Document:

Unassociated Document

    
       

      Exhibit
No. 10.3

       

      LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND
RENTS,

    

    
      SECURITY
AGREEMENT AND FIXTURE FILING

      
        
          	 
      

        

      

      
         

      

      NANTUCKET ACQUISITION LLC, a
Delaware limited liability company, as Borrower (Borrower)

       

      to

       

      CORNERSTONE OPERATING PARTNERSHIP,
L.P.,

      a
Delaware limited partnership, as Lender, and its successors and assigns
(Lender)

       

      
        
          

        

      

       

      THE COLLATERAL IS OR INCLUDES
FIXTURES

       

      This
document serves as a fixture filing under the Uniform Commercial
Code

       

      
        
          
            
              
                
                  
                    	
                            Borrower’s Federal Identification No.:
      27-1275344

                          
	
                            Date:

                          	
                            As
      of December 14, 2009

                          
	
                            Location:

                          	
                            Nantucket,
      Massachusetts

                          
	 
      	 
      
	 
      	
                            County:        
      Nantucket County

                          

                  

                

              

              
                
                  	 
      

                

              

            

          

        

      

      

        
          
             

          

          
            
            

            
              

            

          

          
             

          

        

      

       

      LEASEHOLD
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,

      SECURITY
AGREEMENT AND FIXTURE FILING

      

      THIS
LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND
RENTS, SECURITY AGREEMENT AND FIXTURE
FILING (hereinafter, this “Mortgage” or “Security Instrument”) is made as of
this 14th day of
December, 2009, by NANTUCKET
ACQUISITION LLC, a Delaware limited liability company, having its
principal place of business c/o Cornerstone Ventures, 1920 Main Street, Suite
400, Irvine, California 92614, as Borrower (“Borrower”), to CORNERSTONE OPERATING
PARTNERSHIP,  L.P., a Delaware limited partnership, its
successors and assigns, having an address at 1920 Main Street, Suite 400,
Irvine, California 92614, as Lender (“Lender”).

       

      WITNESSETH:

       

      WHEREAS, this Mortgage is given to secure a loan (the “Loan”) in
the principal sum of EIGHT MILLION 00/100 DOLLARS ($8,000,000.00) (the
“Loan Amount”) evidenced by (i) that certain Promissory
Note dated the date hereof made by Borrower to Lender, and (ii) that certain
Promissory Note (with Shared Appreciation) dated the date hereof made by
Borrower to Lender (such notes, together with all extensions, renewals,
replacements, restatements, consolidations or modifications thereof being
hereinafter collectively referred to as the “Note”), which Note provides, among other things, for
final payment of principal and interest
thereunder, if not sooner paid or payable as provided therein, to be due
on January 1, 2015;

       

      WHEREAS,
Borrower desires to secure the payment of the indebtedness evidenced by the Note
and the performance of all of its obligations under the Note and the other Loan
Documents; and

       

      WHEREAS,
this Mortgage is that certain “Security Instrument” as defined in the Note, and
payment, fulfillment, and performance by Borrower of its obligations thereunder
and under the other Loan Documents are, subject to the limitations set forth herein, secured hereby, and
each and every term and provision of the Note, including the rights, remedies,
obligations, covenants, conditions, agreements, indemnities, representations and
warranties of the parties therein, are hereby incorporated by reference herein
as though set forth in full and shall be considered a part of this
Mortgage.

       

      NOW
THEREFORE, in consideration of the making of the Loan by Lender and the
covenants, agreements, representations and warranties set forth in this
Mortgage:

       

      FOR
CONSIDERATION PAID, to secure the payment of an indebtedness in the principal
sum of EIGHT MILLION AND NO/100 DOLLARS ($8,000,000.00), lawful, money of the
United States of America, to be paid with interest according to the Note,
Borrower has mortgaged, given, granted, bargained, sold, aliened, enfeoffed,
conveyed, confirmed, pledged, assigned and hypothecated and by these presents
does mortgage, give, grant, bargain, sell, alien, enfeoff, convey, confirm,
pledge, assign and hypothecate unto Lender, all of Borrower’s estate, right,
title and interest in, to and under any and all of the following described
property, whether now owned or hereafter acquired (collectively, the “Property”):

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

       

      (A)       All
of Borrower’s leasehold interest in that certain real property situated in the
Town of Nantucket, County of Nantucket, State of Massachusetts, more
particularly described on Exhibit A attached
hereto and incorporated herein by this reference (the “Real Estate”) created pursuant
to that certain Amended and Restated Ground Lease dated November 25, 2009,
by and between the Town of Nantucket, Massachusetts, Sherburne Commons, Inc. and
Borrower, as assigned to Borrower, and all amendments, modifications or
supplements thereto approved by Lender (the “Ground Lease”), together with
all of the easements, rights, privileges, franchises, tenements, hereditaments
and appurtenances (including without limitation, any air rights and development
rights) now or hereafter thereunto belonging or in any way appertaining and all
of the estate, right, title, interest, claim and demand whatsoever of Borrower
therein or thereto, either at law or in equity, in possession or in expectancy,
now owned or hereafter acquired;

       

      (B)        All
structures, buildings and improvements of every kind and description now or at
any time hereafter located or placed on the Real Estate (the “Improvements”);

       

      (C)        All
easements, rights-of-way, strips and gores of land, vaults, streets, ways,
alleys, passages, sewer rights, and other emblements now or hereafter located on
the Real Estate or under or above the same or any part or parcel thereof, and
all estates, rights, titles, interests, tenements, hereditaments and
appurtenances, reversions and remainders whatsoever, in any way belonging,
relating or appertaining to the Property or any part thereof, or which hereafter
shall in any way belong, relate or be appurtenant thereto, whether now owned or
hereafter acquired by Borrower (collectively, “Appurtenant Rights”; and
together with the Real Estate and Improvements, referred to collectively herein
as the “Real
Property”);

       

      (D)        All
furniture, furnishings, fixtures, goods, equipment, inventory or personal
property owned by Borrower and now or hereafter located on, attached to or used
in or about the Improvements, including, but not limited to, all machines,
engines, boilers, dynamos, elevators, stokers, tanks, cabinets, awnings,
screens, shades, blinds, carpets, draperies, lawn mowers, and all appliances,
plumbing, heating, air conditioning, lighting, ventilating, refrigerating,
disposal and incinerating equipment, and all fixtures and appurtenances thereto,
and such other goods and chattels and personal property owned by Borrower as are
now or hereafter used or furnished in operating the Improvements, or the
activities conducted therein, and all building materials and equipment hereafter
situated on or about the Real Estate or Improvements, and all warranties and
guaranties relating thereto, and all additions thereto and substitutions and
replacements therefor (exclusive of any of the foregoing owned or leased by
tenants of space in the Improvements);

       

      (E)        All
water, water courses, ditches, wells, reservoirs and drains and all water,
ditch, well, reservoir and drainage rights and powers which are appurtenant to,
located on, under or above or used in connection with the Real Estate or the
Improvements, or any part thereof, together (i) with all utilities, utility
lines, utility commitments, utility capacity, capital recovery charges, impact
fees and other fees paid in connection with same, (ii) reimbursements or
other rights pertaining to utility or utility services provided to the Real
Estate and/or Improvements and (iii) the present or future use or
availability of waste water capacity, or other utility facilities to the extent
same pertain to or benefit the Real Estate and/or Improvements, including,
without limitation, all reservations of or commitments or letters covering any
such use in the future, whether now existing or hereafter created or
acquired;

      
        
           

        

        
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      (F)        All
minerals, crops, timber, trees, shrubs, flowers and landscaping features now or
hereafter located on, under or above the Real Estate;

       

      (G)        All
cash funds, deposit accounts, reserve accounts, collection accounts and/or
sub-accounts thereof, and other rights and evidence of rights to cash, now or
hereafter created or held by Lender pursuant to this Security Instrument or any
other of the Loan Documents (as hereinafter defined), including, without
limitation, the Reserves (as such term is defined in Section 1.8
hereof);

       

      (H)        All
leases, subleases, licenses, tenancies, concessions, occupancy and residency
agreements of the Real Estate or the Improvements now or hereafter entered into
(including, without limitation, that certain Lease Agreement by and between
Borrower, as landlord, and Sherburne Residences, LLC, a Massachusetts limited
liability company, as tenant (“Tenant”), dated as of December
1, 2009; hereinafter referred to as the “TRS Lease”) and all rents,
royalties, issues, profits, bonus money, revenue, income, accounts receivable
and other benefits (collectively, the “Rents” or “Rents and Profits”) of the
Real Estate, the Improvements, or the fixtures or equipment, now or hereafter
arising from the use or enjoyment of all or any portion thereof or from any
lease, license, tenancy, concession, occupancy agreement, residency agreement or
other agreements (including, without limitation, oil, gas and mineral leases,
cable television, laundry, satellite and/or cell tower agreements, whether in
the nature of a lease, license, contract, or otherwise), pertaining thereto or
arising from any of the Contracts (as hereinafter defined) or any of the General
Intangibles (as hereinafter defined) and all cash or securities (the “Security Deposits”) that
secure performance by the tenants, lessees or licensees, as applicable, of their
obligations under any such leases, licenses, concessions or occupancy
agreements, or which may be available to Borrower or its designee to effect
repairs or maintenance, whether said cash or securities are to be held until the
expiration of the terms of said leases, licenses, concessions or occupancy
agreements or applied to one or more of the installments of rent coming due
prior to the expiration of said terms, subject to, however, the provisions
contained in Section
1.11 of this Security Instrument;

       

      (I)        
All contracts and agreements now or hereafter entered into covering any part of
the Real Estate or the Improvements (collectively, the “Contracts”) and all revenue,
income and other benefits thereof, including, without limitation, management
agreements, service contracts, maintenance contracts, equipment leases, personal
property leases and any contracts or documents relating to construction on any
part of the Real Estate or the Improvements (including plans, specifications,
studies, drawings, surveys, tests, operating and other reports, bonds and
governmental approvals) or to the management or operation of any part of the
Real Estate or the Improvements;

       

      (J)        
All present and future monetary deposits given to any public or private utility
with respect to utility services furnished to any part of the Real Estate or the
Improvements;

      
        
           

        

        
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      (K)        All
present and future funds, accounts, instruments, (including without limitation,
promissory notes), investment property, letter of credit rights, letters of
credit, money, supporting obligations, accounts receivable, documents, causes of
action, claims, general intangibles (including, without limitation, payment
intangibles and software, trademarks, trade names, servicemarks and symbols now
or hereafter used in connection with any part of the Real Estate or the
Improvements, all names by which the Real Estate or the Improvements may be
operated or known, all rights to carry on business under such names, and all
rights, interest and privileges which Borrower has or may have as developer or
declarant under any covenants, restrictions or declarations now or hereafter
relating to the Real Estate or the Improvements) and all notes or chattel paper
(whether tangible or electronic) now or hereafter arising from or by virtue of
any transactions related to the Real Estate or the Improvements (collectively,
the “General
Intangibles”);

       

      (L)        All
water taps, sewer taps, certificates of occupancy, permits, special permits,
uses, licenses, franchises, certificates, consents, approvals and other rights
and privileges now or hereafter obtained in connection with the Real Estate or
the Improvements and all present and future warranties and guaranties relating
to the Improvements or to any equipment, fixtures, furniture, furnishings,
personal property or components of any of the foregoing now or hereafter located
or installed on the Real Estate or the Improvements;

       

      (M)      All
building materials, supplies and equipment now or hereafter placed on the Real
Estate or in the Improvements and all architectural renderings, models,
drawings, plans, specifications, studies and data now or hereafter relating to
the Real Estate or the Improvements;

       

      (N)       
All right, title and interest of Borrower in any insurance policies or binders
now or hereafter relating to the Property including any unearned premiums
thereon;

       

      (O)       All
proceeds, products, substitutions and accessions (including claims and demands
therefor) of the conversion, voluntary or involuntary, of any of the foregoing
into cash or liquidated claims, including, without limitation, proceeds of
insurance and condemnation awards;

       

      (P)        all
refunds, rebates or credits in connection with a reduction in ad valorem taxes,
assessments or similar impositions, including, without limitation, rebates,
refunds or credits as a result of tax certiorari or any other application,
proceeding or appeal (administrative, judicial or otherwise) for reduction in
taxes, assessments or similar impositions; and

       

      (Q)        All
other or greater rights and interests of every nature in the Real Estate or the
Improvements and in the possession or use thereof and income therefrom, whether
now owned or hereafter acquired by Borrower.

       

      FOR THE
PURPOSE OF SECURING:

       

      (1)         The
debt evidenced by the Note, together with interest (including, without
limitation, interest at the Default Interest Rate (as defined in the Note) and
any Additional Interest (as defined in the Note)) and any fees as therein
provided;

      
        
           

        

        
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      (2)         The
full and prompt payment and performance of all of the provisions, agreements,
covenants and obligations herein contained and contained in any other
agreements, documents or instruments now or hereafter evidencing, securing or
otherwise relating to the indebtedness evidenced by the Note (the Note, this
Security Instrument, the Assignment (as hereinafter defined) and such other
agreements, documents and instruments, together with any and all renewals,
modifications, amendments, restatements, consolidations, substitutions,
replacements, and extensions and modifications thereof, are hereinafter
collectively referred to as the “Loan Documents”) and the
payment of all other sums therein covenanted to be paid, including, without
limitation, any prepayment fees or yield maintenance premium;

       

      (3)        Any
and all future or additional advances (whether or not obligatory) made by Lender
to protect or preserve the Property, or the lien or security interest created
hereby on the Property, or for taxes, assessments or insurance premiums as
hereinafter provided or for performance of any of Borrower’s obligations
hereunder or under the other Loan Documents or for any other purpose provided
herein or in the other Loan Documents (whether or not the original Borrower
remains the owner of the Property at the time of such advances), together with
interest thereon at the Default Interest Rate (as defined in the Note), such
advances to be secured to the same extent as if such future advances were made
on the date hereof and although there may be no indebtedness outstanding at the
time any advance is made; and

       

      (4)        Any
and all other indebtedness now owing or which may hereafter be owing by Borrower
to Lender under the Note and related Loan Documents and related to the Property,
however and whenever incurred or evidenced, whether express or implied, direct
or indirect, absolute or contingent, or due or to become due, and all renewals,
modifications, amendments, restatements, consolidations, substitutions,
replacements and extensions thereof.

       

      (All of
the sums referred to in Paragraphs (1) through (4) above are herein sometimes
referred to as the “secured
indebtedness” or the “indebtedness secured hereby”
or the “Debt”).

       

      TO HAVE
AND TO HOLD the above granted and described Property for the benefit of Lender,
and its successors and assigns, forever;

       

      WITH THE
POWER OF SALE, to secure payment to Lender of the Debt at the time and in the
manner provided for in the Note, and this Mortgage;

       

      PROVIDED,
HOWEVER, these presents are upon the express condition that, if Borrower shall
well and truly pay to Lender the Debt at the time and in the manner provided in
the Note, and this Mortgage, shall well and truly perform the Other Obligations
as set forth in this Mortgage and shall well and truly abide by and comply with
each and every covenant and condition set forth herein and in the Note and the
other Loan Documents, these presents and the estate hereby granted shall cease,
terminate and be void and Lender shall mark the Note “paid in full” and will, at
Borrower’s sole cost and expense, release the lien of this Mortgage; provided,
however, that Borrower’s obligation to indemnify and hold harmless Lender
pursuant to the provisions hereof shall survive any such payment or
release.

      
        
           

        

        
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      ARTICLE
I

      COVENANTS
OF BORROWER

       

      For the
purpose of further securing the indebtedness secured hereby and for the
protection of the security of this Security Instrument, for so long as the
indebtedness secured hereby or any part thereof remains unpaid, Borrower
represents, covenants and agrees as follows:

       

      Section
1.1          Warranties of
Borrower.  Borrower, for itself and its successors and assigns,
does hereby represent, warrant and covenant to and with Lender, its successors
and assigns, that:

       

      (a)         Organization and
Existence.  Borrower is duly organized and validly existing as
a limited liability company in good standing under the laws of Delaware and in
all other jurisdictions in which Borrower is transacting business.

       

      (b)        Authorization.  Borrower
has the power and authority to execute, deliver and perform the obligations
imposed on it under the Loan Documents and to consummate the transactions
contemplated by the Loan Documents and has taken all necessary actions in
furtherance thereof including, without limitation, that those partners,
shareholders, managers, or members of Borrower whose approval or consent is
required by the terms of Borrower’s organizational documents have duly approved
or consented to the transactions contemplated by the Loan Documents and have
authorized execution and delivery thereof by the respective
signatories.  To the best of Borrower’s knowledge, no other consent by
any local, state or federal agency is required in connection with the execution
and delivery of the Loan Documents.

       

      (c)      
  Valid
Execution and Delivery.  All of the Loan Documents requiring
execution by Borrower have been duly and validly executed and delivered by
Borrower.

       

      (d)        Enforceability. All
of the Loan Documents constitute valid, legal and binding obligations of
Borrower and are fully enforceable against Borrower in accordance with their
terms, subject only to bankruptcy laws and general principles of
equity.

       

      (e)     
   No
Defenses.  The Note, this Security Instrument and the other
Loan Documents are not subject to any right of rescission, set-off, counterclaim
or defense, nor would the operation of any of the terms of the Note, this
Security Instrument or any of the other Loan Documents, or the exercise of any
right thereunder, render this Security Instrument unenforceable, in whole or in
part, or subject to any right of rescission, set-off, counterclaim or defense,
including the defense of usury.

       

      (f)        
Defense of
Usury.  Borrower knows of no facts that would support a claim
of usury to defeat or avoid its obligation to repay the principal of, interest
on, and other sums or amounts due and payable under, the Loan
Documents.

       

      (g)        No Conflict/Violation of
Law.  The execution, delivery and performance of the Loan
Documents by the Borrower will not cause or constitute a default under or
conflict with the organizational documents of Borrower, any indemnitor or any
general partner, manager, or managing member of Borrower or any
indemnitor.  The execution, delivery and performance of the
obligations imposed on Borrower under the Loan Documents will not cause Borrower
to be in default, including after due notice or lapse of time or both, under the
provisions of any agreement, judgment or order to which Borrower is a party or
by which Borrower is bound.

      
        
           

        

        
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      (h)        Compliance with Applicable
Laws and Regulations.  All of the Improvements and the use of
the Property by the Borrower comply in all material respects with, and shall
remain in compliance with, all applicable statutes, rules, regulations and
private covenants now or hereafter relating to the ownership, construction, use
or operation of the Property, including all applicable statutes, rules and
regulations pertaining to requirements for equal opportunity,
anti-discrimination, fair housing, environmental protection, zoning and land
use.  The Improvements comply with, and shall remain in compliance
with, applicable health, fire and building codes.  There is no
evidence of any illegal activities relating to controlled substances on the
Property.  All certifications, permits, licenses and approvals,
including, without limitation, certificates of completion and occupancy permits
required for the legal use, occupancy and operation of the Property for the use
currently being made thereof have been obtained and are in full force and
effect.  All of the Improvements comply with all material requirements
of any applicable zoning and subdivision laws and ordinances.  The
Borrower has all requisite licenses, permits, franchises, qualifications,
certificates of occupancy or other governmental authorizations to own, lease and
operate the Property (provided that to the extent the Property is operated by
Tenant, Tenant has all such requisite licenses, permits, franchises,
qualifications and other governmental authorizations) and carry on its
business.

       

      (i)         Consents
Obtained.  All consents, approvals, authorizations, orders or
filings with any court or governmental or administrative agency or body, if any,
required for the execution, delivery and performance of the Loan Documents by
Borrower have been obtained or made.

       

      (j)          No
Litigation.  There are no pending actions, suits or
proceedings, arbitrations or governmental investigations against the Property,
Borrower or any guarantor of Borrower an adverse outcome of which would
materially affect (i) the Borrower’s performance under the Note, this Security
Instrument or the other Loan Documents, (ii) the Property, (iii) the Loan, or
(iv) the ability of the Property to continue to generate income, or continue in
operation, in a manner consistent with current operations.

       

      (k)         Title.  Borrower
is well seized of an indefeasible leasehold estate in the Real Estate, subject
only to those matters expressly listed as exceptions to title or subordinate
matters in the title insurance policy accepted by Lender in connection with this
Security Instrument (all such matters, excluding therefrom all preprinted and/or
standard exceptions are referred to herein, collectively, as the “Permitted
Exceptions”).  The Ground Lease is now a valid, subsisting
ground lease and is presently in full force and effect.  All of the
terms, covenants, agreements, and conditions of the Ground Lease have been fully
performed and no default presently exists under the Ground
Lease.  Subject to the term of the Ground Lease Borrower has full
right, power and lawful authority to mortgage the Property to
Lender.  This Mortgage has been executed and delivered to Lender in
full compliance with the Ground Lease and is and will continue to be a valid,
enforceable lien on Borrower’s interests under the Ground Lease.  The
leasehold interest in the Property has been peaceful and undisturbed and title
thereto has not been disputed or questioned to the best of Borrower’s
knowledge.  Further, Borrower and has full power and lawful authority
to grant, bargain, sell, convey, assign, transfer and mortgage its interest in
the Property in the manner and form hereby done or intended.  Borrower
will preserve its interest in and title to the Property and will forever warrant
and defend the same to Lender against any and all claims whatsoever and will
forever warrant and defend the validity and priority of the lien and security
interest created herein against the claims of all persons and parties
whomsoever, subject to the Permitted Exceptions.  The foregoing
warranty of title shall survive the foreclosure of this Security Instrument and
shall inure to the benefit of and be enforceable by Lender in the event Lender
acquires title to the Property pursuant to any foreclosure.

      
        
           

        

        
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      (l)         Permitted
Exceptions.  The Permitted Exceptions do not and will not
materially and adversely affect (1) the ability of the Borrower to pay in full
the principal and interest on the Note in a timely manner or (2) the use of the
Property for the use currently being made thereof, the operation of the Property
as currently being operated or the value of the Property.

       

      (m)       First
Lien.  Upon the execution by the Borrower and the recording of
this Mortgage, and upon the execution and filing of UCC-1 financing statements
or amendments thereto, the Lender will have a valid first lien on the Property
and a valid security interest in all personal property encumbered hereby,
subject to no liens, charges or encumbrances other than the Permitted
Exceptions.

       

      (n)        ERISA.  The
Borrower has made and shall continue to make all required contributions to all
employee benefit plans, if any, established or maintained by it, if any, and the
Borrower has no knowledge of any material liability which has been incurred by
the Borrower which remains unsatisfied for any taxes or penalties with respect
to any such employee benefit plan or any such multi-employer plan, and each such
plan has been administered in compliance with its terms and the applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”) and any other
federal or state law.

       

      (o)        Contingent
Liabilities.  The Borrower has no known material contingent
liabilities.

       

      (p)        No Other
Obligations.  The Borrower has no material financial obligation
under any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Borrower is a party or by which the Borrower or the
Property is otherwise bound, other than (i) obligations incurred in the ordinary
course of the operation of the Property, (ii) obligations under this Security
Instrument, the Note and the other Loan Documents, and (iii) obligations under
the Junior Loan (as defined in the Promissory Note (with Shared
Appreciation)).

      
        
           

        

        
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      (q)        Fraudulent
Conveyance.  The Borrower (1) has not entered into the Loan or
any Loan Document with the actual intent to hinder, delay, or defraud any
creditor and (2) received reasonably equivalent value in exchange for its
obligations under the Loan Documents.  Giving effect to the Loan
contemplated by the Loan Documents, the fair saleable value of the Borrower’s
assets exceed and will, immediately following the execution and delivery of the
Loan Documents, exceed the Borrower’s total liabilities, including, without
limitation, subordinated, unliquidated, disputed or contingent liabilities (if
permitted hereunder).  The fair saleable value of the Borrower’s
assets is and will, immediately following the execution and delivery of the Loan
Documents, be greater than the Borrower’s probable liabilities, including the
maximum amount of its contingent liabilities or its debts as such debts become
absolute and matured (if permitted hereunder).  The Borrower assets do
not and, immediately following the execution and delivery of the Loan Documents
will not, constitute unreasonably small capital to carry out its business as
conducted or as proposed to be conducted.  The Borrower does not
intend to, and does not believe that it will, incur debts and liabilities
(including, without limitation, contingent liabilities and other commitments)
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts to be payable on or in respect of obligations of the
Borrower).

