Facility State or any governmental entity in the
Facility State due to this lease transaction or Landlord’s ownership of the
Leased Property and the income arising therefrom, or due to Landlord being
considered as doing business in the Facility State because of Landlord’s
ownership of the Leased Property or lease thereof to Tenant), all real estate
and personal property ad valorem, sales and use, business or occupation, single
business, gross receipts, transaction privilege, rent or similar taxes;
[ii] assessments (including, without limitation, all assessments for public
improvements or benefits, whether or not commenced or completed prior to the
date hereof and whether or not to be completed within the Term);
[iii] ground rents, water, sewer or other rents and charges, excises, tax
levies, and fees (including, without limitation, license, permit, inspection,
authorization and similar fees); [iv] all taxes imposed on Tenant’s
operations of the Leased Property, including, without limitation, employee
withholding taxes, income taxes and intangible taxes; [v] all taxes imposed
by the Facility State or any governmental entity in the Facility State with
respect to the conveyance of the Leased Property by Landlord to Tenant or
Tenant’s designee, including, without limitation, conveyance taxes; and
[vi] all other governmental charges, in each case whether general or
special, ordinary or extraordinary, or foreseen or unforeseen, of every
character in respect of the Leased Property or any part thereof and/or the Rent
(including all interest and penalties thereon due to any failure in payment by
Tenant), which at any time prior to, during or in respect of the Term hereof may
be assessed or imposed on or in respect of or be a lien upon [a] Landlord
or Landlord’s interest in the Leased Property or any part thereof; [b] the
Leased Property or any part thereof or any rent therefrom or any estate, right,
title or interest therein; or [c] any occupancy, operation, use or
possession of, or sales from, or activity conducted on, or in connection with
the Leased Property or the leasing or use by Tenant of the Leased Property or
any part thereof.  Tenant shall not, however, be required to pay any
capital gains tax or any tax based on net income imposed on Landlord by any
governmental entity other than the capital stock and franchise taxes described
in clause [i] above.

     

    3.3           Escrow of
Impositions.  Tenant shall deposit with Landlord on the first
day of each month a sum equal to 1/12th of the Impositions assessed against the
Leased Property for the preceding tax year for real estate taxes, which sums
shall be used by Landlord toward payment of such Impositions.  In
addition, if an Event of Default occurs and while it remains uncured, Tenant
shall, at Landlord’s election, deposit with Landlord on the first day of each
month a sum equal to 1/12th of the Impositions assessed against the Leased
Property for the preceding tax year other than real estate taxes, which sums
shall be used by Landlord toward

     

    
      
         

      

      
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    payment
of such Impositions.  Tenant, on demand, shall pay to Landlord any
additional funds necessary to pay and discharge the obligations of Tenant
pursuant to the provisions of this section.  The receipt by Landlord
of the payment of such Impositions by and from Tenant shall only be as an
accommodation to Tenant, the mortgagees, and the taxing authorities, and shall
not be construed as rent or income to Landlord, Landlord serving, if at all,
only as a conduit for delivery purposes.

     

    3.4           Utilities.  Tenant
shall pay, as Additional Rent, all taxes, assessments, charges, deposits, and
bills for utilities, including, without limitation, charges for water, gas, oil,
sanitary and storm sewer, electricity, telephone service, and trash collection,
which may be charged against the occupant of the Improvements during the
Term.  If an Event of Default occurs and while it remains uncured,
Tenant shall, at Landlord’s election, deposit with Landlord on the first day of
each month a sum equal to 1/12th of the amount of the annual utility expenses
for the preceding Lease Year, which sums shall be used by Landlord to pay such
utilities.  Tenant shall, on demand, pay to Landlord any additional
amount needed to pay such utilities.  Landlord’s receipt of such
payments shall only be an accommodation to Tenant and the utility companies and
shall not constitute rent or income to Landlord.  Absent circumstances
beyond Tenant’s reasonable control, Tenant shall at all times maintain that
amount of heat necessary to ensure against the freezing of water
lines.  Tenant hereby agrees to indemnify and hold Landlord harmless
from and against any liability or damages to the utility systems and the Leased
Property that may result from Tenant’s failure to maintain sufficient heat in
the Improvements absent circumstances beyond Tenant’s reasonable
control.

     

    3.5           Discontinuance of
Utilities.  Landlord will not be liable for damages to person
or property or for injury to, or interruption of, business for any
discontinuance of utilities nor will such discontinuance in any way be construed
as an eviction of Tenant or cause an abatement of rent or operate to release
Tenant from any of Tenant’s obligations under this Lease.

     

    3.6           Business
Expenses.  Tenant shall promptly pay all expenses and costs
incurred in connection with the operation of the Facility on the Leased
Property, including, without limitation, employee benefits, employee vacation
and sick pay, consulting fees, and expenses for inventory and
supplies.

     

    3.7           Permitted
Contests.  Tenant, on its own or on Landlord’s behalf (or in
Landlord’s name), but at Tenant’s expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount or
validity or application, in whole or in part, of any Imposition or any Legal
Requirement or insurance requirement or any lien, attachment, levy, encumbrance,
charge or claim provided that [i] in the case of an unpaid Imposition,
lien, attachment, levy, encumbrance, charge or claim, the commencement and
continuation of such proceedings shall suspend the collection thereof from
Landlord and from the Leased Property; [ii] neither the Leased Property nor
any Rent therefrom nor any part thereof or interest therein would be in any
immediate danger of being sold, forfeited, attached or lost; [iii] in the
case of a Legal Requirement, Landlord would not be in any immediate danger of
civil or criminal liability for failure to comply therewith pending the outcome
of such proceedings; [iv] in the event that any such contest shall involve
a sum of money or potential loss in excess of $50,000.00, Tenant shall deliver
to Landlord and its counsel an opinion of Tenant’s counsel to the effect set
forth in clauses [i], [ii] and [iii], to the extent applicable; [v] in the
case of a Legal

     

    
      
         

      

      
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    Requirement
and/or an Imposition, lien, encumbrance or charge, Tenant shall give such
reasonable security as may be demanded by Landlord to insure ultimate payment of
the same and to prevent any sale or forfeiture of the affected Leased Property
or the Rent by reason of such nonpayment or noncompliance; provided, however,
the provisions of this section shall not be construed to permit Tenant to
contest the payment of Rent (except as to contests concerning the method of
computation or the basis of levy of any Imposition or the basis for the
assertion of any other claim) or any other sums payable by Tenant to Landlord
hereunder; [vi] in the case of an insurance requirement, the coverage
required by Article 4 shall be maintained; and [vii] if such contest
be finally resolved against Landlord or Tenant, Tenant shall, as Additional Rent
due hereunder, promptly pay the amount required to be paid, together with all
interest and penalties accrued thereon, or comply with the applicable Legal
Requirement or insurance requirement.  Landlord, at Tenant’s expense,
shall execute and deliver to Tenant such authorizations and other documents as
may be reasonably required in any such contest, and, if reasonably requested by
Tenant or if Landlord so desires, Landlord shall join as a party
therein.  Tenant hereby agrees to indemnify and save Landlord harmless
from and against any liability, cost or expense of any kind that may be imposed
upon Landlord in connection with any such contest and any loss resulting
therefrom.

     

    ARTICLE
4:  INSURANCE

     

    4.1           Property
Insurance.  At Tenant’s expense, Tenant shall maintain in full
force and effect a property insurance policy or policies insuring the Leased
Property against the following:

     

    (a) Loss or
damage commonly covered by a “Special Form” or “All Risk” policy insuring
against physical loss or damage to the Improvements and Personal Property,
including, but not limited to, risk of loss from fire and other hazards,
collapse, transit coverage, vandalism, malicious mischief, theft, earthquake (if
the Leased Property is in earthquake zone 1 or 2) and sinkholes (if usually
recommended in the area of the Leased Property).  The policy shall be
in the amount of the full replacement value (as defined in §4.5) of the
Improvements and Personal Property and shall contain a deductible amount
acceptable to Landlord.  Landlord shall be named as an additional
insured.  The policy shall include a stipulated value endorsement or
agreed amount endorsement and endorsements for contingent liability for
operations of building laws, demolition costs, and increased cost of
construction.

     

    (b) If
applicable, loss or damage by explosion of steam boilers, pressure vessels, or
similar apparatus, now or hereafter installed on the Leased Property, in
commercially reasonable amounts acceptable to Landlord.

     

    (c) Consequential
loss of rents and income coverage insuring against all “All Risk” or “Special
Form” risk of physical loss or damage with limits and deductible amounts
acceptable to Landlord covering risk of loss during the first nine months of
reconstruction, and containing an endorsement for extended period of indemnity
of at least 90 days, and shall be written with a stipulated amount of
coverage if available at a reasonable premium.

     

    (d) If the
Leased Property is located, in whole or in part, in a federally designated
100-year flood plain area, flood insurance for the Improvements in an amount
equal

     

    
      
         

      

      
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    to the
lesser of [i] the full replacement value of the Improvements; or
[ii] the maximum amount of insurance available for the Improvements under
all federal and private flood insurance programs.

     

    (e) Loss or
damage caused by the breakage of plate glass in commercially reasonable amounts
acceptable to Landlord.

     

    (f) Loss or
damage commonly covered by blanket crime insurance, including employee
dishonesty, loss of money orders or paper currency, depositor’s forgery, and
loss of property of patients accepted by Tenant for safekeeping, in commercially
reasonable amounts acceptable to Landlord.

     

    4.2           Liability
Insurance.  At Tenant’s expense, Tenant shall maintain
liability insurance against the following:

     

    (a) Claims
for personal injury or property damage commonly covered by comprehensive general
liability insurance with endorsements for incidental malpractice, contractual,
personal injury, owner’s protective liability, voluntary medical payments,
products and completed operations, broad form property damage, and extended
bodily injury, with commercially reasonable amounts for bodily injury, property
damage, and voluntary medical payments acceptable to Landlord, but with a
combined single limit of not less than $5,000,000.00 per
occurrence.

     

    (b) Claims
for personal injury and property damage commonly covered by comprehensive
automobile liability insurance, covering all owned and non-owned automobiles,
with commercially reasonable amounts for bodily injury, property damage, and for
automobile medical payments acceptable to Landlord, but with a combined single
limit of not less than $5,000,000.00 per occurrence.

     

    (c) Claims
for personal injury commonly covered by medical malpractice insurance in
commercially reasonable amounts acceptable to Landlord.

     

    (d) Claims
commonly covered by worker’s compensation insurance for all persons employed by
Tenant on the Leased Property.  Such worker’s compensation insurance
shall be in accordance with the requirements of all applicable local, state, and
federal law.

     

    4.3           Builder’s Risk
Insurance.  In connection with any construction, Tenant shall
maintain in full force and effect a builder’s completed value risk coverage
(“Builder’s Risk Coverage”) of insurance in a nonreporting form insuring against
all “All Risk” or “Special Form” risk of physical loss or damage to the
Improvements, including, but not limited to, risk of loss from fire and other
hazards, collapse, transit coverage, vandalism, malicious mischief, theft,
earthquake (if Leased Property is in earthquake zone 1 or 2) and sinkholes
(if usually recommended in the area of the Leased Property).  The
Builder’s Risk Coverage shall include endorsements providing coverage for
building materials and supplies and temporary premises.  The Builder’s
Risk Coverage shall be in the amount of the full replacement value of the
Improvements and shall contain a deductible amount acceptable to
Landlord.  Landlord shall be named as an additional
insured.  The Builder’s Risk Coverage shall include an endorsement
permitting initial occupancy.

     

    
      
         

      

      
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    4.4           Insurance
Requirements.  The following provisions shall apply to all
insurance coverages required hereunder:

     

    (a) The form
and substance of all policies shall be subject to the approval of Landlord,
which approval will not be unreasonably withheld.

     

    (b) The
carriers of all policies shall have a Best’s Rating of “A” or better and a
Best’s Financial Category of XII or higher and shall be authorized to do
insurance business in the Facility State.

     

    (c) Tenant
shall be the “named insured” and Landlord shall be an “additional insured” on
each policy.

     

    (d) Tenant
shall deliver to Landlord certificates or policies showing the required
coverages and endorsements.  The policies of insurance shall provide
that the policy may not be canceled or not renewed, and no material change or
reduction in coverage may be made, without at least 30 days’ prior written
notice to Landlord.

     

    (e) The
policies shall contain a severability of interest and/or cross-liability
endorsement, provide that the acts or omissions of Tenant or Landlord will not
invalidate the coverage of the other party, and provide that Landlord shall not
be responsible for payment of premiums.

     

    (f) All loss
adjustment shall require the written consent of Landlord and Tenant, as their
interests may appear.

     

    (g) At least
30 days prior to the expiration of each insurance policy, Tenant shall
deliver to Landlord a certificate showing renewal of such policy and payment of
the annual premium therefor and a current Certificate of Compliance (in the form
delivered at the time of Closing) completed and signed by Tenant’s insurance
agent.

     

    4.5           Replacement
Value.  The term “full replacement value” means the actual
replacement cost thereof from time to time, including increased cost of
construction endorsement, with no reductions or deductions.  Tenant
shall, in connection with each annual policy renewal, deliver to Landlord a
redetermination of the full replacement value by the insurer or an endorsement
indicating that the Leased Property is insured for its full replacement
value.  If Tenant makes any Permitted Alterations (as hereinafter
defined) to the Leased Property, Landlord may have such full replacement value
redetermined at any time after such Permitted Alterations are made, regardless
of when the full replacement value was last determined.

     

    4.6           Blanket
Policy.  Notwithstanding anything to the contrary contained in
this Article 4, Tenant may carry the insurance required by this Article
under a blanket policy of insurance, provided that the coverage afforded Tenant
will not be reduced or diminished or otherwise be different from that which
would exist under a separate policy meeting all of the requirements of this
Lease.

     

    4.7           No Separate
Insurance.  Tenant shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required in
this Article, or

     

    
      
         

      

      
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    increase
the amounts of any then existing insurance, by securing an additional policy or
additional policies, unless all parties having an insurable interest in the
subject matter of the insurance, including Landlord and any mortgagees, are
included therein as additional insureds or loss payees, the loss is payable
under said insurance in the same manner as losses are payable under this Lease,
and such additional insurance is not prohibited by the existing policies of
insurance.  Tenant shall immediately notify Landlord of the taking out
of such separate insurance or the increasing of any of the amounts of the
existing insurance by securing an additional policy or additional
policies.

     

    4.8           Waiver of
Subrogation.  Each party hereto hereby waives any and every
claim which arises or may arise in its favor and against the other party hereto
during the Term for any and all loss of, or damage to, any of its property
located within or upon, or constituting a part of, the Leased Property, which
loss or damage is covered by valid and collectible insurance policies, to the
extent that such loss or damage is recoverable under such
policies.  Said mutual waiver shall be in addition to, and not in
limitation or derogation of, any other waiver or release contained in this Lease
with respect to any loss or damage to property of the parties
hereto.  Inasmuch as the said waivers will preclude the assignment of
any aforesaid claim by way of subrogation (or otherwise) to an insurance company
(or any other person), each party hereto agrees immediately to give each
insurance company which has issued to it policies of insurance, written notice
of the terms of said mutual waivers, and to have such insurance policies
properly endorsed, if necessary, to prevent the invalidation of said insurance
coverage by reason of said waivers, so long as such endorsement is available at
a reasonable cost.

     

    4.9           Mortgages.  The
following provisions shall apply if Landlord now or hereafter places a mortgage
on the Leased Property or any part thereof:  [i] Tenant shall
obtain a standard form of lender’s loss payable clause insuring the interest of
the mortgagee; [ii] Tenant shall deliver evidence of insurance to such
mortgagee; [iii] loss adjustment shall require the consent of the
mortgagee; and [iv] Tenant shall provide such other information and
documents as may be required by the mortgagee.

     

    4.10           Escrows.  After
an Event of Default occurs hereunder, Tenant shall make such periodic payments
of insurance premiums in accordance with Landlord’s requirements after receipt
of notice thereof from Landlord.

     

    ARTICLE
5:  INDEMNITY

     

    5.1           Tenant’s
Indemnification.  Tenant hereby indemnifies and agrees to hold
harmless Landlord, any successors or assigns of Landlord, and Landlord’s and
such successor’s and assign’s directors, officers, employees and agents from and
against any and all demands, claims, causes of action, fines, penalties, damages
(including consequential damages), losses, liabilities (including strict
liability), judgments, and expenses (including, without limitation, reasonable
attorneys’ fees, court costs, and the costs set forth in §8.7) incurred in
connection with or arising from:  [i] the use or occupancy of the
Leased Property by Tenant or any persons claiming under Tenant; [ii] any
activity, work, or thing done, or permitted or suffered by Tenant in or about
the Leased Property; [iii] any acts, omissions, or negligence of Tenant or
any person claiming under Tenant, or the contractors, agents, employees,
invitees, or visitors of Tenant or any such person; [iv] any breach,
violation, or nonperformance by Tenant or any person claiming

     

    
      
         

      

      
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    under
Tenant or the employees, agents, contractors, invitees, or visitors of Tenant or
of any such person, of any term, covenant, or provision of this Lease or any
law, ordinance, or governmental requirement of any kind, including, without
limitation, any failure to comply with any applicable requirements under the
ADA; [v] any injury or damage to the person, property or business of
Tenant, its employees, agents, contractors, invitees, visitors, or any other
person entering upon the Leased Property; [vi] any construction,
alterations, changes or demolition of the Facility performed by or contracted
for by Tenant or its employees, agents or contractors; and [vii] any
obligations, costs or expenses arising under any Permitted
Exceptions.  If any action or proceeding is brought against Landlord,
its employees, or agents by reason of any such claim, Tenant, upon notice from
Landlord, will defend the claim at Tenant’s expense with counsel reasonably
satisfactory to Landlord.  All amounts payable to Landlord under this
section shall be payable on written demand and any such amounts which are not
paid within 10 days after demand therefor by Landlord shall bear interest
at Landlord’s rate of return as provided in the Commitment.  In case
any action, suit or proceeding is brought against Tenant by reason of any such
occurrence, Tenant shall use its commercially reasonable efforts to defend such
action, suit or proceeding.  Nothing in this §5.1 shall be construed
as requiring Tenant to indemnify Landlord with respect to Landlord’s own gross
negligence or willful misconduct.

     

    5.1.1           Notice of
Claim.  Landlord shall notify Tenant in writing of any claim or
action brought against Landlord in which indemnity may be sought against Tenant
pursuant to this section.  Such notice shall be given in sufficient
time to allow Tenant to defend or participate in such claim or action, but the
failure to give such notice in sufficient time shall not constitute a defense
hereunder nor in any way impair the obligations of Tenant under this section
unless the failure to give such notice precludes Tenant’s defense of any such
action.

     

    5.1.2           Survival of
Covenants.  The covenants of Tenant contained in this section
shall remain in full force and effect after the termination of this Lease until
the expiration of the period stated in the applicable statute of limitations
during which a claim or cause of action may be brought and payment in full or
the satisfaction of such claim or cause of action and of all expenses and
charges incurred by Landlord relating to the enforcement of the provisions
herein specified.

     

    5.1.3           Reimbursement of
Expenses.  Unless prohibited by law, Tenant hereby agrees to
pay to Landlord all of the reasonable fees, charges and reasonable out-of-pocket
expenses related to the Facility and required hereby, or incurred by Landlord in
enforcing the provisions of this Lease.

     

    5.2           Environmental Indemnity;
Audits.  Tenant hereby indemnifies and agrees to hold harmless
Landlord, any successors to Landlord’s interest in this Lease, and Landlord’s
and such successors’ directors, officers, employees and agents from and against
any losses, claims, damages (including consequential damages), penalties, fines,
liabilities (including strict liability), costs (including cleanup and recovery
costs), and expenses (including expenses of litigation and reasonable
consultants’ and attorneys’ fees) incurred by Landlord or any other indemnitee
or assessed against any portion of the Leased Property by virtue of any claim or
lien by any governmental or quasi-governmental unit, body, or agency, or any
third party, for cleanup costs or other costs pursuant to any Environmental
Law.  Tenant’s indemnity shall survive the termination of this
Lease.  Provided, however, Tenant shall have no indemnity obligation
with

     

    
      
         

      

      
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    respect
to [i] Hazardous Materials first introduced to the Leased Property
subsequent to the date that Tenant’s occupancy of the Leased Property shall have
fully terminated; or [ii] Hazardous Materials introduced to the Leased
Property by Landlord, its agent, employees, successors or assigns.  If
at any time during the Term of this Lease any governmental authority notifies
Landlord or Tenant of a violation of any Environmental Law or Landlord
reasonably believes that a Facility may violate any Environmental Law, Landlord
may require one or more environmental audits of such portion of the Leased
Property, in such form, scope and substance as specified by Landlord, at
Tenant’s expense.  Tenant shall, within 30 days after receipt of
an invoice from Landlord, reimburse Landlord for all costs and expenses incurred
in reviewing any environmental audit, including, without limitation, reasonable
attorneys’ fees and costs.

     

    5.3           Limitation of Landlord’s
Liability.  Landlord, its agents, and employees, will not be
liable for any loss, injury, death, or damage (including consequential damages)
to persons, property, or Tenant’s business occasioned by theft, act of God,
public enemy, injunction, riot, strike, insurrection, war, court order,
requisition, order of governmental body or authority, fire, explosion, falling
objects, steam, water, rain or snow, leak or flow of water (including water from
the elevator system), rain or snow from the Leased Property or into the Leased
Property or from the roof, street, subsurface or from any other place, or by
dampness or from the breakage, leakage, obstruction, or other defects of the
pipes, sprinklers, wires, appliances, plumbing, air conditioning, or lighting
fixtures of the Leased Property, or from construction, repair, or alteration of
the Leased Property or from any acts or omissions of any other occupant or
visitor of the Leased Property, or from any other cause beyond Landlord’s
control.

     

    ARTICLE
6:  USE AND ACCEPTANCE OF PREMISES

     

    6.1           Use of Leased
Property.  Tenant shall use and occupy the Leased Property
exclusively for the Facility Uses specified for each Facility and for all lawful
and licensed ancillary uses, including the operation of an Alzheimer’s Memory
Loss Unit, provided Tenant complies with all applicable Legal Requirements, and
for no other purpose without the prior written consent of
Landlord.  Tenant or Subtenant, as the case may be, shall obtain and
maintain all approvals, licenses, and consents needed to use and operate the
Leased Property as herein permitted.  Tenant shall deliver to Landlord
complete copies of surveys, examinations, certification and licensure
inspections, compliance certificates, and other similar reports issued to Tenant
by any governmental agency within 10 Business Days after Tenant’s receipt
of each item.

     

    6.2           Acceptance of Leased
Property.  Tenant acknowledges that [i] Tenant and its
agents have had an opportunity to inspect the Leased Property; [ii] Tenant
has found the Leased Property fit for Tenant’s use; [iii] Landlord will
deliver the Leased Property to Tenant in “as-is” condition; [iv] Landlord
is not obligated to make any improvements or repairs to the Leased Property; and
[v] the roof, walls, foundation, heating, ventilating, air conditioning,
telephone, sewer, electrical, mechanical, elevator, utility, plumbing, and other
portions of the Leased Property are in good working order.  Tenant
waives any claim or action against Landlord with respect to the condition of the
Leased Property.  LANDLORD MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF,
EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR
PURPOSE OR OTHERWISE, OR AS

     

    
      
         

      

      
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    TO
QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING
AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.

     

    6.3           Conditions of Use and
Occupancy.  Tenant agrees that during the Term it shall use and
keep the Leased Property in a careful, safe and proper manner; not commit or
suffer waste thereon; not use or occupy the Leased Property for any unlawful
purposes; not use or occupy the Leased Property or permit the same to be used or
occupied, for any purpose or business deemed extrahazardous on account of fire
or otherwise; keep the Leased Property in such repair and condition as may be
required by the Board of Health, or other city, state or federal authorities,
free of all cost to Landlord; not permit any acts to be done which will cause
the cancellation, invalidation, or suspension of any insurance policy; and
permit Landlord and its agents to enter upon the Leased Property at all
reasonable times to examine the condition thereof.  Landlord shall
have the right to have an annual inspection of the Leased Property performed and
Tenant shall pay an inspection fee of the lesser of $1,500.00 per Facility or
Landlord’s reasonable out-of-pocket expenses within 30 days after receipt
of Landlord’s invoice.

     

    ARTICLE
7:  MAINTENANCE AND MECHANICS’ LIENS

     

    7.1           Maintenance.  Tenant
shall maintain, repair, and replace the Leased Property, including, without
limitation, all structural and nonstructural repairs and replacements to the
roof, foundations, exterior walls, HVAC systems, equipment, parking areas,
sidewalks, water, sewer and gas connections, pipes and mains.  Tenant
shall pay, as Additional Rent, the full cost of maintenance, repairs, and
replacements.  Tenant shall maintain all drives, sidewalks, parking
areas, and lawns on or about the Leased Property in a clean and orderly
condition, free of accumulations of dirt, rubbish, snow and
ice.  Tenant shall at all times maintain, operate and otherwise manage
the Leased Property on a basis and in a manner consistent with the standards
currently maintained by Tenant at the Leased Property.  All repairs
shall, to the extent reasonably achievable, be at least equivalent in quality to
the original work or the property to be repaired shall be
replaced.  Tenant will not take or omit to take any action the taking
or omission of which might materially impair the value or the usefulness of the
Leased Property or any parts thereof for the Facility Uses.  Tenant
shall permit Landlord to inspect the Leased Property at all reasonable times and
on reasonable advance notice, and if Landlord has a reasonable basis to believe
that there are maintenance problem areas and gives Tenant written notice thereof
setting forth its concerns in reasonable detail, Tenant shall deliver to
Landlord a plan of correction within 10 Business Days after receipt of the
notice.  Tenant shall diligently pursue correction of all problem
areas within 60 days after receipt of the notice or such longer period as
may be necessary for reasons beyond its reasonable control such as shortage of
materials or delays in securing necessary permits, but not caused by lack of
diligence by Tenant, and, upon expiration of the 60-day period, shall deliver
evidence of completion to Landlord or an interim report evidencing Tenant’s
diligent progress towards completion and, at the end of the next 60-day period,
evidence of satisfactory completion.  Upon completion, Landlord shall
have the right to re-inspect the Facility and Tenant shall pay a re-inspection
fee of $750.00 per Facility plus Landlord’s reasonable out-of-pocket expenses
within 30 days after receipt of Landlord’s invoice.  At each
inspection of the Leased Property by Landlord, the Facility employee in charge
of maintenance shall be available to tour the Facility with Landlord and answer
questions.

     

    
      
         

      

      
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    7.2           Required
Alterations.  Tenant shall, at Tenant’s sole cost and expense,
make any additions, changes, improvements or alterations to the Leased Property,
including structural alterations, which may be required by any governmental
authorities, including those required to maintain licensure or certification
under the Medicare and Medicaid programs (if so certified), whether such changes
are required by Tenant’s use, changes in the law, ordinances, or governmental
regulations, defects existing as of the date of this Lease, or any other cause
whatsoever.  All such additions, changes, improvements or alterations
shall be deemed to be Permitted Alterations and shall comply with all laws
requiring such alterations and with the provisions of §16.4.

     

    7.3           Mechanic’s
Liens.  Tenant shall have no authority to permit or create a
lien against Landlord’s interest in the Leased Property, and Tenant shall post
notices or file such documents as may be required to protect Landlord’s interest
in the Leased Property against liens.  Tenant hereby agrees to defend,
indemnify, and hold Landlord harmless from and against any mechanic’s liens
against the Leased Property by reason of work, labor, services or materials
supplied or claimed to have been supplied on or to the Leased
Property.  Subject to Tenant’s right to contest the same in accordance
with the terms of this Lease, Tenant shall remove, bond-off, or otherwise obtain
the release of any mechanic’s lien filed against the Leased Property within
10 days after notice of the filing thereof.  Tenant shall pay all
expenses in connection therewith, including, without limitation, damages,
interest, court costs and reasonable attorneys’ fees.

     

    7.4           Replacements of Fixtures and
Landlord’s Personal Property.  Tenant shall not remove Fixtures
and Landlord’s Personal Property from the Leased Property except to replace the
Fixtures and Landlord’s Personal Property with other similar items of equal
quality and value.  Items being replaced by Tenant may be removed and
shall become the property of Tenant and items replacing the same shall be and
remain the property of Landlord.  Tenant shall execute, upon written
request from Landlord, any and all documents necessary to evidence Landlord’s
ownership of Landlord’s Personal Property and replacements
therefor.  Tenant may finance replacements for the Fixtures and
Landlord’s Personal Property by equipment lease or by a security agreement and
financing statement if, with respect to any financing of critical care equipment
and with respect to any other Personal Property having a value per Facility in
excess of $250,000.00, [i] Landlord has consented to the terms and
conditions of the equipment lease or security agreement; and [ii] the
equipment lessor or lender has entered into a nondisturbance agreement with
Landlord upon terms and conditions reasonably acceptable to Landlord, including,
without limitation, the following:  [a] Landlord shall have the
right (but not the obligation) to assume such security agreement or equipment
lease upon the occurrence of an Event of Default under this Lease; [b] the
equipment lessor or lender shall notify Landlord of any default by Tenant under
the equipment lease or security agreement and give Landlord a reasonable
opportunity to cure such default; and [c] Landlord shall have the right to
assign its rights under the equipment lease, security agreement, or
nondisturbance agreement.  Tenant shall, within 30 days after
receipt of an invoice from Landlord, reimburse Landlord for all costs and
expenses incurred in reviewing and approving the equipment lease, security
agreement, and nondisturbance agreement, including, without limitation,
reasonable attorneys’ fees and costs.

     

    
      
         

      

      
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    ARTICLE
8:  DEFAULTS AND REMEDIES

     

    8.1           Events of
Default.  The occurrence of any one or more of the following
shall be an event of default (“Event of Default”) hereunder without any advance
notice to Tenant unless specified herein:

     

    (a) Tenant
fails to pay in full any installment of Base Rent, any Additional Rent or any
other monetary obligation payable by Tenant under this Lease within 10 days
after such payment is due.

     

    (b) Tenant,
Subtenant or Guarantor (where applicable) fails to comply with any covenant set
forth in Article 14, §§15.6, 15.7 or 15.8 of this Lease.

     

    (c) Tenant
fails to observe and perform any other covenant, condition or agreement under
this Lease to be performed by Tenant and [i] such failure continues for a
period of 30 days after written notice thereof is given to Tenant by
Landlord; or [ii] if, by reason of the nature of such default it cannot be
remedied within 30 days, Tenant fails to proceed with diligence reasonably
satisfactory to Landlord after receipt of the notice to cure the default or, in
any event, fails to cure such default within 60 days after receipt of the
notice.  The foregoing notice and cure provisions do not apply to any
Event of Default otherwise specifically described in any other subsection of
§8.1.

     

    (d) Tenant or
Subtenant abandons or vacates (except during a period of repair or
reconstruction after damage, destruction or a Taking) any Facility Property or
any material part thereof, ceases to operate any Facility, ceases to do business
or ceases to exist for any reason for any one or more days.

     

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

     

    (f) [i] Any
receiver, administrator, custodian or other person takes possession or control
of any of the Leased Property and continues in possession for 60 days;
[ii] any writ against any of the Leased Property is not released within
60 days; [iii] any judgment

     

    
      
         

      

      
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    is
rendered or proceedings are instituted against the Leased Property, Tenant or
Subtenant which adversely affect the Leased Property or any part thereof, which
is not dismissed for 60 days (except as otherwise provided in this
section); [iv] all or a substantial part of the assets of Tenant, Subtenant
or Guarantor are attached, seized, subjected to a writ or distress warrant, or
are levied upon, or come into the possession of any receiver, trustee,
custodian, or assignee for the benefit of creditors; [v] Tenant or
Subtenant is enjoined, restrained, or in any way prevented by court order, or
any proceeding is filed or commenced seeking to enjoin, restrain or in any way
prevent Tenant, Subtenant or Guarantor from conducting all or a substantial part
of its business or affairs; or [vi] except as otherwise permitted
hereunder, a final notice of lien, levy or assessment is filed of record with
respect to all or any part of the Leased Property or any property of Tenant or
Subtenant located at the Leased Property and is not dismissed, discharged, or
bonded-off within 30 days.

     

    (g) Any
representation or warranty made by Tenant, Subtenant or Guarantor in this Lease
or any other document executed in connection with this Lease, any guaranty of or
other security for this Lease, or any report, certificate, application,
financial statement or other instrument furnished by Tenant, Subtenant or
Guarantor pursuant hereto or thereto shall prove to be false, misleading or
incorrect in any material respect as of the date made.

     

    (h) Tenant,
any Subtenant or any Affiliate defaults on any indebtedness or obligation to
Landlord or any Landlord Affiliate, any Obligor Group Obligation or any
agreement with Landlord or any Landlord Affiliate, including, without
limitation, any lease with Landlord or any Landlord Affiliate, or the occurrence
of a default under any Material Obligation and any applicable grace or cure
period with respect to default under such indebtedness or obligation expires
without such default having been cured.  This provision applies to all
such indebtedness, obligations and agreements as they may be amended, modified,
extended, or renewed from time to time.

     

    (i) Any
guarantor of this Lease dissolves, terminates, is adjudicated incompetent, files
a petition in bankruptcy, or is adjudicated insolvent under the Bankruptcy Code
or any other insolvency law, or fails to comply with any covenant or requirement
of such guarantor set forth in this Lease or in the guaranty of such guarantor,
which is not cured within any applicable cure period.

     

    (j) The
license for the Facility or any other Government Authorization is canceled,
suspended, reduced to provisional or temporary, or otherwise invalidated, or
license revocation or decertification proceedings are commenced against Tenant
or Subtenant and, in each instance, such action is not stayed pending appeal,
or, as a result of the acts or omissions of Tenant or Subtenant, any reduction
of more than 5% occurs in the number of licensed beds or units at the Facility,
or an admissions ban is issued for the Facility and remains in effect for a
period of more than 45 days.

     

    8.2           Remedies.  Upon
the occurrence of an Event of Default under this Lease or any Lease Document,
and at any time thereafter until Landlord waives the default in writing or
acknowledges cure of the default in writing, at Landlord’s option, without
declaration, notice of nonperformance, protest, notice of protest, notice of
default, notice to quit or any other notice

     

    
      
         

      

      
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    or demand
of any kind, Landlord may exercise any and all rights and remedies provided in
this Lease or any Lease Document or otherwise provided under law or in equity,
including, without limitation, any one or more of the following
remedies:

     

    (a) Landlord
may re-enter and take possession of the Leased Property or any portion thereof
without terminating this Lease, and lease such Leased Property for the account
of Tenant, holding Tenant liable for all costs of Landlord in reletting such
Leased Property and for the difference in the amount received by such reletting
and the amounts payable by Tenant under the Lease.

     

    (b) Landlord
may terminate this Lease with respect to all or any portion of the Leased
Property by written notice to Tenant, exclude Tenant from possession of such
Leased Property and use commercially reasonable efforts to lease such Leased
Property to others, holding Tenant liable for the difference in the amounts
received from such reletting and the amounts payable by Tenant under this
Lease.

     

    (c) Landlord
may re-enter the Leased Property or any portion thereof and have, repossess and
enjoy such Leased Property as if this Lease had not been made, and in such
event, Tenant and its successors and assigns shall remain liable for any
contingent or unliquidated obligations or sums owing at the time of such
repossession.

     

    (d) Landlord
may have access to and inspect, examine and make copies of the books and records
and any and all accounts, data and income tax and other returns of Tenant
insofar as they pertain to the Leased Property subject to Landlord’s obligation
to maintain the confidentiality of any patient or employee information in
accordance with the requirements of applicable State or federal
law.

     

    (e) Landlord
may accelerate all of the unpaid Rent hereunder based on the then current Rent
Schedule so that the aggregate Rent for the unexpired term of this Lease becomes
immediately due and payable.

     

    (f) Landlord
may take whatever action at law or in equity as may appear necessary or
desirable to collect the Rent and other amounts payable under this Lease then
due and thereafter to become due, or to enforce performance and observance of
any obligations, agreements or covenants of Tenant under this
Lease.

     

    (g) With
respect to the Collateral or any portion thereof and Secured Party’s security
interest therein, Secured Party may exercise all of its rights as secured party
under Article 9 of the Uniform Commercial Code.  Secured Party
may sell the Collateral by public or private sale upon five days notice to
Tenant or Subtenant.  Tenant and Subtenant agree that a commercially
reasonable manner of disposition of the Collateral shall include, without
limitation and at the option of Secured Party, a sale of the Collateral, in
whole or in part, concurrently with the sale of the Leased
Property.

     

    (h) Secured
Party may obtain control over and collect the Receivables and apply the proceeds
of the collections to satisfaction of the Obligor Group Obligations unless
prohibited by law.  Tenant and Subtenant appoint HCRI or its designee
as attorney for Tenant and Subtenant, respectively, with powers [i] to
receive, to endorse, to sign and/or to deliver, in

     

    
      
         

      

      
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    Tenant’s
or Subtenant’s name or Secured Party’s name, any and all checks, drafts, and
other instruments for the payment of money relating to the Receivables, and to
waive demand, presentment, notice of dishonor, protest, and any other notice
with respect to any such instrument; [ii] to sign Tenant’s or Subtenant’s
name on any invoice or bill of lading relating to any Receivable, drafts against
account debtors, assignments and verifications of Receivables, and notices to
account debtors; [iii] to send verifications of Receivables to any account
debtor; and [iv] to do all other acts and things necessary to carry out
this Lease.  Absent gross negligence or willful misconduct of Secured
Party, Secured Party shall not be liable for any omissions, commissions, errors
of judgment, or mistakes in fact or law made in the exercise of any such
powers.  At Secured Party’s option, Tenant and Subtenant shall
[i] provide Secured Party a full accounting of all amounts received on
account of Receivables with such frequency and in such form as Secured Party may
require, either with or without applying all collections on Receivables in
payment of the Obligor Group Obligations or [ii] deliver to Secured Party
on the day of receipt all such collections in the form received and duly
endorsed by Tenant or Subtenant, as applicable.  At Secured Party’s
request, Tenant and Subtenant shall institute any action or enter into any
settlement determined by Secured Party to be necessary to obtain recovery or
redress from any account debtor in default of Receivables.  Secured
Party may give notice of its security interest in the Receivables to any or all
account debtors with instructions to make all payments on Receivables directly
to Secured Party, thereby terminating Tenant’s and Subtenant’s authority to
collect Receivables.  After terminating Tenant’s and Subtenant’s
authority to enforce or collect Receivables, Secured Party shall have the right
to take possession of any or all Receivables and records thereof and is hereby
authorized to do so, and only Secured Party shall have the right to collect and
enforce the Receivables.  Prior to the occurrence and during the
continuance of an Event of Default, at Tenant’s and Subtenant’s cost and
expense, but on behalf of Secured Party and for Secured Party’s account, Tenant
and Subtenant shall collect or otherwise enforce all amounts unpaid on
Receivables and hold all such collections in trust for Secured Party, but Tenant
and Subtenant may commingle such collections with Tenant’s and Subtenant’s own
funds, until Tenant’s and Subtenant’s authority to do so has been terminated,
which may be done only after an Event of Default.  Notwithstanding any
other provision hereof, Secured Party does not assume any of Tenant’s or
Subtenant’s obligations under any Receivable, and Secured Party shall not be
responsible in any way for the performance of any of the terms and conditions
thereof by Tenant or Subtenant.

     

    (i) Without
waiving any prior or subsequent Event of Default, Landlord may waive any Event
of Default or, with or without waiving any Event of Default, remedy any
default.

     

    (j) Landlord
may terminate its obligation, if any, to disburse Investment
Advances.

     

    (k) Landlord
may enter and take possession of the Land or any portion thereof and any one or
more Facilities without terminating this Lease and complete construction and
renovation of the Improvements (or any part thereof) and perform the obligations
of Tenant under the Lease Documents.  Without limiting the generality
of the foregoing and for the purposes aforesaid, Tenant hereby appoints HCRI its
lawful attorney-in-fact with full power to do any of the
following:  [i] complete construction, renovation and equipping
of the Improvements in the name of Tenant; [ii] use unadvanced funds
remaining under the Investment

     

    
      
         

      

      
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    Amount,
or funds that may be reserved, escrowed, or set aside for any purposes hereunder
at any time, or to advance funds in excess of the Investment Amount, to complete
the Improvements; [iii] make changes in the plans and specifications that
shall be necessary or desirable to complete the Improvements in substantially
the manner contemplated by the plans and specifications; [iv] retain or
employ new general contractors, subcontractors, architects, engineers, and
inspectors as shall be required for said purposes; [v] pay, settle, or
compromise all existing bills and claims, which may be liens or security
interests, or to avoid such bills and claims becoming liens against the Facility
or security interest against fixtures or equipment, or as may be necessary or
desirable for the completion of the construction and equipping of the
Improvements or for the clearance of title; [vi] execute all applications
and certificates, in the name of Tenant, that may be required in connection with
any construction; [vii] do any and every act that Tenant might do in its
own behalf, to prosecute and defend all actions or proceedings in connection
with the Improvements; and [viii] to execute, deliver and file all
applications and other documents and take any and all actions necessary to
transfer the operations of the Facility to Secured Party or Secured Party’s
designee.  This power of attorney is a power coupled with an interest
and cannot be revoked.

     

    (l) Landlord
may apply, with or without notice to Tenant, for the appointment of a receiver
(“Receiver”) for Tenant or Tenant’s business or for the Leased Property;
provided, however, in the case of an Event of Default which relates to less than
all of the Leased Property, such Receiver’s power and authority shall be limited
to the affected Facility.  Unless prohibited by law, such appointment
may be made either before or after termination of Tenant’s possession of the
Leased Property, without notice, without regard to the solvency or insolvency of
Tenant at the time of application for such Receiver and without regard to the
then value of the Leased Property, and Secured Party may be appointed as
Receiver.  After the occurrence and during the continuance of an Event
of Default, Landlord shall be entitled to appointment of a receiver as a matter
of right and without the need to make any showing other than the existence of an
Event of Default.  The Receiver shall have the power to collect the
rents, income, profits and Receivables of the Leased Property during the
pendency of the receivership and all other powers which may be necessary or are
usual in such cases for the protection, possession, control, management and
operation of the Leased Property during the whole of said
proceeding.  All sums of money received by the Receiver from such
rents and income, after deducting therefrom the reasonable charges and expenses
paid or incurred in connection with the collection and disbursement thereof,
shall be applied to the payment of the Rent or any other monetary obligation of
Tenant under this Lease, including, without limitation, any losses or damages
incurred by Landlord under this Lease.  Tenant, if requested to do so,
will consent to the appointment of any such Receiver as aforesaid.

     

    (m) Landlord
may terminate any management agreement with respect to any of the Leased
Property and shall have the right to retain one or more managers for the Leased
Property at the expense of Tenant, such manager(s) to serve for such term and at
such compensation as Landlord reasonably determines is necessary under the
circumstances.

     

    8.3           Right of
Set-Off.  Landlord may, and is hereby authorized by Tenant to,
at any time and from time to time without advance notice to Tenant (any such
notice being expressly waived by Tenant), set-off or recoup and apply any and
all sums held by Landlord, any indebtedness of Landlord to Tenant, and any
claims by

     

    
      
         

      

      
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    Tenant
against Landlord, against any obligations of Tenant hereunder and against any
claims by Landlord against Tenant, whether or not such obligations or claims of
Tenant are matured and whether or not Landlord has exercised any other remedies
hereunder.  The rights of Landlord under this section are in addition
to any other rights and remedies Landlord may have against Tenant.

     

    8.4           Performance of Tenant’s
Covenants.  Landlord may perform any obligation of Tenant which
Tenant has failed to perform within five days after Landlord has sent a written
notice to Tenant informing it of its specific failure.  Tenant shall
reimburse Landlord on demand, as General Additional Rent, for any expenditures
thus incurred by Landlord and shall pay interest thereon at Landlord’s rate of
return as provided in the Commitment.

     

    8.5           Late Payment
Charge.

     

    (a) Rent.  Tenant
acknowledges that any default in the payment of any installment of Rent payable
hereunder will result in loss and additional expense to Landlord in servicing
any indebtedness of Landlord secured by the Leased Property, handling such
delinquent payments, and meeting its other financial obligations, and because
such loss and additional expense is extremely difficult and impractical to
ascertain, Tenant agrees that in the event any Rent payable to Landlord
hereunder is not paid within 10 days after the due date, Tenant shall pay a
late charge of 5% of the amount of the overdue payment as a reasonable estimate
of such loss and expenses, unless applicable law requires a lesser charge, in
which event the maximum rate permitted by such law may be charged by
Landlord.  The 10-day period set forth in this section shall run
concurrently with the 10-day period contemplated under §8.1(a) and shall not
otherwise extend the time for payment of Rent or the period for curing any
default or constitute a waiver of such default.

     

    (b) Non-Rent
Obligations.  With respect to Non-Rent obligations, Tenant
acknowledges that any default in the payment of any amount payable by Tenant to
Landlord under this Lease will result in loss and additional expense to Landlord
in servicing any indebtedness of Landlord secured by the Leased Property,
handling such delinquent payments, and meeting its other financial obligations,
and because such loss and additional expense is extremely difficult and
impractical to ascertain, Tenant agrees that in the event such amount is not
paid within 10 days after the due date or within 10 days after receipt
of any invoice from Landlord (if Landlord is obligated under the terms of the
Lease to provide an invoice), Tenant shall pay a late charge of 5% of the amount
of the overdue payment as a reasonable estimate of such loss and expenses,
unless applicable law requires a lesser charge, in which event the maximum rate
permitted by such law may be charged by Landlord.  The 10-day period
set forth in this section shall run concurrently with the 10-day period
contemplated under §8.1(a) and shall not otherwise extend the time for payment
of the invoice or the period for curing any default or constitute a waiver of
such default.

     

    8.6           Default
Rent.  At Landlord’s option at any time after the occurrence of
an Event of Default and while such Event of Default remains uncured, the Base
Rent payable under this Lease shall be increased to reflect Landlord’s rate of
return of 18.5% per annum on the Investment Amount (“Default Rent”); provided,
however, that if a court of competent jurisdiction determines that any other
amounts payable under this Lease are deemed to be

     

    
      
         

      

      
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    interest,
the Default Rent shall be adjusted to ensure that the aggregate interest payable
under this Lease does not accrue at a rate in excess of the maximum legal
rate.

     

    8.7           Attorneys’
Fees.  Tenant shall pay all reasonable costs and expenses
incurred by Landlord in enforcing or preserving Landlord’s rights under this
Lease, whether or not an Event of Default has actually occurred or has been
declared and thereafter cured, including, without limitation, [i] the fees,
expenses, and costs of any litigation, appellate, receivership, administrative,
bankruptcy, insolvency or other similar proceeding; [ii] reasonable
attorney, paralegal, consulting and witness fees and disbursements; and
[iii] the expenses, including, without limitation, lodging, meals, and
transportation, of Landlord and its employees, agents, attorneys, and witnesses
in preparing for litigation, administrative, bankruptcy, insolvency or other
similar proceedings and attendance at hearings, depositions, and trials in
connection therewith.  All such reasonable costs, expenses, charges
and fees payable by Tenant shall be deemed to be General Additional Rent under
this Lease.