       

      (r)         Investment Company
Act.  The Borrower is not (1) an “investment company” or a
company “controlled” by an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended; (2) a “holding company” or a
“subsidiary company” of a “holding company” or an “affiliate” of either a
“holding company” or a “subsidiary company” within the meaning of the Public
Utility Holding Company Act of 1935, as amended; or (3) subject to any other
federal or state law or regulation which purports to restrict or regulate its
ability to borrow money.

       

      (s)        Access/Utilities.  The
Property has adequate rights of access to public ways and is served by adequate
water, sewer, electric, gas, telephone, cable (where appropriate), sanitary
sewer and storm drain facilities.  All public utilities necessary to
the continued use and enjoyment of the Property as presently used and enjoyed
are located in the public right-of-way abutting the Property, and all such
utilities are connected so as to serve the Property without passing over other
property.  All roads, and access to such roads, necessary for the full
utilization of the Property for its current purpose have been completed and
dedicated to public use and accepted by all governmental authorities or are the
subject of access easements for the benefit of the Property without any further
condition or cost to Borrower or any tenants or other legal occupants of the
Property (collectively, the “Tenants”).

       

      (t)        
Taxes
Paid.  Borrower has filed all federal, state, county and
municipal tax returns required to have been filed by Borrower generally or by
Borrower with respect to the Property, and has paid all taxes which have become
due pursuant to such returns or to any notice of assessment relating to the
Property, and Borrower has no knowledge of any basis for additional assessment
with respect to such taxes.  Borrower has paid or caused to be paid
all sales and payroll taxes applicable to Borrower or the
Property.  Further, the Property is free from delinquent water
charges, sewer rents, taxes and assessments.

       

      (u)        Single Tax
Lot.  The Real Estate consists of a single tax lot and no
portion of said tax lot covers property other than the Real Estate or a portion
of the Real Estate and no portion of the Real Estate lies in any other tax
lot.

       

      (v)        Special
Assessments.  Except as disclosed in the title insurance
policy, there are no pending or, to the knowledge of the Borrower, proposed
special or other assessments for public improvements or otherwise affecting the
Property, nor, to the knowledge of the Borrower, are there any contemplated
improvements to the Property that may result in such special or other
assessments.

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

       

      (w)        Flood
Zone.  The Property is not located in a flood hazard area as
defined by the Federal Insurance Administration.

       

      (x)         Seismic
Exposure.  The Real Estate are not located in Zone 3 or Zone 4
of the “Seismic Zone Map of the U.S.”.

       

      (y)        Misstatements of
Fact.  No statement made in application for the Loan or the
Loan Documents contains any untrue statement of a material fact or omits to
state any material fact necessary to make statements contained herein or therein
not misleading.  There is no fact presently known to the Borrower
which has not been disclosed which adversely affects, nor as far as the Borrower
can foresee, might adversely affect the business, operations or condition
(financial or otherwise) of the representing party.  Further, and in
clarification of the foregoing, all reports, certificates, affidavits,
statements and other data furnished by or on behalf of Borrower to Lender, or
their respective agents, in connection with the Loan are true and correct in all
material respects and do not include or omit to state any fact or circumstance
which inclusion or omission, respectively, would make the statements therein
misleading.

       

      (z)        
Condition of
Improvements.  The Property has not been damaged by fire,
water, wind or other cause of loss and any previous damage to the Property has
been fully restored.  To Borrower’s knowledge, the Improvements are
structurally sound, in good repair and free of defects in materials and
workmanship and have been constructed and installed in substantial compliance
with the plans and specifications relating thereto.  To Borrower’s
knowledge, all major building systems located within the Improvements,
including, without limitation, the heating and air conditioning systems and the
electrical and plumbing systems, are in good working order and
condition.

       

      (aa)       No Insolvency or
Judgment.  None of Borrower, any general partner, manager or
member of Borrower, or any guarantor of the Loan, is currently (a) the subject
of or a party to any completed or pending bankruptcy, reorganization or
insolvency proceeding; or (b) the subject of any unsatisfied judgment of record
or docketed in any court of the state in which the Property is located or in any
other court located in the United States.  The proposed Loan will not
render the Borrower nor any general partner or member of Borrower
insolvent.  As used in this paragraph, the term “insolvent” means that
the sum total of all of an entity’s liabilities (whether secured or unsecured,
contingent or fixed, or liquidated or unliquidated) is in excess of the value of
all such entity’s non-exempt assets, i.e., all of the assets of the entity that
are available to satisfy claims of creditors.

       

      (bb)      No
Condemnation.  No part of any property subject to the Security
Instrument has been taken in condemnation or other like proceeding to an extent
which would impair the value of the Property, the Security Instrument or the
Loan or the usefulness of such property for the purposes contemplated by the
loan application relating to the Loan (the “Loan Application”), nor is any
proceeding pending, known or, to Borrower’s knowledge, threatened, to be
contemplated for the partial or total condemnation or taking of the
Property.

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

       

      (cc)       No Labor or Materialmen
Claims/Labor Disputes.  All parties furnishing labor and
materials have been paid in full and, except for such liens or claims, if any,
insured against by the policy of title insurance to be issued in connection with
the Loan, there are no mechanics’, laborers’ or materialmen’s liens or claims
outstanding for work, labor or materials affecting the Property, whether prior
to, equal with or subordinate to the lien of the Security
Instrument.  To the best of Borrower’s knowledge, there are no
strikes, boycotts, or labor disputes which could reasonably be anticipated to
have a material adverse effect on the operation of the Property.

       

      (dd)      No Purchase
Options.  No Tenant, Person, or party has an option to purchase
the Property, any portion thereof or any interest therein.  For
purposes hereof, “Person” shall mean and refer to an individual, partnership,
limited partnership, corporation, limited liability company, trust, joint stock
company, corporation, unincorporated association, joint venture, governmental
authority or agency, or any other entity of any nature whatsoever, whether
similar or dissimilar to the foregoing.

       

      (ee)       Leases.  The
Property is not subject to any leases, subleases, licenses, concessions or other
agreements related to the occupancy, leasing or renting of the Property or any
portion thereof, except for the TRS Lease and as set forth on the rent roll
provided to Lender and certified by Borrower on the date hereof.  No
person has any possessory interest in the Property or right to occupy the same,
except pursuant to a written lease, license, rental agreement or occupancy
agreement (collectively, the “Leases”) identified on the
rent roll provided by Lender and certified by Borrower on the date
hereof.  As of the date hereof, (i) the Borrower is the owner and
holder of the landlord’s interest under the TRS Lease and the Tenant is the sole
owner and holder of the landlord’s interest under the other Leases; (ii) there
are no prior assignments of all or any portion of the Leases or any portion of
the Rents and Profits which are presently outstanding and have priority over the
assignment of leases and rents contained herein in Section 1.11 given by
Borrower to Lender; (iii) all Rents due and payable under the TRS Lease and, to
Borrower’s knowledge, each other Lease, have been paid in full and no said Rents
have been paid more than one (1) month in advance of the due dates thereof and
(iv) there are no offsets or defenses to the payment of any portion of the Rents
under the TRS Lease or, to Borrower’s knowledge, under any of the other
Leases.  The representations set forth in this Paragraph (ee) are in
addition to those set forth in Section 1.12 of this
Security Instrument.

       

      (ff)        Appraisal.  All
requirements and conditions of the appraisal of the Property submitted to Lender
as part of the loan application, if any, upon which the value of the Property
was conditioned, have been fully satisfied (or waived in writing by
Lender).

       

      (gg)      Boundary
Lines.  To Borrower’s knowledge, all of the Improvements which
were included in determining the appraised value of the Property lie wholly
within the boundaries and building restriction lines of the Property, and no
improvements on adjoining properties encroach upon the Property, and no
easements or other encumbrances upon the Real Estate encroach upon any of the
Improvements, so as to affect the value or marketability of the Property except
those which are insured against by title insurance.

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

       

      (hh)      Survey.  The
survey, if any, of the Property delivered to Lender in connection with this
Security Instrument has been performed by a duly licensed surveyor or registered
professional engineer in the jurisdiction in which the Property is situated, is
certified to the Lender, its successors and assigns, and the title insurance
company, and, to Borrower’s knowledge, is in accordance with the most current
minimum standards for title surveys as determined by the American Land Title
Association, with the signature and seal of a licensed engineer or surveyor
affixed thereto, and does not fail to reflect any material matter affecting the
Property or the title thereto.

       

      (ii)         Forfeiture.  There
has not been and shall never be committed by Borrower or, to Borrower’s
knowledge after due investigation, any other person in occupancy of or involved
with the operation or use of the Property any act or omission affording the
federal government or any state or local government the right of forfeiture as
against the Property or any part thereof or any monies paid in performance of
Borrower’s obligations under any of the Loan Documents.

       

      (jj)         Use of Rents and
Profits.  All Rents and Profits generated by or derived from
the Property shall first be utilized solely for current expenses directly
attributable to the ownership and operation of the Property, including, without
limitation, current expenses relating to Borrower’s liabilities and obligations
with respect to this Security Instrument and the other Loan Documents, and none
of the Rents and Profits generated by or derived from the Property shall be
diverted by Borrower and utilized for any other purposes unless all such current
expenses attributable to the ownership and operation of the Property (including
payment of management fees due under the Management Agreement, as such term is
hereinafter defined) have been fully paid and satisfied. Any license agreements
which generate income with respect to the Property, including cable licenses or
similar arrangements, are not prepaid and the benefits thereof have been
assigned for the benefit of Lender.

       

      (kk)       No
Broker.  No financial advisors, brokers, underwriters,
placement agents, agents or finders have been dealt with by the Borrower in
connection with the Loan, except for any broker whose full commission was paid
out of the proceeds of the Loan and is set forth in the written instructions
from Borrower to Lender regarding disbursement of the proceeds of the
Loan.

       

      (ll)      
  Work.  All
work to be performed by Borrower under any Lease has been substantially
performed, all contributions to be made by Borrower to the Tenant under such
Lease have been made and all other conditions precedent to the Tenant’s
obligations thereunder have been satisfied.

       

      (mm)   
Conviction of Criminal
Acts.  Each of Borrower, any indemnitor and guarantor of
Borrower’s obligations under the Loan Documents, and any general partner, member
or principal of Borrower, and any such indemnitor or guarantor of Borrower, has
never been convicted of a crime and is not currently the subject of any pending
or threatened criminal investigation or proceeding.

       

      (nn)      Security
Agreements.  There are no security agreements or financing
statements affecting any of the Property other than (i) as disclosed in writing
by Borrower to Lender prior to the date hereof and (ii) the security agreements
and financing statements created in favor of Lender.

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

       

      (oo)      Homestead.  The
Property forms no part of any property owned, used or claimed by Borrower as a
residence or business homestead and is not exempt from forced sale under the
laws of the State in which the Real Estate is located.  Borrower
hereby disclaims and renounces each and every claim to all or any portion of the
Property as a homestead.

       

      (pp)      Contracts.  Borrower
will comply with all of its obligations under all Contracts which are material
to the operation of the Property in accordance with Borrower’s current practice,
and with all material obligations under all other Contracts.

       

      (qq)      No Margin
Stock.  None of the proceeds of the indebtedness secured hereby
will be used for the purpose of purchasing or carrying “margin stock” within the
meaning of Regulation U or a “margin security” with the meaning of Regulation T
issued by the Board of Governors of the Federal Reserve System, or for any other
purpose which would be inconsistent with such Regulations T or U or any other
Regulations of such Board of Governors, or for any purpose prohibited by legal
requirements or by the terms and conditions of the Loan Documents.

       

      (rr)        All Appropriate
Inquiry.  Borrower has completed all appropriate inquiry in
accordance with 40 CFR Part 312 and ASTM E1527-05 and has met all of the
requirements and obligations of a bona fide prospective purchaser pursuant
to 42 U.S.C. 9601(40).

       

      (ss)       TRS
Lease.  With respect to the TRS Lease:  (i) Borrower
has delivered to Lender a true and complete copy of the TRS Lease, including all
amendments thereto, (ii) the TRS Lease is in full force and effect on the date
hereof, (iii) no notice of termination of the TRS Lease has been given or
received by Borrower, (iv) such TRS Lease is (and shall continue to be, at
Lender’s option) subject and subordinate to this Security Instrument without
necessity of any further agreement or acknowledgment on the part of the tenant
thereunder, and (v) there are no defaults under the TRS Lease as of the date
hereof, nor, to Borrower’s knowledge, any circumstances which, with the passage
of time or giving of notice would constitute a default thereunder by landlord or
tenant.

       

      Section
1.2          Defense of
Title.  If, while this Security Instrument is in force, the
title to the Property or the interest of Lender therein shall be the subject,
directly or indirectly, of any action at law or in equity, or be attacked
directly or indirectly, or endangered, clouded or adversely affected in any
manner, Borrower, at Borrower’s expense, shall take all necessary and proper
steps for the defense of said title or interest, including the employment of
counsel reasonably approved by Lender, the prosecution or defense of litigation,
and the compromise or discharge of claims made against said title or
interest.  Notwithstanding the foregoing, in the event that Lender
reasonably determines that Borrower is not adequately performing its obligations
under this Section, Lender may, without limiting or waiving any other rights or
remedies of Lender hereunder, take such steps with respect thereto as Lender
shall deem necessary or proper; any and all costs and expenses incurred by
Lender in connection therewith, together with interest thereon at the Default
Interest Rate (as defined in the Note) from the date incurred by Lender until
actually paid by Borrower, shall be immediately paid by Borrower on demand and
shall be secured by this Security Instrument and by all of the other Loan
Documents securing all or any part of the indebtedness evidenced by the
Note.

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

       

      Section
1.3         Performance of
Obligations.  Borrower shall pay when due the principal of and
the interest on the indebtedness secured hereby including all charges, fees and
other sums required to be paid by Borrower as provided in the Loan Documents,
and shall observe, perform and discharge all obligations, and conditions, and
comply with all prohibitions, covenants and agreements to be observed, performed
or discharged by Borrower set forth in the Loan Documents in accordance with
their terms.  In the event that Lender determines that Borrower is not
adequately performing any of its obligations under this Security Instrument or
under any of the other Loan Documents, Lender may, without limiting or waiving
any other rights or remedies of Lender hereunder, take such steps with respect
thereto as Lender shall deem necessary or proper, and any and all costs and
expenses reasonably incurred by Lender in connection therewith, together with
interest thereon at the Default Interest Rate (as defined in the Note) from the
date notice of Lender’s incurrence of the same until actually paid by Borrower,
shall be immediately paid by Borrower on demand and shall be secured by this
Security Instrument and by all of the other Loan Documents securing all or any
part of the indebtedness evidenced by the Note.

       

      Section
1.4         Insurance.  Borrower
shall, at Borrower’s expense, maintain (or cause the tenant under the TRS Lease
and/or Manager to maintain) in force and effect on the Property at all times
while this Security Instrument continues in effect the following
insurance:

       

      (a)         Insurance
against loss or damage to the Property by fire, windstorm, lightning, tornado
and hail and against loss and damage by such other, further and additional risks
including, but not limited to, vandalism, malicious mischief, acts of terrorism,
riot and civil commotion, burglary and theft, as may be now or hereafter
embraced by an “all-risk” form of insurance policy.  The amount of
such insurance shall be not less than one hundred percent (100%) of the full
replacement (insurable) cost of the Improvements, furniture, furnishings,
fixtures, equipment and other items (whether personalty or fixtures) included in
the Property and owned by Borrower from time to time, without reduction for
depreciation.  The determination of the replacement cost amount shall
be adjusted annually to comply with the requirements of the insurer issuing such
coverage or, at Lender’s election, by reference to such indices, appraisals or
information as Lender determines in its reasonable discretion.  Full
replacement cost, as used herein (“Full Replacement Cost”),
means, with respect to the Improvements, the cost of replacing the Improvements
without regard to deduction for depreciation, exclusive of the cost of
excavations, foundations and footings below the lowest basement floor, and
means, with respect to such furniture, furnishings, fixtures, equipment and
other items, the cost of replacing the same, in each case, with inflation guard
coverage to reflect the effect of inflation, or annual
valuation.  Each policy or policies shall contain a replacement cost
endorsement and either an agreed amount endorsement (to avoid the operation of
any co-insurance provisions) or a waiver of any co-insurance provisions, all
subject to Lender’s approval.  If the Property is non-conforming with
respect to zoning requirements, at a minimum (Lender having the right, in its
reasonable discretion to require greater coverage), Borrower shall be required
to maintain ‘demolition’ insurance (in a minimum amount equal to ten percent
(10%) of the value of the Improvements) and ‘increased cost of construction’
insurance (in a minimum amount equal to twenty–five (25%) of the value of the
Improvements.

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

    

     

    (b)         Comprehensive
Commercial General Liability Insurance including broad form coverage property
damage, contractual damage and personal injury (including bodily injury and
death), with liquor liability endorsement if liquor is sold at the Property, in
amounts not less than $1,000,000 per occurrence and $2,000,000 in the aggregate
(both inclusive of umbrella coverage).  During any construction on the
Property, each contractor having a contract for construction in an amount equal
to or greater than $100,000 shall also provide the insurance required in this
Subsection (b),
except that the minimum required coverages shall be $1,000,000 per occurrence
and $2,000,000 in the aggregate (both inclusive of umbrella
coverage).  Lender hereby retains the right to periodically review the
amount of said liability insurance being maintained by Borrower and to require
an increase in the amount of said liability insurance should Lender deem an
increase to be reasonably prudent under then existing
circumstances.

     

    (c)         General
boiler and machinery insurance coverage is required if steam boilers or other
pressure-fired vessels are in operation at the Property.  Minimum
liability amount per accident must equal the greater of the replacement
(insurable) value of the Improvements housing such boiler or pressure-fired
machinery or $100,000.00.

     

    (d)         If
the Property or any part thereof is identified by the Federal Emergency
Management Agency (or successor governmental agency or authority performing such
identification function) as being situated in an area now or subsequently
designated as having special flood hazards (including, without limitation, those
areas designated as Zone A or Zone V), flood insurance in an amount equal to (a)
the maximum insurance available under the appropriate National Flood Insurance
Administration program plus such excess limits as Lender may require and (b)
having deductibles not in excess of $25,000.00.  To the extent the
Property is not in a flood zone as described above, but is located in the
vicinity of a body of water, Lender may require flood coverage.

     

    (e)         During
the period of any construction on the Property or renovation or alteration of
the Improvements, a so-called “Builder’s All-Risk Completed
Value” or “Course of
Construction” insurance policy in non-reporting form for any Improvements
under construction, renovation or alteration in an amount approved by Lender and
Worker’s Compensation Insurance covering all persons engaged in such
construction, renovation or alteration.

     

    (f)        
Business interruption and/or loss of rental income insurance must be maintained
in an amount sufficient to provide proceeds which will cover the ‘actual loss’
sustained during restoration.  Actual loss shall mean projected gross
revenues (less non-recurring expenses) for a period of not less than twelve
(12) months with a one hundred eighty day ‘extended period of indemnity’. The
amount of coverage shall be adjusted annually to reflect changes to ‘actual
loss’ during the succeeding twelve (12) month period.  The perils
covered by this insurance shall be the same as those required to be covered on
the Property, including, but not limited to, flood, windstorm and earthquake, as
applicable.

     

    (g)        Automobile
liability coverage for all owned and non-owned vehicles, including rented and
leased vehicles containing minimum limits per occurrence of One Million and
No/100 Dollars ($1,000,000.00).

     

    (h)        Worker’s
compensation coverage and employee’s liability coverage subject to the worker’s
compensation laws of the applicable State.

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    (i)          Such
other insurance on the Property or on any replacements or substitutions thereof
or additions thereto as may from time to time be required by Lender against
other insurable hazards or casualties which at the time are commonly insured
against in the case of property similarly situated including, without
limitation, Sinkhole, Mine Subsidence, Law and Ordinance, Earthquake and
Environmental insurance, due regard being given to the height and type of
buildings, their construction, location, use and occupancy.

     

    All such
insurance shall (i) be with insurers authorized to do business in the State
within which the Property is located and who have and maintain a rating of at
least “A” (or its equivalent) from Standard & Poor’s, a Division of The
McGraw-Hill Companies, Inc. or any other nationally recognized statistical
agency selected by Lender, or at Lender’s election, a Best Rating of A-IX or
better, (ii) contain the complete address of the Property (or a complete legal
description), (iii) be for terms of at least one year, (iv) contain deductibles
which do not exceed $10,000.00 or, with respect to the policy described in clause (d) above
$3,000, and (v) be subject to the approval of Lender as to insurance companies,
amounts, content, forms of policies, method by which premiums are paid and
expiration dates.  Without limitation to the generality of the
foregoing, the all risk insurance and loss of rents or business income insurance
policies required under subsections (a), (b) and (f) above, respectively, shall
be required to cover perils of terrorism and acts of terrorism.

     

    Borrower
shall as of the date hereof deliver to Lender evidence that said insurance
policies have been paid current as of the date hereof and certified copies of
such insurance policies and original certificates of insurance signed by an
authorized agent of the applicable insurance companies evidencing such insurance
satisfactory to Lender.  Borrower shall renew all such insurance and
deliver to Lender certificates evidencing such renewals at least thirty (30)
days before any such insurance shall expire.  Without limiting the
required endorsements to the insurance policies, Borrower further agrees that
all such policies shall include a standard, non-contributory, mortgagee clause
naming:

     

    Cornerstone
Operating Partnership, L.P.

    1920 Main
Street

    Suite
400

    Irvine,
California 92614

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    (x) as an
additional insured under all liability insurance policies, (y) as the first
mortgagee on all property insurance policies and (z) as the loss payee on all
loss of rents or loss of business income insurance policies.  Borrower
further agrees that all such insurance policies: (1) shall provide for at least
thirty (30) days’ prior written notice to Lender prior to any cancellation or
termination thereof and prior to any modification thereof which affects the
interest of Lender; (2) shall contain an endorsement or agreement by the insurer
that any loss shall be payable to Lender in accordance with the terms of such
policy notwithstanding any act or negligence of Borrower which might otherwise
result in forfeiture of such insurance; (3) shall waive all rights of
subrogation against Lender; and (4) in the event that the Real Estate or the
Improvements constitutes a legal non-conforming use under applicable building,
zoning or land use laws or ordinances, shall include an ordinance or law
coverage endorsement which will contain Coverage A:  “Loss Due to Operation of Law”
(with a minimum liability limit equal to Replacement Cost With Agreed Value
Endorsement), Coverage B:  “Demolition Cost” and Coverage
C: “Increased Cost of
Construction” coverages.  Lender agrees that such insurance
policies may be in the form of a blanket policy provided that, in the event that
any such coverage is provided in the form of a blanket policy, Borrower hereby
acknowledges and agrees that failure to pay any portion of the premium therefor
which is not allocable to the Property or by any other action not relating to
the Property which would otherwise permit the issuer thereof to cancel the
coverage thereof, would require the Property to be insured by a separate,
single-property policy.  The blanket policy must properly identify and
fully protect the Property as if a separate policy were issued for 100% of Full
Replacement Cost at the time of loss and otherwise meet all of Lender’s
applicable insurance requirements set forth in this Section
1.4.  The delivery to Lender of the insurance policies or the
certificates of insurance as provided above shall constitute an assignment of
all proceeds payable under such insurance policies relating to the Property by
Borrower to Lender as further security for the indebtedness secured
hereby.  In the event of foreclosure of this Security Instrument, or
other transfer of title to the Property in extinguishment in whole or in part of
the secured indebtedness, all right, title and interest of Borrower in and to
all proceeds payable under such policies then in force concerning the Property
shall thereupon vest in the purchaser at such foreclosure, or in Lender or other
transferee in the event of such other transfer of title.  Approval of
any insurance by Lender shall not be a representation of the solvency of any
insurer or the sufficiency of any amount of insurance.  In the event
Borrower fails to provide, maintain, keep in force or deliver and furnish to
Lender the policies of insurance required by this Security Instrument or
evidence of their renewal as required herein, Lender may, but shall not be
obligated to, procure such insurance and Borrower shall pay all amounts advanced
by Lender therefore, together with interest thereon at the Default Interest Rate
from and after the date advanced by Lender until actually repaid by Borrower,
promptly upon demand by Lender.  Any amounts so advanced by Lender,
together with interest thereon, shall be secured by this Security Instrument and
by all of the other Loan Documents securing all or any part of the indebtedness
secured hereby.  Lender shall not be responsible for nor incur any
liability for the sufficiency of any insurance, the insolvency of the insurer or
any other failure of the insurer to perform, even though Lender has caused the
insurance to be placed with the insurer after failure of Borrower to furnish
such insurance in accordance herewith.  Borrower shall not obtain
insurance for the Property in addition to that required by Lender without the
prior written consent of Lender, which consent will not be unreasonably withheld
provided that (i) Lender is a named insured on such insurance, (ii) Lender
receives complete copies of all policies evidencing such insurance, and (iii)
such insurance and the related insurer comply with all of the applicable
requirements set forth herein.