     

    8.8           Escrows and Application of
Payments.  As security for the performance of the Obligor Group
Obligations, Tenant hereby assigns to Landlord all its right, title, and
interest in and to all monies escrowed with Landlord under this Lease and all
deposits with utility companies, taxing authorities and insurance companies;
provided, however, that Landlord shall not exercise its rights hereunder until
an Event of Default has occurred.  Any payments received by Landlord
under any provisions of this Lease during the existence or continuance of an
Event of Default shall be applied to the Obligor Group Obligations in the order
which Landlord may determine.

     

    8.9           Remedies
Cumulative.  The remedies of Landlord herein are cumulative to
and not in lieu of any other remedies available to Landlord at law or in
equity.  The use of any one remedy shall not be taken to exclude or
waive the right to use any other remedy.

     

    8.10           Waivers.  Tenant
waives [i] any notice required by statute or other law as a condition to
bringing an action for possession of, or eviction from, any of the Leased
Property, [ii] any right of re-entry or repossession, [iii] any right
to a trial by jury in any action or proceeding arising out of or relating to
this Lease, [iv] any right of redemption whether pursuant to statute, at
law or in equity, [v] all presentments, demands for performance, notices of
nonperformance, protest, notices of protest, notices of dishonor, notices to
quit and any other notice or demand of any kind (other than those specifically
provided for in this Lease, and [vi] all notices of the existence, creation
or incurring of any obligation or advance under this Lease before or after this
date.

     

    8.11           Obligations Under the
Bankruptcy Code.  Upon filing of a petition by or against
Tenant under the Bankruptcy Code, Tenant, as debtor and as debtor-in-possession,
and any trustee who may be appointed with respect to the assets of or estate in
bankruptcy of Tenant, agree to pay monthly in advance on the first day of each
month, as reasonable compensation for the use and occupancy of the Leased
Property, an amount equal to all Rent due pursuant to this
Lease.  Included within and in addition to any other conditions or
obligations imposed upon Tenant or its successor in the event of the assumption
and/or assignment of this Lease are the following:  [i] the cure
of any monetary defaults and reimbursement of pecuniary loss within not more
than five Business Days of assumption and/or assignment; [ii] the deposit
of an additional

     

    
      
         

      

      
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    amount
equal to not less than three months’ Base Rent, which amount is agreed to be a
necessary and appropriate deposit to adequately assure the future performance
under this Lease of the Tenant or its assignee; and [iii] the continued use
of the Leased Property for the Facility Uses.  Nothing herein shall be
construed as an agreement by Landlord to any assignment of this Lease or a
waiver of Landlord’s right to seek adequate assurance of future performance in
addition to that set forth hereinabove in connection with any proposed
assumption and/or assignment of this Lease.

     

    ARTICLE
9:  DAMAGE AND DESTRUCTION

     

    9.1           Notice of
Casualty.  If the Leased Property shall be destroyed, in whole
or in part, or damaged by fire, flood, windstorm or other casualty in excess of
$150,000.00 (a “Casualty”), Tenant shall give written notice thereof to Landlord
within two Business Days after the occurrence of the Casualty.  Within
15 days after the occurrence of the Casualty or as soon thereafter as such
information is reasonably available to Tenant, Tenant shall provide the
following information to Landlord:  [i] the date of the Casualty;
[ii] the nature of the Casualty; [iii] a description of the damage or
destruction caused by the Casualty, including the type of Leased Property
damaged and the area of the Improvements damaged; [iv] a preliminary
estimate of the cost to repair, rebuild, restore or replace the Leased Property;
[v] a preliminary estimate of the schedule to complete the repair,
rebuilding, restoration or replacement of the Leased Property; [vi] a
description of the anticipated property insurance claim, including the name of
the insurer, the insurance coverage limits, the deductible amount, the expected
settlement amount, and the expected settlement date; and [vii] a
description of the business interruption claim, including the name of the
insurer, the insurance coverage limits, the deductible amount, the expected
settlement amount, and the expected settlement date.  Within five days
after request from Landlord, Tenant will provide Landlord with copies of all
correspondence to the insurer and any other information reasonably requested by
Landlord.

     

    9.2           Substantial
Destruction.

     

    9.2.1           If
any Facility’s Improvements are substantially destroyed at any time other than
during the final 18 months of the Initial Term or any Renewal Term, Tenant
shall promptly rebuild and restore such Improvements in accordance with §9.4 and
Landlord shall make the insurance proceeds available to Tenant for such
restoration.  The term “substantially destroyed” means any casualty
resulting in the loss of use of 50% or more of the licensed beds at any one
Facility.

     

    9.2.2           If
any Facility’s Improvements are substantially destroyed during the final
18 months of the Initial Term or any Renewal Term, Landlord may elect to
terminate this Lease with respect to the entire Leased Property and retain the
insurance proceeds unless Tenant exercises its option to renew as set forth in
§9.2.3.  If Landlord elects to terminate, Landlord shall give notice
(“Termination Notice”) of its election to terminate this Lease within
30 days after receipt of Tenant’s notice of the damage.  If
Tenant does not exercise its option to renew under §9.2.3 within 15 days
after delivery of the Termination Notice, this Lease shall terminate on the
15th day
after delivery of the Termination Notice.  If this Lease is so
terminated, Tenant shall be liable to Landlord for all Rent and all other
obligations accrued under this Lease through the effective date of
termination.

     

    
      
         

      

      
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    9.2.3           If
any Facility’s Improvements are substantially destroyed during the final
18 months of the Initial Term and Landlord gives the Termination Notice,
Tenant shall have the option to renew this Lease with respect to the entire
Leased Property (but not any part thereof).  Tenant shall give
Landlord irrevocable notice of Tenant’s election to renew within 15 days
after delivery of the Termination Notice.  If Tenant elects to renew,
the Renewal Term will be in effect for the balance of the then current Term plus
a 15-year period.  The Renewal Term will commence on the third day
following Landlord’s receipt of Tenant’s notice of renewal.  All other
terms of this Lease for the Renewal Term shall be in accordance with
Article 12.  The Improvements will be restored by Tenant in
accordance with the provisions of this Article 9 regarding partial
destruction.

     

    9.3           Partial
Destruction.  If any Facility’s Improvements are not
substantially destroyed, then Tenant shall comply with the provisions of §9.4
and Landlord shall make the insurance proceeds available to Tenant for such
restoration.

     

    9.4           Restoration.  Subject
to any limitations imposed by law with respect to the rebuilding of the Leased
Premises, Tenant shall promptly repair, rebuild, or restore the damaged Leased
Property, at Tenant’s expense, so as to make the Leased Property at least equal
in value to the Leased Property existing immediately prior to such occurrence
and as nearly similar to it in character as is practicable and
reasonable.  Before beginning such repairs or rebuilding, or letting
any contracts in connection with such repairs or rebuilding with respect to any
Casualty, Tenant will submit for Landlord’s approval, which approval Landlord
will not unreasonably withhold or delay, plans and specifications meeting the
requirements of §16.2 for such repairs or rebuilding.  Promptly after
receiving Landlord’s approval of the plans and specifications, Tenant will begin
such repairs or rebuilding and will prosecute the repairs and rebuilding to
completion with diligence, subject, however, to strikes, lockouts, acts of God,
embargoes, governmental restrictions, and other causes beyond Tenant’s
reasonable control.  Landlord will make available to Tenant the net
proceeds of any fire or other casualty insurance paid to Landlord for such
repair or rebuilding as the same progresses, after deduction of any costs of
collection, including reasonable attorneys’ fees.  Payments will be
made against properly certified vouchers of a competent architect in charge of
the work and approved by Landlord.  Payments for deposits for the
repairing or rebuilding or delivery of materials to the Facility will be made
upon Landlord’s receipt of evidence satisfactory to Landlord that such payments
are required in advance.  With respect to any Casualty, prior to
commencing the repairing or rebuilding, Tenant shall deliver to Landlord for
Landlord’s approval a schedule setting forth the estimated monthly draws for
such work.  Landlord will contribute to such payments out of the
insurance proceeds an amount equal to the proportion that the total net amount
received by Landlord from insurers bears to the total estimated cost of the
rebuilding or repairing, multiplied by the payment by Tenant on account of such
work.  Landlord may, however, withhold 10% from each payment until the
work is completed and proof has been furnished to Landlord that no lien or
liability has attached or will attach to the Leased Property or to Landlord in
connection with such repairing or rebuilding.  Upon the completion of
rebuilding and the furnishing of such proof, the balance of the net proceeds of
such insurance payable to Tenant on account of such repairing or rebuilding will
be paid to Tenant.  If required by law as a result of the nature or
extent of the damage, Tenant will obtain and deliver to Landlord a temporary or
final certificate of occupancy before the damaged Leased Property is reoccupied
for any purpose.  Tenant shall complete such repairs or rebuilding
free and clear of mechanic’s or other liens, and in accordance with the building
codes and all

     

    
      
         

      

      
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    applicable
laws, ordinances, regulations, or orders of any state, municipal, or other
public authority affecting the repairs or rebuilding, and also in accordance
with all requirements of the insurance rating organization, or similar
body.  Any remaining proceeds of insurance after such restoration will
be Tenant’s property.

     

    9.5           Insufficient
Proceeds.  If the proceeds of any insurance settlement are not
sufficient to pay the costs of Tenant’s repair, rebuilding or restoration under
§9.4 in full, Tenant shall deposit with Landlord at Landlord’s option, and
within 10 days of Landlord’s request, an amount sufficient in Landlord’s
reasonable judgment to complete such repair, rebuilding or restoration or shall
provide Landlord with evidence reasonably satisfactory to Landlord that Tenant
has available the funds needed to complete such repair, rebuilding or
restoration.  Tenant shall not, by reason of the deposit or payment,
be entitled to any reimbursement from Landlord or diminution in or postponement
of the payment of the Rent.

     

    9.6           Not Trust
Funds.  Notwithstanding anything herein or at law or equity to
the contrary, none of the insurance proceeds paid to Landlord as herein provided
shall be deemed trust funds, and Landlord shall be entitled to dispose of such
proceeds as provided in this Article 9.  Tenant expressly assumes
all risk of loss, including a decrease in the use, enjoyment or value, of the
Leased Property from any casualty whatsoever, whether or not insurable or
insured against.

     

    9.7           Landlord’s
Inspection.  During the progress of such repairs or rebuilding,
Landlord and its architects and engineers may, from time to time, inspect the
Leased Property and will be furnished, if required by them, with copies of all
plans, shop drawings, and specifications relating to such repairs or
rebuilding.  Tenant will keep all plans, shop drawings, and
specifications at the building, and Landlord and its architects and engineers
may examine them at all reasonable times and on reasonable
notice.  If, during such repairs or rebuilding, Landlord and its
architects and engineers determine that the repairs or rebuilding are not being
done in accordance with the approved plans and specifications, Landlord will
give prompt notice in writing to Tenant, specifying in detail the particular
deficiency, omission, or other respect in which Landlord claims such repairs or
rebuilding do not accord with the approved plans and
specifications.  Upon the receipt of any such notice, Tenant will
cause corrections to be made to any deficiencies, omissions, or such other
respect.  Tenant’s obligations to supply insurance, according to
Article 4, will be applicable to any repairs or rebuilding under this
section.

     

    9.8           Landlord’s
Costs.  Tenant shall, within 30 days after receipt of an
invoice from Landlord, pay the costs, expenses, and fees of any architect or
engineer employed by Landlord to review any plans and specifications and to
supervise and approve any construction, or for any services rendered by such
architect or engineer to Landlord as contemplated by any of the provisions of
this Lease, or for any services performed by Landlord’s attorneys in connection
therewith.

     

    9.9           No Rent
Abatement.  Rent will not abate pending the repairs or
rebuilding of the Leased Property.

     

    
      
         

      

      
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    ARTICLE
10:  CONDEMNATION

     

    10.1           Total
Taking.  If, by exercise of the right of eminent domain or by
conveyance made in response to the threat of the exercise of such right
(“Taking”), any entire Facility Property is taken, or so much of any Facility
Property is taken that the number of licensed beds/units at the Facility
Property is reduced by more than 25% as a result of such Taking, then this Lease
will end with respect to such Facility Property only on the earlier of the
vesting of title to the Facility Property in the condemning authority or the
taking of possession of the Facility Property by the condemning
authority.  Upon such termination, the Investment Amount shall be
reduced by the amount received by Landlord as a result of the Taking unless
there is only one Facility Property subject to this Lease in which case the
Lease will terminate.  The removal from this Lease of one Facility
Property due to a taking is the result of circumstances beyond the control of
Landlord and Tenant and the parties affirm that, except for such isolated
situation or as otherwise specifically provided elsewhere in this Lease for the
removal of one or more of the Facility under certain defined circumstances, this
Lease is intended to be a single indivisible Lease.  All damages
awarded for such Taking under the power of eminent domain shall be the property
of Landlord, whether such damages shall be awarded as compensation for
diminution in value of the leasehold or the fee of the Facility Property;
provided, however, nothing herein shall preclude Tenant from pursuing a separate
award for the Taking of its Tenant’s Property (as defined below) or for
relocation costs or expenses.

     

    10.2           Partial
Taking.  If, after a Taking, so much of the Facility Property
remains that the Facility Property can be used for substantially the same
purposes for which it was used immediately before the Taking, then [i] this
Lease will end as to the part taken on the earlier of the vesting of title to
such Leased Property in the condemning authority or the taking of possession of
such Leased Property by the condemning authority and the Rent will be adjusted
accordingly; [ii] at its cost, Tenant shall restore so much of the Facility
Property as remains to a sound architectural unit substantially suitable for the
purposes for which it was used immediately before the Taking, using good
workmanship and new, first-class materials; [iii] upon completion of the
restoration, Landlord will pay Tenant the lesser of the net award made to
Landlord on the account of the Taking (after deducting from the total award,
reasonable attorneys’, appraisers’, and other fees and costs incurred in
connection with the obtaining of the award and amounts paid to the holders of
mortgages secured by the Facility Property), or Tenant’s actual out-of-pocket
costs of restoring the Facility Property; and [iv] Landlord shall be
entitled to the balance of the net award except to the extent specifically
allocated to the value of Tenant’s Property or any relocation costs or expenses
incurred by Tenant as a result of such Partial Taking.  The
restoration shall be completed in accordance with §§9.4, 9.5, 9.7, 9.8 and 9.9
with such provisions deemed to apply to condemnation instead of
casualty.

     

    10.3           Condemnation Proceeds Not
Trust Funds.  Notwithstanding anything in this Lease or at law
or equity to the contrary, none of the condemnation award paid to Landlord shall
be deemed trust funds, and Landlord shall be entitled to dispose of such
proceeds as provided in this Article 10.  Tenant expressly
assumes all risk of loss, including a decrease in the use, enjoyment, or value,
of the Leased Property from any Condemnation.

     

    
      
         

      

      
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    ARTICLE
11:  TENANT’S PROPERTY

     

    11.1           Tenant’s
Property.  Tenant shall have the right to install, place, and
use on the Leased Property such fixtures, furniture, equipment, inventory and
other personal property in addition to Landlord’s Personal Property as may be
required or as Tenant may, from time to time, deem necessary or useful to
operate the Leased Property for its permitted purposes.  All fixtures,
furniture, equipment, inventory, and other personal property installed, placed,
or used on the Leased Property which is owned by Tenant or leased by Tenant from
third parties is hereinafter referred to as “Tenant’s Property”.

     

    11.2           Requirements for Tenant’s
Property.  Tenant shall comply with all of the following
requirements in connection with Tenant’s Property:

     

    (a) Tenant
shall, at Tenant’s sole cost and expense, maintain, repair, and replace Tenant’s
Property.

     

    (b) Tenant
shall, at Tenant’s sole cost and expense, keep Tenant’s Property insured against
loss or damage by fire, vandalism and malicious mischief, sprinkler leakage,
earthquake, and other physical loss perils commonly covered by fire and extended
coverage, boiler and machinery, and difference in conditions insurance in an
amount not less than 90% of the then full replacement cost
thereof.  Tenant shall use the proceeds from any such policy for the
repair and replacement of Tenant’s Property.  The insurance shall meet
the requirements of §4.3.

     

    (c) Tenant
shall pay all taxes applicable to Tenant’s Property.

     

    (d) If
Tenant’s Property is damaged or destroyed by fire or any other cause, Tenant
shall have the right, but not the obligation, to repair or replace Tenant’s
Property (unless the same is required for the operation of the Leased Property
in compliance with applicable Legal Requirements, in which case Tenant shall be
required to promptly repair or replace the same) unless Landlord elects to
terminate this Lease pursuant to §9.2.2.

     

    (e) Unless an
Event of Default or any event which, with the giving of notice or lapse of time,
or both, would constitute an Event of Default has occurred, Tenant may remove
Tenant’s Property from the Leased Property from time to time provided that
[i] the items removed are not required to operate the Leased Property for
the Facility Uses (unless such items are being replaced by Tenant); and
[ii] Tenant repairs any damage to the Leased Property resulting from the
removal of Tenant’s Property.

     

    (f) Tenant
shall not, without the prior written consent of Landlord or as otherwise
provided in this Lease, remove any Tenant’s Property or Leased
Property.  Tenant shall, at Landlord’s option, remove Tenant’s
Property upon the termination or expiration of this Lease and shall repair any
damage to the Leased Property resulting from the removal of Tenant’s
Property.  If Tenant fails to remove Tenant’s Property within
30 days after request by Landlord, then Tenant shall be deemed to have
abandoned Tenant’s Property, Tenant’s Property shall become the property of
Landlord, and Landlord may remove, store and dispose of Tenant’s
Property.  In such event, Tenant shall have no claim or right against
Landlord for such property or the value thereof regardless of the disposition
thereof by Landlord.  Tenant shall pay

     

    
      
         

      

      
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    Landlord,
upon demand, all expenses incurred by Landlord in removing, storing, and
disposing of Tenant’s Property and repairing any damage caused by such
removal.  Tenant’s obligations hereunder shall survive the termination
or expiration of this Lease.

     

    (g) Tenant
shall perform its obligations under any equipment lease or security agreement
for Tenant’s Property.  For equipment loans or leases for critical
care equipment and for all other equipment having an original cost in excess of
$250,000.00 per Facility, Tenant shall cause such equipment lessor or lender to
enter into a nondisturbance agreement with Landlord upon terms and conditions
acceptable to Landlord, including, without limitation, the
following:  [i] Landlord shall have the right (but not the
obligation) to assume such equipment lease or security agreement upon the
occurrence of an Event of Default by Tenant hereunder; [ii] such equipment
lessor or lender shall notify Landlord of any default by Tenant under the
equipment lease or security agreement and give Landlord a reasonable opportunity
to cure such default; and [iii] Landlord shall have the right to assign its
interest in the equipment lease or security agreement and nondisturbance
agreement.  Tenant shall, within 30 days after receipt of an
invoice from Landlord, reimburse Landlord for all costs and expenses incurred in
reviewing and approving the equipment lease, security agreement and
nondisturbance agreement, including, without limitation, reasonable attorneys’
fees and costs.

     

    ARTICLE
12:  RENEWAL OPTIONS

     

    12.1           Renewal
Options.  Tenant has the option to renew (“Renewal Option”)
this Lease for one 15-year renewal term (“Renewal Term”).  Tenant can
exercise the Renewal Option only upon satisfaction of the following
conditions:

     

    (a) There
shall be no uncured Event of Default, or any event which with the passage of
time or giving of notice would constitute an Event of Default, at the time
Tenant exercises its Renewal Option nor on the date the Renewal Term is to
commence.

     

    (b) Tenant
shall give Landlord irrevocable written notice of renewal no later than the date
which is [i] 90 days prior to the expiration date of the then current
Term; or [ii] 15 days after Landlord’s delivery of the Termination
Notice as set forth in §9.2.3.

     

    12.2           Effect of
Renewal.  The following terms and conditions will be applicable
if Tenant renews the Lease:

     

    (a) Effective
Date.  Except as otherwise provided in §9.2.3, the effective
date of any Renewal Term will be the first day after the expiration date of the
then current Term.  The first day of each Renewal Term is also
referred to as the Renewal Date.

     

    (b) Investment
Amount.  Effective as of the Renewal Date, a single Investment
Amount will be computed by summing all Investment Advance Amounts.

     

    (c) Rent
Adjustment.  Effective as of the Renewal Date, Landlord shall
calculate Base Rent for the Renewal Term in accordance with the Commitment and
shall issue a new Rent Schedule reflecting the Base Rent.  Until
Tenant receives a revised Rent Schedule from Landlord, Tenant shall for each
month [i] continue to make installments of Base Rent according to the Rent
Schedule in effect on the day before the Renewal Date; and
[ii] within

     

    
      
         

      

      
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    10 days
following Landlord’s issuance of an invoice, pay the difference between the
installment of Base Rent paid to Landlord for such month and the installment of
Base Rent actually due for such month as a result of the renewal of the
Lease.

     

    (d) Other Terms and
Conditions.  Except for the modifications set forth in this
§12.2, all other terms and conditions of the Lease will remain the same for the
Renewal Term.

     

    ARTICLE
13:  RIGHT OF FIRST OPPORTUNITY

     

    13.1           Right of First
Opportunity.  In the event at any time during the Term either
[i] Landlord elects to seek a purchaser of the Leased Property (the “Right
of First Opportunity Event”) or [ii] Landlord receives a bona fide offer
from a third party (the “Offer”) setting forth the terms and conditions upon
which it proposes to purchase the Leased Property which it is interested in
accepting, but in no event shall Landlord be obligated to accept (the “Right of
First Refusal Event”), the following provisions shall apply:

     

    (a) In the
event of the occurrence of the Right of First Opportunity Event, Landlord shall
provide Tenant with written notice of its intent to sell the Leased Property and
its proposed terms with respect thereto (the “Opportunity
Notice”).  Landlord and Tenant shall have a period of 30 days
after Tenant’s receipt of the Opportunity Notice (the “Protected Period”) to
negotiate in good faith with respect to the terms and conditions under which
such transaction shall occur provided that in no event shall the purchase price
be less than the Base Price and shall occur on the terms and conditions set
forth in the Transaction Documents (as defined below) (the “Opportunity
Transaction”).  In the event Landlord and Tenant are unable to reach
agreement within the Protected Period with respect to the terms of the
Opportunity Transaction, then Landlord shall be free to enter into negotiations
with respect to the Opportunity Transaction with any other person or entity;
provided, however, that Landlord shall not be permitted to consummate a
transaction with any other person or entity on terms which are less favorable to
Landlord than those offered to Tenant during the Protected Period without first
offering Tenant the opportunity on written notice setting forth such terms to
consummate the Opportunity Transaction on such alternative terms and conditions
(the “Modified Opportunity Notice”); provided, however, that Tenant shall be
deemed to have waived its right to proceed with such revised Opportunity
Transaction in the event it does not advise Landlord of its election to proceed
within 10 days after its receipt of the Modified Opportunity
Notice.

     

    (b) In the
event of the occurrence of a Right of First Refusal Event, Landlord shall
provide Tenant with a true and correct copy of the Offer (the “Right of First
Refusal Notice”).  Tenant shall have 20 days from its receipt of
the Right of First Refusal Notice to advise Landlord in writing whether it is
prepared to purchase the Leased Property on the same terms and conditions as set
forth in the Offer.  Tenant’s failure to so advise Landlord within
such 20 day period shall be deemed to be a determination by Tenant not to
exercise the right of first refusal provided for herein, at which time Landlord
shall be free to consummate the transaction which was the subject of the Offer;
provided, however, that Landlord shall not be permitted to modify the terms
specified in the Offer in an manner more favorable to the third party than those
reflected in the original Offer (the “Modified Offer”) without first again
offering Tenant the opportunity to consummate a transaction on the terms set
forth in the Modified Offer; provided,

     

    
      
         

      

      
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    however,
that Tenant shall be deemed to have waived its right to proceed with such a
transaction in the event it does not advise Landlord of its election to proceed
within 10 days after its receipt of the Modified Offer.

     

    (c) In the
event Landlord does not consummate a transaction on the terms provided for in
the Offer or the Modified Offer, as applicable, within 90 days after the
date thereof, Landlord shall not be permitted to sell the Leased Property to the
Offeror or to any other party, whether on the terms set forth in the Offer or
the Modified Offer, as applicable, or pursuant to a new Offer without again
first offering Tenant an option to consummate a transaction on the terms
specified in the Offer, the Modified Offer or any new Offer, as applicable;
provided, however, that Tenant shall be deemed to have waived its rights
hereunder in the event it does not advise Landlord of its election to proceed
within 10 days after its receipt of another copy of the Offer or of the
Modified Offer or the new Offer, as applicable.

     

    (d) In the
event Tenant exercises its right of first refusal or right of first opportunity
provided for herein, Tenant and Landlord shall have a period of 30 days in
which to enter into one or more written agreements outlining the terms and
conditions, in addition to those set forth in the Offer or Modified Offer, if
applicable, on which the sale will occur (the “Transaction
Documents”).  In the event Landlord and Tenant fail to execute the
Transaction Documents within said 30 day period, then Tenant shall be
deemed to have forfeited its rights hereunder with respect to such transaction;
provided, however, that Landlord shall not be permitted to sell the Leased
Property to any other person or entity on terms which are less favorable to
Landlord than those offered to Tenant during the Protected Period or beyond the
expiration of the 90 day period provided for in clause (c), without
first complying with the terms of this §13.1 unless Landlord and Tenant failed
to execute the Transaction Documents as a result of Tenant’s bad faith in the
negotiation of the terms of such Transaction Documents, in which case Landlord
shall be permitted to sell the Leased Property to any other person or entity
regardless of the terms of such transaction.

     

    (e) Any sale
of the Leased Property by Landlord pursuant to this §13, other than to Tenant,
shall be subject to the rights of Tenant under this Lease, including, but not
limited to, its rights under this §13.

     

    (f) Any
closing pursuant to, and the consequences to Tenant of failing to close after
exercising its rights under §13.1 shall be in accordance with the terms set
forth in the Offer or Modified Offer and in the Transaction Documents executed
pursuant to the terms of this Article 13.

     

    13.1.1           Fair Market
Value.  The fair market value (the “Fair Market Value”) of the
Leased Property shall be determined as follows.

     

    13.1.1.1                      The
parties shall attempt to determine the Fair Market Value by mutual agreement
within 15 days after giving the purchase notice (the “Negotiation
Period”).  However, if the parties do not agree on the Fair Market
Value during the Negotiation Period, the following provisions shall
apply.

     

    
      
         

      

      
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    13.1.1.2                      Landlord
and Tenant shall each give the other party notice of the name of an acceptable
appraiser five Business Days after the end of the Negotiation
Period.  The two appraisers will then select a third appraiser within
an additional five days.  Each appraiser must demonstrate to the
reasonable satisfaction of both Landlord and Tenant that it has significant
experience in appraising properties similar to the Leased
Property.  Within five days after designation, each appraiser shall
submit a resume to Landlord and Tenant setting forth such appraiser’s
qualifications, including education and experience with similar
properties.  A notice of objections to the qualifications of any
appraiser shall be given within 10 days after receipt of such
resume.  If a party fails to timely object to the qualifications of an
appraiser, then the appraiser shall be conclusively deemed
satisfactory.  If a party gives a timely notice of objection to the
qualifications of an appraiser, then the disqualified appraiser shall be
replaced by an appraiser selected by the qualified appraisers or, if all
appraisers are disqualified, then by an appraiser selected by a commercial
arbitrator acceptable to Landlord and Tenant.

     

    13.1.1.3                      The
Fair Market Value shall be determined by the appraisers within 60 days
thereafter as follows.  Each of the appraisers shall be instructed to
prepare an appraisal of the Leased Property in accordance with the following
instructions:

     

    The
Leased Property is to be valued upon the three conventional approaches to
estimate value known as the Income, Sales Comparison and Cost
Approaches.  Once the approaches are completed, the appraiser
correlates the individual approaches into a final value conclusion.

     

    The three
approaches to estimate value are summarized as follows:

     

    Income
Approach:  This valuation approach recognizes that the value of
the operating tangible and intangible assets can be represented by the expected
economic viability of the business giving returns on and of the
assets.

     

    Sales Comparison
Approach:  This valuation approach is based upon the principle
of substitution.  When a facility is replaceable in the market, the
market approach assumes that value tends to be set at the price of acquiring an
equally desirable substitute facility.  Since healthcare market
conditions change and frequently are subject to regulatory and financing
environments, adjustments need to be considered.  These adjustments
also consider the operating differences such as services and
demographics.

     

    Cost Approach:  This
valuation approach estimates the value of the tangible assets
only.  Value is represented by the market value of the land plus the
depreciated reproduction cost of all improvements and equipment.

     

    In
general, the Income and Sales Comparison Approaches are considered the best
representation of value because they cover both tangible and intangible assets,
consider the operating

     

    
      
         

      

      
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    characteristics
of the business and have the most significant influence on attracting potential
investors.

     

    The
appraised values submitted by the three appraisers shall be ranked from highest
value to middle value to lowest value, the appraised value (highest or lowest)
which is furthest from the middle appraised value shall be discarded, and the
remaining two appraised values shall be averaged to arrive at the Fair Market
Value.

     

    13.1.1.4                      Tenant
shall pay, or reimburse Landlord for, all costs and expenses in connection with
the appraisals.

     

    13.2           [RESERVED]

     

    ARTICLE
14:  NEGATIVE COVENANTS

     

    Until the Obligor Group Obligations
shall have been performed in full, Tenant and Subtenant covenant and agree that
Tenant and Subtenant (and Guarantor where applicable) shall not do any of the
following without the prior written consent of Landlord:

     

    14.1           No
Debt.  Tenant and Subtenant shall not create, incur, assume, or
permit to exist any indebtedness with respect to the Leased Property other than
[i] trade debt incurred in the ordinary course of business;
[ii] indebtedness for Facility working capital purposes; and
[iii] indebtedness that is secured by any Permitted Lien.

     

    14.2           No
Liens.  Tenant and Subtenant shall not create, incur, or permit
to exist any lien, charge, encumbrance, easement or restriction upon the Leased
Property or any lien upon or pledge of any interest in Subtenant, except for
Permitted Liens.

     

    14.3           No
Guaranties.  Tenant and Subtenant shall not create, incur,
assume, or permit to exist any guarantee of any loan or other indebtedness with
respect to the operation of the Leased Property except for the endorsement of
negotiable instruments for collection in the ordinary course of
business.

     

    14.4           No
Transfer.  Tenant and Subtenant shall not sell, lease,
sublease, mortgage, convey, assign or otherwise transfer any legal or equitable
interest in the Leased Property or any part thereof, except for transfers made
in connection with any Permitted Lien or leases to the residents of the Leased
Property or commercial leases with respect to a portion of the Leased Property
comprising in the aggregate less than 2,500 square feet provided such
commercial leases shall be for services that are an integral part of the
Facility.

     

    14.5           No
Dissolution.  Tenant or Subtenant shall not dissolve,
liquidate, merge, consolidate or terminate its existence or sell, other than in
a sale/leaseback or sale/manage back transaction, assign, lease, or otherwise
transfer (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired)
unless, in the case of a merger or consolidation by Tenant, the surviving entity
in such merger or consolidation has a net worth immediately after the merger or
consolidation at least equal to that of the Tenant immediately prior thereto;
provided, however, nothing herein shall preclude a merger or consolidation of
Subtenant into Tenant or dissolution of Subtenant in the event of
the

     

    
      
         

      

      
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    termination
of the Sublease at such time as Tenant is licensed to operate the Facilities
subleased to Subtenant.

     

    14.6           Subordination of Payments to
Affiliates.

     

    (a) Except as
otherwise provided in §14.6(b) below, after the occurrence of an Event of
Default and until such Event of Default is cured or waived in writing, Tenant
and Subtenant shall not make any payments or distributions (including, without
limitation, salary, bonuses, fees, principal, interest, dividends, liquidating
distributions, management fees, cash flow distributions or lease payments) to
any Affiliate or any shareholder, member or partner of Tenant, Subtenant or any
Affiliate.

     

    (b) Notwithstanding
the provisions of §14.6(a) or any other provision to the contrary contained in
this Lease, [1] whether or not there is outstanding an Event of Default,
the following shall be expressly permitted:  [A] salaries paid to
employees of the Facilities or employees of Tenant and Subtenant in the ordinary
course of business; [B] equity contributions and inter-company loans from
Tenant to its direct and indirect subsidiaries made in the ordinary course of
business; and [C] with respect to Subtenant, (i) distributions,
dividends and repayments of inter-company loans to Tenant made in the ordinary
course of business and (ii) payments to Tenant under the Sublease covering
the Facilities and provided that any such payments will be held in trust by
Tenant for the sole purpose of paying Rent to Landlord; and [2] so long as
there is no Event of Default under §8.1(a) of this Lease, Tenant may pay cash
dividends to any preferred shareholder of Tenant who is not an Affiliate of
Tenant.

     

    14.7           Change of Location or
Name.  Tenant and Subtenant shall not, without providing
Landlord with 30 days prior notice thereof, change any of the
following:  [i] the location of the principal place of business
or chief executive office of Tenant or Subtenant, or any office where any of
Tenant’s or Subtenant’s books and records are maintained; [ii] the name
under which Tenant or Subtenant conducts any of its business or operations; or
[iii] reorganize or otherwise change its respective Organization
State.

     

    ARTICLE
15:  AFFIRMATIVE COVENANTS

     

    15.1           Perform
Obligations.  Tenant and Subtenant shall each perform all of
its obligations under this Lease, the Government Authorizations, the Permitted
Exceptions, and all Legal Requirements.  If applicable, Tenant and
each Subtenant shall take all necessary action to obtain all Government
Authorizations required for the operation of the Facility as soon as possible
after the Effective Date.

     

    15.2           Proceedings to Enjoin or
Prevent Construction.  If any proceedings are filed seeking to
enjoin or otherwise prevent or declare invalid or unlawful Tenant’s
construction, occupancy, maintenance, or operation of the Facility or any
portion thereof, Tenant will cause such proceedings to be vigorously contested
in good faith, and in the event of an adverse ruling or decision, prosecute all
allowable appeals therefrom, and will, without limiting the generality of the
foregoing, resist the entry or seek the stay of any temporary or permanent
injunction that may be entered, and use its best commercially reasonable efforts
to bring about a favorable and speedy disposition of all such proceedings and
any other proceedings.

     

    
      
         

      

      
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    15.3           Documents and
Information.

     

    15.3.1           Furnish
Documents.  Tenant and each Subtenant shall periodically during
the term of the Lease deliver to Landlord the Annual Financial Statements,
Periodic Financial Statements, Annual Facility Budget, Annual Company Budget and
all other documents, reports, schedules and copies described on Exhibit E
within the specified time periods.  With each delivery of Annual
Financial Statements and Periodic Financial Statements (other than the monthly
Facility Financial Statement) to Landlord, Tenant and each Subtenant shall also
deliver to Landlord a certificate signed by the Chief Financial Officer, general
partner or managing member (as applicable) of Tenant and each Subtenant, an
Annual Facility Financial Report or Quarterly Facility Financial Report, as
applicable, and a Quarterly Facility Accounts Receivable Aging Report all in the
form of Exhibit F.  In addition, Tenant and each Subtenant shall
deliver to Landlord the applicable Annual Facility Financial Report and the
applicable Quarterly Facility Accounts Receivable Aging Report (based upon
internal financial statements) within 60 days after the end of each fiscal
year.  After the occurrence of an Event of Default and receipt of
Landlord’s written request, Tenant shall deliver to Landlord an updated Annual
Facility Budget and Annual Company Budget (based on a 12-month rolling forward
period) within 10 Business Days after receipt of Landlord’s
request.

     

    15.3.2           Furnish
Information.  Tenant and each Subtenant shall [i] promptly
supply Landlord with such information concerning its financial condition,
affairs and property, as Landlord may reasonably request from time to time
hereafter; [ii] promptly notify Landlord in writing of any condition or
event that constitutes a breach or event of default of any term, condition,
warranty, representation, or provisions of this Lease or any other agreement,
and of any material adverse change in its financial condition;
[iii] maintain a standard and modern system of accounting; [iv] permit
Landlord or any of its agent or representatives to have access to and to examine
all of its books and records regarding the financial condition of the Facility
at any time or times hereafter during business hours and after reasonable oral
or written notice; and [v] permit Landlord to copy and make abstracts from
any and all of said books and records subject to any limitations imposed by
State or federal law with respect to the confidentiality of patient and employee
records.

     

    15.3.3           Further Assurances and
Information.  Tenant shall, on request of Landlord from time to
time, execute, deliver, and furnish documents as may be necessary to fully
consummate the transactions contemplated under this Lease.  Within
15 days after a request from Landlord, Tenant and each Subtenant shall
provide to Landlord such additional information regarding Tenant, Tenant’s
financial condition, Subtenant, each Subtenant’s financial condition or the
Facility as Landlord, or any existing or proposed creditor of Landlord, or any
auditor or underwriter of Landlord, may reasonably require from time to time,
including, without limitation, a current Tenant’s Certificate and Facility
Financial Report in the form of Exhibit F.  From and after and
during the continuance of an Event of Default, Landlord shall have the right to
require Tenant to provide to Landlord, at Tenant’s expense, an appraisal
prepared by an MAI appraiser setting forth the current fair market value of the
Leased Property.

     

    15.3.4           Material
Communications.  Tenant and each Subtenant shall transmit to
Landlord, within five days after receipt thereof, any material communication
affecting a Facility, this Lease, the Legal Requirements or the Government
Authorizations, and Tenant and each

     

    
      
         

      

      
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    Subtenant
will promptly respond to Landlord’s inquiry with respect to such
information.  Tenant and each Subtenant shall notify Landlord in
writing within five days after Tenant or any Subtenant has knowledge of any
potential, threatened or existing litigation or proceeding against, or
investigation of, Tenant, Subtenant, Guarantor or the Facility that would
reasonably be expected to adversely affect the right to operate the Facility or
Landlord’s title to the Facility or Tenant’s interest therein.

     

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

     

    15.4           Compliance With
Laws.  Tenant and each Subtenant shall comply with all Legal
Requirements and keep all Government Authorizations in full force and
effect.  Subject to Tenant’s right to contest the same in accordance
with the terms of this Lease, Tenant and each Subtenant shall pay when due all
taxes and governmental charges of every kind and nature that are assessed or
imposed upon Tenant and each Subtenant, respectively, at any time during the
term of the Lease, including, without limitation, all income, franchise, capital
stock, property, sales and use, business, intangible, employee withholding, and
all taxes and charges relating to Tenant’s and each Subtenant’s respective
business and operations at the Leased Property.  Tenant and each
Subtenant shall be solely responsible for compliance with all Legal
Requirements, including the ADA, and Landlord shall have no responsibility for
such compliance.

     

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

     

    15.6           Existence and Change in
Ownership.  Except as otherwise specifically provided herein,
Tenant, Subtenant and Guarantor shall maintain its existence throughout the term
of this Lease and any change in the ownership of Tenant, Subtenant or Guarantor,
directly or indirectly, shall require Landlord’s prior written
consent.

     

    
      
         

      

      
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    15.7           Financial
Covenants.  The defined terms used in this section are defined
in §15.7.1.  The method of valuing assets shall be consistent with the
Financial Statements.  The following financial covenants shall be met
throughout the term of this Lease:

     

    15.7.1           Definitions.

     

    (a) “Denominator
Amount” means the Base Rent payments under this Lease and all other debt service
and equipment lease payments relating to the Facilities for the applicable
period.

     

    (b) “Portfolio
Cash Flow” means the aggregate net income arising from all Facilities under this
Lease as reflected on the Facility Financial Statement of each Facility plus
[i] the amount of the provision for depreciation and amortization; plus
[ii] the amount of the provision for management fees; plus [iii] the
amount of the provision for income taxes; plus [iv] the amount of the
provision for Base Rent payments and interest and equipment lease payments, if
any, relating to the Facilities; minus [v] an imputed management fee equal
to 5% of gross revenues of the Facilities (net of contractual allowances); and
minus [vi] an imputed replacement reserve of $250.00 per unit at the
Facilities, per year.

     

    (c) “Portfolio
Cash Flow Shortfall” means, as of the end of any fiscal quarter, the amount by
which the Denominator Amount for the trailing six-month period exceeds the
Portfolio Cash Flow for such period.

     

    (d) “Portfolio
Coverage Ratio” is the ratio of [i] Portfolio Cash Flow for each applicable
period; to [ii] the Denominator Amount for such applicable
period.

     

    15.7.2           Coverage
Ratio.  Tenant shall maintain as at the end of each fiscal
quarter (on a trailing six-month basis) a Portfolio Coverage Ratio of not less
than 1.00 to 1.00.  Notwithstanding the foregoing, Tenant shall not be
deemed in violation of the terms of this §15.7.2 if the Portfolio Coverage Ratio
as at the end of any quarter on a trailing six-month basis is greater than .50
to 1.00 but less than 1.00 to 1.00, and Tenant provides to Landlord, within 30
days after the end of such quarter, additional cash collateral securing the
Obligor Group Obligations in an amount equal to the Portfolio Cash Flow
Shortfall for such period.  Thereafter, Tenant and Landlord shall
adjust the amount of such cash collateral so that it equals the Portfolio Cash
Shortfall as at the end of the then most recently ended fiscal
quarter.  Tenant shall enter into such Cash Collateral Security
Agreement and other arrangements with respect to such cash collateral as
Landlord may reasonably require.  Landlord shall promptly release such
cash collateral back to Tenant if and when Tenant shall next have maintained as
at the end of any fiscal quarter on a trailing six-month basis a Portfolio
Coverage Ratio of not less than 1.00 to 1.00.

     

    15.8           Facility Licensure and
Certification.

     

    15.8.1           Notice of
Inspection.  Tenant and Subtenant, as applicable, shall
[i] give written notice to Landlord within five days after an inspection of
the Facility with respect to health care licensure or certification has
occurred; and [ii] deliver to Landlord copies of each of the reports,
notices, correspondence and all other items and documents listed under item
no. 18

     

    
      
         

      

      
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    of
Exhibit E within five days after receipt thereof.  Tenant and
Subtenant acknowledge that each has reviewed Exhibit E and agrees to the
foregoing obligation.

     

    15.8.2           Material
Deficiencies.  If Tenant or Subtenant receives a Facility
survey or inspection report with material deficiencies that threatens a loss of
licensure or, if applicable, certification of the Facility or the imposition of
a ban on admissions to the Facility (the “Material Deficiencies”) or notice of
failure to comply with a previously submitted plan of correction or an HIPDB
adverse action report related to any Material Deficiencies, Tenant and Subtenant
shall cure all of the Material Deficiencies and implement all corrective actions
with respect thereto by the date required by the regulatory authority and shall
deliver evidence of same to Landlord.

     

    15.9           Transfer of License and
Facility Operations.  If this Lease is terminated due to
expiration of the Term, pursuant to an Event of Default or for any reason other
than Tenant’s purchase of the Leased Property, or if Tenant or Subtenant vacates
the Leased Property (or any part thereof) without termination of this Lease
(other than during periods of repair or reconstruction after damage, destruction
or a Taking, the following provisions shall be immediately
effective:

     

    15.9.1           Licensure.  Tenant
and each Subtenant shall execute, deliver and file all documents and statements
requested by Landlord to effect the transfer of the Facility license and
Government Authorizations to a replacement operator designated by Landlord
(“Replacement Operator”), subject to any required approval of governmental
regulatory authorities, and Tenant and each Subtenant shall provide to Landlord
all information and records required by Landlord in connection with the transfer
of the license and Government Authorizations.

     

    15.9.2           Facility
Operations.  In order to facilitate a responsible and efficient
transfer of the operations of the Facility, Tenant and Subtenant shall, if and
to the extent requested by Landlord, [i] deliver to Landlord the most
recent updated reports, notices, schedules and documents listed under item
nos. 17, 18, 19, 20 and 21 of Exhibit E; [ii] assuming Tenant or
Subtenant has not already vacated the Leased Property, continue and maintain the
operation of the Facility in the ordinary course of business, including using
its commercially reasonable efforts to retain the residents at the Facility to
the fullest extent practicable and consistent with applicable laws and
regulations, until transfer of the Facility operations to the Replacement
Operator is completed; [iii] enter into such management agreements,
operations transfer agreements and other types of agreements that may be
reasonably requested by Landlord or the Replacement Operator; provided, however,
in no event shall Tenant or Subtenant be required to permit the Replacement
Operator to operate the Leased Property under their licenses unless they receive
confirmation that doing so will not violate applicable Legal Requirements and
they get appropriate indemnities from the Replacement Operator in form and
substance reasonably acceptable to Tenant and Subtenant; and [iv] provide
reasonable access during normal business hours and on reasonable advance notice
for Landlord and its agents to show the Facility to potential replacement
operators.  Tenant and Subtenant consent to the distribution by
Landlord to potential replacement operators of Facility financial statements,
licensure reports, financial and property due diligence materials and other
documents, materials and information relating to the Facility.  The
provisions of this section do not create or establish any rights in Tenant,
Subtenant or any third party and Landlord reserves all rights and remedies
relating to termination of this Lease.

     

    
      
         

      

      
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    15.10           Bed Operating
Rights.  Tenant and Subtenant acknowledge and agree that the
rights to operate the beds located at the Facility as set forth on
Exhibit C under the law of the Facility State, to relocate such bed
operating rights to another location or locations, and to transfer such bed
operating rights to third parties, are property of the Landlord and are an
integral part of the real and personal property that constitutes the Leased
Property.  Tenant and Subtenant have only the right to use of such
rights during the term of this Lease and subject to its terms and
conditions.  All operating rights shall automatically revert to
Landlord or Landlord’s designee upon the expiration or termination of this Lease
for any reason whatsoever (other than Tenant’s purchase of the Leased Property)
without any requirement of a transfer or the payment of additional
consideration.

     

    15.11           Power of
Attorney.  Effective upon [i] the occurrence and during
the continuance of an Event of Default, or [ii] termination of this Lease
for any reason other than Tenant’s purchase of the Leased Property, Tenant and
Subtenant hereby irrevocably and unconditionally appoint Landlord, or Landlord’s
authorized officer, agent, employee or designee, as Tenant’s and Subtenant’s
true and lawful attorney-in-fact, to act for Tenant and Subtenant in Tenant’s
and Subtenant’s respective name, place, and stead, to execute, deliver and file
all applications and any and all other necessary documents and statements to
effect the issuance, transfer, reinstatement, renewal and/or extension of the
Facility license and all Governmental Authorizations issued to Tenant and
Subtenant or applied for by Tenant and Subtenant in connection with Tenant’s and
Subtenant’s operation of the Facility, to permit any designee of Landlord or any
other transferee to operate the Facility under the Governmental Authorizations,
and to do any and all other acts incidental to any of the foregoing but only in
the event Tenant or Subtenant fail to take such actions or execute such
documents after a request from Landlord.  Tenant and Subtenant
irrevocably and unconditionally grant to Landlord as their respective
attorney-in-fact full power and authority to do and perform every act necessary
and proper to be done in the exercise of any of the foregoing powers as fully as
Tenant and Subtenant might or could do if personally present or acting, with
full power of substitution, hereby ratifying and confirming all that said
attorney shall lawfully do or cause to be done by virtue hereof.  This
power of attorney is coupled with an interest and is irrevocable prior to
Tenant’s purchase of the Leased Property.  Landlord shall provide
Tenant and Subtenant with copies of any documents filed and/or with a summary of
any actions taken pursuant to this power of attorney.