     

    Section
1.5          Payment of
Taxes.  Borrower shall pay or cause to be paid, except to the
extent provision is actually made therefore pursuant to Section 1.6 of this
Security Instrument, all taxes and assessments which are or may become a lien on
the Property or which are assessed against or imposed upon the
Property.  Upon request by Lender, Borrower shall furnish Lender with
receipts (or if receipts are not immediately available, with copies of canceled
checks evidencing payment with receipts to follow promptly after they become
available) showing payment of such taxes and assessments at least fifteen (15)
days prior to the applicable delinquency date
therefore.  Notwithstanding the foregoing, Borrower may in good faith,
by appropriate proceedings and upon notice to Lender, contest the validity,
applicability or amount of any asserted tax or assessment so long as
(a) such contest is diligently pursued, (b) Lender determines, in its
subjective opinion, that such contest suspends the obligation to pay the tax or
assessment and that nonpayment of such tax or assessment will not result in the
sale, loss, forfeiture or diminution of the Property or any part thereof or any
interest of Lender therein, and (c) prior to the earlier of the
commencement of such contest or the delinquency date of the asserted tax or
assessment, Borrower deposits in the Impound Account (as hereinafter defined) an
amount determined by Lender to be adequate to cover the payment of such tax or
assessment and a reasonable additional sum to cover possible interest, costs and
penalties; provided, however, that Borrower shall
promptly cause to be paid any amount adjudged by a court of competent
jurisdiction to be due, with all interest, costs and penalties thereon, promptly
after such judgment becomes final; and provided further that in any event
each such contest shall be concluded and the taxes, assessments, interest, costs
and penalties shall be paid prior to the date any writ or order is issued under
which the Property may be sold, lost or forfeited.

    
      
         

      

      
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    Section
1.6          Tax and Insurance Impound
Account.  If and when required by Lender by notice to Borrower
on or after the date hereof (it being acknowledged that the same is not required
prior to the occurrence of an Event of Default hereunder), Borrower shall
establish and maintain at all times while this Security Instrument continues in
effect an impound account (the “Impound Account”) with Lender
for payment of real estate taxes and assessments and insurance on the Property
and as additional security for the indebtedness secured
hereby.  Borrower shall deposit in the Impound Account an amount
determined by Lender to be sufficient (when added to the monthly deposits
described herein) to pay the next due annual installment of real estate taxes
and assessments on the Property at least one (1) month prior to the delinquency
date thereof and the next due annual insurance premiums with respect to the
Property at least one (1) month prior to the due date thereof.  Upon
requirement by Lender for establishment of such Impound Account, and continuing
thereafter on each monthly payment date under the Note, Borrower shall pay to
Lender, concurrently with the monthly payment due under the Note, deposits in an
amount equal to one-twelfth (1/12) of the amount of the annual real estate taxes
and assessments that will next become due and payable on the Property, plus
one-twelfth (1/12) of the amount of the annual premiums that will next become
due and payable on insurance policies which Borrower is required to maintain
hereunder, each as estimated and determined by Lender.  So long as no
default hereunder or under the other Loan Documents has occurred and is
continuing, all sums in the Impound Account shall be held by Lender in the
Impound Account to pay said taxes, assessments and insurance premiums in one
installment before the same become delinquent.  Borrower shall be
responsible for ensuring the receipt by Lender, at least thirty (30) days prior
to the respective due date for payment thereof, of all bills, invoices and
statements for all taxes, assessments and insurance premiums to be paid from the
Impound Account, and so long as no default hereunder or under the other Loan
Documents has occurred and is continuing, Lender shall pay the governmental
authority or other party entitled thereto directly to the extent funds are
available for such purpose in the Impound Account.  In making any
payment from the Impound Account, Lender shall be entitled to rely on any bill,
statement or estimate procured from the appropriate public office or insurance
company or agent without any inquiry into the accuracy of such bill, statement
or estimate and without any inquiry into the accuracy, validity, enforceability
or contestability of any tax, assessment, valuation, sale, forfeiture, tax lien
or title or claim thereof.  No interest on funds contained in the
Impound Account shall be paid by Lender to Borrower and any interest or other
earnings on funds deposited in the Impound Account shall be solely for the
account of Lender.  If the total funds in the Impound Account shall
exceed the amount of payments actually applied by Lender for the purposes of the
Impound Account, such excess may be credited by Lender on subsequent payments to
be made hereunder or, at the option of Lender, refunded to
Borrower.  If, however, the Impound Account shall not contain
sufficient funds to pay the sums required when the same shall become due and
payable, Borrower shall, within the earlier to occur of ten (10) days after
receipt of written notice thereof and two (2) Business Days prior to the tax due
date, deposit with Lender the full amount of any such
deficiency.

    
      
         

      

      
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    Section
1.7          Intentionally
reserved.

     

    Section
1.8         Security Interest In
Reserves.  i)  As additional security for the payment
and performance by Borrower of all duties, responsibilities and obligations
under the Note and the other Loan Documents, Borrower hereby unconditionally and
irrevocably assigns, conveys, pledges, mortgages, transfers, delivers, deposits,
sets over and confirms unto Lender, and hereby grants to Lender a security
interest in all sums on deposit or due under this Security Instrument and the
other Loan Documents including, without limitation, (i) the Impound Account, the
Cash Collateral Account and any other accounts or sub-accounts thereof
established pursuant to the Cash Management Agreement, as such terms are defined
in that certain Cash Management Agreement date on or about the date hereof (the
“Cash Management
Agreement”) by and among Borrower, Lender and Manager (collectively,
the “Reserves”), (ii)
the accounts into which the Reserves have been deposited, (iii) all insurance on
said accounts, (iv) all accounts, contract rights and general intangibles or
other rights and interests pertaining thereto, (v) all sums now or hereafter
therein or represented thereby, (vi) all replacements, substitutions or proceeds
thereof, (vii) all instruments and documents now or hereafter evidencing the
Reserves or such accounts, (viii) all powers, options, rights, privileges and
immunities pertaining to the Reserves (including the right to make withdrawals
therefrom), and (ix) all proceeds of the foregoing.  Borrower hereby
authorizes and consents to the account into which the Reserves have been
deposited being held in Lender’s name or the name of any entity servicing the
Note for Lender and hereby acknowledges and agrees that Lender, or at Lender’s
election, such servicing agent, shall have exclusive control over said
account.  Notice of the assignment and security interest granted to
Lender herein may be delivered by Lender at any time to the financial
institution wherein the Reserves have been established, and Lender, or such
servicing entity, shall have possession of all passbooks or other evidences of
such accounts.  BORROWER HEREBY HOLDS LENDER HARMLESS WITH RESPECT TO
ALL RISK OF LOSS REGARDING AMOUNTS ON DEPOSIT IN THE RESERVES, EXCEPT TO THE
EXTENT THAT ANY SUCH LOSS IS CAUSED BY THE GROSS NEGLIGENCE OR INTENTIONAL
MISCONDUCT OF LENDER.  Borrower hereby knowingly, voluntarily and
intentionally stipulates, acknowledges and agrees that the advancement of the
funds from the Reserves as set forth herein is at Borrower’s direction and is
not the exercise by Lender of any right of set-off or other remedy upon a
default.  If a default shall occur hereunder or under any other of the
Loan Documents which is not cured within any applicable grace or cure period,
then Lender may, without notice or demand on Borrower, at its
option:  (A) withdraw any or all of the funds (including, without
limitation, interest) then remaining in the Reserves and apply the same, after
deducting all costs and expenses of safekeeping, collection and delivery
(including, but not limited to, attorneys’ fees, costs and expenses) to the
indebtedness evidenced by the Note or any other obligations of Borrower under
the other Loan Documents in such manner or as Lender shall deem appropriate in
its sole discretion, and the excess, if any, shall be paid to Borrower, (B)
exercise any and all rights and remedies of a secured party under any applicable
Uniform Commercial Code, or (C) exercise any other remedies available at law or
in equity.  No such use or application of the funds contained in the
Reserves shall be deemed to cure any default or Event of Default hereunder or
under the other Loan Documents.

    
      
         

      

      
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    The
Reserves are solely for the protection of Lender and entail no responsibility on
Lender’s part beyond the payment of the respective costs and expenses in
accordance with the terms thereof and beyond the allowing of due credit for the
sums actually received.  Upon assignment of this Security Instrument
by Lender, any funds in the Reserves shall be turned over to the assignee and
any responsibility of Lender, as assignor, with respect thereto shall
terminate.  The Reserves shall not, unless otherwise explicitly
required by applicable law, be or be deemed to be escrow or trust funds, but, at
Lender’s option and in Lender’s discretion, may either be held in a separate
account or be commingled by Lender with the general funds of
Lender.  Upon full payment of the indebtedness secured hereby in
accordance with its terms (or if earlier, the completion of the applicable
conditions to release of each Reserve to Lender’s satisfaction) or at such
earlier time as Lender may elect, the balance in Reserves then in Lender’s
possession shall be paid over to Borrower and no other party shall have any
right or claim thereto.

     

    Any
amounts received by Lender from Borrower may be invested by Lender (or its
servicer) for its benefit, and Lender shall not be obligated to pay, or credit,
any interest earned thereon to Borrower except as may be otherwise specifically
provided in this Security Instrument.

     

    Section
1.9         Casualty and
Condemnation.  Borrower shall give Lender prompt written notice
of the occurrence of any casualty affecting, or the institution of any
proceedings for eminent domain or for the condemnation of, the Property or any
portion thereof (collectively, an “Insured
Event”).  All insurance proceeds on the Property, and all
causes of action, claims, compensation, awards and recoveries for any damage,
condemnation or taking of all or any part of the Property or for any damage or
injury to it for any loss or diminution in value of the Property, are hereby
assigned to and shall be paid to Lender (and Borrower hereby covenants and
agrees that Borrower shall deliver or cause to be delivered to Lender any
proceeds or awards which may be payable to, or received by,
Borrower).  Lender may participate in any suits or proceedings
relating to any such proceeds, causes of action, claims, compensation, awards or
recoveries and Lender is hereby authorized, in its own name or in Borrower’s
name, to adjust any loss covered by insurance or any condemnation claim or cause
of action, and to settle or compromise any claim or cause of action in
connection therewith, and Borrower shall from time to time deliver to Lender any
instruments required to permit such participation; provided, however, that Lender
shall not have the right to participate in the adjustment of any loss which is
not in excess of $50,000.00 (the “Threshold
Amount”).  If requested by Lender, Borrower shall provide
copies to Lender of all notices or filings made or received by Borrower in
connection with such casualty or condemnation suits or proceedings or with
respect to the collection of the insurance proceeds or condemnation award, as
the case may be.  Provided no default is then continuing hereunder or
under any of the other Loan Documents beyond applicable notice and/or cure
period, if any, provided herein, and no event has occurred which, with the
giving of notice or the passage of time or both, would constitute an Event of
Default hereunder or under any of the other Loan Documents,  Lender
shall apply any sums received by it under this Section first to the payment of
all of its costs and expenses (including, but not limited to, reasonable legal
fees and disbursements) incurred in obtaining those sums, and then, as
follows:

    
      
         

      

      
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    In the
event that Lender receives insurance proceeds or condemnation awards upon the
occurrence of an Insured Event in an amount not in excess of the Threshold
Amount, Lender shall, to the extent such insurance proceeds or condemnation
awards are available for such purpose, disburse to Borrower the amount paid or
incurred by Borrower as a result of any such Insured Event for costs and
expenses incurred by Borrower to repair or restore the Property (collectively
the “Casualty Repairs”)
within ten (10) days following: (A) the receipt by Lender of a written request
from Borrower for disbursement and a certification by Borrower to Lender that
the applicable item of Repair has been completed; (B) the delivery to Lender of
invoices, receipts or other evidence verifying the cost of performing the
Casualty Repairs; and (C) for disbursement requests (i) in excess of
$20,000.00 with respect to any single Casualty Repair, or (ii) for any single
Casualty Repair that is structural in nature, delivery to Lender of (1)
affidavits, lien waivers or other evidence reasonably satisfactory to Lender
showing that all materialmen, laborers, subcontractors and any other parties who
might or could claim statutory or common law liens and are furnishing or have
furnished material or labor to the Property have been paid all amounts due for
labor and materials furnished to the Property; (2) a certification from an
inspecting architect or other third party acceptable to Lender describing the
completed Casualty Repairs and verifying the completion of the Casualty Repairs
and the value of the completed Casualty Repairs; and (3) a new (or amended)
certificate of occupancy for the portion of the Improvements covered by such
Casualty Repairs, if said new certificate of occupancy was required by law, or a
certification by Borrower that no new certificate of occupancy was required by
law.  Lender shall not be required to make any such advances more
frequently than one time in any calendar month.  In the event any
proceeds or awards from an Insured Event exceed the Threshold Amount but less
than thirty-five (35%) percent of the Improvements located on the Real Estate
have been taken or destroyed, then if:

     

    (a) the
Property can, in Lender’s and Borrower’s reasonable judgment, with diligent
restoration or repair, be returned to a condition at least equal to the
condition thereof that existed prior to the casualty or partial taking causing
the loss or damage within the earlier to occur of (i) six (6) months after
the receipt of insurance proceeds or condemnation awards by either Borrower or
Lender, (ii) six (6) months prior to the stated maturity date of the Note, (iii)
the earliest date by which completion is required under applicable law to
preserve the right to rebuild the Improvements as they existed prior to the
casualty or condemnation, (iv) the earliest date by which completion is required
under any Major Lease, (v) Leases covering in the aggregate at least fifty
percent (50%) of the rentable square feet of the Property (as existed
immediately prior to the occurrence of the casualty or condemnation) shall
remain in effect during and upon completion of the restoration, and (vi) the
expiration of Borrower’s business interruption insurance policy,
and

     

    (b) all
necessary governmental approvals can be obtained to allow the rebuilding and
re-occupancy of the Property as described in subsection (b)(1) above,
and

     

    (c) there
are sufficient sums available (through insurance proceeds or condemnation awards
and contributions by Borrower, the full amount of which shall at Lender’s option
have been deposited with Lender) for such restoration or repair (including,
without limitation, for any reasonable costs and expenses of Lender to be
incurred in administering said restoration or repair) and for payment of
principal and interest to become due and payable under the Note during such
restoration or repair, and

    
      
         

      

      
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    (d) the
economic feasibility of the Improvements after such restoration or repair will
be such that income from their operation is reasonably anticipated to be
sufficient to pay operating expenses of the Property and debt service on the
indebtedness secured hereby in full with the same coverage ratio considered by
Lender in its determination to make the Loan, and

     

    (e)
Borrower shall have delivered to Lender, at Borrower’s sole cost and expense, an
appraisal report from an appraiser, in form and substance, satisfactory to
Lender appraising the value of the Property as proposed to be restored or
repaired to be not less than the appraised value of the Property considered by
Lender in its determination to make the Loan, and

     

    (f)
Borrower confirms by written notice delivered to Lender within five (5) days
after settlement of the aforesaid insurance or condemnation claim its intention
to repair and restore as herein provided, and

     

    (g) the
Property can, in Lender’s and Borrower’s reasonable judgment, be repaired or
restored such that the Property, taken as a whole, as repaired or restored, will
conform to all applicable governmental laws and ordinances including, without
limitation, then current zoning ordinances,

     

    then,
Lender shall, provided no Event of Default has occurred which is then
continuing, solely for the purposes of such restoration or repair, advance so
much of the remainder of such sums as may be required to facilitate such
restoration or repair, and any funds deposited by Borrower therefore, to
Borrower in the manner and upon such terms and conditions as would be required
by a prudent interim construction lender, including, but not limited to, the
prior approval by Lender of plans and specifications, contractors and the form
of construction contracts and the furnishing to Lender of permits, bonds, lien
waivers, invoices, receipts and affidavits from contractors and subcontractors
in form and substance reasonably satisfactory to Lender.  Any
remaining proceeds shall be applied by Lender for payment of the indebtedness
secured hereby in whatever order as Lender directs, or released to Borrower, in
its absolute discretion.  Borrower shall, in good faith, undertake
reasonable efforts to cause the conditions described in this Section 1.9(b) to
be fully satisfied (e.g., Borrower shall timely make applications for necessary
governmental permits, shall order an appropriate appraisal report,
etc.).  Any disbursement pursuant to this clause (b) of sums by
Lender shall, subject to Borrower’s satisfaction of the provisions hereof, be in
a manner to promptly facilitate the restoration or repair of the
Property.  In the event Borrower fails to meet the requirements of
this clause
(b), then Lender may elect in its absolute discretion and without regard
to the adequacy of Lender’s security, to accelerate the maturity date of the
Note and declare any and all of the indebtedness secured hereby to be
immediately due and payable and apply the remainder of such sums to the payment
of the secured indebtedness in whatever order Lender directs in its sole
discretion, with any remainder being paid to Borrower.

    
      
         

      

      
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    In all
other cases, namely, in the event that thirty-five (35%) percent or more of the
Improvements located on the Real Estate have been taken or destroyed or in the
event the conditions described in Section 1.9(b) are not fully satisfied, Lender
may elect, in Lender’s absolute discretion and without regard to the adequacy of
Lender’s security, to (i) accelerate the maturity date of the Note and declare
any and all indebtedness secured hereby to be immediately due and payable and
apply the remainder of such sums received pursuant to this Section to the
payment of the secured indebtedness in whatever order Lender directs in its
absolute discretion, with any remainder being paid to Borrower, or (ii) make
insurance or condemnation proceeds available to Borrower for repair or
restoration if Borrower establishes to the satisfaction of Lender, in its sole
discretion, that Borrower otherwise satisfies the requirements of clause (b)
above.  Should Lender make the election described immediately above in
item (ii) of this Section 1.9(c), Borrower shall be obligated to undertake
restoration and repair of the damaged Improvements consistent with the
provisions of this Section 1.9.

     

    Any
reduction in the indebtedness secured hereby resulting from Lender’s application
of any sums received by it hereunder shall take effect only when Lender actually
receives such sums and elects to apply such sums to the indebtedness secured
hereby and, in any event, the unpaid portion of the indebtedness secured hereby
shall remain in full force and effect and Borrower shall not be excused in the
payment thereof.  Partial payments received by Lender, as described in
the preceding sentence, shall be applied as set forth in Section 1.02(c) of the
Note.  If Borrower undertakes to restore or repair the Property after
the occurrence of a casualty or partial taking of the Property as provided
above, Borrower shall promptly and diligently, at Borrower’s sole cost and
expense and regardless of whether the insurance proceeds or condemnation award,
as appropriate, shall be sufficient for the purpose, restore, repair, replace
and rebuild the Property as nearly as possible to its value, condition and
character immediately prior to such casualty or partial taking in accordance
with the foregoing provisions and Borrower shall pay to Lender all costs and
expenses of Lender incurred in administering said rebuilding, restoration or
repair, provided that Lender makes such proceeds or award available for such
purpose.  Borrower agrees to execute and deliver from time to time
such further instruments as may be requested by Lender to confirm the foregoing
assignment to Lender of any award, damage, insurance proceeds, payment or other
compensation.  Borrower hereby irrevocably constitutes and appoints
Lender the attorney-in-fact of Borrower (which power of attorney shall be
irrevocable so long as any indebtedness secured hereby is outstanding, shall be
deemed coupled with an interest, shall survive the voluntary or involuntary
dissolution of Borrower and shall not be affected by any disability or
incapacity suffered by Borrower subsequent to the date hereof), with full power
of substitution, subject to the terms of this Section, to settle for, collect
and receive any such awards, damages, insurance proceeds, payments or other
compensation from the parties or authorities making the same, to appear in and
prosecute any proceedings therefor and to give receipts and acquittance
therefor.

     

    Section
1.10       Mechanics’
Liens.  Borrower shall pay when due all claims and demands of
mechanics, materialmen, laborers and others for any work performed or materials
delivered for the Real Estate or the Improvements; provided, however, that
Borrower shall have the right to contest in good faith any such claim or demand,
so long as it does so diligently, by appropriate proceedings and without
prejudice to Lender and provided that neither the Property nor any interest
therein would be in any danger of sale, loss or forfeiture as a result of such
proceeding or contest.  In the event Borrower shall contest any such
claim or demand, Borrower shall promptly notify Lender of such contest and
thereafter shall, upon Lender’s request, promptly provide a bond, cash deposit
or other security satisfactory to Lender to protect Lender’s interest and
security should the contest be unsuccessful.  If Borrower shall fail
to immediately discharge or provide security against any such claim or demand as
aforesaid, Lender may do so and any and all expenses incurred by Lender (of
which Lender shall give notice to Borrower), together with interest thereon at
the Default Interest Rate from the date incurred by Lender until actually paid
by Borrower, shall be immediately paid by Borrower on demand and shall be
secured by this Security Instrument and by all of the other Loan Documents
securing all or any part of the indebtedness evidenced by the
Note.

    
      
         

      

      
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    Section
1.11       Assignment of Leases and
Rents.  As additional and collateral security for the payment
of the indebtedness secured hereby and cumulative of any and all rights and
remedies herein provided for, Borrower hereby absolutely and presently assigns
to Lender all existing and future Leases (including, without limitation, the TRS
Lease), and all existing and future Rents and Profits.  Borrower
hereby grants to Lender the sole, exclusive and immediate right, without taking
possession of the Property, to demand, collect (by suit or otherwise), receive
and give valid and sufficient receipts for any and all of said Rents and
Profits, for which purpose Borrower does hereby irrevocably make, constitute and
appoint Lender its attorney-in-fact with full power to appoint substitutes or a
trustee to accomplish such purpose (which power of attorney shall be irrevocable
so long as any indebtedness secured hereby is outstanding, shall be deemed to be
coupled with an interest, shall survive the voluntary or involuntary dissolution
of Borrower and shall not be affected by any disability or incapacity suffered
by Borrower subsequent to the date hereof).  Lender shall be without
liability for any loss which may arise from a failure or inability to collect
Rents and Profits, proceeds or other payments.  However, until the
occurrence of an Event of Default under this Security Instrument, Borrower shall
have a license to collect and receive the Rents and Profits when due and
prepayments thereof for not more than one month prior to due date
thereof.  Upon the occurrence of an Event of Default, Borrower’s
license shall automatically terminate without notice to Borrower and Lender may
thereafter, without taking possession of the Property, collect the Rents and
Profits itself or by an agent or receiver.  From and after the
termination of such license, Borrower shall be the agent of Lender in collection
of the Rents and Profits and all of the Rents and Profits so collected by
Borrower shall be held in trust by Borrower for the sole and exclusive benefit
of Lender and Borrower shall, within one (1) business day after receipt of any
Rents and Profits, pay the same to Lender to be applied by Lender as hereinafter
set forth.  Neither the demand for or collection of Rents and Profits
by Lender, nor the exercise of Lender’s rights as assignee of the
Leases,  shall constitute any assumption by Lender of any obligations
under any Lease or other agreement relating thereto.  Lender is
obligated to account only for such Rents and Profits as are actually collected
or received by Lender.  Borrower irrevocably agrees and consents that
the respective payors of the Rents and Profits shall, upon demand and notice
from Lender of an Event of Default hereunder, pay said Rents and Profits to
Lender without liability to determine the actual existence of any Event of
Default claimed by Lender.  Borrower hereby waives any right, claim or
demand which Borrower may now or hereafter have against any such payor by reason
of such payment of Rents and Profits to Lender, and any such payment shall
discharge such payor’s obligation to make such payment to
Borrower.  All Rents and Profits collected or received by Lender shall
be applied against all expenses of collection, including, without limitation,
attorneys’ fees, against costs of operation and management of the Property and
against the indebtedness secured hereby, in whatever order or priority as to any
of the items so mentioned as Lender directs in its sole subjective discretion
and without regard to the adequacy of its security.  Neither the
exercise by Lender of any rights under this Section nor the application of any
Rents and Profits to the secured indebtedness shall cure or be deemed a waiver
of any default or Event of Default hereunder.  The assignment of
Leases and of Rents and Profits hereinabove granted shall continue in full force
and effect during any period of foreclosure or redemption with respect to the
Property.  As additional security for the indebtedness secured hereby,
Borrower has executed and delivered an Assignment of Leases and Rents dated of
even date herewith (as hereafter amended, consolidated or modified from time to
time, the “Assignment”) in favor
of Lender covering all of the right, title and interest of Borrower, as
landlord, lessor or licensor, in and to any Leases.  All rights and
remedies granted to Lender under the Assignment shall be in addition to and
cumulative of all rights and remedies granted to Lender
hereunder.