     

    15.12           Information and
Images.  Tenant grants to Landlord and Landlord’s Affiliates
the right and license during the Term to utilize as set forth herein information
describing, and photographic or other images depicting, the exterior and/or
interior of the Leased Property and Facilities (but not the names of the
Facilities or Tenant nor images that include any of the persons residing in the
Facilities unless Landlord has specifically obtained the written consent of such
persons to have their images included) (the “Information and
Images”).  Such Information and Images may be reproduced, used,
published, distributed, and displayed by Landlord and Landlord’s Affiliates
solely in connection with any promotional or marketing materials,
advertisements, reports, or web sites relating to the business of
Landlord.  Provided Landlord’s use of the Information and Images
complies with the limitations set forth in this §15.12, Tenant expressly waives
and releases [i] any right to receive compensation for such reproduction,
use, publication, distribution, or display; [ii] any right to inspect or
approve such Information and Images prior to such reproduction, use,
publication, distribution, or display; or

     

    
      
         

      

      
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    [iii] any
rights under any copyright, patent, trademark, or similar statute or regulation
with respect to such use, publication, distribution or display.

     

    ARTICLE
16:  ALTERATIONS, CAPITAL IMPROVEMENTS, AND SIGNS

     

    16.1           Prohibition on Alterations
and Improvements.  Except for Permitted Alterations (as
hereinafter defined), Tenant shall not make any structural or nonstructural
changes, alterations, additions and/or improvements (hereinafter collectively
referred to as “Alterations”) to the Leased Property.

     

    16.2           Approval of
Alterations.  If Tenant desires to perform any Permitted
Alterations, Tenant shall deliver to Landlord plans, specifications, drawings,
and such other information as may be reasonably requested by Landlord
(collectively the “Plans and Specifications”) showing in reasonable detail the
scope and nature of the Alterations that Tenant desires to
perform.  It is the intent of the parties hereto that the level of
detail shall be comparable to that which is referred to in the architectural
profession as “design development drawings” as opposed to working or biddable
drawings.  Landlord agrees not to unreasonably delay its review of the
Plans and Specifications.  Within 30 days after receipt of an
invoice, Tenant shall reimburse Landlord for all costs and expenses incurred by
Landlord in reviewing and, if required, approving or disapproving the Plans and
Specifications, inspecting the Leased Property, and otherwise monitoring
compliance with the terms of this Article 16.  Tenant shall
comply with the requirements of §16.4 in making any Permitted
Alterations.

     

    16.3           Permitted
Alterations.  Permitted Alterations means any one of the
following:  [i] Alterations approved by Landlord;
[ii] Alterations required under §7.2; [iii] Alterations affecting the
structure of the Leased Property and having a total cost of less than
$250,000.00 individually or in the aggregate; [iv] repairs, rebuilding and
restoration required or undertaken pursuant to §9.4; or [v] non-structural
Alterations such as painting, landscaping, wallpapering, installing new floor
coverings, etc. without regard to the cost thereof.

     

    16.4           Requirements for Permitted
Alterations.  Tenant shall comply with all of the following
requirements in connection with any Permitted Alterations:

     

    (a) The
Permitted Alterations shall be made in accordance with the approved Plans and
Specifications.

     

    (b) The
Permitted Alterations and the installation thereof shall comply with all
applicable legal requirements and insurance requirements.

     

    (c) The
Permitted Alterations shall be done in a good and workmanlike manner, shall not
impair the value or the structural integrity of the Leased Property, and shall
be free and clear of all mechanic’s liens.

     

    (d) For any
Permitted Alterations having a total cost of $100,000.00 or more, Tenant shall
deliver to Landlord a payment and performance bond, with a surety acceptable to
Landlord, in an amount equal to the estimated cost of the Permitted Alterations,
guaranteeing the completion of the work free and clear of liens and in
accordance with the

     

    
      
         

      

      
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    approved
Plans and Specifications, and naming Landlord and any mortgagee of Landlord as
joint obligees on such bond.

     

    (e) Tenant
shall, at Tenant’s expense, obtain a builder’s completed value risk policy of
insurance insuring against all risks of physical loss, including collapse and
transit coverage, in a nonreporting form, covering the total value of the work
performed, and equipment, supplies, and materials, and insuring initial
occupancy.  Landlord and any mortgagee of Landlord shall be additional
insureds of such policy.  Landlord shall have the right to approve the
form and substance of such policy.

     

    (f) Tenant
shall pay the premiums required to increase the amount of the insurance
coverages required by Article 4 to reflect the increased value of the
Improvements resulting from installation of the Permitted Alterations, and shall
deliver to Landlord a certificate evidencing the increase in
coverage.

     

    (g) Tenant
shall, not later than 60 days after completion of the Permitted
Alterations, deliver to Landlord a revised “as-built” survey of the respective
Facility if the Permitted Alterations altered the Land or “footprint” of the
Improvements and an “as-built” set of Plans and Specifications for the Permitted
Alterations in form and substance satisfactory to Landlord.

     

    (h) Tenant
shall, not later than 30 days after Landlord sends an invoice, reimburse
Landlord for any reasonable costs and expenses, including attorneys’ fees and
architects’ and engineers’ fees, incurred in connection with reviewing and
approving the Permitted Alterations and ensuring Tenant’s compliance with the
requirements of this section.  The daily fee for Landlord’s consulting
engineer is $750.00.

     

    16.5           Ownership and Removal of
Permitted Alterations.  The Permitted Alterations shall become
a part of the Leased Property, owned by Landlord, and leased to Tenant subject
to the terms and conditions of this Lease.  Tenant shall not be
required or permitted to remove any Permitted Alterations.

     

    16.6           Minimum Qualified Capital
Expenditures.  During each calendar year of the Term, Tenant
shall expend at least $380.00 per unit for Qualified Capital Expenditures to
improve the Facilities (provided that as to any Facility with respect to which a
certificate of occupancy was not issued prior to the end of the first calendar
year, the minimum qualified capital expenditures required by this section shall
be waived until the calendar year immediately following the year in which such
certificate of occupancy is issued).  Thereafter throughout the Term,
Tenant shall expend such amount each calendar year, increased annually in
proportion to increases in the CPI.  At least annually, at the request
of Landlord, Landlord and Tenant shall review capital expenditures budgets and
agree on modifications, if any, required by changed circumstances and the
changed conditions of the Leased Property.

     

    16.7           Signs.  Tenant
may, at its own expense, erect and maintain identification signs at the Leased
Property, provided such signs comply with all laws, ordinances, and
regulations.  Upon the termination or expiration of this Lease (other
than as a result of the

     

    
      
         

      

      
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    exercise
by Tenant of its purchase option), Tenant shall, within 30 days after
notice from Landlord, remove the signs and restore the Leased Property to its
original condition.

     

    ARTICLE
17:  CONTINGENT PAYMENT

     

    17.1           Contingent
Payment.  Landlord has no current commitment to make a
Contingent Payment Advance.

     

    ARTICLE
18:  ASSIGNMENT AND SALE OF LEASED PROPERTY

     

    18.1           Prohibition on Assignment
and Subletting.  Tenant acknowledges that Landlord has entered
into this Lease in reliance on the personal services and business expertise of
Tenant.  Tenant may not assign, sublet, mortgage, hypothecate, pledge,
grant a right of first refusal or transfer any interest in this Lease, or in the
Leased Property, in whole or in part, without the prior written consent of
Landlord, which Landlord may withhold in its sole and absolute
discretion.  The following transactions will be deemed an assignment
or sublease requiring Landlord’s prior written consent:  [i] an
assignment by operation of law; [ii] an imposition (whether or not
consensual) of a lien, mortgage, or encumbrance upon Tenant’s interest in the
Lease; [iii] except as otherwise permitted by §§14.4 and 18.3, an
arrangement (including, but not limited to, management agreements, concessions,
licenses, and easements) which allows the use or occupancy of all or part of the
Leased Property by anyone other than Tenant; and [iv] a material change of
ownership of Tenant other than changes resulting from the trading of Tenant’s
stock on a national stock exchange.  Landlord’s consent to any
assignment, right of first refusal or sublease will not release Tenant (or any
guarantor) from its payment and performance obligations under this Lease, but
rather Tenant, any guarantor, and Tenant’s assignee or sublessee will be jointly
and severally liable for such payment and performance.  An assignment,
right of first refusal or sublease without the prior written consent of Landlord
will be void at Landlord’s option.  Landlord’s consent to one
assignment, right of first refusal or sublease will not waive the requirement of
its consent to any subsequent assignment or sublease.  Notwithstanding
the foregoing, Tenant may enter into a Sublease with each Subtenant for each
Facility provided that each Sublease complies with §18.2 and Tenant may enter
into any interim sublease and management agreement required to comply with
licensure requirements until such time as the license to operate the Facility is
issued in Tenant’s name.

     

    18.2           Requests for Landlord’s
Consent to Assignment, Sublease or Management Agreement.  If
Tenant is required to obtain Landlord’s consent to a specific assignment,
sublease, or management agreement, Tenant shall give Landlord [i] the name
and address of the proposed assignee, subtenant or manager; [ii] a copy of
the proposed assignment, sublease or management agreement; [iii] reasonably
satisfactory information about the nature, business and business history of the
proposed assignee, subtenant, or manager and its proposed use of the Leased
Property; and [iv] banking, financial, and other credit information, and
references about the proposed assignee, subtenant or manager sufficient to
enable Landlord to determine the financial responsibility and character of the
proposed assignee, subtenant or manager.  Any assignment, sublease or
management agreement shall contain provisions to the effect that [a] such
assignment, sublease or management agreement is subject and subordinate to all
of the terms and provisions of this Lease and to the rights of Landlord and that
the assignee, subtenant or manager shall comply with all applicable provisions
of this Lease; [b] such assignment,

     

    
      
         

      

      
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    sublease
or management agreement may not be modified without the prior written consent of
Landlord not to be unreasonably withheld or delayed; [c] if this Lease
shall terminate before the expiration of such assignment, sublease or management
agreement, the assignee, subtenant or manager thereunder will, solely at
Landlord’s option and only upon the express written notice of attornment from
Landlord, attorn to Landlord and waive any right the assignee, subtenant or
manager may have to terminate the assignment, sublease or management agreement
or surrender possession thereunder as a result of the termination of this Lease;
and [d] if the assignee, subtenant or manager receives a written notice
from Landlord stating that Tenant is in default under this Lease, the assignee,
subtenant or manager shall thereafter pay all rentals or payments under the
assignment, sublease or management agreement directly to Landlord until such
default has been cured.  Any attempt or offer by an assignee,
subtenant or manager to attorn to Landlord shall not be binding or effective
without the express written consent of Landlord.  Tenant hereby
collaterally assigns to Landlord, as security for the performance of its
obligations hereunder, all of Tenant’s right, title, and interest in and to any
assignment, sublease or management agreement now or hereafter existing for all
or part of the Leased Property.  Tenant shall, at the request of
Landlord, execute such other instruments or documents as Landlord may request to
evidence this collateral assignment.  If Landlord, in its sole and
absolute discretion, consents to such assignment, sublease, or management
agreement, such consent shall not be effective until [i] a fully executed
copy of the instrument of assignment, sublease or management agreement has been
delivered to Landlord; [ii] in the case of an assignment, Landlord has
received a written instrument in which the assignee has assumed and agreed to
perform all of Tenant’s obligations under the Lease; and [iii] Tenant has
paid to Landlord a fee in the amount equal to the lesser of Landlord’s actual
out-of-pocket costs and expenses and $2,500.00 (applies only to consent requests
after the Closing); and [iv] Landlord has received reimbursement from
Tenant or the assignee for all attorneys’ fees and expenses and all other
reasonable out-of-pocket expenses incurred in connection with determining
whether to give its consent, giving its consent and all matters relating to the
assignment (applies only to consent requests after the Closing).

     

    18.3           Agreements with
Residents.  Notwithstanding §18.1, Tenant and Subtenant may
enter into an occupancy agreement with residents of the Leased Property without
the prior written consent of Landlord provided that [i] the agreement does
not provide for lifecare services; [ii] the agreement does not contain any
type of rate lock provision or rate guaranty for more than one calendar year;
[iii] the agreement does not provide for any rent reduction or waiver other
than for an introductory period not to exceed six months; [iv] Tenant and
Subtenant may not collect rent for more than one month in advance, other than
one month of rent collected to be held as security for the performance of the
resident’s obligation to Tenant and Subtenant; and [v] all residents of the
Leased Property are accurately shown in accounting records for the
Facility.  Without the prior written consent of Landlord, Tenant and
Subtenant shall not materially change the form of resident occupancy agreement
that was submitted to Landlord prior to the Effective Date.

     

    18.4           Sale of Leased
Property.  If Landlord or any subsequent owner of the Leased
Property sells the Leased Property, its liability for the performance of its
agreements in this Lease will end on the date of the sale of the Leased
Property, and Tenant will look solely to the purchaser for the performance of
those agreements.  For purposes of this section, any holder of a
mortgage or security agreement which affects the Leased Property at any time,
and any landlord under any lease to which this Lease is subordinate at any time,
will be a subsequent

     

    
      
         

      

      
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    owner of
the Leased Property when it succeeds to the interest of Landlord or any
subsequent owner of the Leased Property.

     

    18.5           Assignment by
Landlord.  Landlord may transfer, assign, mortgage,
collaterally assign, or otherwise dispose of Landlord’s interest in this Lease
or the Leased Property.

     

    ARTICLE
19:  HOLDOVER AND SURRENDER

     

    19.1           Holding
Over.  If Tenant, with or without the express or implied
consent of Landlord, continues to hold and occupy the Leased Property (or any
part thereof) after the expiration of the Term or earlier termination of this
Lease (other than pursuant to Tenant’s purchase of the Leased Property), such
holding over beyond the Term and the acceptance or collection of Rent in the
amount specified below by Landlord shall operate and be construed as creating a
tenancy from month to month and not for any other term
whatsoever.  Said month-to-month tenancy may be terminated by Landlord
by giving Tenant five days written notice, and at any time thereafter Landlord
may re-enter and take possession of the Leased Property.  If, without
Landlord’s consent or at Landlord’s request, Tenant continues after the
expiration of the Term or earlier termination of this Lease to hold and occupy
the Leased Property whether as a month-to-month tenant or a tenant at sufferance
or otherwise, Tenant shall pay Rent for each month in an amount equal to the sum
of [i] one and one-half (1-1/2) times the Base Rent payable during the
month in which such expiration or termination occurs, plus [ii] all General
Additional Rent accruing during the month, plus [iii] any and all other
sums payable by Tenant pursuant to this Lease.  During any continued
tenancy after the expiration of the Term or earlier termination of this Lease,
Tenant shall be obligated to perform and observe all of the terms, covenants and
conditions of this Lease, but shall have no rights hereunder other than the
right, to the extent given by applicable law, to continue its occupancy and use
of the Leased Property until the tenancy is terminated.  Nothing
contained herein shall constitute the consent, express or implied, of Landlord
to the holding over of Tenant after the expiration or earlier termination of
this Lease.

     

    19.2           Surrender.  Except
for [i] Permitted Alterations; [ii] normal and reasonable wear and
tear (subject to the obligation of Tenant to maintain the Leased Property in
good order and repair during the Term); and [iii] damage and destruction
not required to be repaired by Tenant, Tenant shall surrender and deliver up
each Facility which is then subject to this Lease at the expiration or
termination of the Term in as good order and condition as of the date that
Facility was added to the Lease.  The provisions of this §19.2 shall
not apply in the event of the termination of the Lease upon the exercise by
Tenant of the rights set forth in Article 13.

     

    19.3           Indemnity.  If
Tenant fails to surrender the entire Leased Property or any part thereof upon
the expiration or termination of this Lease in a timely manner and in accordance
with the provisions of this Lease, in addition to any other liabilities to
Landlord accruing therefrom, Tenant shall defend, indemnify and hold Landlord,
its principals, officers, directors, agents, and employees harmless from loss or
liability resulting from such failure, including, without limiting the
generality of the foregoing, loss of rental with respect to any new lease in
which the rental payable thereunder exceeds the Rent collected by Landlord
pursuant to this Lease during Tenant’s hold-over and any claims by any proposed
new tenant founded on

     

    
      
         

      

      
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    Tenant’s
failure to surrender the Leased Property.  The provisions of this
Article 19 shall survive the expiration or termination of this
Lease.  The provisions of this §19.3 shall not apply in the event of
the termination of this Lease upon the exercise by Tenant of the rights set
forth in Article 13.

     

    ARTICLE
20:  [RESERVED]

     

    ARTICLE
21:  QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT AND ESTOPPEL
CERTIFICATES

     

    21.1           Quiet
Enjoyment.  So long as Tenant performs all of its obligations
under this Lease, Tenant’s possession of the Leased Property will not be
disturbed by Landlord or any party claiming by, through or under
Landlord.

     

    21.2           Subordination.  Subject
to the terms and conditions of this section, this Lease and Tenant’s rights
under this Lease are subordinate to any ground lease or underlying lease, first
mortgage, first deed of trust, or other first lien against the Leased Property,
together with any renewal, consolidation, extension, modification or replacement
thereof, which now or at any subsequent time affects the Leased Property or any
interest of Landlord in the Leased Property, except to the extent that any such
instrument expressly provides that this Lease is superior.  The
foregoing subordination provision is expressly conditioned upon any lessor or
mortgagee being obligated and bound to recognize Tenant as the tenant under this
Lease, and such lessor or mortgagee shall have no right to disturb Tenant’s
possession, use and occupancy of the Leased Property or Tenant’s enjoyment of
its rights under this Lease unless and until an Event of Default occurs
hereunder.  Any foreclosure action or proceeding by any mortgagee with
respect to the Leased Property shall not affect Tenant’s rights under this Lease
and shall not terminate this Lease unless and until an Event of Default occurs
hereunder.  The foregoing provisions will be self-operative, and no
further instrument will be required in order to effect them.  However,
Tenant shall execute, acknowledge and deliver to Landlord, at any time and from
time to time upon demand by Landlord, such documents as may be requested by
Landlord or any mortgagee or any holder of any mortgage or other instrument
described in this section, to confirm or effect any such subordination, provided
that any such document shall include a nondisturbance provision as set forth in
this section satisfactory to Tenant.  Any mortgagee of the Leased
Property shall be deemed to be bound by the nondisturbance provision set forth
in this section.  If Tenant fails or refuses to execute, acknowledge,
and deliver any such document within 20 days after written demand, Landlord
may execute acknowledge and deliver any such document on behalf of Tenant as
Tenant’s attorney-in-fact.  Tenant hereby constitutes and irrevocably
appoints Landlord, its successors and assigns, as Tenant’s attorney-in-fact to
execute, acknowledge, and deliver on behalf of Tenant any documents described in
this section.  This power of attorney is coupled with an interest and
is irrevocable.

     

    21.3           Attornment.  If
any holder of any mortgage, indenture, deed of trust, or other similar
instrument described in §21.2 succeeds to Landlord’s interest in the Leased
Property, Tenant will pay to such holder all Rent subsequently payable under
this Lease.  Tenant shall, upon request of anyone succeeding to the
interest of Landlord, automatically become the tenant of, and attorn to, such
successor in interest without changing this Lease.  The successor in
interest will not be bound by [i] any payment of Rent for more than one
month in advance unless

     

    
      
         

      

      
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    actually
received by such successor; [ii] any amendment or modification of this
Lease thereafter made without its consent as provided in this Lease;
[iii] any claim against Landlord arising prior to the date on which the
successor succeeded to Landlord’s interest; or [iv] any claim or offset of
Rent against Landlord.  Upon request by Landlord or such successor in
interest and without cost to Landlord or such successor in interest, Tenant will
execute, acknowledge and deliver an instrument or instruments confirming the
attornment.  If Tenant fails or refuses to execute, acknowledge, and
deliver any such instrument within 20 days after written demand, then
Landlord or such successor in interest will be entitled to execute, acknowledge,
and deliver any document on behalf of Tenant as Tenant’s
attorney-in-fact.  Tenant hereby constitutes and irrevocably appoints
Landlord, its successors and assigns, as Tenant’s attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any such document.  This
power of attorney is coupled with an interest and is irrevocable.

     

    21.4           Estoppel
Certificates.  At the request of Landlord or any mortgagee or
purchaser of the Leased Property, Tenant shall execute, acknowledge, and deliver
an estoppel certificate, in recordable form, in favor of Landlord or any
mortgagee or purchaser of the Leased Property certifying the
following:  [i] that the Lease is unmodified and in full force
and effect, or if there have been modifications that the same is in full force
and effect as modified and stating the modifications; [ii] the date to
which Rent and other charges have been paid; [iii] whether Tenant or
Landlord is in default or whether there is any fact or condition known to
Landlord or Tenant which, with notice or lapse of time, or both, would
constitute a default, and specifying any existing default, if any;
[iv] that Tenant has accepted and occupies the Leased Property;
[v] that Tenant has no defenses, set-offs, deductions, credits, or
counterclaims against Landlord, if that be the case, or specifying such that
exist; and [vi] such other information as may reasonably be requested by
Landlord or any mortgagee or purchaser.  Any purchaser or mortgagee
may rely on this estoppel certificate.  If Tenant fails to deliver the
estoppel certificates to Landlord within 10 days after the request of
Landlord, then Tenant shall be deemed to have certified that [a] the Lease
is in full force and effect and has not been modified, or that the Lease has
been modified as set forth in the certificate delivered to Tenant;
[b] Tenant has not prepaid any Rent or other charges except for the current
month; [c] Tenant has accepted and occupies the Leased Property;
[d] neither Tenant nor Landlord is in default nor is there any fact or
condition which, with notice or lapse of time, or both, would constitute a
default; and [e] Tenant has no defenses, set-offs, deductions, credits, or
counterclaims against Landlord.  Tenant hereby irrevocably appoints
Landlord as Tenant’s attorney-in-fact to execute, acknowledge, and deliver on
Tenant’s behalf any estoppel certificate to which Tenant does not object within
10 days after Landlord sends the certificate to Tenant.  This
power of attorney is coupled with an interest and is irrevocable.

     

    
      
         

      

      
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    ARTICLE
22:  REPRESENTATIONS AND WARRANTIES

     

    Tenant and Subtenant hereby make the
following representations and warranties, as of the Effective Date, to Landlord
and acknowledge that Landlord is granting the Lease in reliance upon such
representations and warranties.  Tenant’s and Subtenant’s
representations and warranties shall survive the Closing and, except to the
extent made as of a specific date, shall continue in full force and effect until
the Obligor Group Obligations have been performed in full.

     

    22.1           Organization and Good
Standing.  Tenant is a corporation, duly organized, validly
existing and in good standing under the laws of its Organization State.
Subtenant is a limited liability company, duly organized, validly existing and
in good standing under the laws of its Organization State.  Tenant is
qualified to do business in and is in good standing under the laws of the
Facility States.  Subtenant is qualified to do business and is in good
standing under the laws of its Facility State.

     

    22.2           Power and
Authority.  Tenant and Subtenant have the power and authority
to execute, deliver and perform this Lease.  Tenant and Subtenant have
taken all requisite action necessary to authorize the execution, delivery and
performance of their respective obligations under this Lease.

     

    22.3           Enforceability.  This
Lease constitutes a legal, valid, and binding obligation of Tenant and
Subtenant, as applicable, enforceable in accordance with its terms except as
such enforceability may be limited by creditors rights laws and general
principles of equity.

     

    22.4           Government
Authorizations.  The Facility is in compliance with all Legal
Requirements.  All Government Authorizations are in full force and
effect.  Except as otherwise noted in Exhibit G, Tenant or the
respective Subtenant holds all Government Authorizations necessary for the
operation of the Facility in accordance with the Facility Uses.  No
prior notice to or approval from any licensure authority is required in
connection with the execution of this Lease by Landlord or Tenant other than
those notices which have been given or approvals which have been obtained prior
to the Effective Date.

     

    22.5           [RESERVED]

     

    22.6           Condition of
Facility.  To the best of Tenant’s and Subtenant’s knowledge
and except as otherwise disclosed in writing by Tenant to Landlord prior to the
Effective Date, all of the mechanical and electrical systems, heating and
air-conditioning systems, plumbing, water and sewer systems, and all other items
of mechanical equipment or appliances are in good working order, condition and
repair, are of sufficient size and capacity to service the Facility for the
Facility Uses and conform with all applicable ordinances and regulations, and
with all building, zoning, fire, safety, and other codes, laws and
orders.  The Improvements, including the roof and foundation, are
structurally sound and free from leaks and other defects.

     

    22.7           Compliance with
Laws.  To the best of Tenant’s and Subtenant’s knowledge, there
is no violation of, or noncompliance with, [i] any laws, orders, rules or
regulations, ordinances or codes of any kind or nature whatsoever relating to
the Facility or the ownership or operation thereof (including, without
limitation, building, fire, health, occupational

     

    
      
         

      

      
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    safety
and health, zoning and land use, planning and environmental laws, orders, rules
and regulations); [ii] any covenants, conditions, restrictions or
agreements affecting or relating to the ownership, use or occupancy of the
Facility; or [iii] any order, writ, regulation or decree relating to any
matter referred to in [i] or [ii] above.

     

    22.8           No
Litigation.  As of the Effective Date and except as disclosed
on Exhibit H, [i] there are no actions or suits, or any proceedings or
investigations by any governmental agency or regulatory body pending against
Tenant or Subtenant with respect to its operation at the Facility or against the
Facility; [ii] no HIPDB adverse action reports have been issued to Tenant
or Subtenant with respect to its operations at the Facility or against the
Facility; [iii] neither Tenant nor Subtenant has received notice of any
threatened actions, suits, proceedings or investigations against Tenant or
Subtenant with respect to its operations at the Facility or against the Facility
at law or in equity, or before any governmental board, agency or authority
which, if determined adversely to Tenant or Subtenant, would materially and
adversely affect the Facility or title to the Facility (or any part thereof),
the right to operate the Facility as presently operated, or the financial
condition of Tenant or Subtenant; [iv] there are no unsatisfied or
outstanding judgments against Tenant or Subtenant with respect to its operations
at the Facility or against the Facility; [v] there is no labor dispute
materially and adversely affecting the operation or business conducted by Tenant
or Subtenant at the Facility; and [vi] Tenant does not have knowledge of
any facts or circumstances which might reasonably form the basis for any such
action, suit, or proceeding.

     

    22.9           Consents.  The
execution, delivery and performance of this Lease will not require any consent,
approval, authorization, order, or declaration of, or any filing or registration
with, any court, any federal, state, or local governmental or regulatory
authority, or any other person or entity, the absence of which would materially
impair the ability of Tenant or Subtenant to operate the Facility for the
Facility Uses except for the post-acquisition filing for licensure of the
Facility.

     

    22.10           No
Violation.  The execution, delivery and performance of this
Lease [i] do not and will not conflict with, and do not and will not result
in a breach of Tenant’s or Subtenant’s Organizational Documents; [ii] do
not and will not conflict with, and do not and will not result in a breach of,
and do not and will not constitute a default under (or an event which, with or
without notice or lapse of time, or both, would constitute a default under), any
of the terms, conditions or provisions of any agreement or other instrument or
obligation to which Tenant or Subtenant is a party or by which its assets are
bound; and [iii] do not and will not violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Tenant, Subtenant or the
Facility.

     

    22.11           Reports and
Statements.  All reports, statements, certificates and other
data furnished by or on behalf of Tenant or Guarantor to Landlord in connection
with this Lease, and all representations and warranties made herein or in any
certificate or other instrument delivered in connection herewith and therewith,
are true and correct in all material respects and do not omit to state any
material fact or circumstance necessary to make the statements contained herein
or therein, in light of the circumstances under which they are made, not
misleading as of the date of such report, statement, certificate or other
data.  The copies of all agreements and instruments submitted to
Landlord, including, without limitation, all agreements relating to

     

    
      
         

      

      
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    management
of the Facility and Tenant’s working capital are true, correct and complete
copies in all material respects and include all material amendments and
modifications of such agreements.

     

    22.12           ERISA.  All
plans (as defined in §4021(a) of the Employee Retirement Income Security Act of
1974, as amended or supplemented from time to time (“ERISA”)) for which Tenant
or Subtenant is an “employer” or a “substantial employer” (as defined in §§3(5)
and 4001(a)(2) of ERISA, respectively) are in compliance with ERISA and the
regulations and published interpretations thereunder.  To the extent
Tenant or Subtenant maintains a qualified defined benefit pension
plan:  [i] there exists no accumulated funding deficiency;
[ii] no reportable event and no prohibited transaction has occurred;
[iii] no lien has been filed or threatened to be filed by the Pension
Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of
ERISA; and [iv] Tenant and Subtenant have not been deemed to be a
substantial employer.

     

    22.13           Chief Executive
Office.  Tenant and Subtenant each maintain its respective
chief executive office and its books and records at Tenant’s address set forth
in the introductory paragraph of this Lease.  Tenant and Subtenant do
not conduct any business or operations other than at Tenant’s chief executive
office and at the Facility.

     

    22.14           Other Name or
Entities.  Except as disclosed herein, none of Tenant’s or
Subtenant’s business at the Leased Property is conducted through any subsidiary,
unincorporated association or other entity and neither Tenant nor Subtenant have
in connection with its operations at the Leased Property, within the six years
preceding the date of this Lease [i] changed its name, [ii] used any
name other than the name stated at the beginning of this agreement, or
[iii] merged or consolidated with, or acquired any of the assets of, any
corporation or other business.

     

    22.15           Parties in
Possession.  Except as disclosed on Exhibit B and except
for each Subtenant, there are no parties in possession of any Leased Property or
any portion thereof as managers, lessees, tenants at sufferance, or
trespassers.

     

    22.16           Access.  Except
as otherwise disclosed in writing by Tenant to Landlord prior to the Effective
Date, access to the Land is directly from a dedicated public right-of-way
without any easement.  To the knowledge of Tenant and Subtenant, there
is no fact or condition which would result in the termination or reduction of
the current access to and from the Land to such right-of-way.

     

    22.17           Utilities.  There
are available at the Land gas, municipal water, and sanitary sewer lines, storm
sewers, electrical and telephone services in operating condition which are
adequate for the operation of the Facility at a reasonable
cost.  Except as otherwise disclosed in writing by Tenant to Landlord
prior to the Effective Date, the Land has direct access to utility lines located
in a dedicated public right-of-way without any easement.  As of the
Effective Date, there is no pending or, to the knowledge of Tenant or Subtenant,
threatened governmental or third party proceeding which would impair or result
in the termination of such utility availability.

     

    22.18           Condemnation and
Assessments.  As of the Effective Date, neither Tenant nor
Subtenant has received notice of, and there are no pending or, to the best of
Tenant’s and

     

    
      
         

      

      
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    Subtenant’s
knowledge, threatened, condemnation, assessment (other than as disclosed in
writing by Tenant to Landlord prior to the Effective Date) or similar
proceedings affecting or relating to the Facility, or any portion thereof, or
any utilities, sewers, roadways or other public improvements serving the
Facility.

     

    22.19           Zoning.  As
of the Effective Date, [i] the use and operation of the Facility for the
Facility Uses is a permitted use under the applicable zoning code;
[ii] except as disclosed on Exhibit G hereto, no special use permits,
conditional use permits, variances, or exceptions have been granted or are
needed for such use of the Facility; [iii] the Land is not located in any
special districts such as historical districts or overlay districts; and
[iv] the Facility has been constructed in accordance with and complies with
all zoning laws in effect at the time of its construction, including, but not
limited to, dimensional, parking, setback, screening, landscaping, sign and curb
cut requirements or the Facility obtained required waivers or variances from
such requirements.

     

    22.20           [RESERVED]

     

    22.21           Environmental
Matters.  During the period of Tenant’s or Subtenant’s
ownership or possession of the Leased Property and, to the best of Tenant’s and
Subtenant’s knowledge after diligent inquiry, for the period prior to Tenant’s
and Subtenant’s ownership or possession of the Leased Property, [i] the
Leased Property is in compliance with all Environmental Laws; [ii] there
were no releases or threatened releases of Hazardous Materials on, from, or
under the Leased Property, except in compliance with all Environmental Laws;
[iii] no Hazardous Materials have been, are or will be used, generated,
stored, or disposed of at the Leased Property, except in compliance with all
Environmental Laws; [iv] asbestos has not been and will not be used in the
construction of any Improvements; [v] no permit is or has been required
from the Environmental Protection Agency or any similar agency or department of
any state or local government for the use or maintenance of any Improvements;
[vi] underground storage tanks on or under the Land, if any, have been and
currently are being operated in compliance with all applicable Environmental
Laws; [vii] any closure, abandonment in place or removal of an underground
storage tank on or from the Land was performed in compliance with applicable
Environmental Laws and any such tank had no release contaminating the Leased
Property or, if there had been a release, the release was remediated in
compliance with applicable Environmental Laws to the satisfaction of regulatory
authorities; [viii] no summons, citation or inquiry has been made by any
such environmental unit, body or agency or a third party demanding any right of
recovery for payment or reimbursement for costs incurred under CERCLA or any
other Environmental Laws and the Land is not subject to the lien of any such
agency; and [ix] to the best of Tenant’s and Subtenant’s knowledge, the
environmental assessments of the Facility (and all follow-up reports,
supplements and amendments) that were delivered to Landlord by Tenant in
connection with the closing of the Existing Leases were true, complete and
accurate.  “Disposal” and “release” shall have the meanings set forth
in CERCLA.

     

    22.22           Leases and
Contracts.  As of the Effective Date and except as disclosed on
Exhibit I, there are no leases or contracts (including, but not limited to,
insurance contracts, maintenance contracts, construction contracts, employee
benefit plans, employment contracts, equipment leases, security agreements,
architect agreements, and management contracts) to which Tenant, Subtenant or
Guarantor is a party relating to any part of the ownership,
operation,

     

    
      
         

      

      
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    possession,
construction, management or administration of the Land or the Facility which
individually or in the aggregate with respect to any Facility require payments
in excess of $20,000 per year.

     

    22.23           No
Default.  As of the Effective Date, [i] there is no
existing Event of Default under this Lease; and [ii] no event has occurred
which, with the giving of notice or the passage of time, or both, would
constitute or result in such an Event of Default.

     

    22.24           Tax
Status.  If Tenant or Subtenant is a partnership or limited
liability company, it is taxable as a partnership under the Internal Revenue
Code and all applicable facility state tax laws.

     

    ARTICLE
23:  [RESERVED]

     

    ARTICLE
24:  SECURITY INTEREST

     

    24.1           Collateral.  Tenant,
Subtenant and Guarantor hereby grant to each Landlord and HCRI (if not a
Landlord) (individually and collectively called “Secured Party”) a security
interest in the following described property located at a Leased Property,
whether now owned or hereafter acquired by Tenant, Subtenant and Guarantor (the
“Collateral”), to secure the payment and performance of the Obligor Group
Obligations:

     

    (a) All
machinery, furniture, equipment, trade fixtures, appliances, inventory and all
other goods (as “equipment”, “inventory” and “goods” are defined for purposes of
Article 9 (“Article 9”) of the Uniform Commercial Code as adopted in
Ohio) and any leasehold interest of Tenant or any Subtenant in any of the
foregoing, including, without limitation, those items which are to become
fixtures or which are building supplies and materials to be incorporated into
any improvement or fixture.

     

    (b) All
accounts, contract rights, general intangibles, instruments, documents, and
chattel paper [as “accounts”, “contract rights”, “general intangibles”,
“instruments”, “documents”, and “chattel paper”, are defined for purposes of
Article 9] now or hereafter arising.

     

    (c) All
franchises, permits, licenses, operating rights, certifications, approvals,
consents, authorizations and other general intangibles, including, without
limitation, certificates of need, state health care facility licenses, and
Medicare and Medicaid provider agreements, to the extent permitted by
law.

     

    (d) Unless
expressly prohibited by the terms thereof, all contracts, agreements, contract
rights and materials relating to the design, construction, operation or
management of any improvements, including, but not limited to, plans,
specifications, drawings, blueprints, models, mock-ups, brochures, flyers,
advertising and promotional materials and mailing lists.

     

    (e) All
subleases, occupancy agreements, license agreements and concession agreements,
written or unwritten, of any nature, now or hereafter entered into, and all
right, title and interest of Tenant thereunder, including, without limitation,
those certain

     

    
      
         

      

      
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    Subleases
dated as of the Effective Date, by and between Tenant, as Sublandlord, and each
Subtenant, as Subtenant; and including, without limitation, Tenant’s right, if
any, to cash or securities deposited thereunder whether or not the same was
deposited to secure performance by the subtenants, occupants, licensees and
concessionaires of their obligations thereunder, including the right to receive
and collect the rents, revenues, and other charges thereunder.

     

    (f) All
ledger sheets, files, records, computer programs, tapes, other electronic data
processing materials, and other documentation.

     

    (g) The
products and proceeds of the preceding listed property, including, without
limitation, cash and non-cash proceeds, proceeds of proceeds, and insurance
proceeds.

     

    24.2           Additional
Documents.  At the request of Landlord, Tenant and each
Subtenant shall execute additional security agreements, financing statements,
and such other documents as may be requested by Landlord to maintain and perfect
such security interest.  Tenant and each Subtenant hereby irrevocably
appoint Landlord, its successors and assigns, as Tenant’s or Subtenant’s
attorney-in-fact to execute, acknowledge, deliver and file such documents on
behalf of Tenant or such Subtenant.  This power of attorney is coupled
with an interest and is irrevocable.

     

    24.3           Notice of
Sale.  With respect to any sale or other disposition of any of
the Collateral after the occurrence of an Event of Default, Landlord, Tenant and
each Subtenant agree that the giving of five days’ notice by Landlord, sent by
overnight delivery, postage prepaid, to Tenant’s or Subtenant’s notice address
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of such Collateral is to be made,
shall be deemed to be reasonable notice thereof and Tenant and each Subtenant
waive any other notice with respect thereto.

     

    24.4           Recharacterization.  Landlord
and Tenant intend this Lease to be a true lease.  However, if despite
the parties’ intent, it is determined or adjudged by a court for any reason that
this Lease is not a true lease or if this Lease is recharacterized as a
financing arrangement, then this Lease shall be considered a secured financing
agreement and Landlord’s title to the Leased Property shall constitute a
perfected first priority lien in Landlord’s favor on the Leased Property to
secure the payment and performance of all the Obligor Group
Obligations.

     

    ARTICLE
25:  MISCELLANEOUS

     

    25.1           Notices.  Landlord,
Tenant and Subtenant hereby agree that all notices, demands, requests, and
consents (hereinafter “notices”) required to be given pursuant to the terms of
this Lease shall be in writing, shall be addressed to the addresses set forth in
the introductory paragraph of this Lease, and shall be served by
[i] personal delivery; [ii] certified mail, return receipt requested,
postage prepaid; or [iii] nationally recognized overnight
courier.  Notices to any Subtenant should be sent c/o Tenant at
Tenant’s address set forth in the introductory paragraph.  All notices
shall be deemed to be given upon the earlier of actual receipt or three Business
Days after mailing, or one Business Day after deposit with the overnight
courier.  Any notices meeting the requirements of this section shall
be effective, regardless of

     

    
      
         

      

      
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    whether
or not actually received.  Landlord or Tenant may change its notice
address at any time by giving the other party notice of such
change.

     

    25.2           Advertisement of Leased
Property.  In the event the Tenant fails to exercise its option
to renew within the time period set forth in §12.1, then Landlord or its agent
shall have the right to enter the Leased Property at all reasonable times for
the purpose of exhibiting the Leased Property to others and to place upon the
Leased Property for and during the period commencing 120 days prior to the
expiration of this Lease, “for sale” or “for rent” notices or
signs.

     

    25.3           Entire
Agreement.  This Lease contains the entire agreement between
Landlord and Tenant with respect to the subject matter hereof.  No
representations, warranties, and agreements have been made by Landlord except as
set forth in this Lease.  No oral agreements or understandings between
Landlord and Tenant shall survive execution of this Lease.

     

    25.4           Severability.  If
any term or provision of this Lease is held or deemed by Landlord to be invalid
or unenforceable, such holding shall not affect the remainder of this Lease and
the same shall remain in full force and effect, unless such holding
substantially deprives Tenant of the use of the Leased Property or Landlord of
the rents herein reserved, in which event this Lease shall forthwith terminate
as if by expiration of the Term.

     

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

     

    25.6           Governing
Law.  This Lease shall be governed by and construed in
accordance with the laws of the State of Ohio, except as to matters under which
the laws of a State in which a respective Facility is located, or under
applicable procedural conflicts of laws rules, require the application of laws
of such other State, in which case the laws or conflicts of laws rules, as the
case may be, of such State shall govern to the extent required.

     

    25.7           Memorandum of
Lease.  Tenant shall not record this Lease.  Tenant
shall, however, record a memorandum of lease approved by Landlord upon
Landlord’s request.

     

    25.8           Waiver.  No
waiver by Landlord of any condition or covenant herein contained, or of any
breach of any such condition or covenant, shall be held or taken to be a waiver
of any subsequent breach of such covenant or condition, or to permit or excuse
its continuance or any future breach thereof or of any condition or covenant,
nor shall the acceptance of Rent by Landlord at any time when Tenant or
Subtenant is in default in the performance or observance of any condition or
covenant herein be construed as a waiver of such default, or of Landlord’s right
to terminate this Lease or exercise any other remedy granted herein on account
of such existing default.

     

    25.9           Binding
Effect.  This Lease will be binding upon and inure to the
benefit of the heirs, successors, personal representatives, and permitted
assigns of Landlord, Tenant and Subtenant.

     

    
      
         

      

      
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    25.10           No
Offer.  Landlord’s submission of this Lease to Tenant is not an
offer to lease the Leased Property, or an agreement by Landlord to reserve the
Leased Property for Tenant.  Landlord will not be bound to Tenant
until Tenant has duly executed and delivered duplicate original leases to
Landlord, and Landlord has duly executed and delivered one of these duplicate
original leases to Tenant.

     

    25.11           Modification.  This
Lease may only be modified by a writing signed by both Landlord and
Tenant.  All references to this Lease, whether in this Lease or in any
other document or instrument, shall be deemed to incorporate all amendments,
modifications and renewals of this Lease, made after the date
hereof.  If Tenant requests Landlord’s consent to any change in
ownership, merger or consolidation of Tenant or Guarantor, any assumption of the
Lease, or any modification of the Lease, Tenant shall provide Landlord all
relevant information and documents sufficient to enable Landlord to evaluate the
request.  In connection with any such request, Tenant shall pay to
Landlord a fee in an amount equal to the lesser of $2,500.00 and Landlord’s
actual reasonable attorney’s fees and expenses and other reasonable
out-of-pocket expenses incurred in connection with Landlord’s evaluation of
Tenant’s request, the preparation of any documents and amendments, the
subsequent amendment of any documents between Landlord and its collateral pool
lenders (if applicable), and all related matters.

     

    25.12           Landlord’s
Modification.  Tenant acknowledges that Landlord may mortgage
the Leased Property or use the Leased Property as collateral for a
collateralized mortgage obligations or Real Estate Mortgage Investment Companies
(REMICS).  If any mortgage lender of Landlord desires any modification
of this Lease, Tenant agrees to consider such modification in good faith and to
execute an amendment of this Lease if Tenant finds such modification
acceptable.  Landlord shall not do anything in connection with its
financing of the Leased Property which would limit the rights granted to Tenant
or Subtenant hereunder.

     

    25.13           No
Merger.  The surrender of this Lease by Tenant or the
cancellation of this Lease by agreement of Tenant and Landlord or the
termination of this Lease on account of Tenant’s default will not work a merger,
and will, at Landlord’s option, terminate any subleases or operate as an
assignment to Landlord of any subleases.  Landlord’s option under this
paragraph will be exercised by notice to Tenant and all known subtenants of the
Leased Property.

     

    25.14           Laches.  No
delay or omission by either party hereto to exercise any right or power accruing
upon any noncompliance or default by the other party with respect to any of the
terms hereof shall impair any such right or power or be construed to be a waiver
thereof.

     

    25.15           Limitation on Tenant’s
Recourse.  Tenant’s sole recourse against Landlord, and any
successor to the interest of Landlord in the Leased Property, is to the interest
of Landlord, and any such successor, in the Leased Property.  Tenant
will not have any right to satisfy any judgment which it may have against
Landlord, or any such successor, from any other assets of Landlord, or any such
successor.  In this section, the terms “Landlord” and “successor”
include the shareholders, venturers, and partners of “Landlord” and “successor”
and the officers, directors, and employees of the same.  The
provisions of this section are not intended to limit Tenant’s right to seek
injunctive relief or specific performance.

     

    
      
         

      

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

     

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

     

    25.18           Custody of Escrow
Funds.  Any funds paid to Landlord in escrow hereunder may be
held by Landlord or, at Landlord’s election, by a financial institution, the
deposits or accounts of which are insured or guaranteed by a federal or state
agency.  The funds shall not be deemed to be held in trust, may be
commingled with the general funds of Landlord or such other institution, and
shall not bear interest.

     

    25.19           Landlord’s Status as a
REIT.  Tenant acknowledges that Landlord (or a Landlord
Affiliate) has elected and may hereafter elect to be taxed as a real estate
investment trust (“REIT”) under the Internal Revenue Code.

     

    25.20           Exhibits.  All
of the exhibits referenced in this Lease are attached hereto and incorporated
herein.

     

    25.21           WAIVER OF JURY
TRIAL.  LANDLORD, TENANT AND SUBTENANT WAIVE TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY OF THEM AGAINST THE OTHER
ON ALL MATTERS ARISING OUT OF THIS LEASE OR THE USE AND OCCUPANCY OF THE LEASED
PROPERTY (EXCEPT CLAIMS FOR PERSONAL INJURY OR PROPERTY DAMAGE).  IF
LANDLORD COMMENCES ANY SUMMARY PROCEEDING FOR NONPAYMENT OF RENT, TENANT AND
SUBTENANT WILL NOT INTERPOSE, AND WAIVES THE RIGHT TO INTERPOSE, ANY
COUNTERCLAIM IN ANY SUCH PROCEEDING.

     

    25.22           CONSENT TO
JURISDICTION.  TENANT AND SUBTENANT HEREBY IRREVOCABLY SUBMIT
AND CONSENT TO THE NONEXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL
COURT HAVING JURISDICTION OVER LUCAS COUNTY, OHIO OR ANY COUNTY IN WHICH A
FACILITY IS LOCATED FOR ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER
ARISING FROM OR RELATED TO [I] THE COMMITMENT; [II] THIS LEASE; OR
[III] ANY DOCUMENT EXECUTED BY TENANT OR SUBTENANT IN CONNECTION WITH THIS
LEASE.  TENANT AND SUBTENANT HEREBY IRREVOCABLY WAIVE, TO THE FULLEST
EXTENT TENANT AND SUBTENANT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR
PROCEEDING.  TENANT AND SUBTENANT AGREE THAT A FINAL JUDGMENT IN ANY
SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER
JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW.

     

    
      
         

      

      
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    TENANT AND SUBTENANT AGREE NOT TO
INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST LANDLORD OR ANY DIRECTOR,
OFFICER, EMPLOYEE, AGENT OR PROPERTY OF LANDLORD, CONCERNING ANY MATTER ARISING
OUT OF OR RELATING TO THE COMMITMENT, THIS LEASE OR ANY RELATED DOCUMENT IN ANY
COURT OTHER THAN A STATE OR FEDERAL COURT HAVING JURISDICTION OVER LUCAS COUNTY,
OHIO UNLESS SUCH COURT LACKS IN PERSONAM OR SUBJECT MATTER JURISDICTION IN WHICH
CASE TENANT AND SUBTENANT SHALL HAVE THE RIGHT TO INSTITUTE SUCH ACTION OR
PROCEEDING BEFORE ANY COURT HAVING SUCH JURISDICTION.

     

    TENANT AND SUBTENANT HEREBY CONSENT TO
SERVICE OF PROCESS BY LANDLORD IN ANY MANNER AND IN ANY JURISDICTION PERMITTED
BY LAW.  NOTHING HEREIN SHALL AFFECT OR IMPAIR LANDLORD’S RIGHT TO
SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW, OR LANDLORD’S RIGHT TO BRING
ANY ACTION OR PROCEEDING AGAINST TENANT, SUBTENANT OR THE PROPERTY OF TENANT OR
SUBTENANT IN THE COURTS OF ANY OTHER JURISDICTION.

     

    25.23           Attorney’s Fees and
Expenses.  Tenant shall pay to Landlord all reasonable costs
and expenses incurred by Landlord in administering this Lease and the security
for this Lease, enforcing or preserving Landlord’s rights under this Lease and
the security for this Lease, and in all matters of collection, whether or not an
Event of Default has actually occurred or has been declared and thereafter
cured, including, but not limited to, [a] reasonable attorney’s and
paralegal’s fees and disbursements; [b] the fees and expenses of any
litigation, administrative, bankruptcy, insolvency, receivership and any other
similar proceeding; [c] court costs; [d] the expenses of Landlord, its
employees, agents, attorneys and witnesses in preparing for litigation,
administrative, bankruptcy, insolvency and other proceedings and for lodging,
travel, and attendance at meetings, hearings, depositions, and trials; and
[e] consulting and witness fees and expenses incurred by Landlord in
connection with any litigation or other proceeding; provided, however,
Landlord’s internal bookkeeping and routine lease servicing costs are not
payable by Tenant.

     

    25.24           Survival.  The
following provisions shall survive termination of the
Lease:  Article 8 (Defaults and Remedies); Article 9 (Damage
and Destruction); Article 10 (Condemnation); §15.3.6 (Confidentiality);
§15.9 (Transfer of License and Facility Operations); §15.10 (Bed Operating
Rights); §18.2 (Assignment or Sublease); Article 19 (Holdover and
Surrender); Article 24 (Security Interest) and §25.24
(Survival).

     

    25.25           Time.  Time
is of the essence in the performance of this Lease.

     

    25.26           Subtenant.  Each
Subtenant has joined in the execution of this Lease to acknowledge that it is
subject to and bound by the terms of the Lease applicable to such Subtenant,
including, without limitation, the grant of a security interest under
Article 24.

     

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    IN WITNESS WHEREOF, the parties hereto
have executed this Lease or caused the same to be executed by their respective
duly authorized officers as of the date first set forth above.

     

    
      	
              Signed
      and acknowledged in the presence of:

               

              Signature
      /s/ Rita Rogge

              Print
      Name Rita Rogge

               

              Signature
      /s/ Donna J. Lunsford

              Print
      Name Donna J.
Lunsford

            	
              HEALTH
      CARE REIT, INC.

               

              By: /s/ Erin C. Ibele

                    Erin C.
      Ibele

              Title: Senior Vice President –

                   Administration and
      Corporate Secretary

            
	 
      	 
      
	
               

               

               

               

              Signature
      /s/ Rita Rogge

              Print
      Name Rita Rogge

               

              Signature
      /s/ Donna J. Lunsford

              Print
      Name Donna J.
Lunsford

            	
              HCRI DRUM
      HILL PROPERTIES, LLC

               

              By:Health
      Care REIT, Inc., its Sole Member

               

              By: /s/ Erin C. Ibele

                    Erin C.
      Ibele

              Title: Senior Vice President –

                   Administration and
      Corporate Secretary

            
	 
      	 
      
	
               

               

               

               

              Signature
      /s/ Rita Rogge

              Print
      Name Rita Rogge

               

              Signature
      /s/ Donna J. Lunsford

              Print
      Name Donna J.
Lunsford

            	
              HCRI FAIRMONT
      PROPERTIES, LLC

               

              By:Health
      Care REIT, Inc., its Sole Member

               

              By: /s/ Erin C. Ibele

                    Erin C.
      Ibele

              Title: Senior Vice President –

                   Administration and
      Corporate Secretary

            
	 
      	 
      
	
               

               

               

               

              Signature
      /s/ Rita Rogge

              Print
      Name Rita Rogge

               

              Signature
      /s/ Donna J. Lunsford

              Print
      Name Donna J.
Lunsford

            	
              HCRI KIRKLAND
      PROPERTIES, LLC

               

              By:Health
      Care REIT, Inc., its Sole Member

               

              By: /s/ Erin C. Ibele

                    Erin C.
      Ibele

              Title: Senior Vice President –

                   Administration and
      Corporate Secretary

            
	 
      	 
      

    

    
      
         

      

      
        S -
1

        
          

        

      

      
         

      

    

    

    
      	
               

               

              Signature /s/ Marrji Padden

              Print
      Name Marrji Padden

               

              Signature /s/ Charlie Hyde

              Print
      Name Charlie Hyde

            	
              EMERITUS
      CORPORATION

               

              By: /s/ Eric Mendelsohn

                    Eric
      Mendelsohn

              Title: SVP Corporate Development

               

              Tax I.D.
      No.:  91-1605454

            
	 
      	 
      
	
               

               

              Signature /s/ Marrji Padden

              Print
      Name Marrji Padden

               

              Signature /s/ Charlie Hyde

              Print
      Name Charlie Hyde

            	
              EMERITUS
      PROPERTIES IX, LLC

               

              By:       Emeritus
      Corporation

              Its:       Sole
      Member

               

              By: /s/ Eric Mendelsohn

                    Eric
      Mendelsohn

              Title: SVP Corporate Development

               

              Tax I.D.
      No.: 91-1934975

            
	 
      	 
      
	
               

               

              Signature /s/ Marrji Padden

              Print
      Name Marrji Padden

               

              Signature /s/ Charlie Hyde

              Print
      Name Charlie Hyde

            	
              EMERITUS
      PROPERTIES X, LLC

               

              By:       Emeritus
      Corporation

              Its:       Sole
      Member

               

              By: /s/ Eric Mendelsohn

                    Eric
      Mendelsohn

                    Title:
      SVP Corporate
Development

               

              Tax I.D.
      No.: 91-1935103

            
	 
      	 
      
	
               

               

               

              Signature /s/ Marrji Padden

              Print
      Name Marrji Padden

               

              Signature /s/ Charlie Hyde

              Print
      Name Charlie Hyde

            	
              EMERITUS
      PROPERTIES XII, LLC

               

              By:       Emeritus
      Corporation

              Its:       Sole
      Member

               

              By: /s/ Eric Mendelsohn

                    Eric
      Mendelsohn

                    Title:
      SVP Corporate
Development

               

              Tax I.D.
      No.: 91-1994665

            

    

    

    
      
         

      

      
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              STATE
      OF
      OHIO                                      )

              ) SS:

              COUNTY
      OF
      LUCAS                                      )

               

              The foregoing instrument was
      acknowledged before me this 3 day of August, 2009 by Erin C. Ibele,
      the Senior Vice President of Adminstration and Corporate Secretary of
      Health Care REIT, Inc., a Delaware corporation, on behalf of the
      corporation.

               

              /s/ Rita J. Rogge

              Notary Public

               

              My
      Commission Expires:08-26-2010                                                                [SEAL]

            
	 
      
	
              STATE
      OF
      OHIO                                      )

              ) SS:

              COUNTY
      OF
      LUCAS                                      )

               

              The foregoing instrument was
      acknowledged before me this 3 day of August, 2009 by Erin C. Ibele,
      the Senior Vice President Adminstration and Corporate Secretary of Health
      Care REIT, Inc., a Delaware corporation and the sole member of
      HCRI Drum Hill Properties, LLC, a limited liability company organized
      under the laws of the State of Delaware, on behalf of the limited
      liability company.

               

              /s/ Rita J. Rogge

              Notary
      Public

               

              My
      Commission Expires:
      08-26-2010                                                                [SEAL]

            
	 
      
	
              STATE
      OF
      OHIO                                      )

              ) SS:

              COUNTY
      OF
      LUCAS                                      )

               

              The foregoing instrument was
      acknowledged before me this 3 day of August, 2009 by Erin C. Ibele,
      the Senior Vice President Adminstration and Corporate Secretary of Health
      Care REIT, Inc., a Delaware corporation and the sole member of
      HCRI Fairmont Properties, LLC, a limited liability company organized
      under the laws of the State of Delaware, on behalf of the limited
      liability company.

               

              s/ Rita J. Rogge

              Notary
      Public

               

              My
      Commission Expires:
      08-26-2010                                                                [SEAL]

            
	 
      

    

    
      
         

      

      
        S -
3

        
          

        

      

      
         

      

    

    

    
      	
              STATE
      OF
      OHIO                                      )

              ) SS:

              COUNTY
      OF
      LUCAS                                      )

               

              The foregoing instrument was
      acknowledged before me this 3 day of August, 2009 by Erin C. Ibele,
      the Senior Vice President Adminstration and Corporate Secretary of Health
      Care REIT, Inc., a Delaware corporation and the sole member of
      HCRI Kirkland Properties, LLC, a limited liability company organized
      under the laws of the State of Delaware, on behalf of the limited
      liability company.

               

              s/ Rita J. Rogge

              Notary
      Public

               

              My
      Commission
      Expires:                                           08-26-2010                                                                  
      [SEAL]

            
	 
      
	
              STATE
      OF
      WASHINGTON                                                )

              ) SS:

              COUNTY
      OF
      KING                                                )

               

              The foregoing instrument was
      acknowledged before me this 31st day of July, 2009 by Eric
      Mendelsohn, the SVP Corporate Development of Emeritus Corporation, a
      Washington corporation, on behalf of the corporation.

               

              /s/ Melanie Jule Pennington

              Notary Public

               

              My
      Commission Expires:07/09/2011                                                                [SEAL]

            
	 
      
	
              STATE
      OF
      WASHINGTON                                                      )

              ) SS:

              COUNTY
      OF
      KING                                           )

               

              The foregoing instrument was
      acknowledged before me this 31st day of July, 2009 by Eric
      Mendelsohn, the SVP Corporate Development of Emeritus Corporation, a
      Washington corporation, the sole member of Emeritus Properties IX,
      LLC, a Washington limited liability company, on behalf of the limited
      liability company.

               

              /s/ Melanie Jule Pennington

              Notary Public

               

              My
      Commission Expires:
      07/09/2011                                                                [SEAL]

            
	 
      

    

    
      
         

      

      
        S -
4

        
          

        

      

      
         

      

    

    

    
      	 
      
	
              STATE
      OF
      WASHINGTON                                                      )

              ) SS:

              COUNTY
      OF
      KING                                           )

               

              The foregoing instrument was
      acknowledged before me this 31st day of July, 2009 by Eric
      Mendelsohn, the SVP Corporate Development of Emeritus Corporation, a
      Washington corporation, the sole member of Emeritus Properties X,
      LLC, a Washington limited liability company, on behalf of the limited
      liability company.

               

              /s/ Melanie Jule Pennington

              Notary Public

               

              My
      Commission Expires:
      07/09/2011                                                                [SEAL]

            
	 
      
	
              STATE
      OF
      WASHINGTON                                                      )

              ) SS:

              COUNTY
      OF
      KING                                           )

              The foregoing instrument was
      acknowledged before me this 31st day of July, 2009 by Eric
      Mendelsohn, the SVP Corporate Development of Emeritus Corporation, a
      Washington corporation, the sole member of Emeritus Properties XII,
      LLC, a Washington limited liability company, on behalf of the limited
      liability company.

              /s/ Melanie Jule Pennington

              Notary Public

              My
      Commission Expires:
      07/09/2011                                                                [SEAL]

            

    

    

    

    THIS
INSTRUMENT PREPARED BY:

    

    Kathleen
A. Kress, Esq.

    Shumaker,
Loop & Kendrick, LLP

    1000 Jackson
Street

    Toledo,
Ohio  43604-5573

    
      
         

      

      
        S -
5

        
          

        

      

      
         

      

    

    SCHEDULE 1:  RENT
SCHEDULE

     

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT A:  LEGAL
DESCRIPTIONS

     

    CONSISTING
OF EXHIBIT A-1 THROUGH EXHIBIT A-3

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT A-1:  LEGAL
DESCRIPTION

     

    Facility:  Chelmsford
Facility

     

    A tract
of land, with all improvements thereon, if any there be, situated in Chelmsford,
Middlesex County, Massachusetts, shown as Lot 2 on a plan entitled “Plan of
Land in Chelmsford, Massachusetts Assessor’s Plat 20 Lots 27 & 28
and Assessor’s Plan 21 Lot 6,” prepared by: Vanasse Hangen Brustlin,
Inc., dated May 22, 1996 (the “Plan”), which Plan is recorded in
Book 191, Plan 90 and more particularly bounded and described as
follows:

     

    Beginning
at a point in the Northwesterly line of Technology Drive in Chelmsford,
Massachusetts at the Southerly corner of the herein described
parcel:

     

    Thence N
39° 41’ 46” W Four Hundred Seventy Seven and 72/100 feet (477.72’) bounded
Northeasterly by land now or formerly of Wang Laboratories, Inc. to a
point;

     

    Thence N
55° 52’ 37” E Seventy Four and 69/100 (74.69’) bounded Northwesterly by land now
or formerly of Joseph and Bertha E. Sadowski to a point marked by a drill
hole;

     

    Thence N
31° 27’ 43” W Twenty and 02/100 feet (20.02’) bounded Southwesterly by land
now or formerly of Joseph and Bertha E. Sadowski to a point;

     

    Thence N
55° 53’ 48” E Three Hundred Fifty Six and 34/100 feet (356.34’) bounded
Northwesterly by land now or formerly of Wang Laboratories, Inc. to a
point;

     

    Thence S
34° 06’ 12” E Forty and 20/100 (40.20’) bounded Northeasterly by land now or
formerly of Wang Laboratories, Inc. a Forty Food Wide Utility Easement to a
Point;

     

    Thence N
89° 02’ 55” E Five Hundred Sixty One and 61/100 feet (561.61’) bounded
Northwesterly by land now or formerly of Wang Laboratories, Inc. and Forty Foot
Wide Utility Easement to a Point;

     

    Thence S
13° 00’ 17” E One Hundred Sixty and 40/100 feet (160.04’) bounded Easterly
by land now or formerly of Wang Laboratories, Inc. and a Thirty Foot Wide
Utility Easement to a Point;

     

    Thence S
52° 47’ 37” W One Hundred Thirty Six and 01/100 feet (136.01’) bounded
Southeasterly by land now or formerly of Wang Laboratories, Inc. and a Thirty
Foot Wide Utility Easement to a Point;

     

    Thence S
03° 37’ 30” W Three Hundred Eleven and 46/100 feet (311.46’) bounded
Easterly by land now or formerly of Wang Laboratories, Inc. and a Thirty Foot
Wide Utility Easement to a Point;

     

    Thence N
79° 31’ 00” W One Hundred Fifty and 20/100 feet (150.20’) bounded Southerly
by Technology Drive to a point of curvature marked by a granite
bound.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Thence a
curve to the left having a radius of Three Hundred Eighty and 00/100 feet
(380.00’) a length of Three Hundred One and 35/100 feet (301.35’) bounded
Southerly by Technology Drive to a point of tangency.

     

    Thence S
55° 02’ 47” W Thirty Two and 57/100 feet (32.57’) bounded Southerly by
Technology Drive to the point of beginning.

     

    Together
with the benefit of those certain covenants, conditions and restrictions
contained in that certain Deed from Wang Laboratories, Inc. to the University of
Lowell dated October 22, 1984 and recorded with Middlesex North District
Registry of Deeds in Book 2875, page 31.

     

    Together
with the benefit of that certain Utility and Driveway Easement dated January 8,
1985 and recorded with Middlesex North District Registry of Deeds in
Book 2932, page 216, as affected by Amendment to Utility and Driveway
Easement dated December 30, 1987 and recorded with said Deeds in Book 4392,
page 48.

     

    Together
with the benefit of, and in common with others legally entitled to, those
certain rights and easements more particularly set forth in an instrument
entitled “Driveway Easement” between Drum Hill Chelmsford Limited Liability,
Chelmsford Land LLC and Chelmsford Assisted Living dated June 28, 1996 and
recorded in Book 8101, page 173, as affected by Certificate of
Satisfaction dated June 27, 1996 recorded in Book 8273, page 257,
subject, however, to the condition set forth in Paragraph 8 of said Driveway
Easement.

     

    Together
with Easement Agreement dated August 28, 1997 recorded in Book 8750,
page 139, as affected by Assent to Easement and Subordination by Enterprise
Bank and Trust Company recorded in Book 8750, page 135.

     

    Together
with Technology Drive Easement as set forth in an instrument entitled “Grant of
Easements” dated August 31, 1984 and recorded with said Deeds in
Book 2846, page 181.

     

    Together
with Technology Drive Utility Easement as set forth in an instrument entitled
“Grant of Easements” dated June 28, 1984 and recorded with said Deeds in
Book 2800, page 214.

     

    Together
with Water and Sewer Easements as set forth in an instrument entitled
“Declaration of Easements” dated May 24, 1983 and recorded with said Deeds
in Book 2615, page 426.

     

    Together
with Reciprocal Easement Agreement by and between TGE of Chelmsford, LLC, and LM
Chelmsford Assisted Living LLC, dated March 31, 1998 and recorded in
Book 9222, page 140.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    EXHIBIT A-2:  LEGAL
DESCRIPTION

     

    Facility:  Kirkland
Facility

     

    THAT
PORTION OF GOVERNMENT LOTS 3 AND 4, SECTION 8, TOWNSHIP 25 NORTH,
RANGE 5 EAST, W.M., DESCRIBED AS FOLLOWS:

     

    BEGINNING
AT THE SOUTHWEST MEANDER CORNER OF GOVERNMENT LOT 4, SAID
SECTION 8;

     

    THENCE
ALONG THE GOVERNMENT MEANDER LINE, NORTH 8°30’ WEST 990 FEET;

    THENCE
NORTH 339 FEET TO THE SOUTHWEST MEANDER CORNER OF GOVERNMENT
LOT 3;

    THENCE
EASTERLY ALONG THE SOUTH LINE OF SAID GOVERNMENT LOT 3, SAID LINE BEING
ALSO THE NORTH LINE OF GOVERNMENT LOT 4, TO A POINT WHICH LIES
300 FEET EASTERLY OF THE EASTERLY MARGIN OF LAKE WASHINGTON BOULEVARD AND
THE TRUE POINT OF BEGINNING;

    THENCE
NORTH 82.5 FEET;

    THENCE
EAST TO THE NORTHERLY EXTENSION OF THE WEST LINE OF SECOND STREET (NOW 102ND AVENUE
NORTHEAST EXTENSION) AS SHOWN ON THE PLAT OF FRENCH’S HOMESTEAD VILLA, AS PER
PLAT RECORDED IN VOLUME 20 OF PLATS, PAGE 24, RECORDS OF KING COUNTY,
WASHINGTON;

    THENCE
SOUTHERLY ALONG SAID EXTENSION LINE, 82.5 FEET, MORE OR LESS, TO THE
SOUTHERLY LINE OF GOVERNMENT LOT 3;

    THENCE
CONTINUING SOUTHERLY ALONG SAID EXTENSION LINE, 121 FEET, MORE OR LESS, TO
A POINT 92 FEET NORTH OF THE NORTH LINE OF SAID FRENCH’S HOMESTEAD
VILLA;

    THENCE
WEST TO A POINT WHICH IS SOUTH OF THE TRUE POINT OF BEGINNING;

    THENCE
NORTH TO THE TRUE POINT OF BEGINNING;

     

    SAID
PARCEL ALSO BEING DESCRIBED AS SET FORTH IN SURVEY BY SADLER/BARNARD &
ASSOC. INC., DATED APRIL 22, 1997, DESIGNATED AS JOB NO. 97082,
DESCRIBED AS FOLLOWS:

     

    THAT
PORTION OF GOVERNMENT LOTS 3 AND 4, SECTION 8, TOWNSHIP 25 NORTH,
RANGE 5 EAST, W.M., IN KING COUNTY, WASHINGTON, DESCRIBED AS
FOLLOWS:

     

    BEGINNING
AT A POINT ON THE SOUTH LINE OF SAID GOVERNMENT LOT 3 AND THE NORTH LINE OF
SAID GOVERNMENT LOT 4, WHICH LIES 300.00 FEET EASTERLY OF THE EASTERLY
MARGIN OF LAKE WASHINGTON BOULEVARD;

    THENCE
NORTH 01°37’22” EAST 82.50 FEET;

    THENCE
SOUTH 88°22’38” EAST, 241.07 FEET TO THE NORTHERLY EXTENSION OF THE WEST
LINE OF SECOND STREET (NOW 102ND AVENUE
NORTHEAST EXTENSION), AS SHOWN ON THE PLAT OF FRENCH’S HOMESTEAD VILLA,
ACCORDING TO THE PLAT THEREOF, RECORDED IN VOLUME 20 OF PLATS,
PAGE 24, IN KING COUNTY, WASHINGTON;

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    THENCE
SOUTH 01°34’36” WEST, ALONG SAID EXTENSION LINE, 203.50 FEET TO A POINT
WHICH IS 92.00 FEET NORTH OF THE NORTH LINE OF SAID FRENCH’S HOMESTEAD
VILLA;

    THENCE
NORTH 88°22’38” WEST, ALONG A LINE WHICH IS PARALLEL TO THE NORTH LINE OF SAID
FRENCH’S HOMESTEAD VILLA, 241.24 FEET;

    THENCE
NORTH 01°37’22” EAST, 121.00 FEET TO THE POINT OF BEGINNING;

     

    TOGETHER
WITH AN EASEMENT FOR SANITARY SEWER AND SURFACE WATER DRAIN SYSTEM, RECORDED
UNDER RECORDING NO. 4979611, RECORDS OF KING COUNTY,
WASHINGTON;

    SITUATE
IN THE CITY OF KIRKLAND, COUNTY OF KING, STATE OF WASHINGTON.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    EXHIBIT A-3:  LEGAL
DESCRIPTION

     

    Facility:  Manassas
Facility

     

    Parcel 3K-4,
comprising 3.000 acres, more or less, more particularly described by metes
and bounds on Plat Showing Subdivision of the Property of Potomac Conference
Corporation, dated June 2, 1988, and recorded in Deed Book 1702 at
page 1423, among the land records of Prince William County, Virginia, and
being more particularly described by metes and bounds as follows:

     

    All of
that certain tract or Parcel of land situate in the Gainesville Magisterial
District of Prince William County, Virginia, at 8341 Barrett Drive,
Manassas, Virginia and being more particularly described as
follows:

     

    Beginning
at an iron pipe set on the Easterly right of way line of Barrett Drive,
Route 732, a public roadway of variable width, said pipe being a corner to
the Potomac Conference Corporation of Seventh Day Adventists and said pipe being
the Southwest corner of the herein described parcel.  Thence with said
right of way line, North 16 degrees 31 minutes 51 seconds East
for 358.73 feet to an iron pipe found, corner to president, Potomac Church
of Jesus Christ of Latter Day Saints.  Thence departing said right of
way line and with president, Potomac Church of Jesus Christ of Latter Day
Saints, South 73 degrees 28 minutes 09 seconds East for
364.28 feet to an iron pipe found, a corner to Manassas Retirement
Residence Limited Partnership. Thence with Manassas Retirement Residence Limited
Partnership, South 16 degrees 31 minutes 51 seconds West for
358.73 feet to an iron pipe found, a corner to the aforementioned Potomac
Conference Corporation of Seventh Day Adventists.  Thence with Potomac
Conference Corporation of Seventh Day Adventists, North 73 degrees
28 minutes 09 seconds West for 364.29 feet to the point of
beginning and containing 130.680 S.F., more or less.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT B:  PERMITTED
EXCEPTIONS

     

    

     

    CONSISTING
OF EXHIBIT B-1 THROUGH EXHIBIT B-3

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT B-1:  PERMITTED
EXCEPTIONS

     

    Facility:  Chelmsford
Facility

     

    
      	
              1.  

            	
              Taxes
      and assessments not yet due and
payable.

            

    

     

    
      	
              2.  

            	
              Plan
      entitled “ALTA/ACSM Land Title Plan 4 Technology Drive, Chelmsford,
      MA Prepared for:  The Nathanson Group, PLLC, dated May 10,
      2003, by Howe Surveying Associates, Inc. (the “Survey”), reveals the
      following:

            

    

     

    Existence
and location of Rip Rap and utilities that crosses the premises.

     

    
      	
              3.  

            	
              Terms
      and provisions of Technology Drive Easement for Building 9A Land,
      Technology Drive Utility Easement for Building 9A Land, Water Line
      System and Sewer Line Easement for Building 9A Land and Water Line
      System for Building 9A Land as set forth in an instrument entitled
      “Grant of Easements” dated August 31, 1984, recorded in
      Book 2846, page 181 as shown on the
  Survey.

            

    

     

    
      	
              4.  

            	
              Terms
      and provisions of Technology Drive Utility Connection Easement for
      Building 8 Land, Sewer Line Easement for Building 8 Land and
      Water Line System Easement for Building 8 Land as set forth in an
      instrument entitled “Grant of Easements” dated June 28, 1984 recorded
      in Book 2800, page 214, as shown on the
  Survey.

            

    

     

    
      	
              5.  

            	
              Terms
      and provisions of Water and Sewer Easements as set forth in an instrument
      entitled “Declaration of Easements” dated May 24, 1983 recorded in
      Book 2615, page 426, as shown on the Survey and that only affect
      the appurtenant easement rights in Technology
  Drive.

            

    

     

    
      	
              6.  

            	
              Terms
      and provisions of a Driveway Easement dated June 27, 1996 recorded in
      Book 8101, page 173, as affected by Certificate of Satisfaction
      dated June 27, 1996 recorded in Book 8273, page 257, as
      shown on the Survey.

            

    

     

    
      	
              7.  

            	
              Easement
      to New England Telephone and Telegraph Company dated June 7, 1997
      recorded in Book 8649, page 75, as shown on the Survey and that
      only affect the appurtenant easement rights in Technology
      Drive.

            

    

     

    
      	
              8.  

            	
              Easement
      Agreement for the sole purposes of the installation, construction,
      inspection, maintenance, repair and operation of a water line as set forth
      in an instrument dated August 28, 1997 recorded in Book 8750,
      page 139, as assented to Easement and Subordination by Enterprise
      Bank and Trust Company recorded in Book 8750, page 135, as shown
      on the Survey.

            

    

     

    
      	
              9.  

            	
              Easement
      Agreement for the sole purposes of the installation, construction,
      inspection, maintenance, repair and operation of a sewer line as set forth
      in an instrument dated August 28, 1997 recorded in Book 8750,
      page 147, as assented by MSCPF Assisted Living, Inc. by Assent dated
      August 29, 1997 recorded in Book 8750, page 143, as shown
      on the Survey.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
              10.  

            	
              Grant
      of Easement for Water Main to North Chelmsford Water District dated
      August 27, 1997 recorded in Book 8819, page 276, as shown
      on the Survey.

            

    

     

    
      	
              11.  

            	
              Terms
      and provisions of Reciprocal Easement Agreement dated March 31, 1998
      recorded in Book 9222, page 140, as shown on the
      Survey.

            

    

     

    
      	
              12.  

            	
              The
      following items a-d affect the appurtenant Easement Agreement
      recorded in Book 8750,
page 139:

            

    

     

    
      	
               
      

            	
              a.

            	
              Mortgage
      and Security Agreement to Enterprise Bank and Trust Company dated
      April 29, 1997 recorded in Book 8555,
    page 071.

            

    

    
      	
               
      

            	
              b.

            	
              UCC-1
      Financing Statement naming Enterprise Bank and Trust Company, Secured
      Party recorded in Book 8555,
page 085.

            

    

    
      	
               
      

            	
              c.

            	
              Mortgage
      and Security Agreement to Enterprise Bank and Trust Company dated
      April 29, 1997 recorded in Book 8555,
    page 086.

            

    

    
      	
               
      

            	
              d.

            	
              UCC-1
      Financing Statement naming Enterprise Bank and Trust Company, Secured
      Party recorded in Book 8555,
page 100.

            

    

     

    
      	
              13.  

            	
              Certificate
      of Decision on Special Permit Application dated January 12, 1996
      recorded in Book 8096, page 159, as affected by Modification of
      Certificate of Decision on Special Permit Application dated
      February 14, 1996 recorded in Book 8096,
      page 211.

            

    

     

    
      	
              14.  

            	
              Certificate
      of Decision on Special Permit Application dated January 12, 1996
      recorded in Book 8096, page 172, as affected by Modification of
      Permit Application dated February 14, 1996 recorded in
      Book 8096, page 212.

            

    

     

    
      	
              15.  

            	
              Certificate
      of Decision on Special Permit Application dated January 12, 1996
      recorded in Book 8096, page 198, as affected by Modification of
      Certificate of Decision on Special Permit Application dated
      February 14, 1996 recorded in Book 8096,
      page 213.

            

    

     

    
      	
              16.  

            	
              Certificate
      of Grant of Variance or Special Permit by the Town of Chelmsford dated
      September 20, 1995 recorded in Book 8101,
      page 157.

            

    

     

    
      	
              17.  

            	
              Certificate
      of Granting of Variance or Special Permit by the Board of Appeals of the
      Town of Chelmsford dated September 20, 1995 recorded in
      Book 8101, page 162.

            

    

     

    
      	
              18.  

            	
              Order
      of Conditions (DEP File No. 129-0411) dated December 24, 1995
      recorded in Book 8255,
page 192.

            

    

     

    
      	
              19.  

            	
              Order
      of Conditions (DEP File No. 129-0411) dated December 24, 1995
      recorded in Book 8255,
page 198.

            

    

     

    
      	
              20.  

            	
              Certificate
      of Decision on Special Permit Application dated March 13, 1997
      recorded in Book 8902,
page 144.

            

    

     

    
      	
              21.  

            	
              Certificate
      of Decision on Special Permit Application dated March 13, 1997
      recorded in Book 8902,
page 162.

            

    

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    
      	
              22.  

            	
              Certificate
      of Decision on Special Permit Application dated March 13, 1997
      recorded in Book 8902,
page 180.

            

    

     

    
      	
              23.  

            	
              Certificate
      of Decision on Special Permit Application dated March 13, 1997
      recorded in Book 8902,
page 198.

            

    

     

    
      	
              24.  

            	
              Terms
      and conditions of a Memorandum of Lease between Landlord and
      Tenant.

            

    

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    EXHIBIT B-2:  PERMITTED
EXCEPTIONS

     

    Facility:  Kirkland
Facility

     

    
      	
              (a)  

            	
              Taxes
      and assessments not yet due and payable.  Tax ID No.:
      0825059030

            

    

     

    
      	
              (b)  

            	
              EASEMENT
      AND THE TERMS AND CONDITIONS
THEREOF:

            

    

     

    Grantee:                              King
County

    Purpose:                              Constructing
and Maintaining slopes and embankment

    Area
Affected:                              A
5 foot strip being a portion of said premises

    Recorded:                              April 27,
1944

    Recording
No.:                              3383049

     

    
      	
              (c)  

            	
              EASEMENT
      AND THE TERMS AND CONDITIONS
THEREOF:

            

    

     

    Grantee:                              Puget
Sound Power and Light Company

    Purpose:                              Electric
Transmission and/or Distribution Line System

    Area
Affected:                              The
South 10 feet of the East 120 feet of said premises

    Recorded:                              March 4,
1991

    Recording
No.:                              9103040485

     

    
      	
              (d)  

            	
              EASEMENT
      AND THE TERMS AND CONDITIONS THEREOF, as disclosed by King County
      Commissioner’s Records under Volume 42,
  page 58:

            

    

     

    Purpose:                              Slopes
and embankment

    Area
Affected:                              Portion
adjoining 102nd Avenue
Northeast extension

     

    
      	
              (e)  

            	
              EASEMENT
      AND THE TERMS AND CONDITIONS
THEREOF:

            

    

     

    Grantee:                              Televue
Systems, Inc., d/b/a Viacom Cable

    Purpose:                              Cable
distribution system

    Area
Affected:                              A
portion of said premises

    Recorded:                              September 1,
1995

    Recording
No.:                              9509010092

     

    
      	
              (f)  

            	
              LICENSE
      TO ENTER THE TERMS AND CONDITIONS
THEREOF:

            

    

     

    Grantee:                              City
of Kirkland

    
      	
               
      

            	
              Purpose:

            	
              Inspection
      and maintenance of storm, sanitary sewer and water
    utilities

            

    

    Area
Affected:                              A
portion of said premises

    Recorded:                              February 12,
1996

    Recording
No.:                              9602120584

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
              (g)  

            	
              EASEMENT
      AND THE TERMS AND CONDITIONS
THEREOF:

            

    

     

    Grantee:                              City
of Kirkland

    
      	
               
      

            	
              Purpose:

            	
              Landscape
      greenbelt

            

    

    
      	
               
      

            	
              Area
      Affected:

            	
              The
      North 5 feet, East 15 feet, the South 5 feet, the West
      5 feet and the East 10 feet of the West 15 of the South
      121 feet of said premises

            

    

    Recorded:                              April 8,
1996

    Recording
No.:                              9604080152

     

    
      	
              (h)  

            	
              AGREEMENT
      AND THE TERMS AND CONDITIONS
THEREOF:

            

    

     

    Recorded:                              December 24,
1958

    Recording
No.:                              4979611

    
      	
               
      

            	
              Regarding:

            	
              Conditions
      and agreements for beneficial side sewer and drain
  easement

            

    

     

    
      	
              (i)  

            	
              AGREEMENT
      AND THE TERMS AND CONDITIONS
THEREOF:

            

    

     

    Recorded:                              February 6,
1995

    Recording
No.:                              9502060550

    
      	
               
      

            	
              Regarding:

            	
              Operation
      of Kirkland Pointe Assisted Living and Congregate
  Residence

            

    

     

    
      	
              (j)  

            	
              AGREEMENT
      AND THE TERMS AND CONDITIONS
THEREOF:

            

    

     

    Recorded:                              April 8,
1996

    Recording
No.:                              9604080155

    
      	
               
      

            	
              Regarding:

            	
              Construction
      or installation of public
improvements

            

    

     

    
      	
              (k)  

            	
              ALTA
      Survey prepared by Hebrank, Steadman & Associates, Inc., P.S. on
      July 16, 2003 under Job No. 2003-045.00 discloses the
      following:

            

    

     

    1)      Encroachments
as follows:

     

    a)      Building
corner is 0.1 feet North of building setback line.

     

    b)      South
edge of Rock Wall (pond) is 1.8 feet South of property line.

     

    c)      South
Edge of brick pillar is 0.6 feet South of property line.

     

    
      	
               
      

            	
              d)

            	
              West
      edge of overhead power line is 2.2 feet plus or minus West of
      property line.

            

    

     

    
      	
               
      

            	
              e)

            	
              East
      edge of sign is 2.9 feet East of property
  line.

            

    

     

    
      	
               
      

            	
              f)

            	
              Guy
      Anchor is 0.3 feet South and 1.9 feet West of property corner
      and the west edge of overhead power line is 0.3 feet West of property
      corner.

            

    

     

    
      	
               
      

            	
              g)

            	
              East
      end of fence is 0.9 feet North and 4.6 feet West of property
      corner.

            

    

     

    
      	
               
      

            	
              h)

            	
              Fence
      corner is 0.8 feet North of property
line.

            

    

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              i)

            	
              Fence
      corner is 0.4 feet North of property
line.

            

    

     

    
      	
               
      

            	
              j)

            	
              Fence
      corner is 0.1 feet North and 0.1 feet West of property
      corner.

            

    

     

    
      	
               
      

            	
              k)

            	
              Wood
      deck is 4.0 feet in to the rear building
  setback.

            

    

     

    
      	
               
      

            	
              l)

            	
              Fence
      corner is 0.3 feet West of property
line.

            

    

     

    
      	
               
      

            	
              m)

            	
              Encroachment
      of fence along the South line of
property.

            

    

     

    
      	
               
      

            	
              n)

            	
              Encroachment
      of deck into landscape easement recorded under King County Recording
      No. 9604080152 along the Southwest corner of
  property.

            

    

     

    
      	
               
      

            	
              2)

            	
              Possible
      unrecorded easement for water lines located in the Westerly, Easterly and
      Northeasterly portion of the
property.

            

    

     

    
      	
               
      

            	
              3)

            	
              Possible
      unrecorded easement for gas lines located on the
  property.

            

    

     

    
      	
               
      

            	
              4)

            	
              Possible
      unrecorded easement for underground power and telecommunication lines
      located in the Northeast corner of the
property.

            

    

     

    
      	
               
      

            	
              5)

            	
              Possible
      unrecorded easement for sewer line located in Easterly portion of the
      property.

            

    

     

    
      	
              (l)  

            	
              EASEMENT
      AND THE TERMS AND CONDITIONS
THEREOF:

            

    

     

    Grantee:                              Comcast
of California, Texas, Washington

    
      	
               
      

            	
              Purpose:

            	
              Cable
      Television Distribution System

            

    

    Area
affected:                              A
portion of said premises

    Recorded:                              September 17,
2003

    Recording
No.:                              20030917000156

     

    (m)                       TERMS
AND CONDITIONS OF A MEMORANDUM OF LEASE BETWEEN LANDLORD AND
TENANT.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    EXHIBIT B-3:  PERMITTED
EXCEPTIONS

     

    Facility:  Manassas
Facility

     

    
      	
              1.  

            	
              Taxes,
      Storm Water Management fees, Solid Waste User fees and any other
      assessments not yet due and
payable.

            

    

     

    
      	
              2.  

            	
              Terms,
      conditions and all matters as set forth in and as shown on plat attached
      to instrument recorded in Deed Book 1702 at page 1423, among the
      land records of Prince William County,
Virginia.

            

    

     

    
      	
              3.  

            	
              Easement(s)
      granted to the American Telephone and Telegraph Company of Virginia,
      recorded in Deed Book 71 at page 161, among the aforesaid land
      records.

            

    

     

    
      	
              4.  

            	
              Easement(s)
      granted to Prince William Electric Cooperative, recorded in Deed
      Book 546 at page 564 among the aforesaid land
      records.

            

    

     

    
      	
              5.  

            	
              Easement(s)
      granted to the Board of Supervisors of Prince William County, Virginia,
      and the Prince William County Service Authority, recorded in Deed
      Book 1887 at page 928 among the aforesaid land
      records.

            

    

     

    
      	
              6.  

            	
              Easement(s)
      granted to the Board of County Supervisors of Prince William County,
      Virginia, recorded in Deed Book 2282 at page 437, and in Deed
      Book 2356 at page 491, among the aforesaid land
      records.

            

    

     

    
      	
              7.  

            	
              Easements
      and all matters as set forth in and as shown on plat attached to Grant of
      Easement recorded in Deed Book 2356 at page 502, among the
      aforesaid land records.

            

    

     

    
      	
              8.  

            	
              Terms,
      provisions, obligations and all matters as set forth in Agreement to Grant
      Easement recorded in Deed Book 2515 at page 997, among the
      aforesaid land records.

            

    

     

    
      	
              9.  

            	
              Easement(s)
      granted to Northern Virginia Electric Cooperative recorded in Deed
      Book 2349 at page 1969, among the aforesaid land
      records.

            

    

     

    
      	
              10.  

            	
              Easement(s)
      granted to GTE South Incorporated, recorded in Deed Book 2374 at
      page 707, among the aforesaid land
records.

            

    

     

    
      	
              11.  

            	
              Waterline
      Easements granted to the Prince William County Service Authority, recorded
      in Deed Book 2282 at page 454; and in Deed Book 2803 at
      page 1853, among the aforesaid land
  records.

            

    

     

    
      	
              12.  

            	
              Term,
      provisions and all matters set forth in Stormwater Management/BMP
      Facilities Maintenance Agreements recorded in Deed Book 2282 at
      page 450; and in Deed Book 2803 at page 1858, among the
      aforesaid land records.

            

    

     

    
      	
              13.  

            	
              Reservation
      of a 15’ buffer as set forth in instrument recorded in Deed Book 2282
      at page 437, among the aforesaid land
  records.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
              14.  

            	
              Waterline
      Easement as the same is set forth on plat attached to instrument recorded
      in Deed Book 2356 at page 491, among the aforesaid land
      records.

            

    

     

    
      	
              15.  

            	
              Twenty
      foot (20’); thirty-five foot (35’); and twenty-five foot (25’) building
      restriction lines as shown on survey by R.S. Thomas, CLS, dated
      May 14, 2003.

            

    

     

    
      	
              16.  

            	
              Terms
      and conditions of a Memorandum of Lease between Landlord and
      Tenant.

            

    

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    EXHIBIT C:  FACILITY
INFORMATION

     

    
      	
              Facility
      Name

              Subtenant
      and/or Licensed Operator

               

            	
              Street
      Address

              County

               

            	
              Facility
      Type (per license)

              Beds/Units

               

            	
              Investment
      Amount

               

            
	
              Meadow
      Lodge at Drum Hill

               

              (“Chelmsford
      Facility”)

               

              Emeritus Properties IX,
      LLC

            	
              4 Technology
      Drive

              Chelmsford,
      MA  01863

              County:  Middlesex

            	
              Assisted
      Living Residence

               

              The
      License provides that the Facility is certified to operate a maximum of 80
      units.

               

            	
              $12,000,000

            
	
              Kirkland
      Lodge at Lakeside (formerly known as Kirkland Lodge)

               

              (“Kirkland
      Facility”)

               

              Emeritus Properties X,
      LLC

            	
              6505 Lakeview
      Drive NE

              Kirkland,
      WA  98033

              County:  King

            	
              Boarding
      Home

               

              There
      is no reference to the number of units at the Kirkland Facility on the
      face of the license.  It does refer to the Kirkland Facility
      being licensed for the care of 85 adults. According to the Tenant there
      are 75 units at the Kirkland Facility.

               

            	
              $6,200,000

            
	
              Emeritus
      at Manassas (formerly known as Cobblestones at Fairmont)

               

              (“Manassas
      Facility”)

               

              Emeritus Properties XII,
      LLC

            	
              8341 Barrett
      Drive

              Manassas,
      VA  20109

              County:  Prince
      William

            	
              Assisted
      Living/Residential Living Care and Assisted Living Care

               

              There
      is no reference to the number of units at the Manassas Facility on the
      face of the license.  It does refer to the Manassas Facility
      having a maximum capacity of 125. According to the Tenant there are 75
      units at the Manassas Facility.

            	
              $8,200,000

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT D:  LANDLORD’S
PERSONAL PROPERTY

     

    CONSISTING
OF EXHIBIT D-1 THROUGH EXHIBIT D-3

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT D-1:  LANDLORD’S
PERSONAL PROPERTY

     

    Facility:  Chelmsford
Facility

     

    
      	
              1.  

            	
              Any
      and all furniture, fixtures and equipment located at the Facility, but
      excluding inventory and Tenant’s
Property.

            

    

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT D-2:  LANDLORD’S
PERSONAL PROPERTY

     

    Facility:  Kirkland
Facility

     

    
      	
              1.  

            	
              Any
      and all furniture, fixtures and equipment located at the Facility, but
      excluding inventory and Tenant’s
Property.

            

    

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT D-3:  LANDLORD’S
PERSONAL PROPERTY

     

    Facility:  Manassas
Facility

     

    
      	
              1.  

            	
              Any
      and all furniture, fixtures and equipment located at the Facility, but
      excluding inventory and Tenant’s
Property.

            

    

     

    

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT E:  DOCUMENTS
TO BE DELIVERED

     

    Tenant shall deliver each of the
following documents to Landlord, to the extent applicable, no later than the
date specified for each document:

     

    1. Annual
Financial Statement of Tenant (audited) and Facility Financial Statement
(unaudited) – within 90 days after the end of each fiscal
year.

     

    2. Annual
Facility Budget and Annual Company Budget not later than 45 days after the
beginning of the next fiscal year.

     

    3. Quarterly
Variance Report for each Facility, including occupancy, census, capital
expenditures and operating revenues and expenses by line item with a detailed
explanation of the cause of all material variances from the Annual Facility
Budget (i.e., more than 10% for that line item) and a description of Tenant’s
plans for eliminating all material variances – within 45 days after
the end of each quarter.

     

    4. Quarterly
Update to Annual Company Budget (on a 12-month rolling forward period) –
within 45 days after the end of each quarter.

     

    5. Quarterly
Healthcare Integrity and Protection Data Bank (HIPDB) Report (dated not earlier
than the end of the quarter) – within 45 days after the end of each
quarter.

     

    6. Quarterly
Updates to Operator Profile of Tenant, including a review of the Profile
prepared by Landlord and identification of all changes to the Profile to reflect
the current situation – within 45 days after the end of each
quarter.

     

    7. Periodic
Financial Statement of Tenant and Facility Financial Statement
(unaudited) – within 45 days after the end of each
quarter.

     

    8. Monthly
Facility Financial Statement – within 30 days after the end of each
month.

     

    9. Tenant’s
Certificate and Annual or Quarterly Facility Financial Report
(Exhibit F) – with each delivery of Tenant’s financial
statements.

     

    10. Annual
Facility Financial Report (based upon internal financial records) – within
60 days after the end of each fiscal year.

     

    11. Federal
tax return of Tenant – within 15 days after the filing of the
return.  If the filing date is extended, also provide a copy of the
extension application within 15 days after filing.

     

    12. If
applicable, Medicaid cost reports for each Facility – within 15 days
after filing of the report with the State agency.

     

    13. State and
federal health care survey and inspection reports, inspector exit interview
notes and report (if delivered to Tenant or Subtenant), plans of correction,
re-survey

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    reports,
evidence of annual license renewal – within 30 days after receipt by Tenant
or Subtenant, HIPDB adverse action report, notice of licensure deficiencies or
commencement of licensure revocation or decertification proceeding, notice of
admissions ban, issuance of a provisional or temporary license and all
correspondence regarding any of the foregoing for each Facility – within
five days after receipt by Tenant or Subtenant.

     

    14. Real
estate taxes

     

    (a) Copy of
invoice and check – within five days after the due date; and

     

    (b) Copy of
official receipt or other satisfactory evidence of payment – within
30 days after the due date.

     

    15. Certificate
of insurance renewal, current Certificate of Compliance from insurance agent and
evidence of payment of premium – at least 30 days prior to the
expiration of each policy.