    
      
         

      

      
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    Section
1.12        Leases and
Licenses.

     

    (a) Lease Requirements.  Prior
to execution of any Leases (other than the residency agreements entered into on
the form approved by Lender in connection with the closing of the Loan) after
the date hereof, Borrower shall submit to Lender, for Lender’s prior approval,
which approval shall not be unreasonably withheld so long as no default exists
hereunder, a copy of the form lease Borrower plans to use in leasing space in
the Improvements.  Each Lease executed after the date hereof affecting
any of the Real Estate or the Improvements must provide, in a manner approved by
Lender, that (i) such Lease is subject and subordinate to this Security
Instrument, and (ii) the Tenant will attorn to, and recognize as its landlord,
lessor or licensor, any person succeeding to the interest of Borrower in such
Lease upon any foreclosure of this Security Instrument or deed in lieu of
foreclosure (it being understood that residency agreements executed in the form
approved by Lender shall be deemed to satisfy the foregoing).  Each
such Lease shall also provide that, upon request of said successor-in-interest,
the Tenant shall execute and deliver an instrument or instruments confirming its
attornment as provided for in this Section (it being understood that residency
agreements executed in the form approved by Lender shall be deemed to satisfy
the foregoing); provided, however, that neither Lender nor any
successor-in-interest shall be bound by any payment of rental for more than one
(1) month in advance, or any amendment or modification of said Lease made
without the express written consent of Lender or said
successor-in-interest.  No Lease shall contain any option or right of
first refusal to purchase all or any portion of the Property.  No
Lease (other than any residency agreement entered into in the form approved by
Lender in connection with the origination of this Loan) shall contain any right
to terminate the term thereof (except in the event of the destruction of all or
substantially all of the Property).

     

    (b) Acts Requiring Consent of Lender.  Borrower
shall not, without the prior written consent of Lender, (i) enter into any Lease
of all or any portion of the Property either (Y) for space in excess of five
percent (5%) of the rentable square feet, or represents ten (10%) percent or
more of the gross rents reflected on the rent roll for the Property, or (Z) for
a term (including, without limitation, options exercisable by the lessee
thereunder) of greater than five (5) years (any such lease, a “Major Lease”); (ii) cancel,
terminate, abridge or otherwise modify the terms of the TRS Lease (except as may
be expressly permitted pursuant to subsection 1.12(d) below) or any other Major
Lease, or accept a surrender thereof; (iii) consent to any assignment of, or
subletting of all or any portion of the premises demised under, the TRS Lease or
any other Major Lease unless required by the terms thereof; (iv) cancel,
terminate, abridge, release or otherwise modify any guaranty of the TRS Lease or
any other Major Lease or the terms thereof; (v) enter into any Lease not meeting
the requirements of Section 1.12(a) of this Security Instrument; or (vi) enter
into any Lease containing material adverse variations from the current form
lease approved by Lender.  The request for approval of each such
proposed Lease shall be made to Lender in writing.  As part of such
request, Borrower shall furnish to Lender (and any loan servicer specified from
time to time by Lender) to the extent required by Lender and/or such loan
servicer: (1) such biographical and financial information about the proposed
tenant as Lender may require in conjunction with its review, (2) a copy of the
proposed Lease, and (3) a summary of the material terms of such proposed Lease
(including, without limitation, rental terms and the term of the proposed Lease
and any options).

    
      
         

      

      
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    (c)  Affirmative Covenants Regarding Leases.  Borrower
shall at all times promptly and faithfully perform, or cause to be performed,
all of the covenants, conditions and agreements contained in all Leases, now or
hereafter existing, on the part of the landlord, lessor or licensor thereunder
to be kept and performed.  Borrower shall promptly send copies to
Lender and any servicer of all notices of default which Borrower shall send or
receive under the TRS Lease and, upon request by Lender, under any other
Lease.  Borrower, at no cost or expense to Lender, shall enforce,
short of termination, the performance and observance of each and every condition
and covenant of each of the other parties under each Lease.  Borrower
shall furnish to Lender, within ten (10) days after a request by Lender to do
so, and in any event by January 1 of each year, a current rent roll certified by
Borrower as being true and correct containing the names of all Tenants, the
terms of their respective Leases, the spaces occupied and the rentals or fees
payable thereunder and the amount of each Tenant’s security
deposit.  Upon the request of Lender, Borrower shall deliver to Lender
(i) a copy of each Lease; and (ii) an estoppel certificate from the tenant under
the TRS Lease (provided that Lender shall not be required to deliver such
certificates more frequently than twice in any calendar year).

     

    (d)  Negative Covenants Regarding Leases.  Borrower
shall not enter into any Lease (i) without the prior written consent of Lender
where such consent is required pursuant to this Security Instrument; (ii) except
on terms consistent with the terms for similar leases in the market area of the
Real Estate, including, without limitation, as to the rental rate, security
deposit, tenant improvement and work letter terms and free rent periods; (iii)
other than with a third-party Tenant unrelated to Borrower or any general
partner, principal, manager, member or affiliate of Borrower or any affiliate of
any such general partner, principal, manager, or member of Borrower (provided
that the foregoing is not applicable with respect to the TRS Lease); or (iv)
except for an actual occupancy by the tenant, lessee or licensee
thereunder.  Borrower shall not do or suffer to be done any act that
might result in a default by the landlord, lessor or licensor under any Lease or
allow the Tenant thereunder to withhold payment of rent.  Borrower
shall not, without the prior written consent of Lender:  (1) (x)
modify the TRS Lease; provided that Borrower may enter into any modification of
the TRS Lease so long as such modification shall (a) in no way impair the lien
of this Mortgage, (b) impair the ability of the Borrower to satisfy any and all
of its obligations under this Mortgage and the Loan Documents, (c) increase
in a material manner the obligations of the landlord under the TRS Lease, (d)
decrease the rent due and payable under the TRS Lease, or (e) decrease or reduce
the term of the TRS Lease or (y) modify any Major Lease in any material respect,
or (z) other than in the ordinary course of business and in compliance with
applicable legal requirements, otherwise modify any other Lease; (2) terminate
or accept the surrender of the TRS Lease, any other Major Lease or, except in
the ordinary course of business and in compliance with the requirements thereof,
any other Lease; or (3) waive or release any other party from the performance or
observance of any obligation or condition under any Lease; provided, however, that with
respect to all Leases other than Major Leases, provided no default exists
hereunder, Borrower may do any of the foregoing in the normal course of business
in a manner which is consistent with sound and customary leasing and management
practices for similar properties in the community in which the Property is
located.  Borrower shall not solicit or accept the prepayment of any
rents under any Lease for more than one (1) month prior to the due date
thereof.  Except for the Assignment, Borrower shall not execute any
other assignment of the lessor’s interest in the Leases or the Rents and Profits
or otherwise encumber, pledge or hypothecate lessor’s interest
therein.

    
      
         

      

      
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    (e)  Security Deposits.  All
security deposits of Tenants, whether held in cash or in any other form, shall
not be commingled with any other funds of Borrower or any other person and, if
cash, shall be deposited by Borrower at such commercial or savings bank or
banks, or otherwise held in compliance with applicable law, as may be reasonably
satisfactory to Lender.  Any bond or other instrument which Borrower
is permitted to hold in lieu of cash security deposits under any applicable
legal requirements shall be maintained in full force and effect in the full
amount of such deposits unless replaced by cash deposits as hereinabove
described; shall be issued by an institution reasonably satisfactory to Lender;
shall, if permitted pursuant to any applicable legal requirements, name Lender
as payee or mortgagee thereunder or, at Lender’s option, be assigned or fully
assignable to Lender; and shall, in all respects, comply with any applicable
legal requirements and otherwise be reasonably satisfactory to
Lender.  Borrower shall, upon request, provide Lender with evidence
reasonably satisfactory to Lender of Borrower’s compliance with the
foregoing.  Upon an Event of Default under this Security Instrument,
Borrower shall, immediately upon Lender’s request (if permitted by applicable
law), deliver to Lender the security deposits (and any interest previously
earned thereon and not disbursed to the person(s) lawfully entitled to receive
same) with respect to all or any portion of the Property, to be held by Lender
subject to the terms of the Leases.

     

    (f) Rights Of Lender Upon Default.  Upon
an Event of Default, whether before or after the whole principal sum secured
hereby is declared to be immediately due or whether before or after the
institution of legal proceedings to foreclose this Security Instrument,
forthwith, upon demand of Lender, Borrower shall surrender to Lender and Lender
shall be entitled to take actual possession of the Property or any part thereof
personally, or by its agent or attorneys.  In such event, Lender shall
have, and Borrower hereby gives and grants to Lender, the right, power and
authority to make and enter into Leases for such rents and for such periods of
occupancy and upon conditions and provisions as Lender may deem desirable in its
sole discretion, and borrower expressly acknowledges and agrees that the term of
such Lease may extend beyond the date of any foreclosure sale for the Property;
it being the intention of Borrower that in such event Lender shall be deemed to
be and shall be the attorney-in-fact of Borrower for the purpose of making and
entering into Leases for the rents and upon the terms, conditions and provisions
deemed desirable to Lender in its sole discretion and with like effect as if
such leases had been made by Borrower as the owner of the Property free and
clear of any conditions or limitations established by this Security
Instrument.  The power and authority hereby given and granted by
Borrower to Lender shall be deemed to be coupled with an interest, shall not be
revocable by Borrower so long as any indebtedness secured hereby is outstanding,
shall survive the voluntary or involuntary dissolution of Borrower and shall not
be affected by any disability or incapacity suffered by Borrower subsequent to
the date hereof.  In connection with any action taken by Lender
pursuant to this Section, Lender shall not be liable for any loss sustained by
Borrower resulting from any failure to let the Property, or any part thereof, or
from any other act or omission of Lender in managing the Property, nor shall
Lender be obligated to perform or discharge any obligation, duty or liability
under any Lease or under or by reason of this instrument or the exercise of
rights or remedies hereunder.  Borrower shall, and does hereby,
indemnify Lender for, and hold Lender harmless from, any and all claims,
actions, demands, liabilities, loss or damage which may or might be incurred by
Lender under any such lease or under this Security Instrument or by the exercise
of rights or remedies hereunder and from any and all claims and demands
whatsoever which may be asserted against Lender by reason of any alleged
obligations or undertakings on its part to perform or discharge any of the
terms, covenants or agreements contained in any such Lease other than those
finally determined to have resulted solely from the gross negligence or willful
misconduct of Lender.  Should Lender incur any such liability, the
amount thereof, including, without limitation, costs, expenses and attorneys’
fees, together with interest thereon at the default interest rate from the date
incurred by Lender until actually paid by Borrower, shall be immediately due and
payable to Lender by Borrower on demand and shall be secured hereby and by all
of the other Loan Documents securing all or any part of the indebtedness
evidenced by the Note.  Nothing in this Section shall impose on Lender
any duty, obligation or responsibility for the control, care, management or
repair of the Property, or for the carrying out of any of the terms and
conditions of any such Lease, nor shall it operate to make Lender responsible or
liable for any waste committed on the Property by the tenants or by any other
parties or for any dangerous or defective condition of the Property, or for any
negligence in the management, upkeep, repair or control of the
Property.  Borrower hereby assents to, ratifies and confirms any and
all actions of Lender with respect to the property taken under this
Section.  The foregoing rights are in addition to all other rights and
remedies granted to Lender pursuant to this Security
Instrument.

    
      
         

      

      
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    (g) Representations to Leases.  Borrower
hereby represents and warrants that (i) each Tenant under a non-residential
Lease has entered into occupancy of the demised premises; and (ii) Borrower has
delivered to Lender true, correct and complete copies of all Leases described in
the Rent Roll.

     

    (h) Tenant Financial
Information.  Borrower shall cause the tenant under the TRS
Lease (a “Major Income
Lease”) to deliver to Borrower periodic operating statements with respect
to (i) such Tenant’s operations at the Property, and (ii) the operations of such
Tenant and, if applicable, any parent or affiliated entity of such Tenant which
operates, or has subsidiaries that operate, comparable businesses (collectively,
“Tenant Financial
Information”).  Notwithstanding the provisions of Section 1.12(b)
above, any Major Income Lease entered into after the date hereof which does not
require the Tenant to provide Tenant Financial Information upon request shall
require the prior written approval of Lender.  Borrower shall, from
time to time promptly upon request of Lender, request Tenant Financial
Information from the Tenant under each Major Income Lease (and use all
commercially reasonable efforts to obtain such Tenant Financial Information),
and promptly upon receipt thereof, deliver such Tenant Financial Information to
Lender, provided, however, that
provided no Event of Default is continuing, Lender shall not request such
information without reasonable cause (which reasonable cause shall include,
without limitation, the occurrence of any default by the Tenant).
Notwithstanding anything to the contrary contained herein, Borrower shall
provide the Tenant Financial Information (A) annually, (B) each time a new Major
Income Lease is executed and (iii) upon any material change in such Tenant
financial situation of which Borrower shall become aware.

    
      
         

      

      
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    For
purposes of this Section 1.12, in the event Lender does not approve or
disapprove a requested (x) proposed new Lease, or a proposed modification,
extension, termination of a Lease, within ten (10) Business Days, in each case
from the date Lender receives such request together with a copy of the final
version of such proposed new Lease or proposed extension, modification or
termination of an existing Lease, as the case may be, Borrower shall re-submit
such request, with the notation “IMMEDIATE RESPONSE REQUIRED, CONSENT DEEMED
GIVEN IF NO RESPONSE IS MADE WITHIN 5 DAYS” prominently displayed in bold, all
caps, 14 point type or larger, at the top of each page of such re-submitted
request and on any cover page or envelope, and if Lender does not approve such
request within five (5) calendar days from the date Lender receives the
re-submitted request, same shall be deemed approved.

     

    Section
1.13        Alienation and Further
Encumbrances.

     

    Borrower
acknowledges that Lender has relied upon the Borrower and the principals of
Borrower and their experience in owning and operating properties similar to the
Property in agreeing to make the loan evidenced by the Note and will continue to
rely upon Borrower’s ownership of the Property as a means of maintaining the
value of the Property as security for repayment of the Note and the performance
of the obligations of Borrower contained herein and the other Loan
Documents.  Borrower acknowledges that Lender has a valid interest in
maintaining the value of the Property so as to ensure that the indebtedness
secured hereby may be recovered by Lender should Borrower default in the
repayment of the indebtedness secured hereby or the performance of the
obligations of Borrower hereunder and under the other Loan
Documents.

     

    Accordingly,
except as specifically allowed hereinbelow in this Section and notwithstanding
anything to the contrary contained in Section 4.6 hereof,
in the event that the Property or any part thereof or any interest therein or
any interest in Borrower or its general partner shall be sold, conveyed,
disposed of, alienated, hypothecated, leased (except to Tenants under Leases
which are approved, or deemed approved, in accordance with the provisions of
Section 1.12
hereof), assigned, pledged, mortgaged, further encumbered or otherwise
transferred or Borrower or any other Restricted Party (as such term is
hereinafter defined) shall be divested of its title to the Property or any
interest (whether direct or indirect) therein, in any manner or way, whether
voluntarily or involuntarily, by operation of law or otherwise, without the
prior written consent of Lender being first obtained, which consent may be
withheld in Lender’s sole discretion (any of the foregoing being herein referred
to as a “Transfer”),
then, the same shall constitute an Event of Default hereunder and Lender shall
have the right, at its option, to declare any or all of the indebtedness secured
hereby, irrespective of the maturity date specified in the Note, immediately due
and payable and to otherwise exercise any of its other rights and remedies
contained in Article
III hereof.  As used in this Section 1.13, the term “Restricted Party” shall mean
collectively, the Borrower and (i) any Transfer Principal (“Transfer Principal” shall mean
any Person which is a managing member or non-member manager of Borrower if
Borrower is a limited liability company, or a general partner of Borrower if
Borrower is a partnership, and (ii) any partner, member, non-member manager,
managing member, or equity owner (or, if a trust, beneficial owner) of Borrower
or a Transfer Principal.

    
      
         

      

      
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    For
purposes of this Section 1.13, a Transfer shall include, but not be limited to,
(1) an installment sales agreement wherein Borrower agrees to sell the Property
or any part thereof for a price to be paid in installments, (2) if a Restricted
Party is a corporation, any merger, consolidation or voluntary or involuntary
sale, conveyance, assignment, transfer, encumbrance or pledge of a legal or
beneficial interest of such corporation’s stock or the creation or issuance of
new stock, (3) if a Restricted Party is a limited or general partnership, or
joint venture, any merger or consolidation or the change, removal, resignation
or addition of a general partner or any voluntary or involuntary sale,
conveyance, assignment, transfer, encumbrance or pledge of a legal or beneficial
interest of the partnership interest of any general partner or any profits or
proceeds relating to such partnership interest, or any voluntary or involuntary
sale, conveyance, assignment, transfer encumbrance or pledge of a legal or
beneficial interests of limited partnership interests or any profits or proceeds
relating to such limited partnership interests or the creation or issuance of
new limited partnership interests, (4) if a Restricted Party is a limited
liability company, any merger or consolidation or the change, removal,
resignation or addition of a managing member or non-member manager (or if no
managing member, any member) or any voluntary or involuntary sale, conveyance,
assignment, transfer encumbrance or pledge of a legal or beneficial interest of
the membership interests of a managing member (or if no managing member, any
member) or any profits or proceeds relating to such membership interest, or any
voluntary or involuntary sale, conveyance, assignment, transfer, encumbrance or
pledge of a legal or beneficial interest of non-managing membership interests or
the creation or issuance of new non-managing membership interests, or (5) if a
Restricted Party is a trust or nominee trust, any merger, consolidation or any
voluntary or involuntary sale, conveyance, assignment, transfer, encumbrance or
pledge of a legal or beneficial interest of the legal or beneficial interest in
a Restricted Party or the creation or issuance of new legal or beneficial
interests.

     

    For the
purposes of this Section 1.13: (i) in
the event either Borrower or any of its general partners or managing members is
a corporation or trust, the sale, conveyance, transfer or disposition of more
than 10% of the issued and outstanding capital stock of Borrower or any of its
general partners or managing members or of the beneficial interest of such trust
(or the issuance of new shares of capital stock in Borrower or any of its
general partners or managing members so that immediately after such issuance the
total capital stock then issued and outstanding is more than 110% of the total
immediately prior to such issuance) shall be deemed to be a transfer of an
interest in the Property, and (ii) in the event Borrower or any general partner
or managing member of Borrower is a limited or general partnership, a joint
venture or a limited liability company, a change in the ownership interests in
any general partner, any joint venturer or any member, either voluntarily,
involuntarily or otherwise, or the sale, conveyance, transfer, disposition,
alienation, hypothecation or encumbering of all or any portion of the interest
of any such general partner, joint venturer or member in Borrower or such
general partner (whether in the form of a beneficial or partnership interest or
in the form of a power of direction, control or management, or otherwise), shall
be deemed to be a transfer of an interest in the
Property.  Notwithstanding the foregoing, however, (1) up to, but not
in excess of, in the aggregate, 49% of the limited partnership, non-managing
member interests and/or aggregate of the issued and outstanding capital stock,
as the case may be, in Borrower or in any general partner or managing member of
Borrower shall be freely transferable without the consent of Lender, provided,
however, no such Transfer shall result in a change of voting control in such
Restricted Party, and as a condition to each such Transfer, Lender shall receive
not less than thirty (30) days prior notice of the proposed Transfer, and (2)
any involuntary Transfer caused by the death of Borrower or any general partner,
shareholder, joint venturer, or beneficial owner of a trust shall not be a
default under this Security Instrument so long as Borrower is reconstituted, if
required, following such death and so long as those persons responsible for the
management of Borrower and the Property remain unchanged as a result of such
death or any replacement management is approved by Lender and (3) gifts for
estate planning purposes of any individual’s interests in Borrower or in any of
Borrower’s general partners, managing members or joint venturers to the spouse
or any lineal descendant of such individual, or to a trust for the benefit of
any one or more of such individual, spouse or lineal descendant, shall not be an
Event of Default under this Security Instrument so long as Borrower is
reconstituted, if required, following such gift and so long as those persons
responsible for the day to day management of the Property and Borrower remain
unchanged following such gift or any replacement management is approved by
Lender.

     

    
      
        
        

      

      
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    Notwithstanding
the foregoing provisions of this Section 1.13, transfers of stock in any
publicly held or publicy traded entity that is a direct or indirect owner of
Borrower made through a public offering of such stock of such entity on a
recognized security exchange or over-the-counter market or otherwise shall not
be considered a Transfer for purposes of this Section 1.13 provided the board of
directors or trustees thereof and the day to day management of such entity
remains unchanged as a result thereof.

     

    Section
1.14       Payment of Utilities,
Assessments, Charges, Etc.  Borrower shall pay or cause to be
paid when due all utility charges which are incurred by Borrower or which may
become a charge or lien against any portion of the Property for gas,
electricity, water and sewer services furnished to the Real Estate and/or the
Improvements and all other assessments or charges of a similar nature, or
assessments payable pursuant to any restrictive covenants, whether public or
private, affecting the Real Estate and/or the Improvements or any portion
thereof, whether or not such assessments or charges are or may become liens
thereon.

     

    Section
1.15       Access Privileges and
Inspections.  Lender and the agents, representatives and
employees of Lender shall, subject to the rights of tenants, have full and free
access to the Real Estate and the Improvements and any other location where
books and records concerning the Property are kept at all reasonable times for
the purposes of inspecting the Property and, subject to applicable law, of
examining, copying and making extracts from the books and records of Borrower
relating to the Property.  Borrower shall lend assistance to all such
agents, representatives and employees of Lender.

     

    Section
1.16       Waste; Alteration of the
Property.  Borrower shall not commit, suffer or permit any
waste on the Property nor take any actions that might invalidate any insurance
carried on the Property.  Borrower shall maintain the Property in good
condition and repair.  No part of the Improvements may be removed,
demolished or materially altered, without the prior written consent of
Lender.  Without the prior written consent of
Lender,  Borrower shall not commence construction of any improvements
on the Real Estate other than improvements required for the maintenance or
repair of the Property.

     

    Section
1.17      Zoning;
Use.  Without the prior written consent of Lender, Borrower
shall not seek, make, suffer, consent to or acquiesce in any change in the
zoning or conditions of use of the Real Estate or the
Improvements.  Borrower shall comply with and make all payments
required under the provisions of any covenants, conditions or restrictions
affecting the Real Estate or the Improvements.  Borrower shall comply
with all existing and future requirements of all governmental authorities having
jurisdiction over the Property.  Borrower shall keep or cause to be
kept all licenses, permits, franchises, certificates of occupancy,
consents, and other approvals necessary for the operation of the Property
in full force and effect.  Borrower shall operate the Property (or
cause the Property to be operated) as an assisted living facility for so long as
the indebtedness secured hereby is outstanding.  If, under applicable
zoning provisions, the use of all or any part of the Real Estate or the
Improvements is or becomes a nonconforming use, Borrower shall not cause or
permit such use to be discontinued or abandoned without the prior written
consent of Lender.  Further, without Lender’s prior written consent,
Borrower shall not file or subject any part of the Real Estate or the
Improvements to any declaration of condominium or cooperative or convert
any part of the Real Estate or the Improvements to a condominium,
cooperative or other form of multiple ownership and governance.