     

    16. Facility
information:  [i] a security deposit report, including resident
name, date of move-in, security deposit, and corresponding security deposit bank
account balance, with a monthly update of any changes; [ii] a report
accounting for all resident trust funds, including corresponding trust fund
deposit bank accounts; [iii] a schedule and copies of any equipment leases
and financings, including vendor, equipment descriptions, monthly payment, rate
and maturity, with a monthly update of any changes and the required
nondisturbance agreement if the original cost of the equipment exceeds
$50,000.00; [iv] a schedule of all utility providers and utility deposits;
[v] a list of all rent concessions, including, but not limited to, free
rent, rent reduction, community fee waivers, rate locks, rate guaranties and
waivers of security deposits; [vi] a copy of each private pay resident’s
occupancy agreement and each Facility’s form of agreement; [vii] a schedule
of all employee vacation and sick days; and [viii] employee policies and
procedures handbook, including employee benefits – current and annually
updated reports, schedules and copies to be delivered upon request.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    EXHIBIT F:  TENANT’S
CERTIFICATE

    AND
FACILITY FINANCIAL REPORTS

    

    

    
      	
              Report
      Period:

            	
              Commencing
      _______________ and ending
_______________

            

    

    

    
      	
              Lease:

            	
              Lease
      made by Health Care REIT, Inc. and certain of its affiliates (collectively
      called “Landlord”) to Emeritus Corporation
  (“Tenant”)

            

    

    

    

    Tenant hereby certifies to Landlord to
the best of Tenant’s knowledge as follows:

     

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

     

    2. The
attached [Annual or Quarterly] Facility Financial Report and Facility Accounts
Receivable Aging Report for the Report Period is complete, true and accurate and
has been prepared in a manner substantially consistent with prior schedules
submitted to Landlord.  As set forth in the [Annual or Quarterly]
Facility Financial Report, Tenant has maintained the Portfolio Coverage Ratio
for the Report Period as required under the Lease between Tenant and
Landlord.

     

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

     

    Executed this ___ day of
_______________, _____.

    

    

    

    

    Name:                                                                

    

    Title:                                                                

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ANNUAL
FACILITY FINANCIAL REPORT

    

    Facility
Name:                                

    Facility
Address:                                

    

    

    
      	
              Report
      Period:

            	
              Twelve
      (12) months beginning _______________ and ending
      _______________.  All information reported should be for this
      period only.

            

    

    

    
      	
              Occupancy
      Data

            	 
      	
              Census
      Data

            	
              %
      Resident

              Days

            	
              % Revenues

            
	
              Total
      Beds/Units:

            	
              _______

            	
              Medicaid:

            	
              _______%

            	
              _______%

            
	
              Total
      Available Days:

            	
              _______

            	
              Medicare:

            	
              _______%

            	
              _______%

            
	
              Total
      Occupied Days:

            	
              _______

            	
              Private
      & Other:

            	
              _______%

            	
              _______%

            
	
              Occupancy
      Percentage:

            	
              _______%

            	
              Total:

            	
              _______%

            	
              _______%

            
	 
      	 
      	 
      	 
      	 
      

    

    

    OPERATING
DATA

    

    1.           Gross
Revenues                                                                                            $                                

    

    2.           Contractual
Allowances                                                                             
$                                

    

    3.           Net
Revenues                                                                                                $                                

    

    
      	
              4.  

            	
              Operating
      Expenses(before interest,
      lease/rent, depreciation,

            

    

    
      	
              amortization and management
      fees)

            	
              $

            	 

    

    

    5.           Net
Operating
Income                                                                                 $                                

    

    6.           Interest
Expense                                                                                           $                                

    

    7.           Lease/Rent
Expense                                                                                     $                                

    

    8.           Depreciation
Expense                                                                                   $                                

    

    9.           Amortization
Expense                                                                                   $                                

    

    10.           Management
Fees                                                                                       $                                

    

    11.           Management
Fees (as a percent of Gross
Revenues)                           %

    

    12.           Overhead
Allocation (if
applicable)                                                          $                                

    

    13.           Other
(identify)                                                                                             $                                

    

    14.           Income
Taxes                                                                                                $                                

    

    15.           Net
Income (amount should agree with
the facility’s financial statements) $ 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    FINANCING
DATA

    (Note:  This
data breaks out Items 6 and 7 above.)

    

    

    
      	 
      	
              Related
      to HCRI

            	
              All
      Other Leases and/or Debt

            	
              Total

            
	
              Lease
      Payments

            	
              _________

            	
              _________

            	
              ________

            
	
              Interest
      Payments

            	
              _________

            	
              _________

            	
              ________

            
	
              Principal
      Payments (if any)

            	
              _________

            	
              _________

            	
              ________

            
	 
      	
              $                

            	
              $              

            	
              $                

            

    

     

    COVERAGE
RATIO

    

    1.           Net
Operating Income $______________

     

    2.           Less
Imputed Management Fee

      ( _____% of gross
revenues) (______________)

     

    3.           Less
Imputed Replacement Reserve for period

      ($_________ per bed [or
unit] per year) (______________)

     

    4.           Adjusted
Net Operating Income $______________

     

    5.           Loan/Lease
Payments to HCRI $______________

     

    6.           Actual
Coverage Ratio (Line 4  ̧ Line
5) ______________

     

    7.           Minimum
Coverage Ratio (per Lease Agreement) ______________

     

    

    CURRENT
RATIO

    [*DELETE
IF NOT APPLICABLE]

    

    1.           Current
Assets $______________

     

    2.           Current
Liabilities $______________

     

    3.           Actual
Current Ratio (Line 1  ̧ Line
2) ______________

     

    4.           Minimum
Current Ratio (per Lease Agreement) ______________

     

    

    

    Tenant/Subtenant
hereby certifies that the foregoing is true and accurate.

    

    Date:                                                                

    

    Name:                                                                Phone
Number:                                                                

    Title:                                                        

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    QUARTERLY
FACILITY FINANCIAL REPORT

    

    Facility
Name:                                

    Facility
Address:                                

    

    

    
      	
              Report
      Period:

            	
              Three
      (3) months beginning _______________ and ending
      _______________.  All information reported should be for this
      period only.

            

    

    

    
      	
              Occupancy
      Data

            	 
      	
              Census
      Data

            	
              %
      Resident

              Days

            	
              % Revenues

            
	
              Total
      Beds/Units:

            	
              _______

            	
              Medicaid:

            	
              _______%

            	
              _______%

            
	
              Total
      Available Days:

            	
              _______

            	
              Medicare:

            	
              _______%

            	
              _______%

            
	
              Total
      Occupied Days:

            	
              _______

            	
              Private
      & Other:

            	
              _______%

            	
              _______%

            
	
              Occupancy
      Percentage:

            	
              _______%

            	
              Total:

            	
              _______%

            	
              _______%

            
	 
      	
               

            	 
      	 
      	 
      

    

    

    OPERATING DATA

    

    1.           Gross
Revenues                                                                                             $                                

    

    2.           Contractual
Allowances                                                                               $                                

    

    3.           Net
Revenues                                                                                                $                                

    

    
      	
              4.  

            	
              Operating
      Expenses (before interest,
      lease/rent, depreciation,

            

    

    
      	
               amortization and management
      fees)

            	
              $

            	 

    

    

    5.           Net
Operating
Income                                                                                  $                                

    

    6.           Interest
Expense                                                                                            $                                

    

    7.           Lease/Rent
Expense                                                                                      $                                

    

    8.           Depreciation
Expense                                                                                   $                                

    

    9.           Amortization
Expense                                                                                   $                                

    

    10.           Management
Fees                                                                                       $                                

    

    11.           Management
Fees (as a percent of Gross
Revenues)                            %

    

    12.           Overhead
Allocation (if
applicable)                                                          $                                

    

    13.           Other
(identify)                                                                                             $                                

    

    14.           Income
Taxes                                                                                                $                                

    15.           Net
Income (amount should agree with
the facility’s financial statements) $ 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    FINANCING
DATA

    (Note:  This
data breaks out Items 6 and 7 above.)

    

    

    
      	 
      	
              Related
      to HCRI

            	
              All
      Other Leases and/or Debt

            	
              Total

            
	
              Lease
      Payments

            	
              _________

            	
              _________

            	
              ________

            
	
              Interest
      Payments

            	
              _________

            	
              _________

            	
              ________

            
	
              Principal
      Payments (if any)

            	
              _________

            	
              _________

            	
              ________

            
	 
      	
              $                

            	
              $                

            	
              $               

            

    

     

    COVERAGE
RATIO

    

    1.           Net
Operating Income $______________

     

    2.           Less
Imputed Management Fee

      ( _____% of gross
revenues) (______________)

     

    3.           Less
Imputed Replacement Reserve for period

      ($_________ per bed [or
unit] per year) (______________)

     

    4.           Adjusted
Net Operating Income $______________

     

    5.           Loan/Lease
Payments to HCRI $______________

     

    6.           Actual
Coverage Ratio (Line 4  ̧ Line
5) ______________

     

    7.           Minimum
Coverage Ratio (per Lease Agreement) ______________

     

    

    CURRENT
RATIO

    [*DELETE
IF NOT APPLICABLE]

    

    1.           Current
Assets $______________

     

    2.           Current
Liabilities $______________

     

    3.           Actual
Current Ratio (Line 1  ̧ Line
2) ______________

     

    4.           Minimum
Current Ratio (per Lease Agreement) ______________

     

    

    

    Tenant/Subtenant
hereby certifies that the foregoing is true and accurate.

    

    Date:                                                                

    

    Name:                                                                Phone
Number:                                                                

    Title:                                                        

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    QUARTERLY
FACILITY ACCOUNTS RECEIVABLE AGING REPORT

     

    Facility
Name:                           

     

    Facility
Address:                                

     

    

    

    

    Accounts
Receivable Aging as of ____________ (most recent quarter ended)

    

    
      	
              PAYOR

            	
              0-30
      DAYS %

            	
              31-60
      DAYS %

            	
              61-90
      DAYS %

            	
              OVER
      90 DAYS %

            	
              TOTALS %

            
	
              Medicaid

            	
              $______________%

            	
              $______________%

            	
              $______________%

            	
              $______________%

            	
              $______________%

            
	
              Medicare

            	
              $______________%

            	
              $______________%

            	
              $______________%

            	
              $______________%

            	
              $______________%

            
	
              Commercial
      Insurance

            	
              $______________%

            	
              $______________%

            	
              $______________%

            	
              $______________%

            	
              $______________%

            
	
              Other
      -_____________

            	
              $______________%

            	
              $______________%

            	
              $______________%

            	
              $______________%

            	
              $______________%

            
	
              TOTALS

            	
              $__________100%

            	
              $__________100%

            	
              $__________100%

            	
              $__________100%

            	
              $__________100%

            
	 
      	 
      	 
      	 
      	 
      	 
      
	
              %
      OF TOTALS $

            	
              ___________%

            	
              ___________%

            	
              ___________%

            	
              ___________%

            	
              100%

            

    

    

    Accounts
Receivable Aging as of ____________ (2nd recent quarter ended)

    

    
      	
              PAYOR

            	
              0-30
      DAYS %

            	
              31-60
      DAYS %

            	
              61-90
      DAYS %

            	
              OVER
      90 DAYS %

            	
              TOTALS %

            
	
              Medicaid

            	
              $______________%

            	
              $______________%

            	
              $______________%

            	
              $______________%

            	
              $______________%

            
	
              Medicare

            	
              $______________%

            	
              $______________%

            	
              $______________%

            	
              $______________%

            	
              $______________%

            
	
              Commercial
      Insurance

            	
              $______________%

            	
              $______________%

            	
              $______________%

            	
              $______________%

            	
              $______________%

            
	
              Other
      -_____________

            	
              $______________%

            	
              $______________%

            	
              $______________%

            	
              $______________%

            	
              $______________%

            
	
              TOTALS

            	
              $__________100%

            	
              $__________100%

            	
              $__________100%

            	
              $__________100%

            	
              $__________100%

            
	 
      	 
      	 
      	 
      	 
      	 
      
	
              %
      OF TOTALS $

            	
              ___________%

            	
              ___________%

            	
              ___________%

            	
              ___________%

            	
              100%

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
G:  GOVERNMENT AUTHORIZATIONS

    TO
BE OBTAINED; ZONING PERMITS

     

    [*TENANT
TO SUPPLY*]

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT H:  PENDING
LITIGATION

     

    [*TENANT
TO CONFIRM*]

     

    NONE

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT I:  LIST
OF LEASES AND CONTRACTS

     

    None

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT J:  WIRE
TRANSFER INSTRUCTIONS

     

    HEALTH
CARE REIT, INC.

     

    WIRE
TRANSFER INSTRUCTIONSex107113freddiemacmortgagesl.htm

    EX-10.71.13

      Prepared
by, and after recording

      return
to:

      James J.
Schwert, Esquire

      Oppenheimer
Wolff & Donnelly LLP

      Plaza
VII, Suite 3300

      45 S.
Seventh Street

      Minneapolis,
MN 55402

      

      

      

      Freddie
Mac Loan No. 534381480

      Saddleridge
Lodge

      

      

      MULTIFAMILY DEED OF
TRUST,

      ASSIGNMENT OF
RENTS

      AND SECURITY AGREEMENT AND
FIXTURE FILING

      (TEXAS
– REVISION DATE 02-15-2008)

      

      

      

      

      
        	
                 
      

              	
                NOTICE OF
      CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE
      OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT
      TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN
      THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER'S LICENSE
      NUMBER.

              

      

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      MULTIFAMILY
DEED OF TRUST,

      ASSIGNMENT
OF RENTS

      SECURITY
AGREEMENT AND FIXTURE FILING

      (TEXAS
– REVISION DATE 02-15-2008)

      

      

      THIS MULTIFAMILY DEED OF TRUST,
ASSIGNMENT OF RENTS AND SECURITY AGREEMENT AND FIXTURE FILING (the “Instrument”) is made to be
effective this 12th day of November, 2009, by EMERITOL SADDLERIDGE LODGE LLC, a
limited liability company organized and existing under the laws of Delaware,
whose address is c/o Emeritus Corporation, 3131 Elliott Avenue, Suite 500,
Seattle, Washington 98120, as trustor (“Borrower”), to REBECCA S.
CONRAD, ESQUIRE, as trustee (“Trustee”), for the benefit of
KEYCORP REAL ESTATE CAPITAL MARKETS, INC., a corporation organized and existing
under the laws of Ohio, whose address is 127 Public Square, Cleveland, Ohio
44114, as beneficiary (“Lender”).  Borrower's
organizational identification number, if applicable, is 4595694.

      

      Borrower, in consideration of the
Indebtedness and the trust created by this Instrument, irrevocably grants,
conveys and assigns to Trustee, in trust, with power of sale, the Mortgaged
Property, including the Land located in Midland County, State of Texas and
described in Exhibit A attached to this Instrument.  To have and to
hold the Mortgaged Property unto Trustee, Trustee’s successor in trust and
Trustee’s assigns forever.

      

      TO SECURE TO LENDER the repayment of
the Indebtedness evidenced by Borrower’s Multifamily Note payable to Lender,
dated as of the date of this Instrument, and maturing on November 1, 2019 (the
"Maturity Date"), in the
principal amount of Six Million Four Hundred Forty-Two Thousand and No/100
Dollars ($6,442,000.00), and all renewals, extensions and modifications of the
Indebtedness, and the performance of the covenants and agreements of Borrower
contained in the Loan Documents.

      

      Borrower warrants and represents that
Borrower is lawfully seized of the Mortgaged Property and has the right, power
and authority to grant, convey and assign the Mortgaged Property, and that the
Mortgaged Property is unencumbered, except as shown on the schedule of
exceptions to coverage in the title policy issued to and accepted by Lender
contemporaneously with the execution and recordation of this Instrument and
insuring Lender's interest in the Mortgaged Property (the "Schedule of Title
Exceptions").  Borrower covenants that Borrower will warrant
and defend generally the title to the Mortgaged Property against all claims and
demands, subject to any easements and restrictions listed in the Schedule of
Title Exceptions.

      

      

      UNIFORM
COVENANTS

      REVISION
DATE 02-15-2008

      

      Covenants.  In
consideration of the mutual promises set forth in this Instrument, Borrower and
Lender covenant and agree as follows:

      
        
           

        

        
          Page
1

          
            

          

        

        
           

        

      

      

      1.           DEFINITIONS.  The
following terms, when used in this Instrument (including when used in the above
recitals), shall have the following meanings:

      

      (a)           "Attorneys' Fees and Costs"
means (i) fees and out-of-pocket costs of Lender's and Loan Servicer's
attorneys, as applicable, including costs of Lender's and Loan Servicer's
in-house counsel, support staff costs, costs of preparing for litigation,
computerized research, telephone and facsimile transmission expenses, mileage,
deposition costs, postage, duplicating, process service, videotaping and similar
costs and expenses; (ii) costs and fees of expert witnesses, including
appraisers; and (iii) investigatory fees. 

      

      (b)           "Borrower" means all persons or
entities identified as "Borrower" in the first paragraph of this Instrument,
together with their successors and assigns.

      

      (c)           "Business Day" means any day
other than a Saturday, a Sunday or any other day on which Lender or the national
banking associations are not open for business.

      

      (d)           "Collateral Agreement" means
any separate agreement between Borrower and Lender for the purpose of
establishing replacement reserves for the Mortgaged Property, establishing a
fund to assure the completion of repairs or improvements specified in that
agreement, or assuring reduction of the outstanding principal balance of the
Indebtedness if the occupancy of or income from the Mortgaged Property does not
increase to a level specified in that agreement, or any other agreement or
agreements between Borrower and Lender which provide for the establishment of
any other fund, reserve or account.

      

      (e)           "Controlling Entity" means an
entity which owns, directly or indirectly through one or more intermediaries,
(i) a general partnership interest or a Controlling Interest of the limited
partnership interests in Borrower (if Borrower is a partnership or joint
venture), (ii) a manager's interest in Borrower or a Controlling Interest
of the ownership or membership interests in Borrower (if Borrower is a limited
liability company), (iii) a Controlling Interest of any class of voting
stock of Borrower (if Borrower is a corporation), (iv) a trustee's interest
or a Controlling Interest of the beneficial interests in Borrower (if Borrower
is a trust), or (v) a managing partner's interest or a Controlling Interest of
the partnership interests in Borrower (if Borrower is a limited liability
partnership).

      

      (f)           "Controlling Interest" means
(i) 51 percent or more of the ownership interests in an entity, or
(ii) a percentage ownership interest in an entity of less than
51 percent, if the owner(s) of that interest actually
direct(s) the business and affairs of the entity without the requirement of
consent of any other party.  The Controlling Interest shall be deemed
to be 51 percent unless otherwise stated in Exhibit B.

      

      (g)           "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 Mortgaged Property.

      

      
        
           

        

        
          Page
2

          
            

          

        

        
           

        

      

      (h)           "Event of Default" means the
occurrence of any event listed in Section 22.

      

      (i)           "Fixtures" means all property
owned by Borrower which is so attached to the Land or the Improvements as to
constitute a fixture under applicable law, including: machinery, equipment,
engines, boilers, incinerators, installed building materials; systems and
equipment for the purpose of supplying or distributing heating, cooling,
electricity, gas, water, air, or light; antennas, cable, wiring and conduits
used in connection with radio, television, security, fire prevention, or fire
detection or otherwise used to carry electronic signals; telephone systems and
equipment; elevators and related machinery and equipment; fire detection,
prevention and extinguishing systems and apparatus; security and access control
systems and apparatus; plumbing systems; water heaters, ranges, stoves,
microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers
and other appliances; light fixtures, awnings, storm windows and storm doors;
pictures, screens, blinds, shades, curtains and curtain rods; mirrors; cabinets,
paneling, rugs and floor and wall coverings; fences, trees and plants; swimming
pools; and exercise equipment.

      

      (j)           
"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 Mortgaged Property or the use, operation or
improvement of the Mortgaged Property or over the Borrower.

      

      (k)           "Hazard Insurance" is defined
in Section 19.

      

      (l)           "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 or above-ground storage
tanks, whether empty or containing any substance; any substance the presence of
which on the Mortgaged 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 that (i)  is defined as a "hazardous
substance," "hazardous material," "hazardous waste," "toxic substance," "toxic
pollutant," "contaminant," or "pollutant" by or within the meaning of any
Hazardous Materials Law, or (ii) is regulated in any way by or within the
meaning of any Hazardous Materials Law.

      

      (m)           "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 or the protection
of human health or the environment and apply to Borrower or to the Mortgaged
Property. 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 of 1976, 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 U.S.C. Section 1251, et seq., and the Hazardous
Materials Transportation Act, 49 U.S.C. Section 5101 et seq., and their state
analogs.

      
        
           

        

        
          Page
3

          
            

          

        

        
           

        

      

      

      (n)           "Impositions" and "Imposition Deposits" are
defined in Section 7(a).

      

      (o)           "Improvements" means the
buildings, structures, improvements, and alterations now constructed or at any
time in the future constructed or placed upon the Land, including any future
replacements and additions.

      

      (p)           "Indebtedness" means the
principal of, interest at the fixed or variable rate set forth in the Note on,
and all other amounts due at any time under, the Note, this Instrument or any
other Loan Document, including prepayment premiums, late charges, default
interest, and advances as provided in Section 12 to protect the security of
this Instrument.

      

      (q)           "Initial Owners" means, with
respect to Borrower or any other entity, the persons or entities that
(i) on the date of the Note, or (ii) on the date of a Transfer to
which Lender has consented, own in the aggregate 100 percent of the
ownership interests in Borrower or that entity.

      

      (r)           "Land" means the land described
in Exhibit A.

      

      (s)           "Leases" means all present and
future leases, subleases, licenses, concessions or grants or other possessory
interests now or hereafter in force, whether oral or written, covering or
affecting the Mortgaged Property, or any portion of the Mortgaged Property
(including proprietary leases or occupancy agreements if Borrower is a
cooperative housing corporation), and all modifications, extensions or
renewals.

      

      (t)           "Lender" means the entity
identified as "Lender" in the first paragraph of this Instrument, or any
subsequent holder of the Note.

      

      (u)           "Loan Documents" means the
Note, this Instrument, all guaranties, all indemnity agreements, all Collateral
Agreements, O&M Programs, the MMP and any other documents now or in the
future executed by Borrower, any guarantor or any other person in connection
with the loan evidenced by the Note, as such documents may be amended from time
to time.

      

      (v)           "Loan Servicer" means the
entity that from time to time is designated by Lender to collect payments and
deposits and receive Notices under the Note, this Instrument and any other Loan
Document, and otherwise to service the loan evidenced by the Note for the
benefit of Lender.  Unless Borrower receives Notice to the contrary,
the Loan Servicer is the entity identified as "Lender" in the first paragraph of
this Instrument.

       

      (w)           "MMP" means a moisture
management plan to control water intrusion and prevent the development of Mold
or moisture at the Mortgaged Property throughout the term of this
Instrument.  At a minimum, the MMP must contain a provision for (i)
staff training, (ii) information to be provided to tenants, (iii) documentation
of the plan, (iv) the appropriate protocol for incident response and remediation
and (v) routine, scheduled inspections of common space and unit
interiors.

      
        
           

        

        
          Page
4

          
            

          

        

        
           

        

      

      

      (x)           "Mold" means mold, fungus,
microbial contamination or pathogenic organisms.

      

      (y)           "Mortgaged Property" means all
of Borrower's present and future right, title and interest in and to all of the
following:

      

      
        	
                 
      

              	
                (i)

              	
                the
      Land;

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                the
      Improvements;

              

      

      

      
        	
                 
      

              	
                (iii)

              	
                the
      Fixtures;

              

      

      

      
        	
                 
      

              	
                (iv)

              	
                the
      Personalty;

              

      

      

      
        	
                 
      

              	
                (v)

              	
                all
      current and future rights, including air rights, development rights,
      zoning rights and other similar rights or interests, easements, tenements,
      rights-of-way, strips and gores of land, streets, alleys, roads, sewer
      rights, waters, watercourses, and appurtenances related to or benefiting
      the Land or the Improvements, or both, and all rights-of-way, streets,
      alleys and roads which may have been or may in the future be
      vacated;

              

      

      

      
        	
                 
      

              	
                (vi)

              	
                all
      proceeds paid or to be paid by any insurer of the Land, the Improvements,
      the Fixtures, the Personalty or any other part of the Mortgaged Property,
      whether or not Borrower obtained the insurance pursuant to Lender's
      requirement;

              

      

      

      
        	
                 
      

              	
                (vii)

              	
                all
      awards, payments and other compensation made or to be made by any
      municipal, state or federal authority with respect to the Land, the
      Improvements, the Fixtures, the Personalty or any other part of the
      Mortgaged Property, including any awards or settlements resulting from
      condemnation proceedings or the total or partial taking of the Land, the
      Improvements, the Fixtures, the Personalty or any other part of the
      Mortgaged Property under the power of eminent domain or otherwise and
      including any conveyance in lieu
thereof;

              

      

      

      
        	
                 
      

              	
                (viii)

              	
                all
      contracts, options and other agreements for the sale of the Land, the
      Improvements, the Fixtures, the Personalty or any other part of the
      Mortgaged Property entered into by Borrower now or in the future,
      including cash or securities deposited to secure performance by parties of
      their obligations;

              

      

      

      
        	
                 
      

              	
                (ix)

              	
                all
      proceeds from the conversion, voluntary or involuntary, of any of the
      above into cash or liquidated claims, and the right to collect such
      proceeds;

              

      

      

      
        
           

        

        
          Page
5

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (x)

              	
                all
      Rents and Leases;

              

      

      

      
        	
                 
      

              	
                (xi)

              	
                all
      earnings, royalties, accounts receivable, issues and profits from the
      Land, the Improvements or any other part of the Mortgaged Property, and
      all undisbursed proceeds of the loan secured by this
      Instrument;

              

      

      

      
        	
                 
      

              	
                (xii)

              	
                all
      Imposition Deposits;

              

      

      

      
        	
                 
      

              	
                (xiii)

              	
                all
      refunds or rebates of Impositions by any municipal, state or federal
      authority or insurance company (other than refunds applicable to periods
      before the real property tax year in which this Instrument is
      dated);

              

      

      

      
        	
                 
      

              	
                (xiv)

              	
                all
      tenant security deposits which have not been forfeited by any tenant under
      any Lease and any bond or other security in lieu of such deposits;
      and

              

      

      

      
        	
                 
      

              	
                (xv)

              	
                all
      names under or by which any of the above Mortgaged Property may be
      operated or known, and all trademarks, trade names, and goodwill relating
      to any of the Mortgaged Property.

              

      

      

      (z)           "Note" means the Multifamily
Note described on page 1 of this Instrument, including all schedules, riders,
allonges and addenda, as such Multifamily Note may be amended from time to
time.

      

      (aa)           "O&M Program" is defined in
Section 18(d).

      

      (bb)           "Personalty" means
all:

      

      (i)      accounts
(including deposit accounts) of Borrower related to the Mortgaged
Property;

       

      

      
        	
                 
      

              	
                (ii)

              	
                equipment
      and inventory owned by Borrower, which are used now or in the future in
      connection with the ownership, management or operation of the Land or
      Improvements or are located on the Land or Improvements, including
      furniture, furnishings, machinery, building materials, goods, supplies,
      tools, books, records (whether in written or electronic form), and
      computer equipment (hardware and
software);

              

      

      

      
        	
                 
      

              	
                (iii)

              	
                other
      tangible personal property owned by Borrower which is used now or in the
      future in connection with the ownership, management or operation of the
      Land or Improvements or is located on the Land or in the Improvements,
      including ranges, stoves, microwave ovens, refrigerators, dishwashers,
      garbage disposers, washers, dryers and other appliances (other than
      Fixtures);

              

      

      

      
        
           

        

        
          Page
6

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (iv)

              	
                any
      operating agreements relating to the Land or the
    Improvements;

              

      

      

      
        	
                 
      

              	
                (v)

              	
                any
      surveys, plans and specifications and contracts for architectural,
      engineering and construction services relating to the Land or the
      Improvements;

              

      

      

      
        	
                 
      

              	
                (vi)

              	
                all
      other intangible property, general intangibles and rights relating to the
      operation of, or used in connection with, the Land or the Improvements,
      including all governmental permits relating to any activities on the Land
      and including subsidy or similar payments received from any sources,
      including a governmental authority;
and

              

      

      

      
        	
                 
      

              	
                (vii)

              	
                any
      rights of Borrower in or under letters of
  credit.

              

      

      

      (cc)           "Property Jurisdiction" is
defined in Section 30(a).

      

      (dd)           "Rents" means all rents
(whether from residential or non-residential space), revenues and other income
of the Land or the Improvements, parking fees, laundry and vending machine
income and fees and charges for food, health care and other services provided at
the Mortgaged Property, whether now due, past due, or to become due, and
deposits forfeited by tenants, and, if Borrower is a cooperative housing
corporation or association, maintenance fees, charges or assessments payable by
shareholders or residents under proprietary leases or occupancy agreements,
whether now due, past due, or to become due.

       
 

      (ee)           "Taxes" means all taxes,
assessments, vault rentals and other charges, if any, whether general, special
or otherwise, including all assessments for schools, public betterments and
general or local improvements, which are levied, assessed or imposed by any
public authority or quasi-public authority, and which, if not paid, will become
a lien on the Land or the Improvements.

      

      (ff)           "Transfer" is defined in
Section 21.

      

      2.           UNIFORM
COMMERCIAL CODE SECURITY AGREEMENT.

      

      (a)           This
Instrument is also a security agreement under the Uniform Commercial Code for
any of the Mortgaged Property which, under applicable law, may be subjected to a
security interest under the Uniform Commercial Code, whether such Mortgaged
Property is owned now or acquired in the future, and all products and cash and
non-cash proceeds thereof (collectively, "UCC Collateral"), and Borrower
hereby grants to Lender a security interest in the UCC
Collateral.  Borrower hereby authorizes Lender to prepare and file
financing statements, continuation statements and financing statement amendments
in such form as Lender may require to perfect or continue the perfection of this
security interest and Borrower agrees, if Lender so requests, to execute and
deliver to Lender such financing statements, continuation statements and
amendments.  Borrower shall pay all filing costs and all costs and
expenses of any record searches for financing statements and/or amendments that
Lender may require.

      
        
           

        

        
          Page
7

          
            

          

        

        
           

        

      

      Without
the prior written consent of Lender, Borrower shall not create or permit to
exist any other lien or security interest in any of the UCC
Collateral.

      

      (b)           Unless
Borrower gives Notice to Lender within 30 days after the occurrence of any
of the following, and executes and delivers to Lender modifications or
supplements of this Instrument (and any financing statement which may be filed
in connection with this Instrument) as Lender may require, Borrower shall not
(i) change its name, identity, structure or jurisdiction of organization;
(ii) change the location of its place of business (or chief executive
office if more than one place of business); or (iii) add to or change any
location at which any of the Mortgaged Property is stored, held or
located.

      

      (c)           If
an Event of Default has occurred and is continuing, Lender shall have the
remedies of a secured party under the Uniform Commercial Code, in addition to
all remedies provided by this Instrument or existing under applicable
law.  In exercising any remedies, Lender may exercise its remedies
against the UCC Collateral separately or together, and in any order, without in
any way affecting the availability of Lender's other remedies.

      

      (d)           This
Instrument constitutes a financing statement with respect to any part of the
Mortgaged Property that is or may become a Fixture, if permitted by applicable
law.

      

      3.           ASSIGNMENT
OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

      

      (a)           As
part of the consideration for the Indebtedness, Borrower absolutely and
unconditionally assigns and transfers to Lender all Rents.  It is the
intention of Borrower to establish a present, absolute and irrevocable transfer
and assignment to Lender of all Rents and to authorize and empower Lender to
collect and receive all Rents without the necessity of further action on the
part of Borrower.  Promptly upon request by Lender, Borrower agrees to
execute and deliver such further assignments as Lender may from time to time
require.  Borrower and Lender intend this assignment of Rents to be
immediately effective and to constitute an absolute present assignment and not
an assignment for additional security only.  For purposes of giving
effect to this absolute assignment of Rents, and for no other purpose, Rents
shall not be deemed to be a part of the Mortgaged Property.  However,
if this present, absolute and unconditional assignment of Rents is not
enforceable by its terms under the laws of the Property Jurisdiction, then the
Rents shall be included as a part of the Mortgaged Property and it is the
intention of the Borrower that in this circumstance this Instrument create and
perfect a lien on Rents in favor of Lender, which lien shall be effective as of
the date of this Instrument.

      

      (b)           After
the occurrence of an Event of Default, Borrower authorizes Lender to collect,
sue for and compromise Rents and directs each tenant of the Mortgaged Property
to pay all Rents to, or as directed by, Lender.  However, until the
occurrence of an Event of Default, Lender hereby grants to Borrower a revocable
license to collect and receive all Rents, to hold all Rents in trust for the
benefit of Lender and to apply all Rents to pay the installments of interest and
principal then due and payable under the Note and the other amounts then due and
payable under the other Loan Documents, including Imposition Deposits, and to
pay the current costs and

      
        
           

        

        
          Page
8

          
            

          

        

        
           

        

      

      expenses
of managing, operating and maintaining the Mortgaged Property, including
utilities, Taxes and insurance premiums (to the extent not included in
Imposition Deposits), tenant improvements and other capital
expenditures.  So long as no Event of Default has occurred and is
continuing, the Rents remaining after application pursuant to the preceding
sentence may be retained by Borrower free and clear of, and released from,
Lender's rights with respect to Rents under this Instrument. From and after the
occurrence of an Event of Default, and without the necessity of Lender entering
upon and taking and maintaining control of the Mortgaged Property directly, or
by a receiver, Borrower's license to collect Rents shall automatically terminate
and Lender shall without Notice be entitled to all Rents as they become due and
payable, including Rents then due and unpaid.  Borrower shall pay to
Lender upon demand all Rents to which Lender is entitled.  At any time
on or after the date of Lender's demand for Rents, (i) Lender may give, and
Borrower hereby irrevocably authorizes Lender to give, notice to all tenants of
the Mortgaged Property instructing them to pay all Rents to Lender, (ii) no
tenant shall be obligated to inquire further as to the occurrence or continuance
of an Event of Default, and (iii) no tenant shall be obligated to pay to
Borrower any amounts which are actually paid to Lender in response to such a
notice.  Any such notice by Lender shall be delivered to each tenant
personally, by mail or by delivering such demand to each rental
unit.  Borrower shall not interfere with and shall cooperate with
Lender's collection of such Rents.

      

      (c)           Borrower
represents and warrants to Lender that Borrower has not executed any prior
assignment of Rents (other than an assignment of Rents securing any prior
indebtedness that is being assigned to Lender, or paid off and discharged with
the proceeds of the loan evidenced by the Note), that Borrower has not
performed, and Borrower covenants and agrees that it will not perform, any acts
and has not executed, and shall not execute, any instrument which would prevent
Lender from exercising its rights under this Section 3, and that at the
time of execution of this Instrument there has been no anticipation or
prepayment of any Rents for more than two months prior to the due dates of such
Rents.  Borrower shall not collect or accept payment of any Rents more
than two months prior to the due dates of such Rents.

      

      (d)           If
an Event of Default has occurred and is continuing, Lender may, regardless of
the adequacy of Lender's security or the solvency of Borrower and even in the
absence of waste, enter upon and take and maintain full control of the Mortgaged
Property in order to perform all acts that Lender in its discretion determines
to be necessary or desirable for the operation and maintenance of the Mortgaged
Property, including the execution, cancellation or modification of Leases, the
collection of all Rents, the making of repairs to the Mortgaged Property and the
execution or termination of contracts providing for the management, operation or
maintenance of the Mortgaged Property, for the purposes of enforcing the
assignment of Rents pursuant to Section 3(a), protecting the Mortgaged
Property or the security of this Instrument, or for such other purposes as
Lender in its discretion may deem necessary or
desirable.  Alternatively, if an Event of Default has occurred and is
continuing, regardless of the adequacy of Lender's security, without regard to
Borrower's solvency and without the necessity of giving prior notice (oral or
written) to Borrower, Lender may apply to any court having jurisdiction for
the appointment of a receiver for the Mortgaged Property to take any or all of
the actions set forth in the preceding sentence.  If Lender elects to
seek the appointment of a receiver for the Mortgaged Property at any time after
an Event of Default has occurred and is continuing, Borrower, by its execution
of

      
        
           

        

        
          Page
9

          
            

          

        

        
           

        

      

      this
Instrument, expressly consents to the appointment of such receiver, including
the appointment of a receiver ex parte if permitted by
applicable law.  If Borrower is a housing cooperative corporation or
association, Borrower hereby agrees that if a receiver is appointed, the order
appointing the receiver may contain a provision requiring the receiver to pay
the installments of interest and principal then due and payable under the Note
and the other amounts then due and payable under the other Loan Documents,
including Imposition Deposits, it being acknowledged and agreed that the
Indebtedness is an obligation of the Borrower and must be paid out of
maintenance charges payable by the Borrower's tenant shareholders under their
proprietary leases or occupancy agreements.  Lender or the receiver,
as the case may be, shall be entitled to receive a reasonable fee for managing
the Mortgaged Property.  Immediately upon appointment of a receiver or
immediately upon the Lender's entering upon and taking possession and control of
the Mortgaged Property, Borrower shall surrender possession of the Mortgaged
Property to Lender or the receiver, as the case may be, and shall deliver to
Lender or the receiver, as the case may be, all documents, records (including
records on electronic or magnetic media), accounts, surveys, plans, and
specifications relating to the Mortgaged Property and all security deposits and
prepaid Rents.  In the event Lender takes possession and control of
the Mortgaged Property, Lender may exclude Borrower and its representatives from
the Mortgaged Property.  Borrower acknowledges and agrees that the
exercise by Lender of any of the rights conferred under this Section 3
shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged
Property so long as Lender has not itself entered into actual possession of the
Land and Improvements.

      

      (e)           If
Lender enters the Mortgaged Property, Lender shall be liable to account only to
Borrower and only for those Rents actually received.  Except to the
extent of Lender's gross negligence or willful misconduct, Lender shall not be
liable to Borrower, anyone claiming under or through Borrower or anyone having
an interest in the Mortgaged Property, by reason of any act or omission of
Lender under Section 3(d), and Borrower hereby releases and discharges
Lender from any such liability to the fullest extent permitted by
law.

      

      (f)           If
the Rents are not sufficient to meet the costs of taking control of and managing
the Mortgaged Property and collecting the Rents, any funds expended by Lender
for such purposes shall become an additional part of the Indebtedness as
provided in Section 12.

      

      (g)           Any
entering upon and taking of control of the Mortgaged Property by Lender or the
receiver, as the case may be, and any application of Rents as provided in this
Instrument shall not cure or waive any Event of Default or invalidate any other
right or remedy of Lender under applicable law or provided for in this
Instrument.

      

      4.           ASSIGNMENT
OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

      

      (a)           As
part of the consideration for the Indebtedness, Borrower absolutely and
unconditionally assigns and transfers to Lender all of Borrower's right, title
and interest in, to and under the Leases, including Borrower's right, power and
authority to modify the terms of any such Lease, or extend or terminate any such
Lease.   It is the intention of Borrower to establish
a

      
        
           

        

        
          Page
10

          
            

          

        

        
           

        

      

      present,
absolute and irrevocable transfer and assignment to Lender of all of Borrower's
right, title and interest in, to and under the Leases.  Borrower and
Lender intend this assignment of the Leases to be immediately effective and to
constitute an absolute present assignment and not an assignment for additional
security only.  For purposes of giving effect to this absolute
assignment of the Leases, and for no other purpose, the Leases shall not be
deemed to be a part of the Mortgaged Property.  However, if this
present, absolute and unconditional assignment of the Leases is not enforceable
by its terms under the laws of the Property Jurisdiction, then the Leases shall
be included as a part of the Mortgaged Property and it is the intention of the
Borrower that in this circumstance this Instrument create and perfect a lien on
the Leases in favor of Lender, which lien shall be effective as of the date of
this Instrument.

      

      (b)           Until
Lender gives Notice to Borrower of Lender's exercise of its rights under this
Section 4, Borrower shall have all rights, power and authority granted to
Borrower under any Lease (except as otherwise limited by this Section or
any other provision of this Instrument), including the right, power and
authority to modify the terms of any Lease or extend or terminate any
Lease.  Upon the occurrence of an Event of Default, the permission
given to Borrower pursuant to the preceding sentence to exercise all rights,
power and authority under Leases shall automatically
terminate.  Borrower shall comply with and observe Borrower's
obligations under all Leases, including Borrower's obligations pertaining to the
maintenance and disposition of tenant security deposits.

      

      (c)           Borrower
acknowledges and agrees that the exercise by Lender, either directly or by a
receiver, of any of the rights conferred under this Section 4 shall not be
construed to make Lender a mortgagee-in-possession of the Mortgaged Property so
long as Lender has not itself entered into actual possession of the Land and the
Improvements.  The acceptance by Lender of the assignment of the
Leases pursuant to Section 4(a) shall not at any time or in any event
obligate Lender to take any action under this Instrument or to expend any money
or to incur any expenses.  Except to the extent of Lender's gross
negligence or willful misconduct, Lender shall not be liable in any way for any
injury or damage to person or property sustained by any person or persons, firm
or corporation in or about the Mortgaged Property.  Prior to Lender's
actual entry into and taking possession of the Mortgaged Property, Lender shall
not (i) be obligated to perform any of the terms, covenants and conditions
contained in any Lease (or otherwise have any obligation with respect to any
Lease); (ii) be obligated to appear in or defend any action or proceeding
relating to the Lease or the Mortgaged Property; or (iii) be responsible
for the operation, control, care, management or repair of the Mortgaged Property
or any portion of the Mortgaged Property.  The execution of this
Instrument by Borrower shall constitute conclusive evidence that all
responsibility for the operation, control, care, management and repair of the
Mortgaged Property is and shall be that of Borrower, prior to such actual entry
and taking of possession.

      

      (d)           Upon
delivery of Notice by Lender to Borrower of Lender's exercise of Lender's rights
under this Section 4 at any time after the occurrence of an Event of
Default, and without the necessity of Lender entering upon and taking and
maintaining control of the Mortgaged Property directly, by a receiver, or by any
other manner or proceeding permitted by the laws of the Property Jurisdiction,
Lender immediately shall have all rights, powers and authority
granted

      
        
           

        

        
          Page
11

          
            

          

        

        
           

        

      

      to
Borrower under any Lease, including the right, power and authority to modify the
terms of any such Lease, or extend or terminate any such Lease.

      

      (e)           Borrower
shall, promptly upon Lender's request, deliver to Lender an executed copy of
each residential Lease then in effect.  All Leases for residential
dwelling units shall be on forms approved by Lender, shall be for initial terms
of at least six months and not more than two years, and shall not include
options to purchase.

      

      (f)           Borrower
shall not lease any portion of the Mortgaged Property for non-residential use
except with the prior written consent of Lender and Lender's prior written
approval of the Lease agreement.  Borrower shall not modify the terms
of, or extend or terminate, any Lease for non-residential use (including any
Lease in existence on the date of this Instrument) without the prior
written consent of Lender.  However, Lender's consent shall not be
required for the modification or extension of a non-residential Lease if such
modification or extension is on terms at least as favorable to Borrower as those
customary at that time in the applicable market and the income from the extended
or modified Lease will not be less than the income received from the Lease as of
the date of this Instrument.  Borrower shall, without request by
Lender, deliver an executed copy of each non-residential Lease to Lender
promptly after such Lease is signed.  All non-residential Leases,
including renewals or extensions of existing Leases, shall specifically provide
that (i) such Leases are subordinate to the lien of this Instrument;
(ii) the tenant shall attorn to Lender and any purchaser at a foreclosure
sale, such attornment to be self-executing and effective upon acquisition of
title to the Mortgaged Property by any purchaser at a foreclosure sale or by
Lender in any manner; (iii) the tenant agrees to execute such further
evidences of attornment as Lender or any purchaser at a foreclosure sale may
from time to time request; (iv) the Lease shall not be terminated by
foreclosure or any other transfer of the Mortgaged Property; (v) after a
foreclosure sale of the Mortgaged Property, Lender or any other purchaser at
such foreclosure sale may, at Lender's or such purchaser's option, accept or
terminate such Lease; and (vi) the tenant shall, upon receipt after the
occurrence of an Event of Default of a written request from Lender, pay all
Rents payable under the Lease to Lender.

      

      (g)           Borrower
shall not receive or accept Rent under any Lease (whether residential or
non-residential) for more than two months in advance.

      

      (h)           If
Borrower is a cooperative housing corporation or association, notwithstanding
anything to the contrary contained in this subsection or in Section 21, so long
as Borrower remains a cooperative housing corporation or association and is not
in breach of any covenant of this Instrument, Lender hereby consents
to:

      

      
        	
                 
      

              	
                (i)

              	
                the
      execution of leases of apartments for a term in excess of two years from
      Borrower to a tenant shareholder of Borrower, so long as such leases,
      including proprietary leases, are and will remain subordinate to the lien
      of this Instrument; and

              

      

      

      
        
           

        

        
          Page
12

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (ii)

              	
                the
      surrender or termination of such leases of apartments where the
      surrendered or terminated lease is immediately replaced or where the
      Borrower makes its best efforts to secure such immediate replacement by a
      newly executed lease of the same apartment to a tenant shareholder of the
      Borrower.  However, no consent is hereby given by Lender to any
      execution, surrender, termination or assignment of a lease under terms
      that would waive or reduce the obligation of the resulting tenant
      shareholder under such lease to pay cooperative assessments in full when
      due or the obligation of the former tenant shareholder to pay any unpaid
      portion of such assessments.

              

      

      

      5.           PAYMENT OF INDEBTEDNESS; PERFORMANCE
UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM.  Borrower shall pay
the Indebtedness when due in accordance with the terms of the Note and the other
Loan Documents and shall perform, observe and comply with all other provisions
of the Note and the other Loan Documents.  Borrower shall pay a
prepayment premium in connection with certain prepayments of the Indebtedness,
including a payment made after Lender's exercise of any right of acceleration of
the Indebtedness, as provided in the Note.

      

      6.           EXCULPATION.  Borrower's
personal liability for payment of the Indebtedness and for performance of the
other obligations to be performed by it under this Instrument is limited in the
manner, and to the extent, provided in the Note.

      

      7.           DEPOSITS
FOR TAXES, INSURANCE AND OTHER CHARGES.

      

      (a)           Unless
this requirement is waived in writing by Lender, which waiver may be contained
in this Section 7(a), Borrower shall deposit with Lender on the day monthly
installments of principal or interest, or both, are due under the Note (or on
another day designated in writing by Lender), until the Indebtedness is paid in
full, an additional amount sufficient to accumulate with Lender the entire sum
required to pay, when due, the items marked "Collect" below.  Lender
will not require the Borrower to make Imposition Deposits with respect to the
items marked "Deferred" below.

      

      
        	
                 
      

              	
                [Deferred]

              	
                Hazard
      Insurance premiums or other insurance premiums required by Lender under
      Section 19,

              

      

      [Collect]                      Taxes,

      
        	
                 
      

              	
                [Deferred]

              	
                water
      and sewer charges (that could become a lien on the Mortgaged
      Property),

              

      

      [N/A]                      ground
rents,

      
        	
                 
      

              	
                [Deferred]

              	
                assessments
      or other charges (that could become a lien on the Mortgaged
      Property)

              

      

      

      

      The
amounts deposited under the preceding sentence are collectively referred to in
this Instrument as the "Imposition
Deposits."  The obligations of Borrower for which the
Imposition

      
        
           

        

        
          Page
13

          
            

          

        

        
           

        

      

      Deposits
are required are collectively referred to in this Instrument as "Impositions."  The
amount of the Imposition Deposits shall be sufficient to enable Lender to pay
each Imposition before the last date upon which such payment may be made without
any penalty or interest charge being added.  Lender shall maintain
records indicating how much of the monthly Imposition Deposits and how much of
the aggregate Imposition Deposits held by Lender are held for the purpose of
paying Taxes, insurance premiums and each other Imposition.

      

      (b)           Imposition
Deposits shall be held in an institution (which may be Lender, if Lender is such
an institution) whose deposits or accounts are insured or guaranteed by a
federal agency.  Lender shall not be obligated to open additional
accounts or deposit Imposition Deposits in additional institutions when the
amount of the Imposition Deposits exceeds the maximum amount of the federal
deposit insurance or guaranty.  Lender shall apply the Imposition
Deposits to pay Impositions so long as no Event of Default has occurred and is
continuing.  Unless applicable law requires, Lender shall not be
required to pay Borrower any interest, earnings or profits on the Imposition
Deposits.  As additional security for all of Borrower's obligations
under this Instrument and the other Loan Documents, Borrower hereby pledges and
grants to Lender a security interest in the Imposition Deposits and all proceeds
of, and all interest and dividends on, the Imposition Deposits.  Any
amounts deposited with Lender under this Section 7 shall not be trust
funds, nor shall they operate to reduce the Indebtedness, unless applied by
Lender for that purpose under Section 7(e).

      

      (c)           If
Lender receives a bill or invoice for an Imposition, Lender shall pay the
Imposition from the Imposition Deposits held by Lender.  Lender shall
have no obligation to pay any Imposition to the extent it exceeds Imposition
Deposits then held by Lender.  Lender may pay an Imposition according
to any bill, statement or estimate from the appropriate public office or
insurance company without inquiring into the accuracy of the bill, statement or
estimate or into the validity of the Imposition.

      

      (d)           If
at any time the amount of the Imposition Deposits held by Lender for payment of
a specific Imposition exceeds the amount reasonably deemed necessary by Lender,
the excess shall be credited against future installments of Imposition
Deposits.  If at any time the amount of the Imposition Deposits held
by Lender for payment of a specific Imposition is less than the amount
reasonably estimated by Lender to be necessary, Borrower shall pay to Lender the
amount of the deficiency within 15 days after Notice from Lender.

      

      (e)           If
an Event of Default has occurred and is continuing, Lender may apply any
Imposition Deposits, in any amounts and in any order as Lender determines, in
Lender's discretion, to pay any Impositions or as a credit against the
Indebtedness. Upon payment in full of the Indebtedness, Lender shall refund to
Borrower any Imposition Deposits held by Lender.

      

      (f)           If
Lender does not collect an Imposition Deposit with respect to an Imposition
either marked "Deferred" in Section 7(a) or pursuant to a separate written
waiver by Lender, then on or before the date each such Imposition is due, or on
the date this Instrument requires each such Imposition to be paid, Borrower must
provide Lender with proof of payment of each such Imposition for which Lender
does not require collection of Imposition Deposits.  Lender
may

      
        
           

        

        
          Page
14

          
            

          

        

        
           

        

      

      revoke
its deferral or waiver and require Borrower to deposit with Lender any or all of
the Imposition Deposits listed in Section 7(a), regardless of whether any
such item is marked "Deferred" in such section, upon Notice to Borrower,
(i) if Borrower does not timely pay any of the Impositions, (ii) if
Borrower fails to provide timely proof to Lender of such payment, or
(iii) at any time during the existence of an Event of Default.

      

      (g)           In
the event of a Transfer prohibited by or requiring Lender's approval under
Section 21, Lender's waiver of the collection of any Imposition Deposit in
this Section 7 may be modified or rendered void by Lender at Lender's
option by Notice to Borrower and the transferee(s) as a condition of Lender's
approval of such Transfer.

      

      8.           COLLATERAL
AGREEMENTS.  Borrower shall deposit with Lender such amounts as
may be required by any Collateral Agreement and shall perform all other
obligations of Borrower under each Collateral Agreement.

      

      9.           APPLICATION OF
PAYMENTS.  If at any time Lender receives, from Borrower or
otherwise, any amount applicable to the Indebtedness which is less than all
amounts due and payable at such time, then Lender may apply that payment to
amounts then due and payable in any manner and in any order determined by
Lender, in Lender's discretion.  Neither Lender's acceptance of an
amount that is less than all amounts then due and payable nor Lender's
application of such payment in the manner authorized shall constitute or be
deemed to constitute either a waiver of the unpaid amounts or an accord and
satisfaction.  Notwithstanding the application of any such amount to
the Indebtedness, Borrower's obligations under this Instrument and the Note
shall remain unchanged.

      

      10.           COMPLIANCE
WITH LAWS AND ORGANIZATIONAL DOCUMENTS.

      

      (a)           Borrower
shall comply with all laws, ordinances, regulations and requirements of any
Governmental Authority and all recorded lawful covenants and agreements relating
to or affecting the Mortgaged Property, including all laws, ordinances,
regulations, requirements and covenants pertaining to health and safety,
construction of improvements on the Mortgaged Property, fair housing, disability
accommodation, zoning and land use, and Leases.  Borrower also shall
comply with all applicable laws that pertain to the maintenance and disposition
of tenant security deposits.

      

      (b)           Borrower
shall at all times maintain records sufficient to demonstrate compliance with
the provisions of this Section 10.

      

      (c)           Borrower
shall take appropriate measures to prevent, and shall not engage in or knowingly
permit, any illegal activities at the Mortgaged Property that could endanger
tenants or visitors, result in damage to the Mortgaged Property, result in
forfeiture of the Mortgaged Property, or otherwise materially impair the lien
created by this Instrument or Lender's interest in the Mortgaged
Property.  Borrower represents and warrants to Lender that no portion
of the Mortgaged Property has been or will be purchased with the proceeds of any
illegal activity.

      

      
        
           

        

        
          Page
15

          
            

          

        

        
           

        

      

      (d)           Borrower
shall at all times comply with all laws, regulations and requirements of any
Governmental Authority relating to Borrower's formation, continued existence and
good standing in the Property Jurisdiction.  Borrower shall at all
times comply with its organizational documents, including but not limited to its
partnership agreement (if Borrower is a partnership), its by-laws (if Borrower
is a corporation or housing cooperative corporation or association) or its
operating agreement (if Borrower is an limited liability company, joint venture
or tenancy-in-common ).  If Borrower is a housing cooperative
corporation or association, Borrower shall at all times maintain its status as a
"cooperative housing corporation" as such term is defined in Section 216(b) of
the Internal revenue Code of 1986, as amended, or any successor statute
thereto.

      

      11.           USE OF
PROPERTY.  Unless required by applicable law, Borrower shall
not (a) allow changes in the use for which all or any part of the Mortgaged
Property is being used at the time this Instrument was executed, except for any
change in use approved by Lender, (b) convert any individual dwelling units
or common areas to commercial use, (c) initiate a change in the zoning
classification of the Mortgaged Property or acquiesce without Notice to and
consent of Lender in a change in the zoning classification of the Mortgaged
Property, (d) establish any condominium or cooperative regime with respect
to the Mortgaged Property, (e) combine all or any part of the Mortgaged
Property with all or any part of a tax parcel which is not part of the Mortgaged
Property, or (f) subdivide or otherwise split any tax parcel constituting
all or any part of the Mortgaged Property without the prior consent of
Lender.  Notwithstanding anything contained in this Section to the
contrary, if Borrower is a housing cooperative corporation or association,
Lender acknowledges and consents to Borrower's use of the Mortgaged Property as
a housing cooperative.

      

      12.           PROTECTION
OF LENDER'S SECURITY; INSTRUMENT SECURES FUTURE ADVANCES.

      

      (a)           If
Borrower fails to perform any of its obligations under this Instrument or any
other Loan Document, or if any action or proceeding is commenced which purports
to affect the Mortgaged Property, Lender's security or Lender's rights under
this Instrument, including eminent domain, insolvency, code enforcement, civil
or criminal forfeiture, enforcement of Hazardous Materials Laws, fraudulent
conveyance or reorganizations or proceedings involving a bankrupt or decedent,
then Lender at Lender's option may make such appearances, file such documents,
disburse such sums and take such actions as Lender reasonably deems necessary to
perform such obligations of Borrower and to protect Lender's interest, including
(i) payment of Attorneys' Fees and Costs, (ii) payment of fees and
out-of-pocket expenses of accountants, inspectors and consultants,
(iii) entry upon the Mortgaged Property to make repairs or secure the
Mortgaged Property, (iv) procurement of the insurance required by
Section 19, (v) payment of amounts which Borrower has failed to pay
under Sections 15 and 17, and (vi) advances made by Lender to pay,
satisfy or discharge any obligation of Borrower for the payment of money that is
secured by a pre-existing mortgage, deed of trust or other lien encumbering the
Mortgaged Property (a "Prior
Lien").

      

      
        
           

        

        
          Page
16

          
            

          

        

        
           

        

      

      (b)           Any
amounts disbursed by Lender under this Section 12, or under any other
provision of this Instrument that treats such disbursement as being made under
this Section 12, shall be secured by this Instrument, shall be added to,
and become part of, the principal component of the Indebtedness, shall be
immediately due and payable and shall bear interest from the date of
disbursement until paid at the "Default Rate," as defined in
the Note.

      

      (c)           Nothing
in this Section 12 shall require Lender to incur any expense or take any
action.

      

      13.           INSPECTION.

      

      (a)           Lender,
its agents, representatives, and designees may make or cause to be made entries
upon and inspections of the Mortgaged Property (including environmental
inspections and tests) during normal business hours, or at any other
reasonable time, upon reasonable notice to Borrower if the inspection is to
include occupied residential units (which notice need not be in
writing).  Notice to Borrower shall not be required in the case of an
emergency, as determined in Lender's discretion, or when an Event of Default has
occurred and is continuing.

      

      (b)             If
Lender determines that Mold has developed as a result of a water intrusion event
or leak, Lender, at Lender's discretion, may require that a professional
inspector inspect the Mortgaged Property as frequently as Lender determines is
necessary until any issue with Mold and its cause(s) are resolved to
Lender's satisfaction.  Such inspection shall be limited to a visual
and olfactory inspection of the area that has experienced the Mold, water
intrusion event or leak.  Borrower shall be responsible for the cost
of such professional inspection and any remediation deemed to be necessary as a
result of the professional inspection.  After any issue with Mold,
water intrusion or leaks is remedied to Lender's satisfaction, Lender shall not
require a professional inspection any more frequently than once every three
years unless Lender is otherwise aware of Mold as a result of a subsequent water
intrusion event or leak.

      

      (c)           If
Lender or Loan Servicer determines not to conduct an annual inspection of the
Mortgaged Property, and in lieu thereof Lender requests a certification,
Borrower shall be prepared to provide and must actually provide to Lender a
factually correct certification each year that the annual inspection is waived
to the following effect:

      

      Borrower
has not received any written complaint, notice, letter or other written
communication from tenants, management agent or governmental authorities
regarding mold, fungus, microbial contamination or pathogenic organisms ("Mold")
or any activity, condition, event or omission that causes or facilitates the
growth of Mold on or in any part of the Mortgaged Property or if Borrower has
received any such written complaint, notice, letter or other written
communication that Borrower has investigated and determined that no Mold
activity, condition or event exists or alternatively has fully and properly
remediated such activity,

      
        
           

        

        
          Page
17

          
            

          

        

        
           

        

      

      condition,
event or omission in compliance with the Moisture Management Plan for the
Mortgaged Property.

      

      If
Borrower is unwilling or unable to provide such certification, Lender may
require a professional inspection of the Mortgaged Property at Borrower's
expense.

      

      14.           BOOKS
AND RECORDS; FINANCIAL REPORTING.

      

      (a)           Borrower
shall keep and maintain at all times at the Mortgaged Property or the management
agent's office, and upon Lender's request shall make available at the Mortgaged
Property (or, at Borrower's option, at the management agent's office), complete
and accurate books of account and records (including copies of supporting bills
and invoices) adequate to reflect correctly the operation of the Mortgaged
Property, and copies of all written contracts, Leases, and other instruments
which affect the Mortgaged Property.  The books, records, contracts,
Leases and other instruments shall be subject to examination and inspection by
Lender at any reasonable time.

      

      (b)           Within
120 days after the end of each fiscal year of Borrower, Borrower shall furnish
to Lender a statement of income and expenses for Borrower's operation of the
Mortgaged Property for that fiscal year, a statement of changes in financial
position of Borrower relating to the Mortgaged Property for that fiscal year
and, when requested by Lender, a balance sheet showing all assets and
liabilities of Borrower relating to the Mortgaged Property as of the end of that
fiscal year.  If Borrower's fiscal year is other than the calendar
year, Borrower must also submit to Lender a year-end statement of income and
expenses within 120 days after the end of the calendar year.

      

      (c)           Within
120 days after the end of each calendar year, and at any other time, upon
Lender's request, Borrower shall furnish to Lender each of the
following.  However, Lender shall not require any of the following
more frequently than quarterly except when there has been an Event of Default
and such Event of Default is continuing, in which case Lender may, upon written
request to Borrower, require Borrower to furnish any of the following more
frequently:

      

      
        	
                 
      

              	
                (i)

              	
                a
      rent schedule for the Mortgaged Property showing the name of each tenant,
      and for each tenant, the space occupied, the lease expiration date, the
      rent payable for the current month, the date through which rent has been
      paid, and any related information requested by
  Lender;

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                an
      accounting of all security deposits held pursuant to all Leases, including
      the name of the institution (if any) and the names and identification
      numbers of the accounts (if any) in which such security deposits are
      held and the name of the person to contact at such financial institution,
      along with any authority or release necessary for Lender to access
      information regarding such accounts;
and

              

      

      

      
        
           

        

        
          Page
18

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (iii)

              	
                a
      statement that identifies all owners of any interest in Borrower and any
      Controlling Entity and the interest held by each (unless Borrower or any
      Controlling Entity is a publicly-traded entity in which case such
      statement of ownership shall not be required), if Borrower or a
      Controlling Entity is a corporation, all officers and directors of
      Borrower and the Controlling Entity, and if Borrower or a Controlling
      Entity is a limited liability company, all managers who are not
      members.

              

      

      

      (d)           At
any time upon Lender's request, Borrower shall furnish to Lender each of the
following.  However, Lender shall not require any of the following
more frequently than quarterly except when there has been an Event of Default
and such Event of Default is continuing, in which case Lender may require
Borrower to furnish any of the following more frequently:

      

      
        	
                 
      

              	
                (i)

              	
                a
      balance sheet, a statement of income and expenses for Borrower and a
      statement of changes in financial position of Borrower for Borrower's most
      recent fiscal year;

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                a
      quarterly or year-to-date income and expense statement for the Mortgaged
      Property; and

              

      

      

      
        	
                 
      

              	
                (iii)

              	
                a
      monthly property management report for the Mortgaged Property, showing the
      number of inquiries made and rental applications received from tenants or
      prospective tenants and deposits received from tenants and any other
      information requested by Lender.

              

      

      

      (e)           Upon
Lender's request at any time when an Event of Default has occurred and is
continuing, Borrower shall furnish to Lender monthly income and expense
statements and rent schedules for the Mortgaged Property.

      

      (f)           An
individual having authority to bind Borrower shall certify each of the
statements, schedules and reports required by Sections 14(b) through
14(e) to be complete and accurate.  Each of the statements,
schedules and reports required by Sections 14(b) through
14(e) shall be in such form and contain such detail as Lender may
reasonably require.  Lender also may require that any of the
statements, schedules or reports listed in Section 14(b) and
14(c)(i) and (ii) be audited at Borrower's expense by independent
certified public accountants acceptable to Lender, at any time when an Event of
Default has occurred and is continuing or at any time that Lender, in its
reasonable judgment, determines that audited financial statements are required
for an accurate assessment of the financial condition of Borrower or of the
Mortgaged Property.

      

      (g)           If
Borrower fails to provide in a timely manner the statements, schedules and
reports required by Sections 14(b) through (e), Lender shall give
Borrower Notice specifying the statements, schedules and reports required by
Section 14(b) through (e) that Borrower has failed to
provide.  If Borrower has not provided the required statements,
schedules and reports within

      
        
           

        

        
          Page
19

          
            

          

        

        
           

        

      

      10
Business Days following such Notice, then Lender shall have the right to have
Borrower's books and records audited, at Borrower's expense, by independent
certified public accountants selected by Lender in order to obtain such
statements, schedules and reports, and all related costs and expenses of Lender
shall become immediately due and payable and shall become an additional part of
the Indebtedness as provided in Section 12.  Notice to Borrower
shall not be required in the case of an emergency, as determined in Lender's
discretion, or when an Event of Default has occurred and is
continuing.

      

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

      

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

      

      15.           TAXES;
OPERATING EXPENSES.

      

      (a)           Subject
to the provisions of Section 15(c) and Section 15(d), Borrower
shall pay, or cause to be paid, all Taxes when due and before the addition of
any interest, fine, penalty or cost for nonpayment.

      

      (b)           Subject
to the provisions of Section 15(c), Borrower shall (i) pay the
expenses of operating, managing, maintaining and repairing the Mortgaged
Property (including utilities, repairs and replacements) before the last
date upon which each such payment may be made without any penalty or interest
charge being added, and (ii) pay insurance premiums at least 30 days
prior to the expiration date of each policy of insurance, unless applicable law
specifies some lesser period.

      

      (c)           If
Lender is collecting Imposition Deposits, to the extent that Lender holds
sufficient Imposition Deposits for the purpose of paying a specific Imposition,
then Borrower shall not be obligated to pay such Imposition, so long as no Event
of Default exists and Borrower has timely delivered to Lender any bills or
premium notices that it has received.  If an Event of Default exists,
Lender may exercise any rights Lender may have with respect to Imposition
Deposits without regard to whether Impositions are then due and
payable.  Lender shall have no liability to Borrower for failing to
pay any Impositions to the extent that (i) any Event of Default has
occurred and is continuing, (ii) insufficient Imposition Deposits are held
by Lender at the time an Imposition becomes due and payable or
(iii) Borrower has failed to provide Lender with bills and premium notices
as provided above.

      

      (d)           Borrower,
at its own expense, may contest by appropriate legal proceedings, conducted
diligently and in good faith, the amount or validity of any Imposition other
than insurance premiums, if (i) Borrower notifies Lender of the
commencement or expected commencement of such proceedings, (ii) the
Mortgaged Property is not in danger of being sold or forfeited, (iii) if
Borrower has not already paid the Imposition, Borrower deposits with Lender
reserves sufficient to pay the contested Imposition, if requested by Lender, and
(iv) Borrower

      
        
           

        

        
          Page
20

          
            

          

        

        
           

        

      

      furnishes
whatever additional security is required in the proceedings or is reasonably
requested by Lender.

      

      (e)           Borrower
shall promptly deliver to Lender a copy of all notices of, and invoices for,
Impositions, and if Borrower pays any Imposition directly, Borrower shall
furnish to Lender, on or before the date this Instrument requires such
Impositions to be paid, receipts evidencing that such payments were
made.

      

      16.           LIENS;
ENCUMBRANCES.  Borrower acknowledges that, to the extent
provided in Section 21, the grant, creation or existence of any mortgage,
deed of trust, deed to secure debt, security interest or other lien or
encumbrance (a "Lien") on the Mortgaged
Property (other than the lien of this Instrument) or on certain ownership
interests in Borrower, whether voluntary, involuntary or by operation of law,
and whether or not such Lien has priority over the lien of this Instrument, is a
"Transfer" which
constitutes an Event of Default and subjects Borrower to personal liability
under the Note.

      

      17.           PRESERVATION,
MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.

      

      (a)           Borrower
shall not commit waste or permit impairment or deterioration of the Mortgaged
Property.

      

      (b)           Borrower
shall not abandon the Mortgaged Property.

      

      (c)           Borrower
shall restore or repair promptly, in a good and workmanlike manner, any damaged
part of the Mortgaged Property to the equivalent of its original condition, or
such other condition as Lender may approve in writing, whether or not insurance
proceeds or condemnation awards are available to cover any costs of such
restoration or repair; however, Borrower shall not be obligated to perform such
restoration or repair if (i) no Event of Default has occurred and is
continuing, and (ii) Lender has elected to apply any available insurance
proceeds and/or condemnation awards to the payment of Indebtedness pursuant to
Section 19(h)(ii), (iii), (iv) or (v), or pursuant to
Section 20.

      

      (d)           Borrower
shall keep the Mortgaged Property in good repair, including the replacement of
Personalty and Fixtures with items of equal or better function and
quality.

      

      (e)           Borrower
shall provide for professional management of the Mortgaged Property by a
residential rental property manager satisfactory to Lender at all times under a
contract approved by Lender in writing, which contract must be terminable upon
not more than 30 days notice without the necessity of establishing cause
and without payment of a penalty or termination fee by Borrower or its
successors.

      

      (f)           Borrower
shall give Notice to Lender of and, unless otherwise directed in writing by
Lender, shall appear in and defend any action or proceeding purporting to affect
the Mortgaged Property, Lender's security or Lender's rights under this
Instrument.  Borrower shall

      
        
           

        

        
          Page
21

          
            

          

        

        
           

        

      

      not (and
shall not permit any tenant or other person to) remove, demolish or alter
the Mortgaged Property or any part of the Mortgaged Property, including any
removal, demolition or alteration occurring in connection with a rehabilitation
of all or part of the Mortgaged Property, except (i) in connection with the
replacement of tangible Personalty, (ii) if Borrower is a cooperative
housing corporation or association, to the extent permitted with respect to
individual dwelling units under the form of proprietary lease or occupancy
agreement and (iii) repairs and replacements in connection with making an
individual unit ready for a new occupant.

      

      (g)           Unless
otherwise waived by Lender in writing, Borrower must have or must establish and
must adhere to the MMP.  If the Borrower is required to have an MMP,
the Borrower must keep all MMP documentation at the Mortgaged Property or at the
management agent's office and available for the Lender or the Loan Servicer to
review during any annual assessment or other inspection of the Mortgaged
Property that is required by Lender.

      

      (h)           If
Borrower is a housing cooperative corporation or association, until the
Indebtedness is paid in full Borrower shall not reduce the maintenance fees,
charges or assessments payable by shareholders or residents under proprietary
leases or occupancy agreements below a level which is sufficient to pay all
expenses of the Borrower, including, without limitation, all operating and other
expenses for the Mortgaged Property and all payments due pursuant to the terms
of the Note and any Loan Documents.

       
 

      18.           ENVIRONMENTAL
HAZARDS.

      

      (a)           Except
for matters described in Section 18(b), Borrower shall not cause or permit
any of the following:

      

      
        	
                 
      

              	
                (i)

              	
                the
      presence, use, generation, release, treatment, processing, storage
      (including storage in above ground and underground storage tanks),
      handling, or disposal of any Hazardous Materials on or under the Mortgaged
      Property or any other property of Borrower that is adjacent to the
      Mortgaged Property;

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                the
      transportation of any Hazardous Materials to, from, or across the
      Mortgaged Property;

              

      

      

      
        	
                 
      

              	
                (iii)

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

              

      

      

      
        	
                 
      

              	
                (iv)

              	
                any
      violation of or noncompliance with the terms of any Environmental Permit
      with respect to the Mortgaged Property or any property of Borrower that is
      adjacent to the Mortgaged Property;
or

              

      

      

      
        
           

        

        
          Page
22

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (v)

              	
                any
      violation or noncompliance with the terms of any O&M Program as
      defined in subsection (d).

              

      

      

      The
matters described in clauses (i) through (v) above, except as
otherwise provided in Section 18(b), are referred to collectively in this
Section 18 as "Prohibited
Activities or Conditions."

      

      (b)           Prohibited
Activities or Conditions shall not include lawful conditions permitted by an
O&M Program or the safe and lawful use and storage of quantities of
(i) pre-packaged supplies, cleaning materials and petroleum products
customarily used in the operation and maintenance of comparable multifamily
properties, (ii) cleaning materials, personal grooming items and other
items sold in pre-packaged containers for consumer use and used by tenants and
occupants of residential dwelling units in the Mortgaged Property; and
(iii) petroleum products used in the operation and maintenance of motor
vehicles from time to time located on the Mortgaged 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.

      

      (c)           Borrower
shall take all commercially reasonable actions (including the inclusion of
appropriate provisions in any Leases executed after the date of this
Instrument) to prevent its employees, agents, and contractors, and all
tenants and other occupants from causing or permitting any Prohibited Activities
or Conditions.  Borrower shall not lease or allow the sublease or use
of all or any portion of the Mortgaged Property to any tenant or subtenant for
nonresidential use by any user that, in the ordinary course of its business,
would cause or permit any Prohibited Activity or Condition.

      

      (d)           As
required by Lender, Borrower shall also have established a written operations
and maintenance program with respect to certain Hazardous
Materials.  Each such operations and maintenance program and any
additional or revised operations and maintenance programs established for the
Mortgaged Property pursuant to this Section 18 must be approved by Lender
and shall be referred to herein as an "O&M
Program."  Borrower shall comply in a timely manner with, and
cause all employees, agents, and contractors of Borrower and any other persons
present on the Mortgaged Property to comply with each O&M
Program.  Borrower shall pay all costs of performance of Borrower's
obligations under any O&M Program, and Lender's out-of-pocket costs incurred
in connection with the monitoring and review of each O&M Program and
Borrower's performance shall be paid by Borrower upon demand by
Lender.  Any such out-of-pocket costs of Lender that Borrower fails to
pay promptly shall become an additional part of the Indebtedness as provided in
Section 12.

      

      (e)           Borrower
represents and warrants to Lender that, except as previously disclosed by
Borrower to Lender in writing (which written disclosure may be in certain
environmental assessments and other written reports accepted by Lender in
connection with the funding of the Indebtedness and dated prior to the date of
this Instrument):

      

      
        	
                 
      

              	
                (i)

              	
                Borrower
      has not at any time engaged in, caused or permitted any Prohibited
      Activities or Conditions on the Mortgaged
  Property;

              

      

      
        
           

        

        
          Page
23

          
            

          

        

        
           

        

      

      

      
        	
                 
      

              	
                (ii)

              	
                to
      the best of Borrower's knowledge after reasonable and diligent inquiry, no
      Prohibited Activities or Conditions exist or have existed on the Mortgaged
      Property;

              

      

      

      
        	
                 
      

              	
                (iii)

              	
                the
      Mortgaged Property does not now contain any underground storage tanks,
      and, to the best of Borrower's knowledge after reasonable and diligent
      inquiry, the Mortgaged Property has not contained any underground storage
      tanks in the past.  If there is an underground storage tank
      located on the Mortgaged Property that has been previously disclosed by
      Borrower to Lender in writing, that tank complies with all requirements of
      Hazardous Materials Laws;

              

      

      

      
        	
                 
      

              	
                (iv)

              	
                to
      the best of Borrower's knowledge after reasonable and diligent inquiry,
      Borrower has complied with all Hazardous Materials Laws, including all
      requirements for notification regarding releases of Hazardous
      Materials.  Without limiting the generality of the foregoing,
      Borrower has obtained all Environmental Permits required for the operation
      of the Mortgaged Property in accordance with Hazardous Materials Laws now
      in effect and all such Environmental Permits are in full force and
      effect;

              

      

      

      
        	
                 
      

              	
                (v)

              	
                to
      the best of Borrower's knowledge after reasonable and diligent inquiry, no
      event has occurred with respect to the Mortgaged Property that
      constitutes, or with the passing of time or the giving of notice would
      constitute, noncompliance with the terms of any Environmental
      Permit;

              

      

      

      
        	
                 
      

              	
                (vi)

              	
                there
      are no actions, suits, claims or proceedings pending or, to the best of
      Borrower's knowledge after reasonable and diligent inquiry, threatened
      that involve the Mortgaged Property and allege, arise out of, or relate to
      any Prohibited Activity or Condition;
and

              

      

      

      
        	
                 
      

              	
                (vii)

              	
                Borrower
      has not received any written 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 Mortgaged
      Property or any other property of Borrower that is adjacent to the
      Mortgaged Property.

              

      

      

      (f)           Borrower
shall promptly notify Lender in writing upon the occurrence of any of the
following events:

      

      
        	
                 
      

              	
                (i)

              	
                Borrower's
      discovery of any Prohibited Activity or
  Condition;

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                Borrower's
      receipt of or knowledge of any written complaint, order, notice of
      violation or other communication from any tenant, management
      agent,

              

      

      
        
           

        

        
          Page
24

          
            

          

        

        
           

        

      

      Governmental
Authority or other person with regard to present or future alleged Prohibited
Activities or Conditions, or any other environmental, health or safety matters
affecting the Mortgaged Property or any other property of Borrower that is
adjacent to the Mortgaged Property; or

      

      
        	
                 
      

              	
                (iii)

              	
                Borrower's
      breach of any of its obligations under this
    Section 18.

              

      

      

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

      

      (g)           Borrower
shall pay promptly the costs of any environmental inspections, tests or audits,
a purpose of which is to identify the extent or cause of or potential for a
Prohibited Activity or Condition ("Environmental
Inspections"), required by Lender in connection with any foreclosure
or deed in lieu of foreclosure, or as a condition of Lender's consent to any
Transfer under Section 21, or required by Lender following a reasonable
determination by Lender that Prohibited Activities or Conditions may
exist.  Any such costs incurred by Lender (including Attorneys' Fees
and Costs and the costs of technical consultants whether incurred in connection
with any judicial or administrative process or otherwise) that Borrower
fails to pay promptly shall become an additional part of the Indebtedness as
provided in Section 12.  As long as (i) no Event of Default
has occurred and is continuing, (ii) Borrower has actually paid for or
reimbursed Lender for all costs of any such Environmental Inspections performed
or required by Lender, and (iii) Lender is not prohibited by law, contract
or otherwise from doing so, Lender shall make available to Borrower, without
representation of any kind, copies of Environmental Inspections prepared by
third parties and delivered to Lender.  Lender hereby reserves the
right, and Borrower hereby expressly authorizes Lender, to make available to any
party, including any prospective bidder at a foreclosure sale of the Mortgaged
Property, the results of any Environmental Inspections made by or for Lender
with respect to the Mortgaged Property.  Borrower consents to Lender
notifying any party (either as part of a notice of sale or otherwise) of
the results of any Environmental Inspections made by or for
Lender.  Borrower acknowledges that Lender cannot control or otherwise
assure the truthfulness or accuracy of the results of any Environmental
Inspections and that the release of such results to prospective bidders at a
foreclosure sale of the Mortgaged Property may have a material and adverse
effect upon the amount that a party may bid at such sale.  Borrower
agrees that Lender shall have no liability whatsoever as a result of delivering
the results to any third party of any Environmental Inspections made by or for
Lender, and Borrower hereby releases and forever discharges Lender from any and
all claims, damages, or causes of action, arising out of, connected with or
incidental to the results of, the delivery of any of Environmental Inspections
made by or for Lender.

      

      (h)           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
Mortgaged Property or the use, operation or improvement of the Mortgaged
Property, or is otherwise required by Lender as a consequence of any Prohibited
Activity or Condition or to prevent the occurrence of a Prohibited Activity or
Condition, Borrower shall, by the earlier of (i) the

      
        
           

        

        
          Page
25

          
            

          

        

        
           

        

      

      applicable
deadline required by Hazardous Materials Law or (ii) 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 the 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 Indebtedness as provided in
Section 12.

      

      (i)           Borrower
shall comply with all Hazardous Materials Laws applicable to the Mortgaged
Property.  Without limiting the generality of the previous sentence,
Borrower shall (i) obtain and maintain all Environmental Permits required
by Hazardous Materials Laws and comply with all conditions of such Environmental
Permits; (ii) cooperate with any inquiry by any Governmental Authority; and
(iii) comply with any governmental or judicial order that arises from any
alleged Prohibited Activity or Condition.

      

      (j)           Borrower
shall indemnify, hold harmless and defend (i) Lender, (ii) any prior
owner or holder of the Note, (iii) the Loan Servicer, (iv) any prior
Loan Servicer, (v) the officers, directors, shareholders, partners,
employees and trustees of any of the foregoing, and (vi) the heirs, legal
representatives, successors and assigns of each of the foregoing (collectively,
the "Indemnitees") from and
against all proceedings, claims, damages, penalties and costs (whether initiated
or sought by Governmental Authorities or private parties), including Attorneys'
Fees and Costs and remediation costs, whether incurred in connection with any
judicial or administrative process or otherwise, arising directly or indirectly
from any of the following:

      

      
        	
                 
      

              	
                (i)

              	
                any
      breach of any representation or warranty of Borrower in this
      Section 18;

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                any
      failure by Borrower to perform any of its obligations under this
      Section 18;

              

      

      

      
        	
                 
      

              	
                (iii)

              	
                the
      existence or alleged existence of any Prohibited Activity or
      Condition;

              

      

      

      
        	
                 
      

              	
                (iv)

              	
                the
      presence or alleged presence of Hazardous Materials on or under the
      Mortgaged Property or in any of the Improvements or on or under any
      property of Borrower that is adjacent to the Mortgaged Property;
      and

              

      

      

      
        	
                 
      

              	
                (v)

              	
                the
      actual or alleged violation of any Hazardous Materials
  Law.

              

      

      

      (k)           Counsel
selected by Borrower to defend Indemnitees shall be subject to the approval of
those Indemnitees.  In any circumstances in which the indemnity under
this Section 18 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.

      
        
           

        

        
          Page
26

          
            

          

        

        
           

        

      

      However,
unless an Event of Default has occurred and is continuing, or the interests of
Borrower and Lender are in conflict, as determined by Lender in its discretion,
Lender shall permit Borrower to undertake the actions referenced in this
Section 18 in accordance with this Section 18(k) and
Section 18(l) so long as Lender approves such action, which approval
shall not be unreasonably withheld or delayed.  Borrower shall
reimburse Lender upon demand for all costs and expenses incurred by Lender,
including all costs of settlements entered into in good faith, consultants' fees
and Attorneys' Fees and Costs.

      

      (l)           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, satisfactory in
form and substance to Lender; or (ii) may materially and adversely affect
Lender, as determined by Lender in its discretion.

      

      (m)           Borrower's
obligation to indemnify the Indemnitees shall not be limited or impaired by any
of the following, or by any failure of Borrower or any 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 Loan
      Document;

              

      

      

      
        	
                 
      

              	
                (iii)

              	
                any
      provision in any of the Loan Documents limiting Lender's recourse to
      property securing the Indebtedness, or limiting the personal liability of
      Borrower or any other party for payment of all or any part of the
      Indebtedness;

              

      

      

      
        	
                 
      

              	
                (iv)

              	
                the
      accuracy or inaccuracy of any representations and warranties made by
      Borrower under this Instrument or any other Loan
  Document;

              

      

      

      
        	
                 
      

              	
                (v)

              	
                the
      release of Borrower or any other person, by Lender or by operation of law,
      from performance of any obligation under any Loan
  Document;

              

      

      

      
        	
                 
      

              	
                (vi)

              	
                the
      release or substitution in whole or in part of any security for the
      Indebtedness; and

              

      

      

      
        	
                 
      

              	
                (vii)

              	
                Lender's
      failure to properly perfect any lien or security interest given as
      security for the Indebtedness.

              

      

      

      (n)           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

              

      

      
        
           

        

        
          Page
27

          
            

          

        

        
           

        

      

      incident
to any matters against which Indemnitees are entitled to be indemnified under
this Section 18;

      

      
        	
                 
      

              	
                (ii)

              	
                reimburse
      Indemnitees for any expenses paid or incurred in connection with any
      matters against which Indemnitees are entitled to be indemnified under
      this Section 18; and

              

      

      

      
        	
                 
      

              	
                (iii)

              	
                reimburse
      Indemnitees for any and all expenses, including Attorneys' Fees and Costs,
      paid or incurred in connection with the enforcement by Indemnitees of
      their rights under this Section 18, or in monitoring and
      participating in any legal or administrative
  proceeding.

              

      

       
 

      (o)           The
provisions of this Section 18 shall be in addition to any and all other
obligations and liabilities that Borrower may have under applicable law or under
other Loan Documents, and each Indemnitee shall be entitled to indemnification
under this Section 18 without regard to whether Lender or that Indemnitee
has exercised any rights against the Mortgaged Property 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 Section 18 shall be joint and several. The
obligation of Borrower to indemnify the Indemnitees under this Section 18
shall survive any repayment or discharge of the Indebtedness, any foreclosure
proceeding, any foreclosure sale, any delivery of any deed in lieu of
foreclosure, and any release of record of the lien of this
Instrument.  Notwithstanding the foregoing, if Lender has never been a
mortgagee-in-possession of, or held title to, the Mortgaged Property, Borrower
shall have no obligation to indemnify the Indemnitees under this Section 18
after the date of the release of record of the lien of this Instrument by
payment in full at the Maturity Date or by voluntary prepayment in
full.

      

      19.           PROPERTY
AND LIABILITY INSURANCE.

      

      (a)           Borrower
shall keep the Improvements insured at all times against such hazards as Lender
may from time to time require, which insurance shall include but not be limited
to coverage against loss by fire, windstorm and allied perils, general boiler
and machinery coverage, and business interruption including loss of rental value
insurance for the Mortgaged Property with extra expense insurance.  If
Lender so requires, such insurance shall also include sinkhole insurance, mine
subsidence insurance, earthquake insurance, and, if the Mortgaged Property does
not conform to applicable zoning or land use laws, building ordinance or law
coverage.  In the event any updated reports or other documentation are
reasonably required by Lender in order to determine whether such additional
insurance is necessary or prudent, Borrower shall pay for all such documentation
at its sole cost and expense.  Borrower acknowledges and agrees that
Lender's insurance requirements may change from time to time throughout the term
of the Indebtedness.  If any of the Improvements is located in an area
identified by the Federal Emergency Management Agency (or any successor to that
agency) as an area having special flood hazards, Borrower shall insure such
Improvements against loss by flood.  All insurance required pursuant
to this Section 19(a) shall be referred to as "Hazard

      
        
           

        

        
          Page
28

          
            

          

        

        
           

        

      

      Insurance."  All
policies of Hazard Insurance must include a non-contributing, non-reporting
mortgagee clause in favor of, and in a form approved by, Lender.

      

      (b)           All
premiums on insurance policies required under this Section 19 shall be paid in
the manner provided in Section 7, unless Lender has designated in writing
another method of payment.  All such policies shall also be in a form
approved by Lender.  Borrower shall deliver to Lender a legible copy
of each insurance policy (or duplicate original) and Borrower shall promptly
deliver to Lender a copy of all renewal and other notices received by Borrower
with respect to the policies and all receipts for paid premiums.  At
least 5 days prior to the expiration date of any insurance policy, Borrower
shall deliver to Lender evidence acceptable to Lender that the policy has been
renewed.  If Borrower has not delivered a legible copy of each renewal
policy (or a duplicate original) prior to the expiration date of any
insurance policy, Borrower shall deliver a legible copy of each renewal policy
(or a duplicate original) in a form satisfactory to Lender within 120 days
after the expiration date of the original policy.

      

      (c)           Borrower
shall maintain at all times commercial general liability insurance, workers'
compensation insurance and such other liability, errors and omissions and
fidelity insurance coverages as Lender may from time to time
require.  All policies for general liability insurance must contain a
standard additional insured provision, in favor of, and in a form approved by,
Lender.

      

      (d)           All
insurance policies and renewals of insurance policies required by this
Section 19 shall be in such amounts and for such periods as Lender may from
time to time require, and shall be issued by insurance companies satisfactory to
Lender.

      

      (e)           Borrower
shall comply with all insurance requirements and shall not permit any condition
to exist on the Mortgaged Property that would invalidate any part of any
insurance coverage that this Instrument requires Borrower to
maintain.

      

      (f)           In
the event of loss, Borrower shall give immediate written notice to the insurance
carrier and to Lender.  Borrower hereby authorizes and appoints Lender
as attorney-in-fact for Borrower to make proof of loss, to adjust and compromise
any claims under policies of Hazard Insurance, to appear in and prosecute any
action arising from such Hazard Insurance policies, to collect and receive the
proceeds of Hazard Insurance, and to deduct from such proceeds Lender's expenses
incurred in the collection of such proceeds.  This power of attorney
is coupled with an interest and therefore is irrevocable.  However,
nothing contained in this Section 19 shall require Lender to incur any
expense or take any action.  Lender may, at Lender's option,
(i) require a "repair or replacement" settlement, in which
case  the proceeds will  be used to reimburse Borrower for
the cost of restoring and repairing the Mortgaged Property to the equivalent of
its original condition or to a condition approved by Lender (the "Restoration"), or
(ii) require an "actual cash value" settlement in which case  the
proceeds may be applied to the payment of the Indebtedness, whether or not then
due. To the extent Lender determines to require a repair or replacement
settlement and apply insurance proceeds to Restoration, Lender shall apply the
proceeds in accordance with Lender's then-current policies relating to the
restoration of casualty damage on similar multifamily
properties.

      
        
           

        

        
          Page
29

          
            

          

        

        
           

        

      

      

      (g)           Notwithstanding
any provision to the contrary in this Section 19, as long as no Event of
Default, or any event which, with the giving of Notice or the passage of time,
or both, would constitute an Event of Default, has occurred and is
continuing,

      

      
        	
                 
      

              	
                (i)

              	
                in
      the event of a casualty resulting in damage to the Mortgaged Property
      which will cost $10,000 or less to repair, the Borrower shall have the
      sole right to make proof of loss, adjust and compromise the claim and
      collect and receive any proceeds directly without the approval or prior
      consent of the Lender so long as the insurance proceeds are used solely
      for the Restoration of the Mortgaged Property;
  and

              

      

      

      
        	
                 
      

              	
                (ii) 

              	
                in
      the event of a casualty resulting in damage to the Mortgaged Property
      which will cost more than $10,000 but less than $50,000 to repair, the
      Borrower is authorized to make proof of loss and adjust and compromise the
      claim without the prior consent of Lender, and Lender shall hold the
      applicable insurance proceeds to be used to reimburse Borrower for the
      cost of Restoration of the Mortgaged Property and shall not apply such
      proceeds to the payment of sums due under this
  Instrument.

              

      

      

      (h)           Lender
will have the right to exercise its option to apply insurance proceeds to the
payment of the Indebtedness only if Lender determines that at least one of the
following conditions is met:

      

      
        	
                 
      

              	
                (i)

              	
                an
      Event of Default (or any event, which, with the giving of Notice or the
      passage of time, or both, would constitute an Event of Default) has
      occurred and is continuing;

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                Lender
      determines, in its discretion, that there will not be sufficient funds
      from insurance proceeds, anticipated contributions of Borrower of its own
      funds or other sources acceptable to Lender to complete the
      Restoration;

              

      

      

      
        	
                 
      

              	
                (iii)

              	
                Lender
      determines, in its discretion, that the rental income from the Mortgaged
      Property after completion of the Restoration will not be sufficient to
      meet all operating costs and other expenses, Imposition Deposits, deposits
      to reserves and loan repayment obligations relating to the Mortgaged
      Property;

              

      

      

      
        	
                 
      

              	
                (iv)

              	
                Lender
      determines, in its discretion, that the Restoration will not be completed
      at least one year before the Maturity Date (or six months before the
      Maturity Date if Lender determines in its discretion that re-leasing of
      the Mortgaged Property will be completed within such six-month period);
      or

              

      

      

      
        
           

        

        
          Page
30

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (v)

              	
                Lender
      determines that the Restoration will not be completed within one year
      after the date of the loss or
casualty.

              

      

      

      (i)           If
the Mortgaged Property is sold at a foreclosure sale or Lender acquires title to
the Mortgaged Property, Lender shall automatically succeed to all rights of
Borrower in and to any insurance policies and unearned insurance premiums and in
and to the proceeds resulting from any damage to the Mortgaged Property prior to
such sale or acquisition.

      

      (j)           Unless
Lender otherwise agrees in writing, any application of any insurance proceeds to
the Indebtedness shall not extend or postpone the due date of any monthly
installments referred to in the Note, Section 7 of this Instrument or any
Collateral Agreement, or change the amount of such installments.

      

      (k)           Borrower
agrees to execute such further evidence of assignment of any insurance proceeds
as Lender may require.

      

      20.           CONDEMNATION.

      

      (a)           Borrower
shall promptly notify Lender in writing of any action or proceeding or notice
relating to any proposed or actual condemnation or other taking, or conveyance
in lieu thereof, of all or any part of the Mortgaged Property, whether direct or
indirect (a "Condemnation").  Borrower
shall appear in and prosecute or defend any action or proceeding relating to any
Condemnation unless otherwise directed by Lender in writing.  Borrower
authorizes and appoints Lender as attorney-in-fact for Borrower to commence,
appear in and prosecute, in Lender's or Borrower's name, any action or
proceeding relating to any Condemnation and to settle or compromise any claim in
connection with any Condemnation, after consultation with Borrower and
consistent with commercially reasonable standards of a prudent
lender.  This power of attorney is coupled with an interest and
therefore is irrevocable.  However, nothing contained in this
Section 20 shall require Lender to incur any expense or take any
action.  Borrower hereby transfers and assigns to Lender all right,
title and interest of Borrower in and to any award or payment with respect to
(i) any Condemnation, or any conveyance in lieu of Condemnation, and
(ii) any damage to the Mortgaged Property caused by governmental action
that does not result in a Condemnation.

      

      (b)           Lender
may apply such awards or proceeds, after the deduction of Lender's expenses
incurred in the collection of such amounts (including Attorneys' Fees and
Costs) at Lender's option, to the restoration or repair of the Mortgaged
Property or to the payment of the Indebtedness, with the balance, if any, to
Borrower.  Unless Lender otherwise agrees in writing, any application
of any awards or proceeds to the Indebtedness shall not extend or postpone the
due date of any monthly installments referred to in the Note, Section 7 of
this Instrument or any Collateral Agreement, or change the amount of such
installments.  Borrower agrees to execute such further evidence of
assignment of any awards or proceeds as Lender may require.

      

      21.           TRANSFERS
OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.  [NO RIGHT TO
TRANSFER].

      
        
           

        

        
          Page
31

          
            

          

        

        
           

        

      

      

      (a)           "Transfer" means

      
        	
                 
      

              	
                (i) 

              	
                a
      sale, assignment, transfer or other disposition (whether voluntary,
      involuntary or by operation of
law);

              

      

      

      
        	
                 
      

              	
                (ii) 

              	
                the
      granting, creating or attachment of a lien, encumbrance or security
      interest (whether voluntary, involuntary or by operation of
      law);

              

      

      

      
        	
                 
      

              	
                (iii) 

              	
                the
      issuance or other creation of an ownership interest in a legal entity,
      including a partnership interest, interest in a limited liability company
      or corporate stock;

              

      

      

      
        	
                 
      

              	
                (iv) 

              	
                the
      withdrawal, retirement, removal or involuntary resignation of a partner in
      a partnership or a member or manager in a limited liability company;
      or

              

      

      

      
        	
                 
      

              	
                (v) 

              	
                the
      merger, dissolution, liquidation, or consolidation of a legal entity or
      the reconstitution of one type of legal entity into another type of legal
      entity.

              

      

      

      For
purposes of defining the term "Transfer," the term "partnership" shall mean a
general partnership, a limited partnership, a joint venture and a limited
liability partnership, and the term "partner" shall mean a general partner, a
limited partner and a joint venturer.

      

      (b)           "Transfer"
does not include

      

      
        	
                 
      

              	
                (i) 

              	
                a
      conveyance of the Mortgaged Property at a judicial or non-judicial
      foreclosure sale under this
Instrument,

              

      

      

      
        	
                 
      

              	
                (ii) 

              	
                the
      Mortgaged Property becoming part of a bankruptcy estate by operation of
      law under the United States Bankruptcy Code,
or

              

      

      

      
        	
                 
      

              	
                (iii) 

              	
                a
      lien against the Mortgaged Property for local taxes and/or assessments not
      then due and payable.