     

    
      
        
        

      

      
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    Section
1.18       Financial Statements and
Books and Records.  Borrower shall keep accurate books and
records of account of the Property and its own financial affairs sufficient to
permit the preparation of financial statements therefrom in accordance with
generally accepted accounting principles.  Lender and its duly
authorized representatives shall have the right to examine, copy and audit
Borrower’s records and books of account at all reasonable times.  So
long as this Security Instrument continues in effect, Borrower shall provide to
Lender, in addition to any other financial statements required hereunder or
under any of the other Loan Documents, the following financial statements and
information, all of which must be certified to Lender as being true and correct
by Borrower or the entity to which they pertain, as applicable, be prepared in
accordance with generally accepted accounting principles consistently applied
and be in form and substance acceptable to Lender:

     

    (a)
copies of all tax returns filed by Borrower, within thirty (30) days after the
date  of filing;

     

    (b)
operating statements for the Property, within thirty (30) days after the end of
each February, April, June, August, October and December;

     

    (c)
current rent rolls for the Property, within thirty (30) days after the end of
each February, April, June, August, October and December;

     

    (d)
annual balance sheets for the Property and annual financial statements for
Borrower, and each indemnitor and guarantor under any indemnity or guaranty
executed in connection with the Loan secured hereby within ninety (90) days
after the end of each calendar year; and

     

    (e) such
other information with respect to the Property, Borrower, the principals, each
manager, managing member or general partner of Borrower, and each indemnitor and
guarantor under any indemnity or guaranty executed in connection with the Loan
secured hereby, which may be requested from time to time by Lender, within a
reasonable time after the applicable request.

     

    
      
        
        

      

      
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    If
Borrower fails to timely furnish Lender with any of the financial information,
statements and/or reports set forth above within the required time periods,
Lender shall be entitled to receive a late charge equal to $500.00 for each such
information, statement or report not so furnished to Lender (the “Financial Late
Charge”).  The Financial Late Charge shall be due and payable
by Borrower immediately upon receipt by Borrower of an invoice for same from
Lender.  Until paid, the Financial Late Charge shall bear interest at
the Default Interest Rate, and shall be deemed additional indebtedness of
Borrower secured by the Loan Documents.  In addition, if any of the
aforementioned materials are not furnished to Lender within the applicable time
periods or Lender is dissatisfied with the contents of any of the foregoing, in
addition to any other rights and remedies of Lender contained herein, Lender
shall have the right, but not the obligation, to obtain the same by means of an
audit by an independent certified public accountant selected by Lender, in which
event Borrower agrees to pay, or to reimburse Lender for, any expense of such
audit and further agrees to provide all necessary information to said accountant
and to otherwise cooperate in the making of such audit.  Borrower
agrees that any and all materials furnished hereunder are the property of Lender
(and Lender’s servicer) and may be released and made available to such parties
as Lender or its servicer deems appropriate,

     

    Section
1.19       Further
Documentation.  Borrower shall, on the request of Lender in its
reasonable discretion and at the expense of Borrower, promptly correct any
defect, error or omission which may be discovered in the contents of this
Security Instrument or in any of the other Loan Documents and promptly execute,
acknowledge, deliver and record or file such further instruments and do such
further acts as may be necessary, desirable or proper to carry out more
effectively the purposes of this Security Instrument and the other Loan
Documents or as may be deemed advisable by Lender to protect, continue or
preserve the liens and security interests hereunder including, without
limitation, security instruments, financing statements and continuation
statements.

     

    Section
1.20       Payment of Costs. (a)
Borrower shall pay all reasonable costs and expenses of every character incurred
in connection with the closing of the Loan or otherwise attributable or
chargeable to Borrower as the owner of the Property, including, without
limitation, appraisal fees, recording fees, documentary, stamp, mortgage or
intangible taxes, brokerage fees and commissions, title policy premiums and
title search fees, uniform commercial code/tax lien/litigation search fees,
escrow fees and reasonable attorneys’ fees. Unless otherwise specified herein,
with respect to any action by Borrower permitted hereunder, Borrower shall pay
all of its own costs and expenses relating thereto as well as any costs and
expenses incurred by Lender.

     

    
      
        
        

      

      
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    (b)           Advances to Protect
Property.  Without limiting or waiving any other rights and
remedies of Lender hereunder, if Lender determines that Borrower is not
adequately performing or has failed to perform any of its obligations, covenants
or agreements contained in this Security Instrument or in any of the other Loan
Documents and such inadequacy or failure is not cured within any applicable
grace or cure period, or if any action or proceeding of any kind (including, but
not limited to, any bankruptcy, insolvency, arrangement, reorganization or other
debtor relief proceeding) is commenced which might affect Lender’s interest in
the Property or Lender’s right to enforce its security, then Lender may, at its
option, with or without notice to Borrower, make any appearances, disburse or
advance any sums and take any actions as may be necessary or desirable to
protect or enforce the security of this Security Instrument or to remedy the
failure of Borrower to perform its covenants and agreements (without, however,
waiving any default of Borrower).  Borrower agrees to pay on demand
all expenses of Lender reasonably incurred with respect to the foregoing
(including, but not limited to, fees and disbursements of counsel), together
with interest thereon at the Default Interest Rate from and after the date on
which Lender has notified Borrowers that Lender has incurred such expenses until
reimbursement thereof by Borrower.  Any such expenses so incurred by
Lender, together with interest thereon as provided above, shall be additional
indebtedness of Borrower secured by this Security Instrument and by all of
the other Loan Documents securing all or any part of the indebtedness evidenced
by the Note.  The necessity for any such actions and of the amounts to
be paid shall be determined by Lender in its sole and absolute
discretion.  Lender is hereby empowered to enter and to authorize
others to enter upon the Property or any part thereof for the purpose of
performing or observing any such defaulted term, covenant or condition
without thereby becoming liable to Borrower or any person in possession
holding under Borrower.  Borrower hereby acknowledges and agrees that
the remedies set forth in this Section 1.20(b) shall
be exercisable by Lender, and any and all payments made or costs or expenses
incurred by Lender in connection therewith shall be secured hereby and shall be,
without demand, immediately repaid by Borrower with interest thereon at
the Default Interest Rate, notwithstanding the fact that such remedies were
exercised and such payments made and costs incurred by Lender after the
filing by Borrower of a voluntary case or the filing against Borrower of an
involuntary case pursuant to or within the meaning of the Bankruptcy Reform Act
of 1978, as amended (the “Act”), Title 11 U.S.C., or
after any similar action pursuant to any other debtor relief law (whether
statutory, common law, case law or otherwise) of any jurisdiction whatsoever,
now or hereafter in effect, which may be or become applicable to Borrower,
Lender, any guarantor or indemnitor, the secured indebtedness or any of the Loan
Documents.  This indemnity shall survive payment in full of the
indebtedness secured hereby.  This Section 1.20(b) shall
not be construed to require Lender to incur any expenses, make any appearances
or take any actions.

     

    Section
1.21          Security
Interest.  This Security Instrument is also intended to
encumber and create a security interest in, and Borrower hereby grants to Lender
a security interest in, all Reserves (as hereinabove defined), and all right,
title and interest of Borrower in and to fixtures, chattels, accounts,
equipment, inventory, contract rights, general intangibles and other personal
property included within the Property, all renewals, replacements of any of the
aforementioned items, or articles in substitution therefor or in addition
thereto or the proceeds thereof (said property is hereinafter referred to
collectively as the “Collateral”), whether or not
the same shall be attached to the Real Estate or the Improvements in any
manner.  It is hereby agreed that to the extent permitted by law, all
of the foregoing property is to be deemed and held to be a part of and affixed
to the Real Estate and the Improvements.  The foregoing security
interest shall also cover Borrower’s leasehold interest in any of the foregoing
property which is leased by Borrower.  Notwithstanding the foregoing,
all of the foregoing property shall be owned by Borrower and no leasing or
installment sales or other financing or title retention agreement in connection
therewith shall be permitted without the prior written approval of
Lender.  Borrower shall promptly replace all of the Collateral subject
to the lien or security interest of this Security Instrument when worn out or
obsolete with Collateral comparable to the worn out or obsolete Collateral when
new and will not, without the prior written consent of Lender, remove from the
Real Estate or the Improvements any of the Collateral subject to the lien or
security interest of this Security Instrument except such as is replaced by an
article of equal suitability and value as above provided, owned by Borrower free
and clear of any lien or security interest except that created by this Security
Instrument and the other Loan Documents and except as otherwise expressly
permitted by the terms of Section 1.13 of this
Security Instrument.  All of the Collateral shall be kept at the
location of the Real Estate except as otherwise required by the terms of the
Loan Documents.  Borrower shall not use any of the Collateral in
violation of any applicable statute, ordinance or insurance policy.

     

    
      
        
        

      

      
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    Section
1.22       Security
Agreement.  This Security Instrument constitutes both a real
property mortgage and a “security agreement” between Borrower and Lender with
respect to the Collateral in which Lender is granted a security interest
hereunder, and, cumulative of all other rights and remedies of Lender hereunder,
Lender shall have all of the rights and remedies of a secured party under any
applicable Uniform Commercial Code.  Borrower hereby authorizes Lender
to prepare, file of record or otherwise effectuate new financing statements or
financing statement amendments which describe all or any portion of the assets
of Borrower as collateral thereunder.  Borrower specifically agrees
that Lender may cause such financing statements and financing statement
amendments to be filed without any signature of a representative of the Borrower
appearing thereon, where such filings are permitted by applicable
law.  Borrower hereby agrees to execute and deliver on demand and
hereby irrevocably constitutes and appoints Lender the attorney-in-fact of
Borrower to execute and deliver and, if appropriate, to file with the
appropriate filing officer or office such security agreements, financing
statements, continuation statements or other instruments as Lender may request
or require in order to impose, perfect or continue the perfection of the lien or
security interest created hereby.  Expenses of retaking, holding,
preparing for sale, selling or the like (including, without limitation, Lender’s
reasonable attorneys’ fees and legal expenses), together with interest thereon
at the Default Interest Rate from the date Lender notifies Borrower of the
incurrence thereof until actually paid by Borrower, shall be paid by Borrower on
demand and shall be secured by this Security Instrument and by all of the other
Loan Documents securing all or any part of the indebtedness evidenced by the
Note.  If notice is required by law, Lender shall give Borrower at
least ten (10) days’ prior written notice of the time and place of any public
sale of such property or of the time of or after which any private sale or any
other intended disposition thereof is to be made, and if such notice is sent to
Borrower, as the same is provided for the mailing of notices herein, it is
hereby deemed that such notice shall be and is reasonable notice to
Borrower.  No such notice is necessary for any such property which is
perishable, threatens to decline speedily in value or is of a type customarily
sold on a recognized market.  Any sale made pursuant to the provisions
of this Section
1.22 shall be deemed to have been a public sale conducted in a
commercially reasonable manner if held contemporaneously with the foreclosure
sale as provided in Section 3.1(e) hereof
upon giving the same notice with respect to the sale of the Property hereunder
as is required under said Section
3.1(e).  Furthermore, to the extent permitted by law, in
conjunction with, in addition to or in substitution for the rights and remedies
available to Lender pursuant to any applicable Uniform Commercial
Code:

     

    (a) In
the event of a foreclosure sale, the Property may, at the option of Lender, be
sold as a whole;

     

    (b) It
shall not be necessary that Lender take possession of the aforementioned
Collateral, or any part thereof, prior to the time that any sale pursuant to the
provisions of this Section 1.22 is
conducted and it shall not be necessary that said Collateral, or any part
thereof, be present at the location of such sale; and

     

    
      
        
        

      

      
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    (c)
Lender may appoint or delegate any one or more persons as agent to perform any
act or acts necessary or incident to any sale held by Lender, including the
sending of notices and the conduct of the sale, but in the name and on behalf of
Lender.

     

    The name,
principal place of business and chief executive office of Borrower (as Debtor
under any applicable Uniform Commercial Code) are:

     

    Nantucket
Acquisition LLC

    c/o
Cornerstone Ventures, Inc.

    1920 Main
Street, Suite 400

    Irvine,
CA 92614

    

    The
federal employer identification number/social security number of Borrower is
27-1275344.

     

    The name
and address of Lender (as Secured Party under any applicable Uniform Commercial
Code) is:

     

    Cornerstone
Operating Partnership, L.P.

    1920 Main
Street, Suite 400

    Irvine,
CA 92614

    

    (d)        Borrower
shall not change its principal place of business, chief executive office, state
of organization or registration or its name, without in each case, obtaining the
prior written consent of Lender.  Without limitation to the foregoing,
Lender may condition its consent thereto upon Borrower’s execution and delivery
of additional financing statements or related documents as Lender may determine
to be necessary to effectively evidence, perfect or continue the perfection of
Lender’s security interest in the Collateral as a result of any such
change.

     

    (e)        The
security interests herein granted shall not be deemed or construed to constitute
Lender as a trustee in possession of the Property, to obligate Lender to lease
the Property or attempt to do so, or to take any action, incur any expense or
perform or discharge any obligation, duty or liability whatsoever under any of
the Leases or otherwise.

     

    Section
1.23       Easements and
Rights-of-Way.  Borrower shall not grant any easement or
right-of-way with respect to all or any portion of the Real Estate or the
Improvements without the prior written consent of Lender.  The
purchaser at any foreclosure sale hereunder may, at its discretion, disaffirm
any easement or right-of-way granted in violation of any of the provisions of
this Security Instrument and may take immediate possession of the Property free
from, and despite the terms of, such grant of easement or
right-of-way.  If Lender consents to the grant of an easement or
right-of-way, Lender agrees to grant such consent without charge to Borrower
other than reasonable expenses, including, without limitation, reasonable
attorneys’ fees, incurred by Lender in the review of Borrower’s request and, if
applicable, in the preparation of documents relating to the subordination of
this Security Instrument to such easement or right-of-way.

     

    
      
        
        

      

      
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    Section
1.24       Compliance with
Laws.  (a)  Borrower shall, and shall cause the
tenant under the TRS Lease, at all times comply with all statutes, ordinances,
regulations and other governmental or quasi-governmental requirements and
private covenants now or hereafter relating to the ownership, construction, use
or operation of the Property or the provision o f services to the occupants of
the Property, including, but not limited to, those concerning employment and
compensation of persons engaged in operation and maintenance of the Property,
employee health and safety, quality and safety standards, accreditation
standards and requirements of applicable state department of health or other
applicable state regulatory agencies, quality and adequacy of medical care,
distribution of pharmaceuticals, rate setting, equipment, personnel, operating
policies, additions to facilities and services and fee splitting, and any
environmental or ecological requirements, even if such compliance shall require
structural changes to the Property; provided, however, that
Borrower may, upon providing Lender with security satisfactory to Lender,
proceed diligently and in good faith to contest the validity or applicability of
any such statute, ordinance, regulation or requirement so long as during such
contest the Property shall not be subject to any lien, charge, fine or other
liability and shall not be in danger of being forfeited, lost or
closed.  Borrower shall not use or occupy, or allow the use or
occupancy of, the Property in any manner which violates any lease of or any
other agreement applicable to the Property or any applicable law, rule,
regulation or order or which constitutes a public or private nuisance or which
makes void, voidable or cancelable, or increases the premium of, any insurance
then in force with respect thereto.  Borrower shall maintain or
obtain, and shall require and cause the tenant under the TRS Lease (and/or its
property manager, as applicable) to obtain and maintain, all licenses,
qualifications and permits now held or hereafter required to be held by Borrower
for which the loss or suspension, revocation or failure to obtain or renew could
reasonably be expected to have a material adverse effect upon the financial
condition of the Borrower or the ability to operate the Property in compliance
with the requirements of this Security Instrument and as it has been operated
prior to the date hereof.

     

    (b)
Borrower agrees that the Property shall at all times comply, to the extent
applicable, with the requirements of the Americans with Disabilities Act of
1990, the Fair Housing Amendments Act of 1988 and all other state and local laws
and ordinances related to handicapped access and all rules, regulations, and
orders issued pursuant thereto including, without limitation, the Americans with
Disabilities Act Accessibility Guidelines for Buildings and Facilities
(collectively, “Access
Laws”).  Borrower agrees to give prompt notice to Lender of the
receipt by Borrower of any complaints related to violations of any Access Laws
and of the commencement of any proceedings or investigations which relate to
compliance with applicable Access Laws.

     

    (c)  (i)
Without limiting the generality of any other provision of this Security
Instrument, Borrower shall be, and shall use its best efforts to cause the
tenant under the TRS Lease and any property manager, and its respective
employees and contractors (other than contracted agencies) in the exercise of
their duties on behalf of Borrower or any such property manager (with respect to
its operation of the Property) to be in compliance in all material respects with
all applicable laws relating to patient healthcare and/or patient healthcare
information, including without limitation the Health Insurance Portability and
Accountability Act of 1996, as amended, and the rules and regulations
promulgated thereunder (“HIPAA”) (collectively, “Healthcare
Laws”).  Borrower and such tenant shall maintain in all
material respects all records required to be maintained by any governmental
authority or otherwise under the Healthcare Laws and there are, to Borrower’s
knowledge, after due inquiry, no presently existing circumstances which would
result or likely would result in material violations of the Healthcare
Laws.  Borrower and such tenant has and will maintain all governmental
approvals necessary under applicable laws for the ownership and operation of the
Property, as applicable (including such Governmental Approvals as are required
under such the Healthcare Laws).

     

    
      
        
        

      

      
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    (ii) If
(1) Borrower or such tenant is a “covered entity” within the meaning of
HIPAA or (2) Borrower (with respect to its operation of the Property) is
subject to the “Administrative Simplification” provisions of HIPAA, then such
person(s) (x) have undertaken or will promptly undertake all necessary
surveys, audits, inventories, reviews, analyses and/or assessments (including
any necessary risk assessments) of all areas of its business and operations
required by HIPAA and/or that could be adversely affected by the failure of such
person(s) to be HIPAA Compliant (as defined below); (y) has developed or
will promptly develop a detailed plan and time line for becoming HIPAA Compliant
(a “HIPAA Compliance
Plan”); and (z) has implemented or will implement those provisions
of such HIPAA Compliance Plan in all material respects necessary to ensure that
such person(s) are or become HIPAA Compliant.  For purposes hereof,
“HIPAA
Compliant” shall
mean that Borrower and such tenant, as applicable (A) is or will be in
compliance in all material respects with each of the applicable requirements of
the so-called “Administrative Simplification” provisions of HIPAA on and as of
each date that any part thereof, or any final rule or regulation thereunder,
becomes effective in accordance with its or their terms, as the case may be
(each such date, a “HIPAA
Compliance Date”) if and to the extent Borrower and/or such tenant are
subjected to such provisions, rules or regulations, and (B) are not and
could not reasonably be expected to become, as of any date following any such
HIPAA Compliance Date, the subject of any civil or criminal penalty, process,
claim, action or proceeding, or any administrative or other regulatory review,
survey, process or proceeding (other than routine surveys or reviews conducted
by any government health plan or other accreditation entity) that could result
in any of the foregoing or that could reasonably be expected to adversely affect
Borrower’s business, operations, assets, properties or condition (financial or
otherwise), in connection with any actual or potential violation by Borrower or
such tenant of the then effective provisions of HIPAA.

     

    (iii) If
required under applicable law, Borrower or such tenant has and shall maintain in
full force and effect a valid certificate of need (“CON”) or similar certificate,
license, or approval issued by any state regulator or regulatory agency for the
requisite number of beds and/or units, as applicable, in the Property, and a
provider agreement or other required documentation of approved provider status
for each provider payment or reimbursement program, if
applicable.  Borrower shall operate the Property (or cause the
Property to be operated) in a manner such that the all required licenses
therefore shall remain in full force and effect.  True and complete
copies of such licenses have been delivered to Lender.  No such
licenses are or shall be pledged as collateral security for any loan or
indebtedness, other than this Loan and Borrower shall not, and shall not suffer
or permit: (1) any such license to be rescinded, withdrawn, revoked, amended,
modified, supplemented, or otherwise alter the nature, tenor or scope of any of
the licenses for the Property without Lender’s consent, (2) any amendment or
other change to the Property’s authorized units/beds capacity and/or the number
of units/beds approved by any governmental authority or agency, replace or
transfer all of any part of the units or beds to another site or location, or
(3) voluntarily transfer or encourage the transfer of any resident of the
Property to any other facility, unless such transfer is at the request of the
resident or is for reasons relating to the health, required level of medical
care or safety of the resident to be transferred.

     

    
      
        
        

      

      
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    (d)        Without
limitation to the generality of any other provisions herein: (i) if Borrower or
the tenant under the TRS Lease participates in any Medicare or Medicaid or other
third-party payor programs with respect to the Property, the Property will
remain in compliance with all requirements for participation in Medicare and
Medicaid, including the Medicare and Medicaid Patient Protection Act of 1987, as
it may be amended, and such other third party payor programs.  The
Property is and will remain in conformance in all material respects with all
insurance, reimbursement and cost reporting requirements, and, if applicable,
have a current provider agreement that is in full force and effect under
Medicare and Medicaid.

     

    (ii)        There
is no, and during the term of this Loan there shall be no, threatened, existing
or pending revocation, suspension, termination, probation, restriction,
limitation, or nonrenewal affecting Borrower the tenant under the TRS Lease, any
property manager, or the Property or any participation or provider agreement
with any third-party payor, if any, including Medicare, Medicaid, Blue Cross
and/or Blue Shield, and any other private commercial insurance managed care and
employee assistance program (such programs, the “Third-Party Payor Programs”)
to which any Borrower or the tenant under the TRS Lease may presently be subject
with respect to any Property, or at any time hereafter is
subject.  Notwithstanding the preceding sentence, Borrowers or the
tenant under the TRS Lease may contest (to the extent such contest rights are
available by statute or as otherwise permitted by law) in good faith by
appropriate proceedings, any of the foregoing so long as (i) Borrowers have
given prior written notice to Lender of the intent to so contest or object to
same, (ii) such contest will not result in a material adverse change upon
Borrower, the Property or Borrower’s ability to (A) operate the Property for the
uses set forth herein or (B) repay the Loan, and (iii) Borrower and/or such
tenant under the TRS Lease is diligently contesting the same by appropriate
legal proceedings in good faith and at their own expense.  Neither
Borrower or tenant under the TRS Lease shall or shall permit, other than in the
normal course of business, any change in the terms of any of the Third-Party
Payor Programs now or hereinafter in effect or their normal billing payment or
reimbursement policies and procedures with respect thereto (including the amount
and timing of finance charges, fees and write-offs).  Notwithstanding
the foregoing, Borrower or such tenant under the TRS Lease may voluntarily
withdraw from or terminate any Third-Party Payor Program to which Borrower or
such tenant under the TRS Lease may be subject to with respect to any
Property.  All Medicaid, Medicare and private insurance cost reports
and financial reports submitted by Borrower or such tenant under the TRS Lease,
if any, are and will be materially accurate and complete and have not been and
will not be misleading in any material respects.  No cost reports for
the Property remain open or unsettled.

     

    (e)        To
Borrower’s knowledge, (i) no “F” Tags or higher with a scope and severity
of “G” or higher have been issued by any governmental authority with respect to
the Property which deficiencies remain uncured (whether or not such cure has
been formally recognized in a subsequent audit or inspection by a governmental
authority), and (ii) no penalties have been imposed on or enforcement
action has been undertaken by any governmental authority against any Property,
Borrower (or the tenant under the TRS Lease) or against any officer, director,
partner, member, manager or owner of Borrower (or the tenant under the TRS
Lease) which has not been paid in full and/or cured or is being contested in
good faith through administrative or judicial proceedings, as
applicable.

     

    
      
        
        

      

      
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    (f)         (i)
To Borrower’s knowledge, there are no current, pending or outstanding Medicaid,
Medicare or Third-Party Payor Programs reimbursement audits or appeals pending
at the Property, and there are no years that are subject to audit.

     

    (ii)        To
Borrower’s knowledge, there are no current or pending Medicaid or Medicare or
Third-Party Payor Programs recoupment efforts at the
Property.  Neither Borrower nor the tenant under the TRS Lease is a
participant in any federal program whereby any Governmental Authority may have
the right to recover funds by reason of the advance of federal funds, including
those authorized under the Hill-Burton Act (42 U.S.C. 291, et seq.), as it may be
amended.

     

    (iii)       To
Borrower’s knowledge, there are no and there will remain no patient or resident
care agreements with patients or residents which deviate in any material adverse
respect from the form agreements which have been delivered to and approved by
Lender.

     

    (iv)     
 To Borrower’s knowledge, in the event any management agreement is
terminated or in the event of foreclosure or other acquisition of the Property
by Lender or its designee or any purchaser at a foreclosure sale or by
acceptance of a deed in lieu of foreclosure, Borrower, Lender, any subsequent
manager or any subsequent purchaser need not obtain a CON prior to applying for
and receiving Medicare or Medicaid payments.