              

      

      

      (c)           The
occurrence of any of the following Transfers shall not constitute an Event of
Default under this Instrument, notwithstanding any provision of
Section 21(e) to the contrary:

      

      
        	
                 
      

              	
                (i)

              	
                a
      Transfer to which Lender has
consented;

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                a
      Transfer that occurs in accordance with
  Section 21(d);

              

      

      

      
        	
                 
      

              	
                (iii)

              	
                the
      grant of a leasehold interest in an individual dwelling unit for a term of
      two years or less not containing an option to
  purchase;

              

      

      

      
        
           

        

        
          Page
32

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (iv)

              	
                a
      Transfer of obsolete or worn out Personalty or Fixtures that are
      contemporaneously replaced by items of equal or better function and
      quality, which are free of liens, encumbrances and security interests
      other than those created by the Loan Documents or consented to by
      Lender;

              

      

      

      
        	
                 
      

              	
                (v)

              	
                the
      creation of a mechanic's, materialman's, or judgment lien against the
      Mortgaged Property which is released of record or otherwise remedied to
      Lender's satisfaction within 60 days of the date of creation;
      and

              

      

      

      
        	
                 
      

              	
                (vi)

              	
                if
      Borrower is a housing cooperative corporation or association, the Transfer
      of more than 49 percent of the shares in the housing cooperative or the
      assignment of more than 49 percent of the occupancy agreements or leases
      relating thereto by tenant shareholders of the housing cooperative or
      association to other tenant
shareholders.

              

      

      

      (d)           The
occurrence of any of the following Transfers shall not constitute an Event of
Default under this Instrument, provided that Borrower has notified Lender in
writing within 30 days following the occurrence of any of the following,
and such Transfer does not constitute an Event of Default under any other
Section of this Instrument:

      

      
        	
                 
      

              	
                (i)

              	
                a
      change of the Borrower's name, provided that UCC financing statements
      and/or amendments sufficient to continue the perfection of Lender's
      security interest have been properly filed and copies have been delivered
      to Lender;

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                a
      change of the form of the Borrower not involving a transfer of the
      Borrower's assets and not resulting in any change in liability of any
      Initial Owner, provided that UCC financing statements and/or amendments
      sufficient to continue the perfection of Lender's security interest have
      been properly filed and copies have been delivered to
    Lender;

              

      

      

      
        	
                 
      

              	
                (iii)

              	
                the
      merger of the Borrower with another entity when the Borrower  is
      the surviving entity;

              

      

      

      
        	
                 
      

              	
                (iv)

              	
                a
      Transfer that occurs by devise, descent, or by operation of law upon the
      death of a natural person;

              

      

      

      
        	
                 
      

              	
                (v)

              	
                the
      grant of an easement, if before the grant Lender determines that the
      easement will not materially affect the operation or value of the
      Mortgaged Property or Lender's interest in the Mortgaged Property, and
      Borrower pays to Lender, upon demand, all costs and expenses, including
      Attorneys' Fees and Costs, incurred by Lender in connection with reviewing
      Borrower's request.

              

      

      

      
        
           

        

        
          Page
33

          
            

          

        

        
           

        

      

      (e)           The
occurrence of any of the following Transfers shall constitute an Event of
Default under this Instrument:

      

      
        	
                 
      

              	
                (i)

              	
                a
      Transfer of all or any part of the Mortgaged Property or any interest in
      the Mortgaged Property;

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                if
      Borrower is a limited partnership, a Transfer of (A) any general
      partnership interest, or (B) limited partnership interests in
      Borrower that would cause the Initial Owners of Borrower to own less than
      a Controlling Interest of all limited partnership interests in
      Borrower;

              

      

      

      
        	
                 
      

              	
                (iii)

              	
                if
      Borrower is a general partnership or a joint venture, a Transfer of any
      general partnership or joint venture interest in
  Borrower;

              

      

      

      
        	
                 
      

              	
                (iv)

              	
                if
      Borrower is a limited liability company, (A) a Transfer of any
      membership interest in Borrower which would cause the Initial Owners to
      own less than a Controlling Interest of all the membership interests in
      Borrower, (B) a Transfer of any membership or other interest of a
      manager in Borrower that results in a change of manager, or (C) a
      change of a nonmember manager;

              

      

      

      
        	
                 
      

              	
                (v)

              	
                if
      Borrower is a corporation, (A) the Transfer of any voting stock in
      Borrower which would cause the Initial Owners to own less than a
      Controlling Interest of any class of voting stock in Borrower or
      (B) if the outstanding voting stock in Borrower is held by 100 or
      more shareholders, one or more Transfers by a single transferor within a
      12-month period affecting an aggregate of 5 percent or more of that
      stock;

              

      

      

      
        	
                (vi)  

              	
                if
      Borrower is a trust, (A) a Transfer of any beneficial interest in
      Borrower which would cause the Initial Owners to own less than a
      Controlling Interest of all the beneficial interests in Borrower,
      (B) the termination or revocation of the trust, or (C) the
      removal, appointment or substitution of a trustee of
    Borrower;

              

      

      

      
        	
                (vii)  

              	
                if
      Borrower is a limited liability partnership, (A) a Transfer of any
      partnership interest in Borrower which would cause  the Initial
      Owners to own less than a Controlling Interest of all partnership
      interests in Borrower, or (B) a transfer of any partnership or other
      interest of a managing partner in Borrower that results in a change of
      manager; and

              

      

      

      
        	
                 
      

              	
                (viii)

              	
                a
      Transfer of any interest in a Controlling Entity which, if such
      Controlling Entity were Borrower, would result in an Event of Default
      under any of Sections 21(e)(i) through
      (vii) above.

              

      

      

      
        
           

        

        
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34

          
            

          

        

        
           

        

      

      Lender
shall not be required to demonstrate any actual impairment of its security or
any increased risk of default in order to exercise any of its remedies with
respect to an Event of Default under this Section 21.

      

      22.           EVENTS OF
DEFAULT.  The occurrence of any one or more of the following
shall constitute an Event of Default under this Instrument:

      

      (a)           any
failure by Borrower to pay or deposit when due any amount required by the Note,
this Instrument or any other Loan Document;

      

      (b)           any
failure by Borrower to maintain the insurance coverage required by
Section 19;

      

      (c)           any
failure by Borrower to comply with the provisions of
Section 33;

      

      (d)           fraud
or material misrepresentation or material omission by Borrower, any of its
officers, directors, trustees, general partners or managers or any guarantor in
connection with (i) the application for or creation of the Indebtedness,
(ii) any financial statement, rent schedule, or other report or information
provided to Lender during the term of the Indebtedness, or (iii) any
request for Lender's consent to any proposed action, including a request for
disbursement of funds under any Collateral Agreement;

      

                 (e)           any
failure by Borrower to comply with the provisions of
Section 20;

      

      (f)           any
Event of Default under Section 21;

      

      (g)           the
commencement of a forfeiture action or proceeding, whether civil or criminal,
which, in Lender's reasonable judgment, could result in a forfeiture of the
Mortgaged Property or otherwise materially impair the lien created by this
Instrument or Lender's interest in the Mortgaged Property;

      

      (h)           any
failure by Borrower to perform any of its obligations under this Instrument
(other than those specified in Sections 22(a) through (g)), as and
when required, which continues for a period of 30 days after Notice of such
failure by Lender to Borrower.  However, if Borrower's failure to
perform its obligations as described in this Section 22(h) is of the
nature that it cannot be cured within the 30 day grace period but
reasonably could be cured within 90 days, then Borrower shall have additional
time as determined by Lender in its discretion, not to exceed an additional
60 days, in which to cure such default, provided that Borrower has
diligently commenced to cure such default during the 30-day grace period and
diligently pursues the cure of such default.  However, no such Notice
or grace periods shall apply in the case of any such failure which could, in
Lender's judgment, absent immediate exercise by Lender of a right or remedy
under this Instrument, result in harm to Lender, impairment of the Note or this
Instrument or any other security given under any other Loan
Document;

      

      
        
           

        

        
          Page
35

          
            

          

        

        
           

        

      

      (i)           any
failure by Borrower to perform any of its obligations as and when required under
any Loan Document other than this Instrument which continues beyond the
applicable cure period, if any, specified in that Loan Document;

      

      (j)           any
exercise by the holder of any other debt instrument secured by a mortgage, deed
of trust or deed to secure debt on the Mortgaged Property of a right to declare
all amounts due under that debt instrument immediately due and
payable;

      

      (k)           any  voluntary
filing by Borrower for bankruptcy protection under the United States Bankruptcy
Code or any reorganization, receivership, insolvency proceeding or other similar
proceeding pursuant to any other federal or state law affecting debtor and
creditor rights to which Borrower voluntarily becomes subject, or the
commencement of any involuntary case against Borrower by any creditor (other
than Lender) of Borrower pursuant to the United States Bankruptcy Code or
other federal or state law affecting debtor and creditor rights which case is
not dismissed or discharged within 90 days after filing; and

      

      (l)           any
representations and warranties by Borrower in this Instrument which is false or
misleading in any material respect.

      

      23.           REMEDIES
CUMULATIVE.  Each right and remedy provided in this Instrument
is distinct from all other rights or remedies under this Instrument or any other
Loan Document or afforded by applicable law, and each shall be cumulative and
may be exercised concurrently, independently, or successively, in any
order.

      

      24.           FORBEARANCE.

      

      (a)           Lender
may (but shall not be obligated to) agree with Borrower, from time to time,
and without giving notice to, or obtaining the consent of, or having any effect
upon the obligations of, any guarantor or other third party obligor, to take any
of the following actions:  extend the time for payment of all or any
part of the Indebtedness; reduce the payments due under this Instrument, the
Note, or any other Loan Document; release anyone liable for the payment of any
amounts under this Instrument, the Note, or any other Loan Document; accept a
renewal of the Note; modify the terms and time of payment of the Indebtedness;
join in any extension or subordination agreement; release any Mortgaged
Property; take or release other or additional security; modify the rate of
interest or period of amortization of the Note or change the amount of the
monthly installments payable under the Note; and otherwise modify this
Instrument, the Note, or any other Loan Document.

      

      (b)           Any
forbearance by Lender in exercising any right or remedy under the Note, this
Instrument, or any other Loan Document or otherwise afforded by applicable law,
shall not be a waiver of or preclude the exercise of any other right or remedy,
or the subsequent exercise of any right or remedy.  The acceptance by
Lender of payment of all or any part of the Indebtedness after the due date of
such payment, or in an amount which is less than the required payment, shall not
be a waiver of Lender's right to require prompt payment when due of all other
payments on account of the Indebtedness or to exercise any remedies for any
failure to make prompt

      
        
           

        

        
          Page
36

          
            

          

        

        
           

        

      

      payment.
Enforcement by Lender of any security for the Indebtedness shall not constitute
an election by Lender of remedies so as to preclude the exercise of any other
right available to Lender.  Lender's receipt of any awards or proceeds
under Sections 19 and 20 shall not operate to cure or waive any Event of
Default.

      

      25.           LOAN CHARGES.  If
any applicable law limiting the amount of interest or other charges permitted to
be collected from Borrower is interpreted so that any charge provided for in any
Loan Document, whether considered separately or together with other charges
levied in connection with any other Loan Document, violates that law, and
Borrower is entitled to the benefit of that law, that charge is hereby reduced
to the extent necessary to eliminate that violation.  The amounts, if
any, previously paid to Lender in excess of the permitted amounts shall be
applied by Lender to reduce the principal of the Indebtedness.  For
the purpose of determining whether any applicable law limiting the amount of
interest or other charges permitted to be collected from Borrower has been
violated, all Indebtedness which constitutes interest, as well as all other
charges levied in connection with the Indebtedness which constitute interest,
shall be deemed to be allocated and spread over the stated term of the
Note.  Unless otherwise required by applicable law, such allocation
and spreading shall be effected in such a manner that the rate of interest so
computed is uniform throughout the stated term of the Note.

      

      26.           WAIVER OF STATUTE OF
LIMITATIONS.  Borrower hereby waives the right to assert any
statute of limitations as a bar to the enforcement of the lien of this
Instrument or to any action brought to enforce any Loan Document.

      

      27.           WAIVER OF
MARSHALLING.  Notwithstanding the existence of any other
security interests in the Mortgaged Property held by Lender or by any other
party, Lender shall have the right to determine the order in which any or all of
the Mortgaged Property shall be subjected to the remedies provided in this
Instrument, the Note, any other Loan Document or applicable
law.  Lender shall have the right to determine the order in which any
or all portions of the Indebtedness are satisfied from the proceeds realized
upon the exercise of such remedies.  Borrower and any party who now or
in the future acquires a security interest in the Mortgaged Property and who has
actual or constructive notice of this Instrument waives any and all right to
require the marshalling of assets or to require that any of the Mortgaged
Property be sold in the inverse order of alienation or that any of the Mortgaged
Property be sold in parcels or as an entirety in connection with the exercise of
any of the remedies permitted by applicable law or provided in this
Instrument.

      

      28.           FURTHER
ASSURANCES.  Borrower shall execute, acknowledge, and deliver,
at its sole cost and expense, all further acts, deeds, conveyances, assignments,
estoppel certificates, financing statements or amendments, transfers and
assurances as Lender may require from time to time in order to better assure,
grant, and convey to Lender the rights intended to be granted, now or in the
future, to Lender under this Instrument and the Loan Documents.

      

      29.           ESTOPPEL
CERTIFICATE.  Within 10 days after a request from Lender,
Borrower shall deliver to Lender a written statement, signed and acknowledged by
Borrower, certifying to Lender or any person designated by Lender, as of the
date of such statement, (i) that

      
        
           

        

        
          Page
37

          
            

          

        

        
           

        

      

      the Loan
Documents are unmodified and in full force and effect  (or, if there
have been modifications, that the Loan Documents are in full force and effect as
modified and setting forth such modifications); (ii) the unpaid principal
balance of the Note; (iii) the date to which interest under the Note has
been paid; (iv) that Borrower is not in default in paying the Indebtedness
or in performing or observing any of the covenants or agreements contained in
this Instrument or any of the other Loan Documents (or, if the Borrower is in
default, describing such default in reasonable detail); (v) whether or not
there are then existing any setoffs or defenses known to Borrower against the
enforcement of any right or remedy of Lender under the Loan Documents; and
(vi) any additional facts requested by Lender.

      

      30.           GOVERNING
LAW; CONSENT TO JURISDICTION AND VENUE.

      

      (a)           This
Instrument, and any Loan Document which does not itself expressly identify the
law that is to apply to it, shall be governed by the laws of the jurisdiction in
which the Land is located (the "Property
Jurisdiction").

      

      (b)           Borrower
agrees that any controversy arising under or in relation to the Note, this
Instrument, or any other Loan Document may be litigated in the Property
Jurisdiction.  The state and federal courts and authorities with
jurisdiction in the Property Jurisdiction shall have jurisdiction over all
controversies that shall arise under or in relation to the Note, any security
for the Indebtedness, or any other Loan Document.  Borrower
irrevocably consents to service, jurisdiction, and venue of such courts for any
such litigation and waives any other venue to which it might be entitled by
virtue of domicile, habitual residence or otherwise.  However, nothing
in this Section 30 is intended to limit Lender's right to bring any suit,
action or proceeding relating to matters under this Instrument in any court of
any other jurisdiction.

      

      31.           NOTICE.

      

      (a)           All
Notices, demands and other communications ("Notice") under or
concerning this Instrument shall be in writing.  Each Notice shall be
addressed to the intended recipient at its address set forth in this Instrument,
and shall be deemed given on the earliest to occur of (i) the date when the
Notice is received by the addressee; (ii) the first Business Day after the
Notice is delivered to a recognized overnight courier service, with arrangements
made for payment of charges for next Business Day delivery; or (iii) the
third Business Day after the Notice is deposited in the United States mail with
postage prepaid, certified mail, return receipt requested.

      

      (b)           Any
party to this Instrument may change the address to which Notices intended for it
are to be directed by means of Notice given to the other party in accordance
with this Section 31.  Each party agrees that it will not refuse
or reject delivery of any Notice given in accordance with this Section 31,
that it will acknowledge, in writing, the receipt of any Notice upon request by
the other party and that any Notice rejected or refused by it shall be deemed
for purposes of this Section 31 to have been received by the rejecting
party on the date so refused or rejected, as conclusively established by the
records of the U.S. Postal Service or the courier service.

      

      
        
           

        

        
          Page
38

          
            

          

        

        
           

        

      

      (c)           Any
Notice under the Note and any other Loan Document that does not specify how
Notices are to be given shall be given in accordance with this
Section 31.

      

      32.           SALE OF NOTE; CHANGE IN SERVICER;
LOAN SERVICING.  The Note or a partial interest in the Note
(together with this Instrument and the other Loan Documents) may be sold
one or more times without prior Notice to Borrower.  A sale may result
in a change of the Loan Servicer.  There also may be one or more
changes of the Loan Servicer unrelated to a sale of the Note.  If
there is a change of the Loan Servicer, Borrower will be given Notice of the
change. All actions
regarding the servicing of the loan evidenced by the Note, including the
collection of payments, the giving and receipt of Notice, inspections of the
Mortgaged Property, inspections of books and records, and the granting of
consents and approvals, may be taken by the Loan Servicer unless Borrower
receives Notice to the contrary.  If Borrower receives conflicting
Notices regarding the identity of the Loan Servicer or any other subject, any
such Notice from Lender shall govern.

      

      33.           SINGLE ASSET
BORROWER.  Until the Indebtedness is paid in full, Borrower
(a) shall not own any real or personal property other than the Mortgaged
Property and personal property related to the operation and maintenance of the
Mortgaged Property;  (b) shall not operate any business other
than the management and operation of the Mortgaged Property; and (c) shall
not maintain its assets in a way difficult to segregate and
identify.

      

      34.           SUCCESSORS AND ASSIGNS
BOUND.  This Instrument shall bind, and the rights granted by
this Instrument shall inure to, the respective successors and assigns of Lender
and Borrower.  However, a Transfer not permitted by Section 21
shall be an Event of Default.

      

      35.           JOINT AND SEVERAL
LIABILITY.  If more than one person or entity signs this
Instrument as Borrower, the obligations of such persons and entities shall be
joint and several.

      

      36.           RELATIONSHIP
OF PARTIES; NO THIRD PARTY BENEFICIARY.

      

      (a)           The
relationship between Lender and Borrower shall be solely that of creditor and
debtor, respectively, and nothing contained in this Instrument shall create any
other relationship between Lender and Borrower.

      

      (b)           No
creditor of any party to this Instrument and no other person shall be a third
party beneficiary of this Instrument or any other Loan
Document.  Without limiting the generality of the preceding sentence,
(i) any arrangement (a "Servicing
Arrangement") between the Lender and any Loan Servicer for loss
sharing or interim advancement of funds shall constitute a contractual
obligation of such Loan Servicer that is independent of the obligation of
Borrower for the payment of the Indebtedness, (ii) Borrower shall not be a
third party beneficiary of any Servicing Arrangement, and (iii) no payment
by the Loan Servicer under any Servicing Arrangement will reduce the amount of
the Indebtedness.

      

      
        
           

        

        
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39

          
            

          

        

        
           

        

      

      37.           SEVERABILITY; AMENDMENTS. The
invalidity or unenforceability of any provision of this Instrument shall not
affect the validity or enforceability of any other provision, and all other
provisions shall remain in full force and effect.  This Instrument
contains the entire agreement among the parties as to the rights granted and the
obligations assumed in this Instrument.  This Instrument may not be
amended or modified except by a writing signed by the party against whom
enforcement is sought; provided, however, that in the event of a Transfer
prohibited by or requiring Lender's approval under Section 21, any or some
or all of the Modifications to Instrument set forth in Exhibit B (if
any) may be modified or rendered void by Lender at Lender's option by
Notice to Borrower and the transferee(s).

      

      38.           CONSTRUCTION.  The
captions and headings of the Sections of this Instrument are for
convenience only and shall be disregarded in construing this
Instrument.  Any reference in this Instrument to an "Exhibit" or a
"Section" shall, unless otherwise explicitly provided, be construed as
referring, respectively, to an Exhibit attached to this Instrument or to a
Section of this Instrument.  All Exhibits attached to or referred
to in this Instrument are incorporated by reference into this
Instrument.  Any reference in this Instrument to a statute or
regulation shall be construed as referring to that statute or regulation as
amended from time to time.  Use of the singular in this Agreement
includes the plural and use of the plural includes the singular.  As
used in this Instrument, the term "including" means "including, but not limited
to."

      

      39.           DISCLOSURE OF
INFORMATION.  Lender may furnish information regarding Borrower
or the Mortgaged Property to third parties with an existing or prospective
interest in the servicing, enforcement, evaluation, performance, purchase or
securitization of the Indebtedness, including but not limited to trustees,
master servicers, special servicers, rating agencies, and organizations
maintaining databases on the underwriting and performance of multifamily
mortgage loans, as well as governmental regulatory agencies having regulatory
authority over Lender.  Borrower irrevocably waives any and all rights
it may have under applicable law to prohibit such disclosure, including but not
limited to any right of privacy.

      

      40.           NO CHANGE IN FACTS OR
CIRCUMSTANCES.  Borrower warrants that (a) all information
in the application for the loan submitted to Lender (the "Loan Application") and in
all financial statements, rent schedules, reports, certificates and other
documents submitted in connection with the Loan Application are complete and
accurate in all material respects; and (b) there has been no material
adverse change in any fact or circumstance that would make any such information
incomplete or inaccurate.

      

      41.           SUBROGATION. If, and to the
extent that, the proceeds of the loan evidenced by the Note, or subsequent
advances under Section 12, are used to pay, satisfy or discharge a Prior Lien,
such loan proceeds or advances shall be deemed to have been advanced by Lender
at Borrower's request, and Lender shall automatically, and without further
action on its part, be subrogated to the rights, including lien priority, of the
owner or holder of the obligation secured by the Prior Lien, whether or not the
Prior Lien is released.

      

      42.           ADJUSTABLE
RATE MORTGAGE - THIRD PARTY CAP AGREEMENT "CAP COLLATERAL."

      
        
           

        

        
          Page
40

          
            

          

        

        
           

        

      

      

      (a)           If
the Note provides for interest to accrue at an adjustable or variable interest
rate (other than during the "Extension Period," as defined in the Note, if
applicable), then the definition of "Mortgaged Property" shall include the
"Cap
Collateral."  The "Cap Collateral" shall mean

      

      
        	
                 
      

              	
                (i)

              	
                any
      interest rate cap agreement, interest rate swap agreement, or other
      interest rate-hedging contract or agreement obtained by Borrower as a
      requirement of any Loan Document or as a condition of Lender's making the
      Loan (a "Cap
      Agreement");

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                any
      and all moneys (collectively, "Cap Payments") payable
      pursuant to any Cap Agreement by the interest rate cap provider or other
      counterparty to a Cap Agreement or any guarantor of the obligations of any
      such cap provider or counterparty (a "Cap
      Provider");

              

      

       

      
        	
                 
      

              	
                (iii)

              	
                all
      rights of Borrower under any Cap Agreement and all rights of Borrower to
      all Cap Payments, including contract rights and general intangibles,
      whether existing now or arising after the date of this
      Instrument;

              

      

       

      
        	
                 
      

              	
                (iv)

              	
                all
      rights, liens and security interests or guaranties granted by a Cap
      Provider or any other person to secure or guaranty payment of any Cap
      Payment whether existing now or granted after the date of this
      Instrument;

              

      

       

      
        	
                 
      

              	
                (v)

              	
                all
      documents, writings, books, files, records and other documents arising
      from or relating to any of the foregoing, whether existing now or created
      after the date of this Instrument;
and

              

      

      

      
        	
                 
      

              	
                (vi)

              	
                all
      cash and non-cash proceeds and products of (ii) – (v)
    above.

              

      

       
 

      (b)           As
additional security for Borrower's obligation under the Loan Documents, Borrower
hereby assigns and pledges to Lender all of Borrower's right, title and interest
in and to the Cap Collateral.  Borrower has instructed and will
instruct each Cap Provider and any guarantor of a Cap Provider's obligations to
make Cap Payments directly to Lender or to Loan Servicer on behalf of
Lender.

      

      (c)           So
long as there is no Event of Default, Lender or Loan Servicer will remit to
Borrower each Cap Payment received by Lender or Loan Servicer with respect to
any month for which Borrower has paid in full the monthly installment of
principal and interest or interest only, as applicable, due under the
Note.  Alternatively, at Lender's option so long as there is no Event
of Default, Lender may apply a Cap Payment received by Lender or Loan Servicer
with respect to any month to the applicable monthly payment of accrued interest
due under the Note if Borrower has paid in full the remaining portion of such
monthly payment of principal and interest or interest only, as
applicable.

      

      
        
           

        

        
          Page
41

          
            

          

        

        
           

        

      

      (d)           Following
an Event of Default, in addition to any other rights and remedies Lender may
have, Lender may retain any Cap Payments and apply them to the Indebtedness in
such order and amounts as Lender determines.  Neither the existence of
a Cap Agreement nor anything in this Instrument shall relieve Borrower of its
primary obligation to timely pay in full all amounts due under the Note and
otherwise due on account of the Indebtedness.

      

      (e)           If
the Note does not provide for interest to accrue at an adjustable or variable
interest rate (other than during the Extension Period) then this Section 42
shall be of no force or effect.

      

      43.           ACCELERATION;
REMEDIES.  At any time during the existence of an Event of
Default, Lender, at Lender’s option, may declare the Indebtedness to be
immediately due and payable without further demand, and may invoke the power of
sale and any other remedies permitted by Texas law or provided in this
Instrument or in any other Loan Document.  Borrower acknowledges that
the power of sale granted in this Instrument may be exercised by Lender without
prior judicial hearing.  Lender shall be entitled to collect all costs
and expenses incurred in pursuing such remedies, including attorneys’ fees,
costs of documentary evidence, abstracts and title reports.

      

      (a)           If
Lender invokes the power of sale, Lender may, by and through the Trustee, or
otherwise, sell or offer for sale the Mortgaged Property in such portions, order
and parcels as Lender may determine, with or without having first taken
possession of the Mortgaged Property, to the highest bidder for cash at public
auction.  Such sale shall be made at the courthouse door of the county
in which all or any part of the Land to be sold is situated (whether the parts
or parcel, if any, situated in different counties are contiguous or not, and
without the necessity of having any Personalty present at such sale) on the
first Tuesday of any month between the hours of 10:00 a.m. and 4:00 p.m., after
advertising the time, place and terms of sale and that portion of the Mortgaged
Property to be sold by posting or causing to be posted written or printed notice
of sale at least twenty-one (21) days before the date of the sale at the
courthouse door of the county in which the sale is to be made and at the
courthouse door of any other county in which a portion of the Land may be
situated, and by filing such notice with the County Clerk(s) of the county(s) in
which all or a portion of the Land may be situated, which notice may be posted
and filed by the Trustee acting, or by any person acting for the Trustee, and
Lender has, at least twenty-one (21) days before the date of the sale, served
written or printed notice of the proposed sale by certified mail on each debtor
obligated to pay the Indebtedness according to Lender’s records by the deposit
of such notice, enclosed in a postpaid wrapper, properly addressed to such
debtor at debtor’s most recent address as shown by Lender’s records, in a post
office or official depository under the care and custody of the United States
Postal Service.  The affidavit of any person having knowledge of the
facts to the effect that such service was completed shall be prima facie evidence of the
fact of service.

      

      (b)           Trustee
shall deliver to the purchaser at the sale, within a reasonable time after the
sale, a deed conveying the Mortgaged Property so sold in fee simple with
covenants of general warranty.  Borrower covenants and agrees to
defend generally the purchaser’s title to the Mortgaged Property against all
claims and demands.  The recitals in Trustee’s deed shall
be

      
        
           

        

        
          Page
42

          
            

          

        

        
           

        

      

      prima facie evidence of the
truth of the statements contained in those recitals.  Trustee shall
apply the proceeds of the sale in the following order:  (i) to all
reasonable costs and expenses of the sale, including reasonable Trustee’s fees
not to exceed 5% of the gross sales price, attorneys’ fees and costs of title
evidence; (ii) to the Indebtedness in such order as Lender, in Lender’s
discretion, directs; and (iii) the excess, if any, to the person or persons
legally entitled to the excess.

      

      (c)           If
all or any part of the Mortgaged Property is sold pursuant to this Section 43,
Borrower will be divested of any and all interest and claim to the Mortgaged
Property, including any interest or claim to all insurance policies, utility
deposits, bonds, loan commitments and other intangible property included as a
part of the Mortgaged Property.  Additionally, after a sale of all or
any part of the Land, Improvements, Fixtures and Personalty, Borrower will be
considered a tenant at sufferance of the purchaser of the same, and the
purchaser shall be entitled to immediate possession of such
property.  If Borrower shall fail to vacate the Mortgaged Property
immediately, the purchaser may and shall have the right, without further notice
to Borrower, to go into any justice court in any precinct or county in which the
Mortgaged Property is located and file an action in forcible entry and detainer,
which action shall lie against Borrower or its assigns or legal representatives,
as a tenant at sufferance.  This remedy is cumulative of any and all
remedies the purchaser may have under this Instrument or otherwise.

      

      (d)           In
any action for a deficiency after a foreclosure under this Instrument, if any
person against whom recovery is sought requests the court in which the action is
pending to determine the fair market value of the Mortgaged Property, as of the
date of the foreclosure sale, the following shall be the basis of the court’s
determination of fair market value:

      

      
        	
                 
      

              	
                (i)

              	
                the
      Mortgaged Property shall be valued “as is” and in its condition as of the
      date of foreclosure, and no assumption of increased value because of
      post-foreclosure repairs, refurbishment, restorations or improvements
      shall be made;

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                any
      adverse effect on the marketability of title because of the foreclosure or
      because of any other title condition not existing as of the date of this
      Instrument shall be considered;

              

      

      

      
        	
                 
      

              	
                (iii)

              	
                the
      valuation of the Mortgaged Property shall be based upon an assumption that
      the foreclosure purchaser desires a prompt resale of the Mortgaged
      Property for cash within a six month-period after
    foreclosure;

              

      

      

      
        	
                 
      

              	
                (iv)

              	
                although
      the Mortgaged Property may be disposed of more quickly by the foreclosure
      purchaser, the gross valuation of the Mortgaged Property as of the date of
      foreclosure shall be discounted for a hypothetical reasonable holding
      period (not to exceed 6 months) at a monthly rate equal to the average
      monthly interest rate on the Note for the twelve months before the date of
      foreclosure;

              

      

      

      
        
           

        

        
          Page
43

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (v)

              	
                the
      gross valuation of the Mortgaged Property as of the date of foreclosure
      shall be further discounted and reduced by reasonable estimated costs of
      disposition, including brokerage commissions, title policy premiums,
      environmental assessment and clean-up costs, tax and assessment,
      prorations, costs to comply with legal requirements and attorneys’
      fees;

              

      

      

      
        	
                 
      

              	
                (vi)

              	
                expert
      opinion testimony shall be considered only from a licensed appraiser
      certified by the State of Texas and, to the extent permitted under Texas
      law, a member of the Appraisal Institute, having at least five years’
      experience in appraising property similar to the Mortgaged Property in the
      county where the Mortgaged Property is located, and who has conducted and
      prepared a complete written appraisal of the Mortgaged Property taking
      into considerations the factors set forth in this Instrument; no expert
      opinion testimony shall be considered without such written
      appraisal;

              

      

      

      
        	
                 
      

              	
                (vii)

              	
                evidence
      of comparable sales shall be considered only if also included in the
      expert opinion testimony and written appraisal referred to in
      subsection (vi), above; and

              

      

      

      
        	
                 
      

              	
                (viii)

              	
                an
      affidavit executed by Lender to the effect that the foreclosure bid
      accepted by Trustee was equal to or greater than the value of the
      Mortgaged Property determined by Lender based upon the factors and methods
      set forth in subsections (i) through (vii) above before the foreclosure
      shall constitute prima
      facie evidence that the foreclosure bid was equal to or greater
      than the fair market value of the Mortgaged Property on the foreclosure
      date.

              

      

      

      (e)           Lender
may, at Lender’s option, comply with these provisions in the manner permitted or
required by Title 5, Section 51.002 of the Texas Property Code (relating to the
sale of real estate) or by Chapter 9 of the Texas Business and Commerce Code
(relating to the sale of collateral after default by a debtor), as those titles
and chapters now exist or may be amended or succeeded in the future, or by any
other present or future articles or enactments relating to same
subject.  Unless expressly excluded, the Mortgaged Property shall
include Rents collected before a foreclosure sale, but attributable to the
period following the foreclosure sale, and Borrower shall pay such Rents to the
purchaser at such sale.  At any such sale:

      

      
        	
                 
      

              	
                (i)

              	
                whether
      made under the power contained in this Instrument, Section 51.002 of
      the Texas Property Code, Chapter 9 of the Texas Business and Commerce
      Code, any other legal requirement or by virtue of any judicial proceedings
      or any other legal right, remedy or recourse, it shall not be necessary
      for Trustee to have physically present, or to have constructive possession
      of, the Mortgaged Property (Borrower shall deliver to Trustee any portion
      of the Mortgaged Property not actually or constructively possessed by
      Trustee immediately upon demand by Trustee) and the title to and right of
      possession of any such property
shall

              

      

      
        
           

        

        
          Page
44

          
            

          

        

        
           

        

      

      pass to
the purchaser as completely as if the property had been actually present and
delivered to the purchaser at the sale;

      

      
        	
                 
      

              	
                (ii)

              	
                each
      instrument of conveyance executed by Trustee shall contain a general
      warranty of title, binding upon
Borrower;

              

      

      

      
        	
                 
      

              	
                (iii)

              	
                the
      recitals contained in any instrument of conveyance made by Trustee shall
      conclusively establish the truth and accuracy of the matters recited in
      the Instrument, including nonpayment of the Indebtedness and the
      advertisement and conduct of the sale in the manner provided in this
      Instrument and otherwise by law and the appointment of any successor
      Trustee;

              

      

      

      
        	
                 
      

              	
                (iv)

              	
                all
      prerequisites to the validity of the sale shall be conclusively presumed
      to have been satisfied;

              

      

      

      
        	
                 
      

              	
                (v)

              	
                the
      receipt of Trustee or of such other party or officer making the sale shall
      be sufficient to discharge to the purchaser or purchasers for such
      purchaser(s)’ purchase money, and no such purchaser or purchasers, or such
      purchaser(s)’ assigns or personal representatives, shall thereafter be
      obligated to see to the application of such purchase money or be in any
      way answerable for any loss, misapplication or nonapplication of such
      purchase money;

              

      

      

      
        	
                 
      

              	
                (vi)

              	
                to
      the fullest extent permitted by law, Borrower shall be completely and
      irrevocably divested of all of Borrower’s right, title, interest, claim
      and demand whatsoever, either at law or in equity, in and to the property
      sold, and such sale shall be a perpetual bar to any claim to all or any
      part of the property sold, both at law and in equity, against Borrower and
      against any person claiming by, through or under Borrower;
    and

              

      

      

      
        	
                 
      

              	
                (vii)

              	
                to
      the extent and under such circumstances as are permitted by law, Lender
      may be a purchaser at any such
sale.

              

      

      

      44.           RELEASE.  Upon
payment of the Indebtedness, Lender shall release this
Instrument.  Borrower shall pay Lender’s reasonable costs incurred in
releasing this Instrument.

      

      45.           TRUSTEE.

      

      (a)           Trustee
may resign by giving of notice of such resignation in writing to
Lender.  If Trustee shall die, resign or become disqualified from
acting under this Instrument or shall fail or refuse to act in accordance with
this Instrument when requested by Lender or if for any reason and without cause
Lender shall prefer to appoint a substitute trustee to act instead of the
original Trustee named in this Instrument or any prior successor or substitute
trustee, Lender shall have full power to appoint a substitute trustee and, if
preferred, several substitute trustees in

      
        
           

        

        
          Page
45

          
            

          

        

        
           

        

      

      succession
who shall succeed to all the estate, rights, powers and duties of the original
Trustee named in this Instrument.  Such appointment may be executed by
an authorized officer, agent or attorney-in-fact of Lender (whether acting
pursuant to a power of attorney or otherwise), and such appointment shall be
conclusively presumed to be executed with authority and shall be valid and
sufficient without proof of any action by Lender.

      

      (b)           Any
successor Trustee appointed pursuant to this Section shall, without any further
act, deed or conveyance, become vested with all the estates, properties, rights,
powers and trusts of the predecessor Trustee with like effect as if originally
named as Trustee in this Instrument; but, nevertheless, upon the written request
of Lender or such successor Trustee, the Trustee ceasing to act shall execute
and deliver an instrument transferring to such successor Trustee, all the
estates, properties, rights, powers and trusts of the Trustee so ceasing to act,
and shall duly assign, transfer and deliver any of the property and monies held
by the Trustee ceasing to act to the successor Trustee.

      

      (c)           Trustee
may authorize one or more parties to act on Trustee’s behalf to perform the
ministerial functions required of Trustee under this Instrument, including the
transmittal and posting of any notices.

      

      46.           VENDOR’S LIEN; RENEWAL AND
EXTENSION.  The Note is primarily secured by the Vendor’s Lien
retained in the Deed, bearing the same date as this Instrument, conveying the
Mortgaged Property to Borrower, which Vendor’s Lien has been assigned to Lender,
this Instrument being additional security therefor.

      

      47.           NO FIDUCIARY
DUTY.  Lender owes no fiduciary or other special duty to
Borrower.

      

      48.           FIXTURE
FILING.  This Instrument is also a fixture filing under the
Uniform Commercial Code of Texas.

      

      49.           ADDITIONAL PROVISIONS REGARDING
ASSIGNMENT OF RENTS. Section 3 shall not be construed to require a pro tanto or other reduction
of the Indebtedness resulting from the assignment of Rents.  If the
provisions of Section 3 and the preceding sentence cause the assignment of Rents
in Section 3 to be deemed to be an assignment for additional security only,
Lender shall be entitled to all rights, benefits and remedies attendant to such
collateral assignment.  The assignment of Rents contained in Section 3
shall terminate upon the release of this Instrument.

      

      50.           LOAN
CHARGES.  Borrower and Lender intend at all times to comply
with the laws of the State of Texas governing the maximum rate or amount of
interest payable on or in connection with the Indebtedness (or applicable United
States federal law to the extent that it permits Lender to contract for, charge,
take, reserve or receive a greater amount of interest than under Texas
law).  If the applicable law is ever judicially interpreted so as to
render usurious any amount payable under the Note, this Instrument or any other
Loan Document, or contracted for, charged, taken, reserved or received with
respect to the Indebtedness, or if acceleration of the

      
        
           

        

        
          Page
46

          
            

          

        

        
           

        

      

      maturity
of the Indebtedness, or if any prepayment by Borrower results in Borrower having
paid any interest in excess of that permitted by any applicable law, then
Borrower and Lender expressly intend that all excess amounts collected by Lender
shall be applied to reduce the unpaid principal balance of the Indebtedness (or,
if the Indebtedness has been or would thereby be paid in full, shall be refunded
to Borrower), and the provisions of the Note, this Instrument and the other Loan
Documents immediately shall be deemed reformed and the amounts thereafter
collectible under the Loan Documents reduced, without the necessity of the
execution of any new documents, so as to comply with any applicable law, but so
as to permit the recovery of the fullest amount otherwise payable under the Loan
Documents.  The right to accelerate the maturity of the Indebtedness
does not include the right to accelerate any interest which has not otherwise
accrued on the date of such acceleration, and Lender does not intend to collect
any unearned interest in the event of acceleration.  All sums paid or
agreed to be paid to Lender for the use, forbearance or detention of the
Indebtedness shall, to the extent permitted by any applicable law, be amortized,
prorated, allocated and spread throughout the full term of the Indebtedness
until payment in full so that the rate or amount of interest on account of the
Indebtedness does not exceed the applicable usury
ceiling.  Notwithstanding any provision contained in the Note, this
Instrument or any other Loan Document that permits the compounding of interest,
including any provision by which any accrued interest is added to the principal
amount of the Indebtedness, the total amount of interest that Borrower is
obligated to pay and Lender is entitled to receive with respect to the
Indebtedness shall not exceed the amount calculated on a simple (i.e., noncompounded)
interest basis at the maximum rate on principal amounts actually advanced to or
for the account of Borrower, including all current and prior advances and any
advances made pursuant to the Instrument or any other Loan Document (such as for
the payment of Impositions and similar expenses or costs).

      

      51.           ENTIRE
AGREEMENT.  THIS INSTRUMENT, THE
NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.

      

      52.           WAIVER OF TRIAL BY
JURY.  BORROWER AND LENDER EACH (A) COVENANTS AND AGREES NOT TO
ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS INSTRUMENT
OR THE RELATIONSHIP BETWEEN THE PARTIES AS BORROWER AND LENDER THAT IS TRIABLE
OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO
SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE
FUTURE.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY
EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL
COUNSEL.

      

      

      
        
           

        

        
          Page
47

          
            

          

        

        
           

        

      

      ATTACHED
EXHIBITS.  The following Exhibits are attached to this
Instrument:

      

      |X|           Exhibit
A                                Description
of the Land (required).

      

      |X|           Exhibit
B                                Modifications
to Instrument

      

      |X|           Exhibit
C                                List
of Material Contracts

      

      |X|           Exhibit
D                                Additional
Modifications to Instrument

      

      IN WITNESS WHEREOF, Borrower
has signed and delivered this Instrument or has caused this Instrument to be
signed and delivered by its duly authorized representative.

      

      EMERITOL
SADDLERIDGE LODGE LLC, a Delaware limited liability company

       

      
        	
                 
      

              	
                By:

              	
                BATUS,
      LLC, a Delaware limited liability company, its Sole
  Member

              

      

       

      
        	
                 
      

              	
                By:

              	
                Summerville
      Senior Living, Inc., a Delaware corporation, its Administrative
      Member

              

      

       

      

      By: /s/ Eric
Mendelsohn

      Name:           Eric
Mendelsohn

      
        	
                 
      

              	
                Title:

              	
                Senior
      Vice President, Corporate
Development

              

      

       

       

      STATE OF
WASHINGTON                                                      )

       

       

      ) ss

       

       

      COUNTY OF
KING                                                      )

       

       

      This
instrument was acknowledged before me on November 10, 2009, by Eric Mendelsohn,
Senior Vice President Corporate Development of Summerville Senior Living, Inc.,
a Delaware corporation, the Administrative Member of BATUS, LLC, a Delaware
limited liability company, the Sole Member of EMERITOL SADDLERIDGE LODGE LLC, a
Delaware limited liability company, on behalf of said limited liability
company.

       

      /s/ Teresa
Franklin                                

      Notary
Public

      

      Printed
Name:                                 Teresa
Franklin

      

      My
Commission Expires:2/9/11

      
        
           

        

        
          Page
48

          
            

          

        

        
           

        

      

      EXHIBIT
A

      

      [DESCRIPTION OF THE
LAND]

      

      BEING LOT
3-A, BLOCK 8, CORRECTED PLAT OF POLO PARK, SECTION 12, an addition to the City
Of Midland, Midland County, Texas, according to the map or plat thereof,
recorded in Cabinet "F", Page 107, Plat Records, Midland County,
Texas.

      

      BEING THE
SAME LAND DESCRIBED AS FOLLOWS:

      

      BEING LOT
3-A, BLOCK 8, CORRECTED PLAT OF POLO PARK, SECTION 12, AN ADDITION TO THE CITY
OF MIDLAND, MIDLAND COUNTY, TEXAS, according to the map or plat thereof,
recorded in Cabinet F, Page 107, Plat Records, Midland County, Texas, as more
particularly described as follows:

      

      Field
notes of a 3.217 acre tract of land out of Section 3, Block "X", H.P. Hilliard
Survey, Midland County, Texas:

      

      BEGINNING
at a found Texas Department of Transportation concrete right-of-way monument in
the northern boundary of Loop No. 250, located in Section 3, Block "X", H.P.
Hilliard Survey, Midland County, Texas, and in the southwest corner of Lot 3A,
Block 8, Corrected Plat of Section 12, as recorded in Cabinet "F", Page 107,
Midland County Plat Records, for the southwest corner of this tract, from which
the southwest corner of said Section 3 bears S 74 degrees 53 minutes 08 seconds
W, 1338.61 feet and S 15 degrees 20 minutes 52 seconds E, 311.49
feet;

      

      THENCE N
15 degrees 06 minutes 52 seconds W, along the common boundary of Lot 3A and 3B,
Block 8 of said Corrected Plat of Polo Park, Section 12, 332.01 feet to a found
1/2-inch iron rod in the southern boundary of a 2.0 foot Common Area for the
northwest corner of this tract;

      

      THENCE N
74 degrees 53 minutes 08 seconds E, along the southern boundary of said 2.0 foot
Common Area, 424.48 feet to a found 1/2 inch iron rod in the western boundary of
Polo Parkway for the northeast corner of this tract;

      

      THENCE S
11 degrees 17 minutes 53 seconds E, along the western boundary of Polo Parkway,
324.22 feet to a found 1/2 inch iron rod in the western boundary of Polo Parkway
and the northern boundary of a Common Area, as recorded in Volume 1125, Page 88,
Midland County Deed Records, for the most easterly southeast corner of this
tract;

      

      THENCE S
74 degrees 53 minutes 08 seconds W, along the northern boundary of a Common
Area, 75.60 feet to a found 1/2 inch iron rod for a corner of this
tract;

      

      THENCE S
11 degrees 18 minutes 58 seconds E, along the western boundary of a Common Area,
30.35 feet to a found 1/2 inch iron rod in the northern boundary of Loop No. 250
for the most southern southeast corner of this tract;

      
        
           

        

        
          Page
A - 1

          
            

          

        

        
           

        

      

      

      THENCE S
78 degrees 42 minutes 07 seconds W, along the northern boundary of Loop No. 250,
325.92 feet to the Place of Beginning and containing 3.217 acres of
land.

      

      
        
           

        

        
          Page
A - 2

          
            

          

        

        
           

        

      

      EXHIBIT
B

      

      MODIFICATIONS
TO INSTRUMENT

      

      

      The
following modifications are made to the text of the Instrument that precedes
this Exhibit:

       

      I.           COMMITMENT
MODIFICATIONS.

       

      
        	
                1.

              	
                Section
      1(y)(xv) is hereby deleted in its entirety and restated as
      follows:

              

      

       

      
        	
                 
      

              	
                “(xv)

              	
                all
      names under or by which any of the above Mortgaged Property may be
      operated or known, and all trademarks, trade names, and goodwill relating
      to any of the Mortgaged Property; provided however, that the name “Emeritus” and/or
      associated trademark rights are not assigned to
  Lender.”

              

      

       

      
        	
                2.

              	
                The
      second sentence of Section 4(e) is hereby deleted in its entirety and
      restated as follows:

              

      

       

      “All
Leases for residential dwelling units shall be on forms approved by Lender,
shall not include options to purchase and shall be for initial terms of at least
six (6)
months one (1)
month and not more than two (2) years.

       

      3.           Section
14(d)(i) is amended to read as follows:

       

      
        	
                 
      

              	
                "(i)

              	
                a
      balance sheet for Borrower and a statement of income and expenses and a
      statement of changes in financial position of Borrower for Borrower's most
      recent fiscal year;".

              

      

       

      
        	
                4.

              	
                Section
      15(b) is amended by adding "and Section 15(d)" after "Section 15(c)" in
      the first line.

              

      

       

      5.           Section
18(j)(v) is hereby deleted in its entirety and the following is substituted
therefor:

       

      
        	
                 
      

              	
                "(v)

              	
                the
      actual or alleged violation of any Hazardous Materials Law with respect to
      the Mortgaged Property."