     

    (v)        To
Borrower’s knowledge, all patient or resident records at the Property, including
patient or resident trust fund accounts, are true and correct in all material
respects, and will remain true and correct in all material
respects.

     

    (g)        Upon
the occurrence of an uncured Event of Default and the request of Lender,
Borrower shall and shall cause the tenant under the TRS Lease and its property
manager, if any, to complete, execute and deliver to Lender any applications,
notices, documentation, and other information necessary or desirable, in
Lender’s judgment, to permit Lender or its designee (including a receiver) to
obtain, maintain or renew any one or more of the licenses for the Property (or
to become the owner of the existing licenses for the Property) and to the extent
permitted by applicable laws to obtain any other provider agreements or
governmental approvals then necessary or desirable for the operation of the
Property by Lender or its designee for their current use (including, without
limitation, any applications for change of ownership of the existing licenses or
change of control of the owner of the existing licenses).  After the
occurrence and continuation of an Event of Default, to the extent permitted by
applicable laws, (i) Lender is hereby authorized (without the consent of
Borrower or such tenant under the TRS Lease or any other person) to submit any
such applications, notices, documentation or other information which Borrower
caused to be delivered to Lender in accordance with the above provisions to the
applicable governmental authorities, or to take such other steps as Lender may
deem advisable to obtain, maintain or renew any license or other governmental
approvals in connection with the operation of the Property for their current
use, and Borrower agrees to, and shall cause the tenant under the TRS Lease, to
cooperate and to cause to cooperate with Lender in connection with the same and
(ii) Borrower, upon demand by Lender, shall and shall cause the tenant
under the TRS Lease to take any action and cause to take any action necessary or
desirable, in Lender’s sole judgment, to permit Lender or its designee
(including a receiver) to use, operate and maintain the Property for its current
use.  If Borrower fails to comply with the provisions of this Section
for any reason whatsoever, Borrower hereby irrevocably appoints Lender and its
designee as Borrower’s attorney-in-fact, with full power of substitution, to
take any action and execute any documents and instruments necessary or desirable
in Lender’s sole judgment to permit Lender or its designee to undertake
Borrower’s obligations under this Section, including obtaining any licenses or
governmental approvals then required for the operation of the Property by Lender
or its designee for its current use.  The foregoing power of attorney
is coupled with an interest and is irrevocable and Lender may exercise its
rights thereunder in addition to any other remedies which Lender may have
against Borrower as a result of a Borrower’s breach of the obligations contained
in this Section.

     

    
      
        
        

      

      
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    Section
1.25       Additional
Taxes.  In the event of the enactment after this date of any
law of the state where the Property is located or of any other governmental
entity deducting from the value of the Property for the purpose of taxation any
lien or security interest thereon, or imposing upon Lender the payment of the
whole or any part of the taxes or assessments or charges or liens herein
required to be paid by Borrower, or changing in any way the laws relating to the
taxation of mortgages or security agreements or debts secured by mortgages or
security agreements or the interest of the mortgagee or secured party in the
property covered thereby, or the manner of collection of such taxes, so as to
adversely affect this Security Instrument or the indebtedness secured hereby or
Lender, then, and in any such event, Borrower, upon demand by Lender, shall pay
such taxes, assessments, charges or liens, or reimburse Lender therefore; provided, however, that if in
the opinion of counsel for Lender (a) it might be unlawful to require Borrower
to make such payment, or (b) the making of such payment might result in the
imposition of interest beyond the maximum amount permitted by law, then and in
either such event, Lender may elect, by notice in writing given to Borrower, to
declare all of the indebtedness secured hereby to be and become due and payable
in full, thirty (30) days from the giving of such notice.

     

    Section
1.26       Borrower’s
Waivers.  To the full extent permitted by law, Borrower agrees
that Borrower shall not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, moratorium or extension, or any law now or
hereafter in force providing for the reinstatement of the indebtedness secured
hereby prior to any sale of the Property to be made pursuant to any provisions
contained herein or prior to the entering of any decree, judgment or order of
any court of competent jurisdiction, or any right under any statute to redeem
all or any part of the Property so sold.  To the full extent permitted
by law, Borrower shall not have or assert any right under any statute or rule of
law pertaining to the exemption of homestead or other exemption under any
federal, state or local law now or hereafter in effect, the administration of
estates of decedents or any other matters whatsoever to defeat, reduce or affect
the right of Lender under the terms of this Security Instrument to a sale of the
Property, for the collection of the secured indebtedness without any prior or
different resort for collection, or the right of Lender under the terms of this
Security Instrument to the payment of the indebtedness secured hereby out of the
proceeds of sale of the Property in preference to every other claimant
whatsoever.  Borrower, for Borrower and Borrower’s successors and
assigns, and for any and all persons ever claiming any interest in the Property,
to the full extent permitted by law, hereby knowingly, intentionally and
voluntarily with and upon the advice of competent counsel waives, releases,
relinquishes and forever forgoes:  (a) all rights of valuation,
appraisement, stay of execution, reinstatement and notice of election or
intention to mature or declare due the secured indebtedness (except such notices
as are specifically provided for herein); (b) all right to a marshalling of the
assets of Borrower, including the Property, to a sale in the inverse order of
alienation, or to direct the order in which any of the Property shall be sold in
the event of foreclosure of the liens and security interests hereby created and
agrees that any court having jurisdiction to foreclose such liens and security
interests may order the Property sold as an entirety; (c) all rights and periods
of redemption provided under applicable law; and (d) all present and future
statutes of limitations as a defense to any action to enforce the provisions of
this Security Instrument or to collect any of the indebtedness secured hereby to
the fullest extent permitted by law and agrees that it shall not solicit or aid
the solicitation of the filing of any Petition (as hereinafter defined) against
Borrower, whether acting on its own behalf or on behalf of any other
party.  Without limiting the generality of the foregoing, Borrower
shall not (i) provide information regarding the identity of creditors or the
nature of creditors’ claims to any third party unless compelled to do so by
order of a court of competent jurisdiction or by regulation promulgated by a
governmental agency; or (ii) pay the legal fees or expenses of any creditor of
or interest holder in Borrower with respect to any matter
whatsoever.

     

    
      
        
        

      

      
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    Section
1.27       SUBMISSION
TO JURISDICTION; WAIVER OF JURY TRIAL.

     

    BORROWER,
TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND
VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, (i) SUBMITS TO
PERSONAL JURISDICTION IN THE STATE OF MASSACHUSETTS OVER ANY SUIT, ACTION
OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THE NOTE, THIS SECURITY
INSTRUMENT OR ANY OTHER OF THE LOAN DOCUMENTS, (ii) AGREES THAT ANY SUCH
ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION SITTING IN NANTUCKET COUNTY, MASSACHUSETTS,
(iii) SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND (iv) AGREES
THAT IT WILL NOT BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM (BUT
NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO BRING ANY ACTION, SUIT OR
PROCEEDING IN ANY OTHER FORUM).  BORROWER, TO THE FULLEST EXTENT
PERMITTED BY LAW, FURTHER CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO BORROWER AT THE ADDRESS
FOR NOTICES DESCRIBED IN SECTION 5.4 HEREOF,
AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT
VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR
EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY
LAW).

     

    BORROWER,
TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND
VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES
AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THE INDEBTEDNESS SECURED
HEREBY OR ANY CONDUCT, ACT OR OMISSION OF LENDER OR BORROWER, OR ANY OF THEIR
DIRECTORS, OFFICERS, PARTNERS, MANAGERS, MEMBERS, EMPLOYEES, AGENTS OR
ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER, IN EACH OF
THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE.

     

    
      
        
        

      

      
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    Section
1.28       Contractual Statute of
Limitations.  Borrower hereby agrees that any claim or cause of
action by Borrower against Lender, or any of Lender’s directors, officers,
employees, agents, accountants or attorneys, based upon, arising from or
relating to the indebtedness secured hereby, or any other matter, cause or thing
whatsoever, whether or not relating thereto, occurred, done, omitted or suffered
to be done by Lender or by Lender’s directors, officers, employees, agents,
accountants or attorneys, whether sounding in contract, in tort or otherwise,
shall be barred unless asserted by Borrower by the commencement of an action or
proceeding in a court of competent jurisdiction by the filing of a complaint
within one (1) year after Borrower first acquires or reasonably should have
acquired knowledge of the first act, occurrence or omission upon which such
claim or cause of action, or any part thereof, is based and service of a summons
and complaint on an officer of Lender or any other person authorized to accept
service of process on behalf of Lender, within thirty (30) days
thereafter.  Borrower agrees that such one (1) year period of time is
reasonable and sufficient time for a borrower to investigate and act upon any
such claim or cause of action.  The one (1) year period provided
herein shall not be waived, tolled or extended except by the specific written
agreement of Lender.  This provision shall survive any termination of
this Security Instrument or any of the other Loan Documents.

     

    Section
1.29      Management.  The
management of the Property shall be by either:  (a) Borrower or
an entity affiliated with Borrower approved by Lender for so long as
Borrower or said affiliated entity is managing the Property in a first
class manner; or (b) a professional property management company approved by
Lender (any such person or entity which manages the Property, other than
Borrower is herein referred to as the “Manager”).  Such
management by an affiliated entity or a professional property management company
shall be pursuant to a written agreement approved by Lender (the “Management Agreement”); Lender
acknowledges that as of the date hereof, there is a management agreement in
effect between Riverwood Retirement Management, Incorporated, a Florida
corporation, and Tenant.  In no event shall any Manager be removed or
replaced or the terms of any Management Agreement modified or amended without
the prior written consent of Lender.  In the event (x) of a default
hereunder or under any Management Agreement then in effect, which default is not
cured within any applicable grace or cure period, (y) of a change in control
(fifty percent or more) of the ownership of the Manager (if Borrower is
self-managing or the Manager is an affiliate of Borrower), or (z) Manager
provides cause for termination pursuant to the Management Agreement, including,
without limitation, gross negligence, willful misconduct or fraud, or the
Manager becomes insolvent or a debtor in any bankruptcy or insolvency
proceeding, Lender shall have the right to terminate, or to direct Borrower to
terminate, such Management Agreement at any time and, in any such event of
termination of the Management Agreement, to retain or direct Borrower to retain,
a new management agent approved by Lender.  Without limitation to the
foregoing, in the event the Manager becomes insolvent or a debtor in any
bankruptcy or insolvency proceeding, without regard to whether Lender shall have
requested any such termination, Borrower shall be required to terminate the
Manager and provide for management in conformity with this Section unless
Borrower shall have obtained Lender’s written consent to retain the Manager
which is insolvent, or a debtor in bankruptcy or other insolvency
proceeding.  All Rents and Profits generated by or derived from the
Property shall first be utilized solely for current expenses directly
attributable to the ownership and operation of the Property, including, without
limitation, current expenses relating to Borrower’s liabilities and
obligations with respect to this Security Instrument and the other Loan
Documents and, subject to the terms and conditions of the other Loan Documents,
the management fees payable pursuant to the Management Agreement, and none of
the Rents and Profits generated by or derived from the Property shall be
diverted by Borrower and utilized for any other purposes unless all such current
expenses attributable to the ownership and operation of the Property have been
fully paid and satisfied.

     

    
      
        
        

      

      
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    Section
1.30       Hazardous Materials and
Environmental Concerns.

     

    (a)        Borrower
hereby represents and warrants to Lender that, as of the date
hereof:  (i) the Property is not, and to the best of Borrower’s
knowledge, information and belief, after due inquiry and investigation, the
Property has not been, in direct or indirect violation of any local, state or
federal law, rule or regulation pertaining to environmental regulation,
contamination, remediation or human health and safety (including the regulation
or remediation of Hazardous Substances as defined below) including, without
limitation, the Architectural Barriers Act of 1968 and the Fair Housing
Amendments Act of 1988, all as amended from time to time and including all
regulations promulgated pursuant to any one or more of them, and laws, statutes,
ordinances, rules, regulations, orders, or determinations relating to
“wetlands,” including without limitation those set forth in the Clean Water Act
(33 U.S.C. §1251 et seq.), as amended from time to time (collectively,
“Environmental Laws”),
all as amended from time to time; (ii) no hazardous, toxic or harmful
substances, wastes, materials, pollutants or contaminants (including, without
limitation, asbestos, polychlorinated biphenyls, petroleum products, radon,
lead-based paint, flammable explosives, radioactive materials, infectious
substances or raw materials which may include hazardous constituents), mold,
mycotoxins, microbial matter and airborne pathogens (naturally occurring or
otherwise), or any other substances or materials which are included under or
regulated by Environmental Laws (collectively, “Hazardous Substances”) are
located on or have been handled, manufactured, generated, stored, processed,
transported to or from, or disposed of on or Released or discharged from the
Property (including underground contamination) except, to Borrower’s knowledge
after due inquiry, for those substances used by Borrower in the ordinary course
of its business and in compliance with all Environmental Laws; (iii) the
Property is not subject to any private or governmental lien or judicial,
administrative or other notice or action relating to Hazardous Substances or
noncompliance with Environmental Laws, nor is Borrower aware of any basis for
such lien, notice or action; (iv) to Borrower’s knowledge, after due inquiry,
there are no underground storage tanks or other underground storage receptacles
(whether active or abandoned) for Hazardous Substances on the Property; (v)
Borrower has received no notice of, and to the best of Borrower’s knowledge and
belief, after due inquiry and investigation, there does not exist any,
investigation, action, proceeding or claim by any agency, authority or unit of
government or by any third party which could result in any liability, penalty,
sanction or judgment under any Environmental Laws with respect to any condition,
use or operation of the Property, nor does Borrower know of any basis for such
investigation, action, proceeding or claim; (vi) Borrower has received no notice
that, and to the best of Borrower’s knowledge and belief after due inquiry and
investigation, there has been no claim by any party that, any use, operation or
condition of the Property has caused any nuisance, trespass or any other
liability or adverse condition on any other property, nor does Borrower know of
any basis for such notice or claim; and (vii) there are no present environmental
conditions or events or, to the best of Borrower’s knowledge, after due inquiry
and investigation, past environmental conditions or events on or near the
Property that could be reasonably anticipated to materially adversely affect the
value of the Property.

     

    
      
        
        

      

      
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    Borrower
shall keep or cause the Property to be kept free from Hazardous Substances
(except those substances used by Borrower in the ordinary course of its business
and in compliance with all Environmental Laws) and in compliance with all
Environmental Laws, shall not install or use any underground storage tanks,
shall expressly prohibit the use, generation, handling, storage, production,
processing and disposal of Hazardous Substances by all tenants, (except those
substances used by Tenants in the ordinary course of their activities and in
compliance with all Environmental Laws), invitees and trespassers, and, without
limiting the generality of the foregoing, during the term of this Security
Instrument, shall not install in the Improvements or permit to be installed in
the Improvements asbestos or any substance containing asbestos.  If
required by Lender (including if recommended in any third-party environmental
report delivered to Lender) or under any Environmental Law, Borrower shall
maintain an Operations and Maintenance Program (“O&M Program”) for the
management of asbestos, lead-based paint, radon or any other Hazardous
Substances at the Property.

     

    Borrower
shall promptly notify Lender if Borrower shall become aware of (i) any Hazardous
Substances at, on, under, affecting or threatening to affect the Property
(except those substances used by Borrower or tenants in the ordinary course of
their business or activities, respectively, and in compliance with all
Environmental Laws), (ii) any lien, action or notice affecting or threatening to
affect the Property or Borrower resulting from any violation or alleged
violation of Environmental Law, (iii) any investigation, inquiry or proceeding
concerning Borrower on the Property pursuant to any Environmental Law or
otherwise relating to Hazardous Substances, or (iv) any occurrence, condition or
state of facts which would render any representation or warranty in this Section
incorrect in any respect if made at the time of such
discovery.  Further, immediately upon receipt of the same,
Borrower shall deliver to Lender copies of any and all orders,
notices, permits, applications, reports, and other communications, documents
and instruments pertaining to the actual, alleged or potential
non-compliance with any Environmental Laws in connection with the Property or
presence or existence of any Hazardous Substances at, on, about, under,
within, near or in connection with the Property (except those substances used in
the ordinary course of its business and in compliance with all Environmental
Laws).  Borrower shall, promptly and when and as required, at
Borrower’s sole cost and expense, take all actions as shall be necessary or
advisable for compliance with the terms of this Section 1.30 or for
the remediation of any and all portions of the Property or other affected
property, including, without limitation, all investigative, monitoring, removal,
containment, remedial and response actions in accordance with all applicable
Environmental Laws (and in all events in a manner satisfactory to Lender), and
shall further pay or cause to be paid, at no expense to Lender, all remediation,
response, administrative and enforcement costs of applicable governmental
agencies which may be asserted against the Property.  In the event
Borrower fails to do so (i) Lender may, but shall not be obligated to, undertake
remediation at the Property or other affected property necessary to bring the
Property into conformance with the terms of Environmental Laws, and (ii)
Borrower hereby grants to Lender and its agents and employees access to the
Property and a license to do all things Lender shall deem necessary to bring the
Property into conformance with Environmental Laws.  Any and all costs
and expenses reasonably incurred by Lender in connection therewith, together
with interest thereon at the Default Interest Rate from the date incurred by
Lender until actually paid by Borrower, shall be immediately paid by Borrower on
demand and shall be secured by this Security Instrument and by all of the other
Loan Documents securing all or any part of the indebtedness evidenced by the
Note.  Borrower covenants and agrees, at Borrower’s sole cost and
expense, to indemnify, defend (at trial and appellate levels, and with
attorneys, consultants and experts acceptable to Lender), and hold Lender
harmless from and against any and all liens, damages, losses, liabilities,
obligations, settlement payments, penalties, assessments, citations, directives,
claims, litigation, demands, defenses, judgments, suits, proceedings, costs,
disbursements or expenses of any kind or of any nature whatsoever (including,
without limitation, reasonable attorneys’, consultants’ and experts’ fees and
disbursements actually incurred in investigating, defending, settling or
prosecuting any claim, litigation or proceeding) which may at any time be
imposed upon, incurred by or asserted or awarded against Lender or the Property,
and arising directly or indirectly from or out of:  (i) the presence,
Release or threat of Release of any Hazardous Substances on, in, under,
affecting or threatening to affect all or any portion of the Property or any
surrounding areas, regardless of whether or not caused by or within the control
of Borrower; (ii) the violation of any Environmental Laws relating to, affecting
or threatening to affect the Property, whether or not caused by or within the
control of Borrower; (iii) the failure by Borrower to comply fully with the
terms and conditions of this Section 1.30; (iv)
the breach of any representation or warranty contained in this Section 1.30; or (v)
the enforcement of this Section 1.30,
including, without limitation, the cost of assessment, containment and/or
removal of any and all Hazardous Substances on and/or from all or any portion of
the Property or any surrounding areas, the cost of any actions taken in response
to the presence, Release or threat of Release of any Hazardous Substances on,
in, under or affecting any portion of the Property or any surrounding areas to
prevent or minimize such release or threat of release so that it does not
migrate or otherwise cause or threaten danger to present or future public
health, safety, welfare or the environment, and costs incurred to comply with
the Environmental Laws in connection with all or any portion of the Property or
any surrounding areas.  The indemnity set forth in this Section 1.30(c) shall
also include any diminution in the value of the security afforded by the
Property or any future reduction in the sales price of the Property by reason of
any matter set forth in this Section
1.30(c).  Lender’s rights under this Section shall survive
payment in full of the indebtedness secured hereby and shall be in addition to
all other rights of Lender under this Security Instrument, the Note and the
other Loan Documents.

    
      
         

      

      
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    Upon
Lender’s request, at any time after the occurrence of a default hereunder or at
such other time as Lender has reasonable grounds to believe that Hazardous
Substances are or have been handled, generated, stored, processed, transported
to or from, or released or discharged from or disposed of on or around the
Property (other than in the normal course of Borrower’s or the Tenants’ business
or activities, respectively, and in compliance with all Environmental Laws) or
that Borrower, any Tenant or the Property may be in violation of Environmental
Laws,  Borrower shall provide, at Borrower’s sole cost and expense, an
inspection or audit of the Property prepared by a hydrogeologist or
environmental engineer or other appropriate consultant approved by Lender
indicating the presence or absence of Hazardous Substances on the Property
(including asbestos-containing material or lead-based paint).  If
Borrower fails to provide such inspection or audit within thirty (30) days after
such request, Lender may order the same, and Borrower hereby grants to Lender
and its employees and agents access to the Property and a license to undertake
such inspection or audit.  The cost of such inspection or audit,
together with interest thereon at the Default Interest Rate from the date Lender
notifies Borrower that Lender has incurred same until actually paid by Borrower,
shall be immediately paid by Borrower on demand and shall be secured by this
Security Instrument and by all of the other Loan Documents securing all or any
part of the indebtedness evidenced by the Note.

     

    Without
limiting the foregoing, Lender and its authorized representatives may, during
normal business hours and at its own expense, but subject to the rights of
tenants, if any, inspect the Property and Borrower’s records related thereto for
the purpose of determining compliance with Environmental Laws and the terms and
conditions of this Section
1.30.

     

    As used
herein, the term “Release” shall
include, without limitation, any intentional or unintentional placing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, disposing, discarding or abandoning of any Hazardous
Substance, other than in the normal course of business or activities or its
tenants, and in compliance with all Environmental Laws.

     

    Borrower
represents and warrants that, from and after its acquisition of the Property,
Borrower has provided, and Borrower covenants and agrees that Borrower shall
provide all legally required notices with respect to the discovery or release of
any hazardous substances at the Property and shall perform each of the
continuing obligations of a bona fide prospective purchaser pursuant to 42
U.S.C. 9601(40).   Borrower shall notify Lender of any notice
given or action taken pursuant to this Section 1.30(g).  This Section
1.30(g) shall survive any termination, satisfaction or foreclosure or other
enforcement of this Security Instrument.

     

    Section
1.31       Indemnification;
Subrogation.

     

    BORROWER
SHALL INDEMNIFY, DEFEND AND HOLD LENDER HARMLESS AGAINST: (I) ANY AND ALL CLAIMS
FOR BROKERAGE, LEASING, FINDER’S OR SIMILAR FEES WHICH MAY BE MADE RELATING TO
THE PROPERTY OR THE SECURED INDEBTEDNESS, (II) ANY AND ALL LIABILITY,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, ACTIONS, SUITS, LIENS, CHARGES,
ENCUMBRANCES, COSTS AND EXPENSES (INCLUDING LENDER’S ATTORNEYS’ FEES, TOGETHER
WITH APPELLATE COUNSEL FEES, IF ANY) OF WHATEVER KIND OR NATURE WHICH MAY BE
ASSERTED AGAINST, IMPOSED ON OR INCURRED BY LENDER UNDER ANY LEASE OR OCCUPANCY
AGREEMENT FOR ANY LOSS ARISING FROM A FAILURE OR INABILITY TO COLLECT RENTS AND
PROFITS OR IN CONNECTION WITH THE SECURED INDEBTEDNESS, THIS SECURITY
INSTRUMENT, THE PROPERTY, OR ANY PART THEREOF, OR THE EXERCISE BY LENDER OF ANY
RIGHTS OR REMEDIES GRANTED TO IT UNDER THIS SECURITY INSTRUMENT, AND ANY DEFAULT
UNDER THIS SECURITY INSTRUMENT,  (III) ANY LIENS (WHETHER JUDGMENTS,
MECHANICS’, MATERIALMEN’S OR OTHERWISE), CHARGES AND ENCUMBRANCES FILED AGAINST
THE PROPERTY, AND (IV) ANY CLAIMS AND DEMANDS FOR DAMAGES OR INJURY, INCLUDING
CLAIMS FOR PROPERTY DAMAGE, PERSONAL INJURY OR WRONGFUL DEATH, ARISING OUT OF OR
IN CONNECTION WITH ANY ACCIDENT OR FIRE OR OTHER CASUALTY ON THE REAL ESTATE OR
THE IMPROVEMENTS OR ANY NUISANCE OR TRESPASS MADE OR SUFFERED THEREON,
INCLUDING, IN ANY CASE, ATTORNEYS’ FEES, COSTS AND EXPENSES AS AFORESAID,
WHETHER AT PRETRIAL, TRIAL OR APPELLATE LEVEL FOR ANY CIVIL, CRIMINAL OR
ADMINISTRATIVE PROCEEDINGS.  SHOULD LENDER INCUR ANY LIABILITY UNDER
THIS SECURITY INSTRUMENT OR ANY OF THE OTHER LOAN DOCUMENTS, THE AMOUNT THEREOF,
INCLUDING, WITHOUT LIMITATION, COSTS, EXPENSES AND REASONABLE ATTORNEYS’ FEES,
TOGETHER WITH INTEREST THEREON AT THE DEFAULT INTEREST RATE FROM THE DATE LENDER
NOTIFIES BORROWER THAT LENDER HAS INCURRED THE SAME UNTIL ACTUALLY PAID BY
BORROWER, SHALL BE IMMEDIATELY DUE AND PAYABLE TO LENDER BY BORROWER ON DEMAND
AND SHALL BE SECURED HEREBY AND BY ALL OF THE OTHER LOAN DOCUMENTS SECURING ALL
OR ANY PART OF THE INDEBTEDNESS EVIDENCED BY THE NOTE.  HOWEVER,
NOTHING HEREIN SHALL BE CONSTRUED TO OBLIGATE BORROWER TO INDEMNIFY, DEFEND AND
HOLD HARMLESS LENDER FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, CLAIMS, ACTIONS, SUITS, COSTS AND EXPENSES
ENACTED AGAINST, IMPOSED ON OR INCURRED BY LENDER BY REASON OF LENDER’S
WILLFUL MISCONDUCT OR GROSS NEGLIGENCE.  THIS INDEMNITY SHALL SURVIVE
PAYMENT IN FULL OF THE INDEBTEDNESS SECURED HEREBY.