              

      

       

      
        	
                6.

              	
                Section
      19(g) of the Instrument is hereby modified by:  (i) changing the
      number “$10,000” in Section 19(g)(i) to “$50,000” and (ii) changing the
      numbers “$10,000” and “$50,000” in Section 19(g)(ii) to “$50,000” and
      “$100,000” respectively.

              

      

       

      
        
           

        

        
          Page
B - 1

          
            

          

        

        
           

        

      

      
        	
                7.

              	
                Section
      19(h) is amended by adding the following in the first line immediately
      after "option" and immediately before "to": "to require an ‘actual cash
      value’ settlement and/or".

              

      

       

      
        	
                8.

              	
                Section
      19 is hereby modified to add the following new subsection
    (l):

              

      

       

      
        	
                 
      

              	
                “(l)

              	
                Borrower
      or an operator of the Mortgaged Property must submit annually to Lender a
      claims history (“Claims
      History”) for the Mortgaged Property comprised of a detailed list
      of all claims made against Borrower’s or an operator of the Mortgaged
      Property’s general or professional liability insurance policies or the
      general or professional liability insurance policy of the management agent
      for the Mortgaged Property or any other entity if such management agent or
      other entity has procured general or professional liability insurance for
      the Mortgaged Property on behalf of Borrower, and a summary of any pending
      or settled actions, suits, claims or proceedings filed against the
      Borrower, an operator of the Mortgaged Property, the Mortgaged Property,
      or a Controlling Entity. The Claims History shall be submitted within
      thirty (30) days after the anniversary of the date of this Instrument for
      each year until the Indebtedness is paid in
  full.”

              

      

       

      
        	
                9.

              	
                Section
      19 is hereby modified to add the following new subsection
    (m):

              

      

       

      
        	
                 
      

              	
                “(m)

              	
                In
      addition to all other rights of Lender under this Section 19, Lender
      reserves the right to require Borrower to obtain and maintain conventional
      insurance (in lieu of its current captive insurer’s coverage) in the event
      the market improves for professional liability insurance or in the event
      Borrower’s current captive insurer (National Orion) suffers a material
      adverse change in its financial conditions or its credit rating, as
      determined by Lender in its sole
discretion.”

              

      

       

      
        	
                10.

              	
                Section
      22(l) is amended by deleting "is" and inserting "was" in its place and by
      adding "when made" after "respect" at the end of the
      subsection.

              

      

       

      11.           Section
31(a) is amended by changing "Notices" to "notices" in the first
line.

       

      
        	
                12.

              	
                Section
      40(a) is amended by (a) deleting the word "are" and inserting in its place
      the word "was" and (b) by adding after the word "respects" and before the
      semi-colon (;) the phrase "as of its
date".

              

      

       

      
        	
                13.

              	
                The
      following new Section is added to the
  Instrument:

              

      

       

      
        	
                 
      

              	
                “53.

              	
                MEDICARE AND MEDICAID;
      ALZHEIMERS OR DEMENTIA.

              

      

       

      
        	
                 
      

              	
                (a)

              	
                No
      more than 25% of the aggregate number of licensed beds at the Mortgaged
      Property and at the Related Properties (as defined in the Master Amendment
      to Cross-Collateralization Agreements and Master Amendment to Security
      Instruments of even date herewith,
between

              

      

       

      
        
           

        

        
          Page
B - 2

          
            

          

        

        
           

        

      

      Borrower
and Lender), may participate in Medicare or Medicaid programs.

       

      
        	
                 
      

              	
                (b)

              	
                If
      the covenant in section (a) above is violated, the Borrower must
      immediately fund a transition reserve with cash in an amount equal to the
      aggregate of six (6) months of principal and interest payments due under
      the terms of the Note for the next six (6) months.  If the Note
      provides for interest to accrue at an adjustable or variable interest rate
      (other than during the "Extension Period," as defined in the Note, if
      applicable), then the Lender shall estimate the amount of the interest due
      during such six-month period.  The Borrower must also enter into
      a transition reserve agreement acceptable to Lender in form and
      content.

              

      

       

      
        	
                 
      

              	
                (c)

              	
                Borrower
      shall furnish to Lender, within ten (10) days after receipt by Borrower,
      any operator of the Mortgaged Property or any management agent for the
      Mortgaged Property, any and all notices from any Governmental Authority
      that the Medicare or Medicaid certification of the Mortgaged Property is
      being downgraded to a substandard category, revoked, or suspended, or that
      action is pending or being considered to downgrade any such
      certification.

              

      

       

      
        	
                 
      

              	
                (d)

              	
                Borrower
      shall furnish to Lender, within ten (10) days after receipt by Borrower,
      any operator of the Mortgaged Property or any management agent for the
      Mortgaged Property, a copy of any survey, report or statement of
      deficiencies by any Governmental Authority administering Medicare or
      Medicaid funds or programs.  Within the time period specified by
      any such Governmental Authority for furnishing a plan of correction, the
      Borrower shall furnish to Lender a copy of the plan of
      correction.  Borrower shall correct or shall cause to be
      corrected any deficiency the curing of which is a condition of continued
      eligibility for Medicare or Medicaid payment or reimbursement, including
      full participation in Medicare and Medicaid for existing residents and for
      new residents to be admitted with Medicare or Medicaid coverage by the
      date required for cure by the Governmental
  Authority.

              

      

       

      
        	
                 
      

              	
                (e)

              	
                Other
      than in the normal course of business, Borrower shall not, and shall not
      permit any operator of the Mortgaged Property or any management agent for
      the Mortgaged Property to, change the terms of any of the Medicaid,
      Medicare or other third party payor programs or its normal billing payment
      and reimbursement policies and procedures with respect thereto (including,
      without limitation, the amount and timing of finance charges, fees and
      write-offs).

              

      

       

      
        
           

        

        
          Page
B - 3

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (f)

              	
                Borrower
      shall provide Lender within ten (10) days of the required filing of cost
      reports of the Mortgaged Property with the Medicaid agency or the date of
      actual filing of such cost report of the Mortgaged Property with such
      agency, whichever is earlier, with a complete and accurate copy of the
      annual Medicaid cost report of the Mortgaged Property, which will be
      prepared by an independent certified public accountant or by an
      experienced cost report preparer acceptable to Lender, and shall promptly
      furnish Lender any amendments filed with respect to such reports and all
      responses, audit reports or inquiries with respect to such
      reports.

              

      

       

      
        	
                 
      

              	
                (g)

              	
                Borrower
      will permit and will cause any management agent for the Mortgaged Property
      or any operator of the Mortgaged Property to permit representatives
      appointed by Lender, including independent accountants, agents, attorneys,
      appraisers and any other persons, to visit and inspect during its normal
      business hours and at any other reasonable times any of the Mortgaged
      Property and to make photographs thereof, and to write down and record any
      information such representatives obtain, and shall permit Lender or its
      representatives to investigate and verify the accuracy of the information
      furnished to Lender under or in connection with this Security Instrument
      or any of the other Loan Documents and to discuss all such matters with
      its officers, employees and
representatives.

              

      

       

      
        	
                 
      

              	
                (h)

              	
                Borrower
      will furnish and will cause any management agent for the Mortgaged
      Property or any operator of the Mortgaged Property to furnish to Lender at
      Borrower’s expense all evidence, which Lender may from time to time
      reasonably request as to the accuracy and validity of or compliance with
      all representations and warranties made by Borrower in the Loan Documents
      and satisfaction of all conditions contained
  therein.

              

      

       

      
        	
                 
      

              	
                (i)

              	
                Any
      inspection or audit of the Mortgaged Property or the books and records of
      Borrower, any management agent for the Mortgaged Property or any operator
      of the Mortgaged Property, or the procuring of documents and financial and
      other information, by or on behalf of Lender, shall be for Lender’s
      protection only, and shall not constitute any assumption of responsibility
      or liability by Lender to Borrower, any management agent for the Mortgaged
      Property or any operator of the Mortgaged Property or anyone else with
      regard to the condition, construction, maintenance or operation of the
      Mortgaged Property, nor Lender’s approval of any certification given to
      Lender nor relieve Borrower of any of Borrower’s obligations or a
      management agent or an operator of the Mortgaged Property of any of its
      obligations.

              

      

       

      
        	
                 
      

              	
                (j)

              	
                Within
      120 days after the end of each fiscal quarter of Borrower, Borrower shall
      deliver or cause management agent for the
  Mortgaged

              

      

       

      
        
           

        

        
          Page
B - 4

          
            

          

        

        
           

        

      

      Property
or an operator of the Mortgaged Property to deliver to Lender information in
sufficient detail, as determined by Lender, to show by patient-mix (i.e., private and Medicare
and Medicaid (if applicable)) the average monthly census of the Mortgaged
Property, occupancy rates and the amount of income attributed to reimbursements
or payments from a Medicare or Medicaid program.

       

      
        	
                 
      

              	
                (k)

              	
                After
      an Event of Default, Lender is authorized to give notice to all third
      party payors at Lender’s option, instructing them to pay all third party
      payments, including Medicare and Medicaid, which would be otherwise paid
      to Borrower or to an operator of the Mortgaged Property to Lender, to the
      extent permitted by law.

              

      

       

      
        	
                 
      

              	
                (l)

              	
                Borrower
      represents and warrants as follows:

              

      

       

      
        	
                 
      

              	
                (1)

              	
                With
      respect to Medicare, Medicaid or other third party payor
      programs:

              

      

       

      
        	
                 
      

              	
                (A)

              	
                The
      Mortgaged Property is in compliance in all material respects with the
      requirements for participation in the Medicare and Medicaid programs,
      including without limitation, the Medicare and Medicaid Patient Protection
      Act of 1987.

              

      

       

      
        	
                 
      

              	
                (B)

              	
                The
      Mortgaged Property is in conformance in all material respects with all
      insurance, reimbursement and cost reporting requirements, and has a
      current provider agreement under Title XVIII and/or XIX of the Social
      Security Act or any other applicable laws for reimbursement necessary for
      its Intended Use.

              

      

       

      
        	
                 
      

              	
                (C)

              	
                There
      is no action pending or threatened to terminate the participation of the
      Mortgaged Property in the Medicare or Medicaid program, or any other third
      party payor program nor is there any decision not to renew any provider
      agreement related to the Mortgaged Property, nor is there any action
      pending or threatened to impose material intermediate or alternative
      sanctions with respect to the Mortgaged
  Property.

              

      

       

      
        	
                 
      

              	
                (D)

              	
                All
      Medicare, Medicaid, and private insurance cost reports and financial
      reports submitted by Borrower, any operator of the Mortgaged Property or
      any management agent for the Mortgaged Property are and will be materially
      accurate

              

      

       

      
        
           

        

        
          Page
B - 5

          
            

          

        

        
           

        

      

      and
complete and have not been and will not be misleading in any material
respects.

       

      
        	
                 
      

              	
                (E)

              	
                No
      cost reports for the Mortgaged Property remain “open” or unsettled, except
      as otherwise disclosed to Lender.

              

      

       

      
        	
                 
      

              	
                (F)

              	
                The
      Mortgaged Property has not received a “Level A” (or equivalent) violation,
      and no statement of charges or deficiencies has been made or penalty
      enforcement action has been undertaken against the Mortgaged Property, any
      management agent or operator thereof or the Borrower (or any officer,
      director or stockholder of any of the foregoing) during the last three (3)
      calendar years, and there have been no violations over the past three (3)
      calendar years which have threatened any certification of the Mortgaged
      Property, any management agent or operator thereof or the Borrower for
      participation in Medicare, Medicaid or other third party payor
      programs.

              

      

       

      
        	
                 
      

              	
                (2)

              	
                There
      are no resident care agreements with residents of the Mortgaged Property
      or with any other persons or organizations which deviate in any material
      adverse respect from the standard forms customarily used at a comparable
      first-class facility or which conflict with any statutory or regulatory
      requirements.  All resident records at the Mortgaged Property,
      including any resident trust fund accounts, are true and correct in all
      material respects.

              

      

       

      
        	
                 
      

              	
                (3)

              	
                Borrower
      and the Mortgaged Property are not subject to any proceeding, suit or
      investigation by any Governmental Authority and none of the Borrower, any
      management agent or any operator of the Mortgaged Property has received
      any notice from any Governmental Authority which may result in the
      imposition of a fine or interim or final sanction or would result in a
      lower reimbursement rate for services rendered to eligible residents which
      has not been provided for on the financial statements provided to
      Lender.

              

      

       

      
        	
                 
      

              	
                (4)

              	
                Neither
      the execution and delivery of the Note, this Instrument or any other Loan
      Document, Borrower’s performance under the Loan Documents, the recordation
      of this Instrument, nor the exercise of any remedies by Lender, will
      adversely affect (A) Borrower, an operator of the Mortgaged Property or
      the Mortgaged Property’s right to receive Medicare and/or Medicaid
      payments and reimbursements with respect to the Mortgaged Property,
      nor

              

      

       

      
        
           

        

        
          Page
B - 6

          
            

          

        

        
           

        

      

      materially
reduce the Medicare and/or Medicaid payments and reimbursements which Borrower
or an operator of the Mortgaged Property is receiving as of the date hereof, or
(B) any of the Licenses.

       

      
        	
                 
      

              	
                (5)

              	
                If
      any existing management agreement or operating lease is terminated or
      Lender acquires the Mortgaged Property through foreclosure or otherwise,
      none of the Borrower, Lender, any subsequent management agent, any
      subsequent operator of the Mortgaged Property or any subsequent purchaser
      (through foreclosure or otherwise) must, under applicable law in existence
      as of the date hereof, obtain a certificate of need from any Governmental
      Authority (other than giving of any notice required under the applicable
      state law or regulation) prior to receiving certification to receive
      Medicare or Medicaid payments (or any successor programs) for residents
      having coverage thereunder, so long as neither the type of service nor any
      unit compliment is changed.

              

      

       

      
        	
                 
      

              	
                (m)

              	
                In
      addition to the Events of Default listed in Sections 22 and 49 it also
      shall constitute an Event of Default if Borrower, an operator of the
      Mortgaged Property or the Mortgaged Property should be assessed fines or
      penalties in excess of $50,000.00 in the aggregate with respect to the
      Mortgaged Property in any year by any state or any Medicare or Medicaid,
      health, reimbursement or licensing agency having jurisdiction over
      Borrower, an operator of the Mortgaged Property or the Mortgaged
      Property.”

              

      

       

      
        	
                 
      

              	
                (n)

              	
                No
      more than 35% of the aggregate number of licensed beds at the Mortgaged
      Property and at the Related Properties (as defined in the Master Amendment
      to Cross-Collateralization Agreements and Master Amendment to Security
      Instruments of even date herewith, between Borrower and Lender), including
      any beds added by the construction of any additional units, may be
      dedicated to the care of residents with Alzheimer’s disease or other
      dementia.”

              

      

       

      II.           SENIOR
HOUSING MODIFICATIONS.

       

      
        	
                1.

              	
                The
      following new Section is added to the
  Instrument:

              

      

       

      “54.           SENIOR HOUSING.

       

      
        
           

        

        
          Page
B - 7

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (a)

              	
                Additions to
      Definitions.  The following terms, when used in this
      Instrument, shall have the following meanings or shall add to the
      definitions in the main body of this Instrument, as
      applicable:

              

      

       

      
        	
                 
      

              	
                (1)

              	
                “Activities
      of Daily Living” shall mean personal care services that provide the frail
      elderly with assistance in eating, dressing, bathing, incontinence care
      and assistance in moving from one place to another (such as from a bed to
      a wheelchair).

              

      

       

      
        	
                 
      

              	
                (2)

              	
                “Assisted
      Living Residences” shall mean residences that are designed to accommodate
      and provide 24-hour protective oversight and assistance for individuals
      with functional limitations, including meals in a central location and
      assistance with Activities of Daily
Living.

              

      

       

      
        	
                 
      

              	
                (3)

              	
                “Continuing
      Care Retirement Community” (“CCRC”) shall mean a property designed to
      provide a continuum of care within a single community. The living
      accommodations and care provided within a CCRC are a combination of the
      accommodations and services provided by Seniors Apartments, Independent
      Living Units, Assisted Living Residences and Skilled Nursing
      Beds.

              

      

       

      
        	
                 
      

              	
                (4)

              	
                “Contract”
      shall mean any contract for the provision of goods or services in
      connection with the operation or management of the Mortgaged Property
      (other than residential care agreements or residential lease
      contracts).

              

      

       

      
        	
                 
      

              	
                (5)

              	
                “Governmental
      Authority” shall also include all applicable licensing or accreditation
      bodies or agencies (whether federal, state, county, district, municipal,
      city or otherwise, whether now or hereafter in existence) that have or
      acquire jurisdiction over the Mortgaged Property or the use, operation or
      improvement of the Mortgaged
Property.

              

      

       

      
        	
                 
      

              	
                (6)

              	
                “Hazardous
      Materials” shall also include any medical products or devices, including,
      those materials defined as “medical waste” or “biological waste” under
      relevant statutes, ordinances or regulations pertaining to Hazardous
      Materials Law.

              

      

       

      
        	
                 
      

              	
                (7)

              	
                “HIPAA”
      shall mean the Health Insurance Portability and Accountability Act of
      1996, as amended.

              

      

       

      
        	
                 
      

              	
                (8)

              	
                “Independent
      Living Units” shall mean residential units that are accompanied by
      optional services designed to aid the
residents’

              

      

       

      
        
           

        

        
          Page
B - 8

          
            

          

        

        
           

        

      

      independence,
including, but not limited to, building security, optional meals, housekeeping,
laundry, and at least some incidental services and activities not related to
personal care, such as valet shopping, financial planning, unscheduled
transportation, beautician services, recreational and social activities and
24-hour staff presence.

       

      
        	
                 
      

              	
                (9)

              	
                “Lease”
      shall also include any occupancy agreements pertaining to occupants of the
      Mortgaged Property, including both residential and commercial agreements
      and patient admission or resident care
  agreements.

              

      

       

      
        	
                (10)  

              	
                “License”
      shall mean any license, permit, certificate, approval, certificate of need
      or authorization, governmental or otherwise, necessary to use, occupy or
      operate the Mortgaged Property.

              

      

       

      
        	
                 
      

              	
                (11)

              	
                “Material
      Contract” shall mean Contracts:

              

      

       

      
        	
                (A)  

              	
                for
      preparing or serving food (but do not include food supply
      Contracts);

              

      

       

      
        	
                (B)  

              	
                for
      medical services or healthcare provider
  agreements;

              

      

       

      
        	
                (C)  

              	
                the
      average annual consideration of which, directly or indirectly, is at least
      $20,000; or

              

      

       

      
        	
                (D)  

              	
                determined
      by Lender to be material to the operation of the Mortgaged
      Property.

              

      

       

      
        	
                 
      

              	
                (12)

              	
                “Mortgaged
      Property” shall also include all of the
  following:

              

      

       

      
        	
                 
      

              	
                (A)

              	
                All
      payments received from any sources, including entrance fees, application
      fees, processing fees, community fees and any other amounts or fees
      deposited by any resident or tenant, payment of second party charges added
      to base rental income, base and additional meal sales, payments received
      from commercial operations located on the Mortgaged Property or provided
      as a service to the occupants of the Mortgaged Property, rental from guest
      suites, seasonal lease charges, rental payments under furniture leases,
      income from laundry service, and income and fees from any and all other
      services provided to residents;

              

      

       

      
        
           

        

        
          Page
B - 9

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (B)

              	
                All
      rights to payments from Medicare, Medicaid or TRICARE programs or similar
      federal, state or local programs or agencies and rights to payment from
      private insurers, arising from the operation of the Mortgaged
      Property;

              

      

       

      
        	
                 
      

              	
                (C)

              	
                All
      Licenses, approvals, permits, accreditations, determinations of need,
      certificates of need and other
certificates;

              

      

       

      
        	
                 
      

              	
                (D)

              	
                All
      Contracts, operating contracts, franchises, license agreements, healthcare
      services contracts, food service contracts and other contracts for
      services related to the operation of the Mortgaged Property;
      and

              

      

       

      
        	
                 
      

              	
                (E)

              	
                All
      utility deposits.

              

      

       

      
        	
                 
      

              	
                (13)

              	
                “Privacy
      Laws” shall mean federal, state and local laws and regulations applicable
      to resident and tenant privacy.  Privacy Laws include, but are
      not limited to, HIPAA.

              

      

       

      
        	
                 
      

              	
                (14)

              	
                “Seniors
      Apartments” shall mean age-restricted apartments for senior residents who
      are able to function independently.  These residences are
      typically restricted to residents 55 and older (or 62 and
      older).  Seniors Apartments do not provide healthcare services,
      medication assistance, meal services or other third-party contract
      services.

              

      

       

      
        	
                 
      

              	
                (15)

              	
                “Skilled
      Nursing Beds” shall mean a portion of a property that provides licensed
      skilled nursing care and related services for patients who require
      medical, nursing or rehabilitative
services.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                Intended
      Use.  The residential units in the Mortgaged Property
      will be allocated as follows (the “Intended
  Use”):

              

      

       

      
        	
                 
      

              	
                1.

              	
                Independent
      Living Units 

              	
                0%

              

      

       

      
        	
                 
      

              	
                2.

              	
                Assisted
      Living Residences 

              	
                100%

              

      

       

      
        	
                 
      

              	
                3.

              	
                Skilled
      Nursing Beds 

              	
                0%

              

      

       

      
        	
                 
      

              	
                4.

              	
                Continuing
      Care Retirement Community with the following percentages of
      use:

              

      

       

      a.           Seniors
Apartments 0%

       

      
        
           

        

        
          Page
B - 10

          
            

          

        

        
           

        

      

      b.           Independent
Living Units 0%

       

      c.           Assisted
Living Residences 0%

       

      d.           Skilled
Nursing Beds 0%

       

      
        	
                 
      

              	
                (c)

              	
                Additional
      Covenants.  In addition to those covenants contained in
      this Instrument, Borrower covenants to Lender as
  follows:

              

      

       

      
        	
                 
      

              	
                (1)

              	
                Borrower
      shall, or shall cause any operator of the Mortgaged Property to, operate
      the Mortgaged Property for its Intended Use and shall, or shall cause any
      operator of the Mortgaged Property to, provide, to Lender’s reasonable
      satisfaction, all of the facilities, services, staff, equipment and
      supplies required or normally associated with a typical high quality
      property devoted to the Intended
Use.

              

      

       

      
        	
                 
      

              	
                (2)

              	
                Borrower
      shall, or shall cause any operator of the Mortgaged Property to, operate
      the Mortgaged Property in a manner such that all applicable Licenses will
      remain in full force and effect.  Borrower shall not, and shall
      not allow any operator or management agent to, (A) transfer any License to
      any location other than the Mortgaged Property, (B) pledge any License as
      collateral security for any other loan or indebtedness; or (C) terminate
      or modify any License if doing so would have a material effect on the
      Mortgaged Property.

              

      

       

      
        	
                 
      

              	
                (3)

              	
                Borrower
      shall furnish to Lender, within ten (10) days after receipt by Borrower,
      any operator of the Mortgaged Property, or any management agent for the
      Mortgaged Property, any and all notices from any Governmental Authority
      that (A) any License is being downgraded to a substandard category,
      revoked, or suspended, or that action is pending or being considered to
      downgrade any such License, (B) any violation, fine, finding,
      investigation or corrective action concerning any License is pending or
      being considered or (C) any health or safety code violation or other
      deficiency at the Mortgaged Property has been
  identified.

              

      

       

      
        	
                 
      

              	
                (4)

              	
                Borrower
      shall furnish to Lender, within ten (10) days after receipt by Borrower,
      any operator of the Mortgaged Property, or any management agent for the
      Mortgaged Property, a copy of any survey, report or statement of
      deficiencies by any Governmental Authority.  Within the time
      period specified by the Governmental Authority for furnishing a plan of
      correction, the Borrower shall

              

      

       

      
        
           

        

        
          Page
B - 11

          
            

          

        

        
           

        

      

      furnish
or shall cause to be furnished to Lender a copy of the plan of
correction.  Borrower shall correct or shall cause to be corrected any
deficiency the curing of which is a condition of continued licensure,
certification or operation by the date required for cure by the Governmental
Authority.

       

      (5)           Upon
Lender’s request and subject to Privacy Laws, Borrower shall furnish to Lender
true and correct copies of all Contracts and all occupancy agreements, admission
agreements and resident care agreements.

       

      
        	
                 
      

              	
                (6)

              	
                Without
      the prior written consent of Lender, which may be granted or withheld in
      Lender’s discretion, Borrower shall not, and shall not permit any operator
      of the Mortgaged Property or any management agent for the Mortgaged
      Property to, provide or contract for skilled nursing care for any of the
      residents other than that level of care which both (A) is consistent with
      the Intended Use and (B) is permissible for Borrower to provide under
      state or local statutes, regulations, ordinances, orders or
      standards.

              

      

       

      
        	
                 
      

              	
                (7)

              	
                Borrower
      shall not, and shall not permit any operator of the Mortgaged Property or
      any management agent for the Mortgaged Property to, enter into any
      Material Contract, unless that Material Contract provides that it is
      terminable upon not more than 30 days notice without the necessity of
      establishing cause and without payment of a penalty or termination fee by
      Borrower or its successors.

              

      

       

      
        	
                 
      

              	
                (8)

              	
                Borrower
      shall not, and shall not allow any operator of the Mortgaged Property or
      any management agent for the Mortgaged Property to, pledge any receivables
      as collateral security for any other loan or
  indebtedness.

              

      

       

      
        	
                 
      

              	
                (9)

              	
                Borrower
      shall fully perform all of its obligations under each Contract, and
      Borrower shall not amend, modify, assign or otherwise encumber its
      interest in any Material Contract without the prior written approval of
      Lender.  If Borrower enters into any Material Contract in the
      future, it shall, simultaneously with entering into the Material Contract,
      (A) assign its rights under and interest in the Material Contract to
      Lender as additional security for the Indebtedness and (B) obtain and
      provide to Lender a consent to that assignment by the other party(ies) to
      the Material Contract.  If in the future any operator of the
      Mortgaged Property or any management agent for the Mortgaged Property
      enters into a

              

      

       

      
        
           

        

        
          Page
B - 12

          
            

          

        

        
           

        

      

      Material
Contract, Borrower shall cause the operator or the management agent to (i)
assign its rights under and interest in the Material Contract to Lender as
additional security for the Indebtedness and (ii) obtain and provide to Lender a
consent to that assignment by the other party(ies) to the Material
Contract.  In either case, both the assignment and the consent shall
be in a form acceptable to Lender in its discretion.

       

      
        	
                (10)  

              	
                Borrower
      shall provide Lender with a copy of any License issued in the future by a
      Governmental Authority within thirty (30) days after its issuance or
      renewal.  To the extent that any such License is assignable,
      Borrower shall assign it to Lender as additional security for the
      Indebtedness, using a form of assignment acceptable to Lender in its
      discretion.  If any License is issued to an operator of the
      Mortgaged Property or management agent for the Mortgaged Property, to the
      extent such License is assignable, Borrower shall cause such operator or
      management agent to assign the License to Lender as additional security
      for the Indebtedness, using a form of assignment acceptable to Lender in
      its discretion.

              

      

       

      
        	
                (11)  

              	
                Subject
      to Privacy Laws, Borrower will furnish and will cause any management agent
      for the Mortgaged Property or any operator of the Mortgaged Property to
      furnish to Lender at Borrower’s expense all evidence, which Lender may
      from time to time reasonably request as to the accuracy and validity of or
      compliance with all representations and warranties made by Borrower in the
      Loan Documents and satisfaction of all conditions contained
      therein.

              

      

       

      
        	
                 
      

              	
                (d)

              	
                Additional Representations and
      Warranties.  In addition to those representations and
      warranties contained in this Instrument, Borrower represents and warrants
      to Lender as follows:

              

      

       

      
        	
                 
      

              	
                (1)

              	
                Borrower
      has obtained or has caused any operator of the Mortgaged Property to
      obtain all Licenses necessary to use, occupy or operate the Mortgaged
      Property for its Intended Use (such Licenses being in its own name or in
      the name of the operator of the Mortgaged Property or the management agent
      for the Mortgaged Property, if any, and in any event in the names of the
      persons and entities required by the applicable Governmental Authorities),
      and all such Licenses are in full force and effect.  Borrower
      has provided Lender with complete and accurate copies of all
      Licenses.  The Intended Use of the Mortgaged Property is in
      conformity with all certificates of occupancy and Licenses and
      any

              

      

       

      
        
           

        

        
          Page
B - 13

          
            

          

        

        
           

        

      

      other
restrictions or covenants affecting the Mortgaged Property.  The
Mortgaged Property contains all equipment, staff and supplies necessary to use
and operate the Mortgaged Property for its Intended Use.

       

      
        	
                 
      

              	
                (2)

              	
                Borrower
      and the Mortgaged Property (and its operation) are in compliance with the
      applicable provisions of all laws, regulations, ordinances, orders or
      standards of any Governmental Authority having jurisdiction over the
      operation of the Mortgaged Property, including:  (A) health care
      and fire safety codes; (B) laws regulating the preparation and serving of
      food; (C) laws regulating the handling and disposal of medical or
      biological waste; (D) the applicable provisions of all laws, rules,
      regulations and published interpretations of them to which the Borrower or
      the Mortgaged Property is subject by virtue of its Intended Use; and (E)
      all criteria established to classify the Mortgaged Property as housing for
      older persons under the Fair Housing Amendments Act of
    1988.

              

      

       

      
        	
                 
      

              	
                (3)

              	
                Borrower
      and the Mortgaged Property are not subject to any proceeding, suit or
      investigation by any Governmental Authority and neither Borrower, any
      operator of the Mortgaged Property nor any management agent for the
      Mortgaged Property has received any notice from any Governmental Authority
      which may result in the imposition of a fine or interim or final sanction
      or would (i) have a material adverse effect on Borrower or the operation
      of the Mortgaged Property, (ii) result in the appointment of a receiver,
      (iii) affect Borrower’s or any operator of the Mortgaged Property’s
      ability to accept and retain residents, or (iv) result in the revocation,
      transfer, surrender, suspension or other impairment of any
      License.

              

      

       

      
        	
                 
      

              	
                (4)

              	
                Neither
      the execution and delivery of the Note, this Instrument or any other Loan
      Document, Borrower’s performance under the Loan Documents, the recordation
      of this Instrument, nor the exercise of any remedies by Lender, will
      adversely affect the Licenses.

              

      

       

      
        	
                 
      

              	
                (5)

              	
                Borrower
      is not a participant in any federal program under which any Governmental
      Authority may have the right to recover funds by reason of the advance of
      federal funds.

              

      

       

      
        	
                 
      

              	
                (6)

              	
                Borrower
      has received no notice of, and is not aware of, any violation of
      applicable antitrust laws.

              

      

       

      
        
           

        

        
          Page
B - 14

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (7)

              	
                If
      any existing management agreement or operating lease is terminated or
      Lender acquires the Mortgaged Property through foreclosure or otherwise,
      none of the Borrower, Lender, any subsequent operator or management agent,
      or any subsequent purchaser (through foreclosure or otherwise) must, under
      applicable law in existence as of the date hereof, obtain a certificate of
      need from any Governmental Authority (other than giving of any notice
      required under the applicable state law or regulation) prior to applying
      for any License, so long as neither the type of service nor any unit
      compliment is changed.

              

      

       

      
        	
                 
      

              	
                (8)

              	
                Exhibit C
      attached to this Instrument lists all Material Contracts now in
      effect.

              

      

       

      
        	
                 
      

              	
                (9)

              	
                With
      regard to each Material Contract listed in Exhibit
      C:  (i) the Material Contract is assignable without the
      consent of the other party thereto or Borrower and any operator of the
      Mortgaged Property has obtained express written consent to the assignment
      from the other party thereto; (ii) no previous assignment of Borrower’s or
      any operator of the Mortgaged Property’s interest in the Material Contract
      has been made; (iii) the Material Contract is in full force and effect in
      accordance with its respective terms; and (iv) there is no default under
      the Material Contract.

              

      

       

      
        	
                 
      

              	
                (10)

              	
                Each
      Material Contract listed in Exhibit C
      provides that it is terminable upon not more than 30 days notice without
      the necessity of establishing cause and without payment of a penalty or
      termination fee by Borrower or its
successors.

              

      

       

      
        	
                 
      

              	
                (11)

              	
                Except
      for termination statements and continuation statements, during the 45-day
      period prior to the date of this Instrument, there have been no UCC
      financing statements filed with respect to any of the UCC Collateral
      listing as debtor the Borrower, any operator of the Mortgaged Property,
      any management agent for the Mortgaged Property or the Mortgaged
      Property’s common name.

              

      

       

      
        	
                 
      

              	
                (e)

              	
                Additional Events of
      Default.  In addition to the Events of Default listed in
      Section 22 of this Instrument, each of the following shall also constitute
      an Event of Default:

              

      

       

      
        	
                 
      

              	
                (1)

              	
                Borrower’s
      or any operator of the Mortgaged Property’s failure within the time
      deadlines set by any Governmental Authority to correct any deficiency that
      may cause any action by such agency with respect to the Mortgaged Property
      to have a material adverse

              

      

       

      
        
           

        

        
          Page
B - 15

          
            

          

        

        
           

        

      

      affect on
the income or operation of the Mortgaged Property or on Borrower’s or any
operator of the Mortgaged Property’s interest in the Mortgaged Property,
including a termination, revocation or suspension of any applicable License, or
a ban on new resident admissions.

       

      
        	
                 
      

              	
                (2)

              	
                A
      default under any of the Material Contracts by Borrower, by any operator
      of the Mortgaged Property, or by any management agent for the Mortgaged
      Property, which continues beyond the expiration of any applicable cure
      period.

              

      

       

      
        	
                 
      

              	
                (3)

              	
                Any
      representation or warranty made by Borrower in this Instrument or any
      other Loan Document was false or misleading in any material respect when
      made.

              

      

       

      
        	
                 
      

              	
                (4)

              	
                The
      Mortgaged Property is no longer classified as housing for older persons
      pursuant to the Fair Housing Amendments Act of
  1988.

              

      

       

      
        	
                 
      

              	
                (f)

              	
                Environmental
      Hazards.  In addition to the activities and conditions
      listed in Section 18(b), “Prohibited Activities or Conditions” shall not
      include the presence at the Mortgaged Property of medical products or
      devices or medical waste, so long as all of the foregoing are used,
      stored, handled, transported and disposed of in compliance with Hazardous
      Materials Laws.

              

      

       

      
        	
                 
      

              	
                (g)

              	
                Financial
      Reporting.  Section 14(b) is deleted and replaced with
      the following:

              

      

       

      Within
120 days after the end of each fiscal quarter of Borrower, Borrower shall
furnish to Lender a statement of income and expenses for the operation of the
Mortgaged Property for that fiscal quarter, a statement of changes in financial
position of Borrower relating to the Mortgaged Property for that fiscal quarter
and, when requested by Lender, a balance sheet showing all assets and
liabilities of Borrower relating to the Mortgaged Property as of the end of that
fiscal quarter.  If Borrower’s fiscal year is other than the calendar
year, Borrower must also submit to Lender a year-end statement of income and
expenses within 120 days after the end of the calendar year.

       

      Section
14(d)(ii) is deleted in its entirety and Section 14(d)(iii) is renumbered as
14(d)(ii).

       

      
        
           

        

        
          Page
B - 16

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (h)

              	
                Section
      21(c)(i) of this Instrument is deleted and replaced with the
      following:

              

      

       

      
        	
                 
      

              	
                (i)

              	
                a
      Transfer to which Lender has consented in Lender’s sole discretion
      (without limiting Lender’s sole discretion, Lender will not consent to a
      Transfer while an Event of Default exists) so long as Lender has received
      (1) a $5,000 review fee as a condition of Lender’s considering any
      proposed Transfer, (2) a transfer fee in an amount equal to 1% of the
      unpaid principal balance of the Indebtedness immediately before the
      Transfer as a condition of Lender’s consent to the proposed Transfer, and
      (3) reimbursement for all of Lender’s out-of-pocket costs (including
      reasonable Attorney’s Fees and Costs) incurred in reviewing the proposed
      Transfer.

              

      

       

      2.           The
following new Section is added to this Instrument:

       

      “55           SENIOR HOUSING
OPERATOR.

       

      
        	
                 
      

              	
                (a)

              	
                Additions to
      Definitions.  The following terms, when used in this
      Instrument, shall have the following meanings or shall add to the
      definitions in the main body of this Instrument, as
      applicable:

              

      

       

      
        	
                (1)  

              	
                The
      term “Lease” shall also include any master lease agreement or operating
      lease under which control of the use or operation of part or all of the
      Mortgaged Property has been granted to another
  entity.

              

      

       

      
        	
                 
      

              	
                (2)

              	
                “Operating
      Lease” or “operating lease” shall mean that Lease, dated of even date
      herewith, entered into by and between Borrower, as landlord, and Operator,
      as tenant, leasing the Mortgaged
Property.

              

      

       

      
        	
                 
      

              	
                (3)

              	
                “Operator”
      or “operator” shall mean ESC IV, L.P., a Washington limited partnership,
      the tenant of the Improvements under the Operating Lease, its successors
      and assigns.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                Additional
      Covenants.  In addition to those covenants contained in
      this Instrument, Borrower covenants to Lender as
  follows:

              

      

       

      
        	
                 
      

              	
                (1)

              	
                Borrower
      shall furnish to Lender (i) within five (5) days after the receipt by
      Borrower from Operator, copies of any and all notices of Borrower’s
      default or failure to pay or perform an obligation under the Operating
      Lease, and/or (ii) immediately upon the issuance by Borrower to Operator
      of any and all notices of Operator’s default or failure to pay or perform
      an obligation under the Operating
Lease.

              

      

       

      
        
           

        

        
          Page
B - 17

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (c)

              	
                Additional Representations and
      Warranties.  In addition to those representations and
      warranties contained in this Instrument, Borrower represents and warrants
      to Lender as follows:

              

      

       

      
        	
                 
      

              	
                (1)

              	
                Any
      management or Operating Lease between Borrower and Operator or between
      Operator and any management agent are in full force and effect and there
      is no default, breach or violation existing under any management agreement
      or Operating Lease by any party thereto and no event (other than payments
      due but not yet delinquent) which, with the passage of time or with notice
      and the expiration of any grace or cure period, would constitute a
      default, breach or violation by any party under any management agreement
      or Operating Lease.

              

      

       

      
        	
                 
      

              	
                (d)

              	
                Additional Events of
      Default.  In addition to the Events of Default listed in
      Section 22 of this Instrument, each of the following shall also constitute
      an Event of Default:

              

      

       

      
        	
                 
      

              	
                (1)

              	
                With
      regard to the Operating Lease, (i) if the Borrower or Operator terminates
      the Operating Lease prior to the stated term of the Operating Lease or
      during any renewal period of the Operating Lease, or (ii) if Operator
      fails to exercise any or all renewal options contained in the Operating
      Lease or (iii) if Borrower and Operator amend, modify or revise in any way
      the Operating Lease without the prior written consent of Lender, which
      consent shall be given in Lender’s sole and exclusive
      discretion.  Notwithstanding the foregoing, it shall not be an
      Event of Default upon the occurrence of either (i) or (ii), if Borrower
      has entered into and executed a new operating lease for the Mortgaged
      Property, containing the same terms and conditions of the Operating Lease
      or including such other terms and conditions as Lender may have approved
      in writing, with a new operator for the Mortgaged Property which Lender
      has approved in writing prior to the execution of the new operating lease,
      which approval shall be given in Lender’s sole and exclusive
      discretion.

              

      

       

      
        	
                (2)  

              	
                Any
      change of the Operator of the Mortgaged Property or of any management
      agent of the Mortgaged Property as of the date of this Instrument without
      Lender’s prior written consent, which consent shall be given in Lender’s
      sole and exclusive discretion; provided, however, that Sections
      21(d)(i)-(iii) and 21(e)(ii)-(viii) and the definition of “Controlling
      Entity” shall apply to the Operator as modified solely for purposes of
      this subsection as follows:  the word “Borrower” used in these
      subsections shall be deleted and replaced with
  “Operator”.

              

      

       

      
        
           

        

        
          Page
B - 18

          
            

          

        

        
           

        

      

      
        	
                (3)  

              	
                Any
      failure by Operator to perform any of its obligations as and when required
      under any Loan Document which continues beyond the applicable cure period,
      if any, specified in that Loan
Document.”

              

      

       

      

       

      
        
           

        

        
          Page
B - 19

          
            

          

        

        
           

        

      

      EXHIBIT
C

       

      (List
of Material Contracts)

       

      

      NOT
APPLICABLE

      

      

      

      
        
           

        

        
          Page
C - 1

          
            

          

        

        
           

        

      

      EXHIBIT
D

      

      ADDITIONAL
MODIFICATIONS TO INSTRUMENT

      

      The following modifications are made to
the text of the Instrument that precedes this Exhibit:

      

      
        	
                1.

              	
                Section
      1(y) is modified by adding after the word “means” at the beginning
      thereof, the words “the Land, the Improvements, and”, and by deleting
      subsections 1(y)(i) and 1(y)(ii).

              

      

       

      
        	
                2.  

              	
                Section
      4(f) is amended in its entirety to read as
  follows:

              

      

       

      “Borrower
shall not lease any portion of the Mortgaged Property for non-residential use
except with the prior written consent of Lender and Lender’s prior written
approval of the Lease agreement with the exception of any Operating Lease which
has previously been approved by Lender; provided, however, that Lender’s prior
written consent and prior written approval shall not be required with respect to
commercial leases for hair salons, physical therapy spaces, or other leases
covering floor space not exceeding 1,000 square feet, provided that the lessee
and its business and non-residential use of a portion of the Mortgaged Property
are consistent with similarly situated senior housing facilities (an “Immaterial
Commercial Lease”).  Borrower shall not modify the terms of, or extend
or terminate, any Lease for non residential use (including any lease in
existence on the date of this Instrument) without the prior written consent of
Lender; provided, however, no such consent shall be required with respect to any
modification, extension or termination of any Immaterial Commercial
Lease.  Borrower shall, without request by Lender, deliver an executed
copy of each non residential Lease to Lender promptly after such Lease is
signed.  All non residential Leases, including renewals or extension
of existing Leases, but specifically excluding all Immaterial Commercial Leases,
shall specifically provide that (1) such Leases are subordinate to the lien of
this Instrument (unless waived in writing by Lender); (2) the tenant shall
attorn to Lender and any purchaser at a foreclosure sale, such attornment to be
self executing and effective upon acquisition of title to the Mortgaged Property
by any purchaser at a foreclosure sale or by Lender in any manner; (3) the
tenant agrees to execute such further evidences of attornment as Lender or any
purchaser at a foreclosure sale may from time to time request; (4) the Lease
shall not be terminated by foreclosure or any other transfer of the Mortgaged
Property; (5) after a foreclosure sale of the Mortgaged Property, Lender or any
other purchasers at such foreclosure sale may, at Lender’s or such purchaser’s
option, accept or terminate such Lease; and (6) the tenant shall, upon receipt
after the occurrence and during the continuance of an Event of Default of a
written request from Lender, pay all Rents payable under the Lease to
Lender.”

      

      
        
           

        

        
          Page
D - 2

          
            

          

        

        
           

        

      

      
        	
                3.  

              	
                Section
      15(b) is amended by adding the phrase “or shall cause Operator to” after
      the words “Borrower shall” in the first line of such
    Section.

              

      

       

      
        	
                4.  

              	
                Section
      17(e) is amended in its entirety to read as follows:  “Borrower
      shall provide for professional management of the Mortgaged Property by a
      residential rental property manager or operator satisfactory to Lender at
      all times under a contract or operating lease approved by the Lender in
      writing.”

              

      

       

      
        	
                5.  

              	
                Section
      17(g) is amended by adding the phrase “or Operator’s” after the word
      “agent’s” in the fourth line of such
Section.

              

      

       

      
        	
                6.  

              	
                Section
      21(c) of the Instrument is amended to include the new subsections (vii)
      and (viii) as follows:

              

      

       

      
        	
                 
      

              	
                “(vii)

              	
                the
      Transfer of any interest in Emeritus Corporation, a Washington corporation
      and a guarantor (“Emeritus”), by such entities or individuals that hold as
      of the date of this Instrument less than a 20% interest in
      Emeritus”;

              

      

      

      
        	
                 
      

              	
                (viii)

              	
                any
      Transfer of Daniel R. Baty’s interest in Batus, LLC, a Delaware limited
      liability company (“Batus”), listed in (A) through (C) below (a “Preapproved Transfer”),
      under the terms and conditions listed as items (1) through (6)
      below:

              

      

      

      
        	
                 
      

              	
                (A)

              	
                a
      sale or transfer to one or more of the transferor’s immediate family
      members; or

              

      

      
        	
                 
      

              	
                (B)

              	
                a
      sale or transfer to any trust having as its sole beneficiaries the
      transferor and/or one or more of the transferor’s immediate family
      members; or

              

      

      
        	
                 
      

              	
                (C)

              	
                a
      sale or transfer from a trust to any one or more of its beneficiaries who
      are immediate family members of the
transferor.

              

      

      
        	
                 
      

              	
                (1)

              	
                Borrower
      shall provide Lender with written Notice of the proposed Preapproved
      Transfer, which Notice must be accompanied by a non-refundable review fee
      in the amount of $3,000.

              

      

       

      
        	
                 
      

              	
                (2)

              	
                For
      the purposes of these Preapproved Transfers, a transferor’s immediate
      family members will be deemed to include a spouse, parent, child or
      grandchild (whether adopted or not) of
  transferor.

              

      

       

      
        	
                 
      

              	
                (3)

              	
                In
      the event the transferee is under the age of twenty-one (21), the Transfer
      may only be to a trust for the benefit of such person described in
      subparagraph (B) above until such transferee shall reach the age of
      twenty-one (21).

              

      

       

      
        
           

        

        
          Page
D - 3

          
            

          

        

        
           

        

      

      
        	
                 
      

              	
                (4)

              	
                At
      the time of the proposed Preapproved Transfer, no Event of Default shall
      have occurred and be continuing.

              

      

       

      
        	
                 
      

              	
                (5)

              	
                Lender
      shall be entitled to collect all costs incurred in confirming that such
      Transfer is a Preapproved Transfer, including the cost of all title
      searches, title insurance and recording costs, and all Attorneys’ Fees and
      Costs.

              

      

       

      
        	
                 
      

              	
                (6)

              	
                Lender
      shall not be entitled to collect a transfer fee as a result of these
      Preapproved Transfers.

              

      

       

      
        	
                7.  

              	
                Section
      21(d) of the Instrument is amended to include the new subsection (vi) as
      follows:

              

      

       

      
        	
                 
      

              	
                “(vi)

              	
                A
      Transfer of Batus’ interest in the Borrower or any permitted successor
      thereto, acceptable to Lender, to Summerville Senior Living, Inc.,
      a  Delaware corporation (“Summerville”), or Emeritus or a legal
      entity in which Summerville or Emeritus owns a Controlling Interest, or a
      Transfer of Daniel R. Baty’s (or any successor thereto) interest in Batus
      to Summerville or Emeritus or a legal entity in which Summerville or
      Emeritus owns a Controlling Interest, provided that there is no Event of
      Default which shall have occurred and be
  continuing”.

              

      

      

      

      
        	
                 

              

      

      

      
        
           

        

        
          Page
D - 4

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