    
      
         

      

      
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    LENDER
MAY ENGAGE THE SERVICES OF ATTORNEYS IF IT IS MADE A PARTY DEFENDANT TO ANY
LITIGATION (OR THREATENED ACTION OR CLAIM) OR TO ENFORCE THE TERMS OF THIS
SECURITY INSTRUMENT OR TO PROTECT ITS RIGHTS HEREUNDER, AND, IN THE EVENT OF ANY
SUCH ENGAGEMENT, BORROWER SHALL PAY LENDER’S ATTORNEYS’ FEES (TOGETHER WITH
REASONABLE APPELLATE COUNSEL FEES, IF ANY), CONSULTANTS’ FEES, EXPERTS FEES, AND
EXPENSES REASONABLY INCURRED BY LENDER, WHETHER OR NOT AN ACTION IS ACTUALLY
COMMENCED AGAINST BORROWER.  ALL REFERENCES TO “ATTORNEYS” IN THIS
SUBSECTION AND ELSEWHERE IN THIS SECURITY INSTRUMENT SHALL INCLUDE WITHOUT
LIMITATION ANY ATTORNEY OR LAW FIRM ENGAGED BY LENDER AND LENDER’S IN-HOUSE
COUNSEL, AND ALL REFERENCES TO “FEES AND EXPENSES” IN THIS SUBSECTION AND
ELSEWHERE IN THIS SECURITY INSTRUMENT SHALL INCLUDE WITHOUT LIMITATION ANY FEES
OF SUCH ATTORNEY OR LAW FIRM AND ANY ALLOCATION CHARGES AND ALLOCATION COSTS OF
LENDER’S IN-HOUSE COUNSEL.

     

    A WAIVER
OF SUBROGATION SHALL BE OBTAINED BY BORROWER FROM ITS INSURANCE CARRIER AND,
CONSEQUENTLY, BORROWER WAIVES ANY AND ALL RIGHT TO CLAIM OR RECOVER AGAINST
LENDER, ITS OFFICERS, EMPLOYEES, AGENTS AND REPRESENTATIVES, FOR LOSS OF OR
DAMAGE TO BORROWER, THE PROPERTY, BORROWER’S PROPERTY OR THE PROPERTY OF OTHERS
UNDER BORROWER’S CONTROL FROM ANY CAUSE INSURED AGAINST OR REQUIRED TO BE
INSURED AGAINST BY THE PROVISIONS OF THIS SECURITY INSTRUMENT.

    
      
         

      

      
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    Section
1.32        Covenants with Respect to
Indebtedness; Operations and Fundamental Changes of
Borrower.  Borrower  represents, warrants and
covenants as of the date hereof and until such time as the indebtedness secured
hereby is paid in full, that Borrower:

     

    (a) has
not owned, does not own and will not own any asset other than (i) the Property,
and (ii) incidental personal property necessary for the operation of the
Property;

     

    (b) has
not engaged, is not engaged and will not engage in any business other than the
ownership, management and operation of the Property;

     

    (c) will
not (other than the TRS Lease) enter into any contract or agreement with any
general partner, principal, member or affiliate of Borrower or any affiliate of
any such general partner, principal, or member of Borrower, except upon terms
and conditions that are intrinsically fair and substantially similar to those
that would be available on an arms-length basis with third parties other than an
affiliate;

     

    (d) has
not incurred and will not incur any debt, secured or unsecured, direct or
contingent (including guaranteeing any obligation), other than (i) the secured
indebtedness, including the Junior Loan, and (ii) unsecured trade payables or
accrued expenses incurred in the ordinary course of business of operating the
Property and not outstanding for more than sixty days with trade creditors and
in amounts as are normal and reasonable under the circumstances;

     

    (e)
except for the Junior Loan, no debt whatsoever may be secured (senior,
subordinate or pari passu) by the Property;

     

    (f) has
not made and will not make any loans or advances (other than as may be expressly
required pursuant to the terms of the TRS Lease) to any third party (including
any general partner, principal, member or affiliate of Borrower, or any
guarantor);

     

    (g) is
and will be solvent and pay its debts from its assets as the same shall become
due;

     

    (h) has
done or caused to be done and will do all things necessary to preserve its
existence and corporate, limited liability company and partnership formalities
(as applicable), and will not, nor will any partner, limited or general, or
member or shareholder thereof, amend, modify or otherwise change its partnership
certificate, partnership agreement, certificate or articles of incorporation or
organization, or by-laws or operating agreement or regulations, in a manner
which adversely affects Borrower’s, or any such partner’s, member’s or
shareholders’ existence as a single-purpose, single-asset “bankruptcy remote”
entity.  If Borrower is a single member limited liability company,
Borrower shall be organized and formed under (and shall maintain its existence
under) the laws of the State of Delaware and shall have at all times at least
one individual who has been designated as a ‘special member’ of such limited
liability company, which special member shall, pursuant to the terms of the
certificate of formation and/or operating agreement of such limited liability
company, automatically become a member of such limited liability company
(without any further consent or action required) upon the occurrence of any
event or circumstance which would cause the sole member of such limited
liability company to cease to be a member of such limited liability
company;

    
      
         

      

      
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    (i) will
conduct and operate its business as presently conducted and
operated;

     

    (j) will
maintain books and records and bank accounts separate from those of its
affiliates, including its general partners, principals and members;

     

    (k) will
be, and at all times will hold itself out to the public as, a legal entity
separate and distinct from any other entity (including any affiliate of
Borrower, any constituent party of Borrower, any guarantor or any affiliate of
any constituent party or guarantor); has corrected, and shall correct, any known
misunderstanding regarding its status as a separate entity; has conducted and
shall conduct, its business in its own name; has paid, and will pay, its own
liabilities out of its own funds and assets; has not, and shall not identify
itself or any of its affiliates as a division or a part of the other; and has
maintained and utilized, and shall maintain separate stationery, invoices and
checks from any other entity);

     

    (l) will
file its own tax returns;

     

    (m) will
maintain adequate capital for the normal obligations reasonably foreseeable in a
business of its size and character and in light of its contemplated business
operations;

     

    (n) will
not, nor will any shareholder, partner, member or affiliate, seek the
dissolution or winding up, in whole or in part, of Borrower;

     

    (o) will
not enter into any transaction of merger or consolidation, or acquire by
purchase or otherwise all or substantially all of the business or assets of, or
any stock or beneficial ownership of, any entity;

     

    (p) will
not commingle the funds and other assets of Borrower with those of any general
partner, principal, member or affiliate, or any other person;

     

    (q) has
and will maintain its assets in such a manner that it is not costly or difficult
to segregate, ascertain or identify its individual assets from those of any
affiliate or any other person;

     

    (r) has,
and any general partner or operating member of Borrower has, at all times since
its formation, observed all legal and customary formalities regarding its
formation and will continue to observe all legal and customary
formalities;

     

    (s) does
not and will not hold itself out to be responsible for the debts or obligations
of any other person; and

     

    (t)  upon
the commencement of a voluntary or involuntary bankruptcy proceeding by or
against Borrower, Borrower shall not seek a supplemental stay or otherwise
pursuant to 11 U.S.C. 105 or any other provision of the Act, or any other debtor
relief law (whether statutory, common law, case law, or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, which may be or become
applicable, to stay, interdict, condition, reduce or inhibit the ability of
Lender to enforce any rights of Lender against any guarantor or indemnitor of
the secured obligations or any other party liable with respect thereto by virtue
of any indemnity, guaranty or otherwise. If Borrower is the “debtor” in any
action arising under any bankruptcy or insolvency laws, Borrower shall not take
any action that might terminate Borrower’s rights as the tenant under the Ground
Lease without Lender’s prior written consent.

    
      
         

      

      
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    Section
1.33       Litigation.  Borrower
will give prompt written notice to Lender and any servicer of any litigation or
governmental proceedings pending or threatened (in writing) against Borrower
which might have a material adverse effect upon Borrower or the
Property.

     

    Section
1.34       ERISA. Borrower shall
not engage in any transaction which would cause any obligation, or action taken
or to be taken, hereunder (or the exercise by Lender of any of its rights under
the Note, this Security Instrument or any of the other Loan Documents) to be a
non-exempt (under a statutory or administrative class exemption) prohibited
transaction under ERISA.

     

    Borrower
further covenants and agrees to deliver to Lender such certifications or other
evidence from time to time throughout the term of this Security Instrument, as
requested by Lender in its sole discretion, that (i) Borrower is not an
“employee benefit plan” as defined in Section 3(3) of ERISA, which is subject to
Title I of ERISA, or a “governmental plan” within the meaning of Section 3(3) of
ERISA; and (ii) Borrower is not subject to state statutes regulating investments
and fiduciary obligations with respect to governmental plans.

     

    Borrower
shall indemnify Lender and defend and hold Lender harmless from and against all
civil penalties, excise taxes, or other loss, cost damage and expense
(including, without limitation, reasonable attorneys’ fees and disbursements and
costs incurred in the investigation, defense and settlement of claims and losses
incurred in correcting any prohibited transaction or in the sale of a prohibited
loan, and in obtaining any individual prohibited transaction exemption under
ERISA that may be required, in Lender’s sole discretion) that Lender may incur,
directly or indirectly, as a result of a default under this
Section.  This indemnity shall survive any termination, satisfaction
or foreclosure of this Security Instrument.

    
      
         

      

      
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    Section
1.35       Compliance with
Anti-Terrorism Laws.  (a) None of Borrower, any guarantor or
any other Person which owns a direct or indirect equity interest in any of the
foregoing (x) is identified by the Office of Foreign Assets Control, Department
of the Treasury (“OFAC”)
or otherwise qualifies as an Embargoed Person (as hereinafter defined), or (y)
has been previously indicted for or convicted of any felony involving a crime or
crimes of moral turpitude or for any Patriot Act Offense (as defined below), or
(z) is currently under investigation by any governmental authority for alleged
criminal activity.  Borrower has performed and shall perform
reasonable due diligence to insure that at all times throughout the term of the
Loan, including after giving effect to any transfers permitted pursuant to the
Loan Documents, (i) that none of the funds or other assets of Borrower, any
guarantor or any other Person who owns a direct or indirect equity interest in
Borrower or any guarantor constitute property of, or are beneficially owned,
directly or indirectly, by any person, entity or government subject to trade
restrictions under U.S. law, including, but not limited to, The USA Patriot Act
(including the anti-terrorism provisions thereof), the International Emergency
Economic Powers Act, 50 U.S.C. §§ 1701, et seq., The Trading with the Enemy
Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations
promulgated thereunder or related thereto including without limitation those
related to Specially Designated Nationals, Specially Designated Global
Terrorists and blocked persons, with the result that the investment in Borrower,
Principal or Guarantor, as applicable (whether directly or indirectly), is
prohibited by law or the Loan made by the Lender is in violation of law (“Embargoed Person”);
(ii) no Embargoed Person has any interest of any nature whatsoever in
Borrower, any guarantor or any other Person which owns a direct or indirect
equity interest in any of the foregoing, as applicable, with the result that the
investment in any such parties, as applicable (whether directly or indirectly),
is prohibited by law or the Loan is in violation of law; and (iii) none of
the funds of Borrower, any guarantor or any other Person which owns a direct or
indirect equity interest in any of the foregoing, as applicable, have been
derived from, or are the proceeds of, any unlawful activity, including money
laundering, terrorism or terrorism activities, with the result that the
investment in Borrower, any guarantor or any other Person which owns a direct or
indirect equity interest in any of the foregoing, as applicable (whether
directly or indirectly), is prohibited by law or the Loan is in violation of
law, or may cause the Property to be subject to forfeiture or
seizure.  Borrower shall, and shall cause any guarantor to provide
such evidence and confirmation of identity (including, without limitation,
certificates) as may be requested by Lender at any time, and from time to time,
to enable Lender to verify such party’s identity or to comply with any
applicable law or regulation, including without limitation, the USA Patriot
Act.  In addition, Borrower shall provide to Lender such additional
information and confirmation (including, without limitation, certificates) as
Lender may request from time to time in order to comply with, and/or confirm
Borrower’s and/or guarantor’s compliance with, all applicable requirements of
governmental authorities having jurisdiction of the Borrower and/or the
Property, including without limitation, those laws and regulations concerning
money laundering and similar activities.  For purposes hereof, “Patriot Act Offense” means any
violation of the criminal laws of the United States of America or of any of the
several states, or that would be a criminal violation if committed within the
jurisdiction of the United States of America or any of the several states,
relating to terrorism or the laundering of monetary instruments, including any
offense under (a) the criminal laws against terrorism; (b) the criminal laws
against money laundering; (c) the Bank Secrecy Act, as amended, (d) the Money
Laundering Control Act of 1986, as amended, or the (e) Patriot Act. “Patriot Act Offense” also
includes the crimes of conspiracy to commit, or aiding and abetting another to
commit, a Patriot Act Offense.  Borrower will advise Lender
immediately of any material change that would affect the representations,
warranties and covenants set forth in this Section 1.35.

     

    (b)  If
a tenant under any Lease is charged with crimes involving money laundering or
predicate crimes to money laundering, and such charges are not dismissed without
further investigation within thirty days, then Borrower shall give notice of
such charges of which Borrower has actual knowledge to Lender and upon Lender’s
request, Borrower shall exclude from the debt service any Rents from such tenant
or resident of the Property.

     

    Section
1.36       Representations and
Covenants Regarding the Ground Lease.

     

    (a)       
Borrower will pay or cause to be paid all rent and other charges required under
the Ground Lease as and when the same are due and Borrower will keep, observe
and perform, or cause to be kept, observed and performed, all of the other
terms, covenants, provisions and agreements of the Ground Lease on the part of
the tenant thereunder to be kept, observed and performed, and will not in any
manner, cancel, terminate or surrender, or permit any cancellation, termination
or surrender, of the Ground Lease, in whole or in part, or, without the written
consent of Lender, either orally or in writing, modify, amend or permit any
modification or amendment of any of the terms thereof in any respect, and any
attempt on the part of Borrower to exercise any such right without such written
consent of Lender shall be null and void and of no effect.

    
      
         

      

      
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    (b)        Borrower
will do, or cause to be done, all things necessary to preserve and keep
unimpaired the rights of Borrower as tenant under the Ground Lease, and to
prevent any default under the Ground Lease, or any termination, surrender,
cancellation, forfeiture or impairment thereof, and in the event of the failure
of Borrower to make any payment required to be made by Borrower pursuant to the
provisions of the Ground Lease or to keep, observe or perform, or cause to be
kept, observed or performed, any of the terms, covenants, provisions or
agreements of the Ground Lease, Borrower agrees that Lender may after the
occurrence and continuance of an Event of Default (but shall not be obligated
to), after notice to Borrower take any action on behalf of Borrower, to make or
cause to be kept, observed or performed any such terms, covenants, provisions or
agreements and to enter upon the Real Property and take all such action thereof
as may be necessary therefor, to the end that the rights of Borrower in and to
the leasehold estate created by the Ground Lease shall be kept unimpaired and
free from default, and all money so expended by Lender, with interest thereon at
the Default Interest Rate (as defined in the Note) from the date of each such
expenditure, shall be paid by Borrower to Lender promptly upon demand by Lender
and shall be added to the indebtedness and secured by this Mortgage and Lender
shall have, in addition to any other remedy of Lender, the same rights and
remedies in the event of non-payment of any such sum by Borrower as in the case
of a default by Borrower in the payment of any sums due under the
Note.

     

    (c)        Borrower
will enforce the obligations of the landlord under the Ground Lease to the end
that Borrower may enjoy all of the rights granted to it under the Ground Lease,
and will promptly notify Lender in writing of any default by the landlord or by
Borrower in the performance or observance of any of the terms, covenants and
conditions on the part of -the landlord or Borrower, as the case may be, to be
performed or observed under the Ground Lease and Borrower will promptly advise
Lender in writing of the occurrences of any of the events of default enumerated
in the Ground Lease and of the giving of any notice by the landlord to Borrower
of any default by Borrower in performance or observance of any of the terms,
covenants or conditions of the Ground Lease on the part of the Borrower to be
performed or observed and will deliver to Lender a true copy of each such
notice. If, pursuant to the Ground Lease, the landlord shall deliver to Lender a
copy of any notice of default given to Borrower, such notice shall constitute
full authority and protection to Lender for any action taken or omitted to be
taken by Lender in good faith in reliance thereon to cure such
default.

     

    (d)        If
any action or proceeding shall be instituted to evict Borrower or to recover
possession of the Real Property or for any other purpose affecting the Ground
Lease or this Mortgage, Borrower will, immediately upon service thereof on or to
Borrower, deliver to Lender a true copy of each petition, summons, complaint,
notice of motion, order to show cause and of all other provisions, pleadings and
papers, however designated, served in any such action or
proceeding.

    
      
         

      

      
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    (e)        Borrower
covenants and agrees that unless Lender shall otherwise expressly consent in
writing, the fee title to the property demised by the Ground Lease and the
leasehold estate shall not merge but shall always remain separate and distinct,
notwithstanding the union of said estates either in the landlord, Borrower or a
third party by purchase or otherwise; and in case Borrower acquires the fee
title or any other estate, title or interest in the Real Estate, this Mortgage
shall attach to and cover and be a lien upon the fee title or such other estate
so acquired, and such fee title or other estate shall, without further
assignment, or . conveyance, become and be subject to the lien of and covered by
this Mortgage.

     

    (f)         No
release or forbearance of any of Borrower’s obligations under the Ground Lease,
pursuant to the Ground Lease, or otherwise, shall release Borrower from any of
its obligations under this Mortgage, including its obligation with respect to
the payment of rent as provided for in the Lease Agreement and the performance
of all of the terms, provisions, covenants, conditions and agreements contained
in the Ground Lease, to be kept, performed and complied with by the tenant
therein.

     

    (g)       Upon
the occurrence and continuance of an Event of Default Borrower shall not make
any election or give any consent or approval (other than the exercise of a
renewal right or extension right pursuant to (i) below) for which a right to do
so is conferred upon Borrower as lessee under the Ground Lease without Lender’s
prior written consent. In case of any Event of Default under this Mortgage, all
such rights, together with the right of termination, cancellation, modification,
change, supplement, alteration or amendment of the Ground Lease, all of which
have been assigned for collateral purpose to Lender, shall vest in and be
exercisable solely by Lender.

     

    (h)       Borrower
will give Lender prompt written notice of the commencement of any arbitration or
appraisal proceeding under and pursuant to the provisions of the Ground Lease.
Lender shall have the right to intervene and participate in any such proceeding
and Borrower shall confer with Lender to the extent which Lender deems necessary
for the protection of Lender.

     

    (i)         Borrower
may exercise any option or right to renew or extend the term of the Ground Lease
without the prior written consent of Lender. Borrower shall give Lender
simultaneous written notice of the exercise of such option or right to renew or
extend, together with a copy of the instrument given to the landlord under the
Ground Lease exercising such option or right, and, thereafter, shall promptly
deliver to Lender a copy of any acknowledgment by the landlord under such Ground
Lease with respect to the exercise of such option or right. Within fifteen (15)
business days of written demand by Lender, Borrower shall exercise any such
option or renewal which is necessary to extend the term of the Ground Lease
beyond the term of this Mortgage or to comply with any law affecting Borrower or
Lender or which is necessary, in Lender’s reasonable judgment, to preserve the
value of the security intended to be afforded by this Mortgage. Borrower shall
promptly provide evidence of such exercise of such option or right to Lender’s
reasonable satisfaction. In the event that Borrower fails to so exercise any
such option or right, or in the event of any default hereunder which is
continuing beyond the applicable cure periods, Borrower hereby agrees and grants
to Lender all right and authority to exercise such option in the name of
Borrower or in its own name. Nothing contained herein shall affect or limit any
rights of Lender granted under the Ground Lease.

    
      
         

      

      
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    (j)         The
lien of this Mortgage shall attach to all of Borrower’s rights and remedies at
any time arising under or pursuant to Subsection 365(h) of the Bankruptcy Code,
I l U.S.C. § 365(h), including, without limitation, all of Borrower’s rights to
remain in possession of the Real Estate.

     

    (k)        Borrower
shall not, without Lender’s prior written consent, elect to treat the Ground
Lease as terminated under Subsection 3650)(1) of the Bankruptcy Code, 11 U.S.C.
§ 365(h)(l). Any such election made without Lender’s consent shall be
void.

     

    (l)         Borrower
hereby unconditionally assigns, transfers and sets over to Lender all of
Borrower’s claims and rights to the payment of damages arising from any
rejection of the Ground Lease by landlord or any other fee owner of the Premises
under the Bankruptcy Code. Lender shall have the right to proceed in its own
name or after a continuing Event of Default, in the name of Borrower in respect
of any claim, suit, action or proceeding relating to the rejection of the Ground
Lease, including, without limitation, the right to file and prosecute, either in
its own name or in the name of Borrower, any proofs of claim, complaints,
motions, applications, notices and other documents, in any case in respect to
the landlord or any fee owner under the Bankruptcy Code. This assignment
constitutes a present, irrevocable and unconditional assignment of the
foregoing, claims, rights and remedies, and shall continue in effect until all
of the obligations secured by this Mortgage shall have been satisfied and
discharged in full. Any amounts received by Lender as damages arising out of the
rejection of the Ground Lease as aforesaid shall be applied first to all costs
and expenses of Lender (including, without limitation, attorneys’ fees) incurred
in connection with the exercise of any of its rights or remedies under this
Section and then in accordance with the provisions of this Mortgage. Borrower
shall promptly make, execute, acknowledge and deliver, in form and substance
satisfactory to Lender, a UCC Financing Statement (Form UCC-I) and all such
additional instruments, agreements and other documents, as may at any time
hereafter be required by Lender to effectuate and carry out the assignment made
pursuant to this Section.

     

    (m)       If
pursuant to Subsection 365(h)(2) of the Bankruptcy Code, 11 U.S.C. § 365(h)(2),
Borrower shall seek to offset against the rent reserved in the Ground Lease the
amount of any damages caused by the nonperformance by the landlord or any fee
owner of any of their obligations under the Ground Lease after the rejection by
the landlord or any fee owner of the Ground Lease under the Bankruptcy Code,
Borrower shall, prior to effecting such offset, notify Lender of its intent to
do so, setting forth the amounts proposed to be so offset and the basis
therefor. Lender shall have the right to object to all or any part of such
offset that, in the reasonable judgment of Lender, would constitute a breach of
the Ground Lease, and in the event of such objection, Borrower shall not effect
any offset of the amounts so objected to by Lender. Neither Lender’s failure to
object as aforesaid nor any objection relating to such offset shall constitute
an approval of any such offset by Lender.

    
      
         

      

      
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    (n)        If
any action, proceeding, motion or notice shall be commenced or filed in respect
of the lessor or any fee owner, the Real Estate or the Ground Lease in
connection with any case under the Bankruptcy Code, Lender shall have the
option, upon continuance of an Event of Default exercisable upon prior written
notice from Lender to Borrower, to conduct and control any such litigation with
counsel of Lender’s choice. Lender may proceed in its own name or in the name of
Borrower in connection with any such litigation, and Borrower agrees to execute
any and all powers, authorizations, consents or other documents reasonably
required by Lender in connection therewith. Borrower shall, upon demand, pay to
Lender all costs and expenses (including attorneys’ fees) paid or incurred by
Lender in connection with the prosecution or conduct of any such proceedings.
Any such costs or expenses not paid by Borrower as aforesaid shall be secured by
the lien of this Mortgage and shall be added to the principal amount of the
indebtedness secured hereby. Borrower shall not commence any action, suit,
proceeding or case, or file any application or make any motion (unless such
motion is for the purpose of protecting the Ground Lease and its value as
security for the obligations secured by this Mortgage), in respect of the Ground
Lease in any such case under the Bankruptcy Code without the prior written
consent of Lender, which consent shall not be unreasonably withheld or
delayed.

     

    (o)       Borrower
shall, after obtaining knowledge thereof, promptly notify Lender of any filing
by or against the landlord or other fee owner of a petition under the Bankruptcy
Code. Borrower shall promptly deliver to Lender, following receipt, copies of
any and all notices, summonses, pleadings, applications and other documents
received by Borrower in connection with any such petition and any proceedings
relating thereto.

     

    (p)       If
there shall be filed by or against Borrower a petition under the Bankruptcy Code
and Borrower, as lessee under the Ground Lease, shall determine to reject the
Ground Lease pursuant to Section 365(a) of the Bankruptcy Code, Borrower shall
give Lender not less than thirty (30) days’ prior notice of the date on which
Borrower shall apply to the Bankruptcy Court for authority to reject the Ground
Lease. Lender shall have the right, but not the obligation, to serve upon
Borrower within such thirty (30) day period a notice stating that Lender demands
that Borrower assume and assign the Lease Agreement to Lender pursuant to
Section 365 of the Bankruptcy Code. If Lender shall serve upon Borrower the
notice described in the preceding sentence, Borrower shall not seek to reject
the Ground Lease and shall comply with the demand provided for in the preceding
sentence.

     

    Notwithstanding
anything to the contrary contained herein, this Mortgage shall not constitute an
assignment of the Ground Lease and Lender shall have not liability or obligation
thereunder by reason of its acceptance of this Mortgage.

     

    ARTICLE
II

    EVENTS
OF DEFAULT

     

    Section
2.1        Events of
Default.  The indebtedness secured hereby shall become
immediately due and payable at the option of Lender upon the happening of any
one or more of the following events of default (each, an “Event of
Default”):

     

    (a)
Borrower fails to make any payment under the Note when due.

     

    (b)
Borrower fails to punctually perform any covenant, agreement, obligation, term
or condition hereof which requires payment of any money to Lender (except those
regarding payments to be made under the Note).

    
      
         

      

      
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    (c)
Borrower fails to provide insurance as required by Section 1.4 hereof or
fails to perform any covenant, agreement obligation, term or condition set forth
in Section 1.16
or Section 1.30
hereof.

     

    (d)
Borrower fails to perform any other covenant, agreement, obligation, term or
condition set forth herein other than those otherwise described in this Section 2.1 and, to
the extent such failure or default is susceptible of being cured, the
continuance of such failure or default for thirty (30) days after written notice
thereof from Lender to Borrower; provided, however, that if such
default is susceptible of cure but such cure cannot be accomplished with
reasonable diligence within said period of time, and if Borrower commences to
cure such default promptly after receipt of notice thereof from Lender, and
thereafter prosecutes the curing of such default with reasonable diligence, such
period of time shall be extended for such period of time as may be necessary to
cure such default with reasonable diligence, but not to exceed an additional
thirty (30) days.

     

    (e) Any
representation or warranty made herein, in or in connection with any application
or commitment relating to the Loan, or in any of the other Loan Documents to
Lender by Borrower, by any principal or general partner in Borrower or by any
indemnitor or guarantor under any indemnity or guaranty executed in connection
with the Loan is determined by Lender to have been false or misleading in any
material respect at the time made.

     

    (f) There
shall be a sale, conveyance, disposition, alienation, hypothecation, leasing,
assignment, pledge, mortgage, granting of a security interest in or other
transfer or further encumbrancing of the Property, Borrower or its owners, or
any portion thereof or any interest therein, in violation of Section 1.13
hereof.

     

    (g) A
default occurs under any of the other Loan Documents which has not been cured
within any applicable grace or cure period therein provided.

     

    (h)
Borrower, any principal, general partner or managing member (as applicable) in
Borrower or any indemnitor or guarantor under any indemnity or guaranty executed
in connection with the loan secured hereby becomes insolvent, or shall make a
transfer in fraud of creditors, or shall make an assignment for the benefit of
creditors, shall file a petition in bankruptcy, shall voluntarily be adjudicated
insolvent or bankrupt or shall admit in writing the inability to pay debts as
they mature, shall petition or apply to any tribunal for or shall consent to or
shall not contest the appointment of a receiver, trustee, custodian or similar
officer for Borrower, for any such principal, general partner or managing member
(as applicable) of Borrower or for any such indemnitor or guarantor or for a
substantial part of the assets of Borrower, of any such principal, managing
member or general partner of Borrower or of any such indemnitor or guarantor, or
shall commence any case, proceeding or other action under any bankruptcy,
reorganization, arrangement, readjustment or debt, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter in
effect.

    
      
         

      

      
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    (i) A
petition (“Petition”) is
filed or any case, proceeding or other action is commenced against Borrower,
against any principal, general partner or managing member of Borrower or against
any indemnitor or guarantor under any indemnity or guaranty executed in
connection with the loan secured hereby seeking to have an order for relief
entered against it as debtor or seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts or other relief under
any law relating to bankruptcy, insolvency, arrangement, reorganization,
receivership or other debtor relief under any law or statute of any
jurisdiction, whether now or hereafter in effect, or a court of competent
jurisdiction enters an order for relief against Borrower, against any principal,
managing member or general partner of Borrower or against any indemnitor or
guarantor under any indemnity or guaranty executed in connection with the loan
secured hereby, as debtor, or an order, judgment or decree is entered
appointing, with or without the consent of Borrower, of any such principal,
managing member or general partner of Borrower or of any such indemnitor or
guarantor, a receiver, trustee, custodian or similar officer for Borrower, for
any such principal, managing member or general partner of Borrower or for any
such indemnitor or guarantor, or for any substantial part of any of the
properties of Borrower, of any such principal,  general partner or
managing member of Borrower or of any such indemnitor or guarantor, and if any
such event shall occur, such Petition, case, proceeding, action, order, judgment
or decree shall not be dismissed within sixty (60) days after being
commenced.

     

    (j)
Borrower solicits or aids the solicitation of the filing of any Petition against
Borrower including, without limitation:  (i) providing information
regarding the identity of creditors or the nature of creditors’ claims to any
third party unless compelled to do so by order of a court of competent
jurisdiction or by regulation promulgated by a governmental agency, or (ii)
paying the legal fees or expenses of any creditor of or interest holder in
Borrower with respect to any matter whatsoever.

     

    (k) The
Property or any part thereof shall be taken on execution or other process of law
in any action against Borrower.

     

    (l)
Borrower abandons all or a portion of the Property.

     

    (m) The
holder of any lien or security interest on the Property (without implying the
consent of Lender to the existence or creation of any such lien or security
interest), whether superior or subordinate to this Security Instrument or any of
the other Loan Documents, declares a default and such default is not cured
within any applicable grace or cure period set forth in the applicable document
or such holder institutes foreclosure or other proceedings for the enforcement
of its remedies thereunder.

     

    (n) The
Property, or any part thereof, is subjected to actual or threatened waste or to
removal, demolition or material alteration so that the value of the Property is
materially diminished thereby and Lender determines (in its subjective
determination) that it is not adequately protected from any loss, damage or risk
associated therewith.

     

    (o) Any
dissolution, termination, partial or complete liquidation, merger or
consolidation of Borrower, any of its principals, members, or general
partners.

     

    (p) An
event of default occurs pursuant to the TRS Lease or Borrower negotiates,
permits, acquiesces to, or suffers a modification to, amendment to, or
supplement to the Ground Lease or a surrender, or termination of the Ground
Lease before its scheduled termination date.
 

    
      
         

      

      
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      (q)  Borrower
or any operator of the Property fails 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 Property to have a material adverse affect on
the income or operation of the Property or on Borrower’s or any operator’s
interest in the Property, including without limitation, a termination,
revocation or suspension of any license or permit or a ban on new resident
admissions.

       

      ARTICLE
III

       

      REMEDIES

       

      Section
3.1        Remedies
Available.  If there shall occur a default under this Security
Instrument, and such default has not been cured within any applicable grace or
cure period, then this Security Instrument is subject to foreclosure as provided
by law and Lender may, at its option and by or through a trustee, nominee,
assignee or otherwise, to the fullest extent permitted by law,
exercise  any or all of the following rights, remedies and recourses,
either successively or concurrently.

       

      (a)  Acceleration.  Accelerate
the maturity date of the Note and declare any or all of the indebtedness secured
hereby to be immediately due and payable without any presentment, demand,
protest, notice or action of any kind whatever (each of which is hereby
expressly waived by Borrower), whereupon the same shall become immediately due
and payable.  Upon any such acceleration, payment of such accelerated
amount shall constitute a prepayment of the principal balance of the Note shall
then be immediately due and payable.  Lender shall not be required to
demonstrate any actual impairment of its security or any increased risk of
default hereunder in order to declare the indebtedness secured hereby
immediately due and payable upon an Event of Default.

       

      (b)  Entry on the
Property.  Without in any way curing or waiving any default of
Borrower, either in person, by agent or by court-appointed receiver, with or
without bringing any action or proceeding, or by a receiver appointed by a court
and without regard to the adequacy of its security, enter upon and take
possession of the Property, or any part thereof, in its own name, without force
or with such force as is permitted by law and without notice or process or with
such notice or process as is required by law unless such notice and process are
waivable, in which case Borrower hereby waives such notice and process, and do
any and all acts and perform any and all work which may be desirable or
necessary in Lender’s judgment to complete any unfinished construction on the
Real Estate, to preserve and/or enhance the value, marketability or rentability
of the Property, to increase the income therefrom, to manage and operate the
Property or to protect the security hereof and all sums expended by Lender
therefor, together with interest thereon at the Default Interest Rate (as
defined in the Note), shall be immediately due and payable to Lender by Borrower
on demand and shall be secured hereby and by all of the other Loan Documents
securing all or any part of the indebtedness evidenced by the Note.

       

      (c)  Collect Rents and
Profits.  With or without taking possession of the Property,
sue for or otherwise collect the Rents and Profits, including those past due and
unpaid, and apply the same, less costs and expenses of operation and collection,
including reasonable  attorney’s fees, upon any indebtedness secured
hereby, all in such order as Lender in its discretion may
determine.

       

    

    
      
        
        

      

      
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    (d) Appointment of
Receiver.  Upon, or at any time prior or after, initiating the
exercise of any power of sale, instituting any judicial foreclosure or
instituting any other foreclosure of the liens and security interests provided
for herein or any other legal proceedings hereunder, make application, ex-parte,
to a court of competent jurisdiction for appointment of a receiver, trustee,
liquidator or conservator for all or any part of the Property, as a matter of
strict right and without notice to Borrower and without regard to
the adequacy of the Property for the repayment of the indebtedness secured
hereby or the solvency of Borrower or any person or persons liable for the
payment of the indebtedness secured hereby, and Borrower does hereby irrevocably
consent to such appointment, waives any and all notices of and defenses to such
appointment and agrees not to oppose any application therefor by Lender, but
nothing herein is to be construed to deprive Lender of any other right, remedy
or privilege Lender may now have under the law to have a receiver, trustee,
liquidator or conservator appointed, provided, however, that
the appointment of such receiver, trustee, liquidator or conservator or
other appointee by virtue of any court order, statute or regulation shall not
impair or in any manner prejudice the rights of Lender to receive payment of the
Rents and Profits pursuant to other terms and provisions of this Security
Instrument or the Assignment.  Any such receiver, trustee, liquidator
or conservator shall have all of the usual powers and duties of
receivers, trustees, liquidators or conservators in similar cases, including,
without limitation, the full power to hold, develop, rent, lease, manage,
maintain, operate and otherwise use or permit the use of the Property upon such
terms and conditions as said receiver may deem to be prudent and reasonable
under the circumstances as more fully set forth in Section 3.3
below.  Such receivership shall, at the option of Lender, continue
until full payment of all of the indebtedness secured hereby or until title to
the Property shall have passed by foreclosure sale under this Security
Instrument or deed in lieu of foreclosure.

     

    (e) Foreclosure.  Sell
or offer for sale the Property in such portions, order and parcels as Lender may
determine, with or without having first taken possession of same, to the highest
bidder for cash at public auction.  Such sale shall be made at a
location designated for foreclosure sales in accordance with Chapter 244 of the
Massachusetts General Laws and all other applicable laws.  Lender
shall have the STATUTORY POWER OF SALE and any other right or remedies provided
by law.  At any such sale (i) whether made under the power herein
contained, the UCC, 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 Lender to have been physically present, or to have constructive
possession of, the Property (Borrower shall deliver to Lender any portion of the
Property not actually or constructively possessed by Lender immediately upon
demand by Lender), and the title to and right of possession of any such property
shall pass to the purchaser thereof as completely as if it had been actually
present and delivered to purchaser at such sale, (ii) each instrument of
conveyance executed by Lender shall contain a general warranty of title, binding
upon Borrower, (iii) each recital contained in any instrument of conveyance made
by Lender shall conclusively establish the truth and accuracy of the matters
recited therein, including, without limitation, nonpayment of the Indebtedness,
advertisement and conduct of such sale in the manner provided herein and
otherwise by law and appointment of any successor Lender hereunder, (iv) any
prerequisites to the validity thereof shall be conclusively presumed to have
been performed, (v) the receipt of Lender or of such other party or officer
making the sale shall be a sufficient discharge to the purchaser or purchasers
for his or their purchase money and no such purchaser or purchasers, or his or
their 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 non-application thereof, (vi) to the fullest extent
permitted by law, Borrower shall be completely and irrevocably divested of all
of its 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 both
at law and in equity against Borrower, and against all other persons claiming or
to claim the property sold or any part thereof, 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.

     

    
      
         

      

      
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    (f)  Judicial
Remedies.  Proceed by suit or suits, at law or in equity,
instituted by Lender to enforce the payment of the indebtedness secured hereby
or the other obligations of Borrower hereunder or pursuant to the Loan
Documents, to foreclose the liens and security interests of this Security
Instrument as against all or any part of the Property, and to have all or any
part of the Property sold under the judgment or decree of a court of competent
jurisdiction.  In the event of a judicial sale pursuant to a
foreclosure decree, it is understood and agreed that Lender or its assigns may
become the purchaser of the Property or any part thereof.  This remedy
shall be cumulative of any other non-judicial remedies available to the Lender
with respect to the Loan Documents.  Proceeding with the request or
receiving a judgment for legal relief shall not be or be deemed to be an
election of remedies or bar any available non-judicial remedy of the
Lender.

     

    (g)  Other.  Exercise
any other right or remedy available hereunder, under any of the other Loan
Documents or at law or in equity (including without limitation, rights and
remedies under any applicable Uniform Commercial Code, and use and/or
application of any Reserves and letters of credit).

     

    (h)  Application of
Proceeds.  To the fullest extent permitted by law, the proceeds
of any sale under this Security Instrument shall be applied to the extent funds
are so available to the following items in such order as Lender in its
discretion may determine:

     

    (i) To
payment of the costs, expenses and fees of taking possession of the Property,
and of holding, operating, maintaining, using, leasing, repairing, improving,
marketing and selling the same and of otherwise enforcing Lender’s right and
remedies hereunder and under the other Loan Documents, including, but not
limited to, receivers’ fees, court costs, attorneys’, accountants’, appraisers’,
managers’ and other professional fees, title charges and transfer
taxes.

     

    (ii) To
payment of all sums expended by Lender under the terms of any of the Loan
Documents and not yet repaid, together with interest on such sums at the Default
Interest Rate.

     

    (iii) To
payment of the secured indebtedness and all other obligations secured by this
Security Instrument, including, without limitation, interest at the Default
Interest Rate and, to the extent permitted by applicable law, any prepayment
fee, charge or premium required to be paid under the Note in order to prepay
principal, in any order that Lender chooses in its sole discretion.

     

    
      
         

      

      
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    (iv)  The
remainder, if any, of such funds shall be disbursed to Borrower or to the person
or persons legally entitled thereto.

     

    Section
3.2        Right and Authority of
Receiver or Lender in the Event of Default; Power of
Attorney.  Upon the occurrence of a default hereunder, which
default is not cured within any applicable grace or cure period, and entry upon
the Property pursuant to Section 3.1(b) hereof
or appointment of a receiver pursuant to Section 3.1(d)
hereof, and under such terms and conditions as may be prudent and reasonable
under the circumstances in Lender’s or the receiver’s sole discretion, all at
Borrower’s expense, Lender or said receiver, or such other persons or entities
as they shall hire, direct or engage, as the case may be, may do or permit one
or more of the following, successively or concurrently:  (a) enter
upon and take possession and control of any and all of the Property; (b) take
and maintain possession of all documents, books, records, papers and accounts
relating to the Property; (c) exclude Borrower and its agents, servants and
employees wholly from the Property; (d) manage and operate the Property;
(e) preserve and maintain the Property; (f) make repairs and alterations to the
Property; (g) complete any construction or repair of the Improvements, with
such changes, additions or modifications of the plans and specifications or
intended disposition and use of the Improvements as Lender may in its sole
discretion deem appropriate or desirable to place the Property in such condition
as will, in Lender’s sole discretion, make it or any part thereof readily
marketable or rentable; (h) conduct a marketing or leasing program with respect
to the Property, or employ a marketing or leasing agent or agents to do so,
directed to the leasing or sale of the Property under such terms and conditions
as Lender may in its sole discretion deem appropriate or desirable; (i) employ
such contractors, subcontractors, materialmen, architects, engineers,
consultants, managers, brokers, marketing agents, or other employees, agents,
independent contractors or professionals, as Lender may in its sole discretion
deem appropriate or desirable to implement and effectuate the rights and powers
herein granted; (j) execute and deliver, in the name of Lender as
attorney-in-fact and agent of Borrower or in its own name as Lender, such
documents and instruments as are necessary or appropriate to consummate
authorized transactions; (k) enter into such leases, whether of real or personal
property, or tenancy agreements, under such terms and conditions as Lender may
in its sole discretion deem appropriate or desirable; (l) collect and receive
the Rents and Profits from the Property; (m) eject Tenants or repossess personal
property, as provided by law, for breaches of the conditions of their Leases or
other agreements; (n) sue for unpaid Rents and Profits, payments, income or
proceeds in the name of Borrower or Lender; (o) maintain actions in forcible
entry and detainer, ejectment for possession and actions in distress for rent;
(p) compromise or give acquittance for Rents and Profits, payments, income
or proceeds that may become due; (q) delegate or assign any and all rights and
powers given to Lender by this Security Instrument; and (r) do any acts which
Lender in its sole discretion deems appropriate or desirable to protect the
security hereof and use such measures, legal or equitable, as Lender may in its
sole discretion deem appropriate or desirable to implement and effectuate the
provisions of this Security Instrument.  This Security Instrument
shall constitute a direction to and full authority to any lessee, or other third
party who has heretofore dealt or contracted or may hereafter deal or contract
with Borrower or Lender, at the request of Lender, to pay all amounts owing
under any Lease, contract, concession, license or other agreement to Lender
without proof of the default relied upon.  Any such lessee or third
party is hereby irrevocably authorized to rely upon and comply with (and shall
be fully protected by Borrower in so doing) any request, notice or demand by
Lender for the payment to Lender of any Rents and Profits or other sums which
may be or thereafter become due under its Lease, contract, concession, license
or other agreement, or for the performance of any undertakings under any such
Lease, contract, concession, license or other agreement, and shall have no right
or duty to inquire whether any default under this Security Instrument or under
any of the other Loan Documents has actually occurred or is then
existing.  Borrower hereby constitutes and appoints Lender, its
assignees, successors, transferees and nominees, as Borrower’s true and lawful
attorney-in-fact and agent, with full power of substitution in the Property, in
Borrower’s name, place and stead, to do or permit any one or more of the
foregoing described rights, remedies, powers and authorities, successively or
concurrently, and said power of attorney shall be deemed a power coupled with an
interest and irrevocable so long as any indebtedness secured hereby is
outstanding.  Any money advanced by Lender in connection with any
action taken under this Section 3.3, together
with interest thereon at the Default Interest Rate from the date of making such
advancement by Lender until actually paid by Borrower, shall be a demand
obligation owing by Borrower to Lender and shall be secured by this Security
Instrument and by every other instrument securing the secured
indebtedness.

    
      
         

      

      
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    Section
3.3        Occupancy After
Foreclosure.  In the event there is a foreclosure sale
hereunder and at the time of such sale, Borrower or Borrower’s representatives,
successors or assigns, or any other persons claiming any interest in the
Property by, through or under Borrower, are occupying or using the Property, or
any part thereof, then, to the extent not prohibited by applicable law, each and
all shall, at the option of Lender or the purchaser at such sale, as the case
may be, immediately become the tenant of the purchaser at such sale, which
tenancy shall be a tenancy from day-to-day, terminable at the will of either
landlord or tenant, at a reasonable rental per day based upon the value of the
Property occupied or used, such rental to be due daily to the
purchaser.  Further, to the extent permitted by applicable law, in the
event the tenant fails to surrender possession of the Property upon the
termination of such tenancy, the purchaser shall be entitled to institute and
maintain an action for unlawful detainer of the Property in the appropriate
court of the county in which the Real Estate is located.

     

    Section
3.4        Notice to Account
Debtors.  Lender may, at any time after a default hereunder,
which default is not cured within any applicable grace or cure period, notify
the account debtors and obligors of any accounts, chattel paper, negotiable
instruments or other evidences of indebtedness to Borrower included in the
Property to pay Lender directly.  Borrower shall at any time or from
time to time upon the request of Lender provide to Lender a current list of all
such account debtors and obligors and their addresses.

     

    Section
3.5        Cumulative
Remedies.  All remedies contained in this Security Instrument
are cumulative and Lender shall also have all other remedies provided at law and
in equity or in any other Loan Documents.  Such remedies may be
pursued separately, successively or concurrently at the sole subjective
direction of Lender and may be exercised in any order and as often as occasion
therefor shall arise.  No act of Lender shall be construed as an
election to proceed under any particular provisions of this Security Instrument
to the exclusion of any other provision of this Security Instrument or as an
election of remedies to the exclusion of any other remedy which may then or
thereafter be available to Lender.  No delay or failure by Lender to
exercise any right or remedy under this Security Instrument shall be construed
to be a waiver of that right or remedy or of any default
hereunder.  Lender may exercise any one or more of its rights and
remedies at its option without regard to the adequacy of its
security.

     

    
      
         

      

      
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    Section
3.6        Payment of
Expenses.  Borrower shall pay on demand all of Lender’s
expenses reasonably incurred in any efforts to enforce any terms of this
Security Instrument, whether or not any lawsuit is filed and whether or not
foreclosure is commenced but not completed, including, but not limited to,
reasonable legal fees and disbursements, foreclosure costs and title charges,
together with interest thereon from and after the date Lender notifies Borrower
of Lender’s incurrence thereof until actually paid by Borrower at the Default
Interest Rate, and the same shall be secured by this Security Instrument and by
all of the other Loan Documents securing all or any part of the indebtedness
evidenced by the Note.

     

    ARTICLE
IV

    MISCELLANEOUS
TERMS AND CONDITIONS

     

    Section
4.1         Time of
Essence.  Time is of the essence with respect to all provisions
of this Security Instrument.

     

    Section
4.2        Release of Security
Instrument.  If and when Borrower has paid all of the secured
indebtedness as the same becomes due and payable, then, and in such event only,
all rights under this Security Instrument shall terminate except for those
provisions hereof which by their terms survive, and the Property shall become
wholly clear of the liens, security interests, conveyances and assignments
evidenced hereby, which shall be released by Lender in due form at Borrower’s
cost.  Borrower shall be responsible for the recordation of such
release and payment of any recordation costs associated therewith.

     

    Section
4.3        Certain Rights of
Lender.  Without affecting Borrower’s liability for the payment
of any of the indebtedness secured hereby, Lender may from time to time and
without notice to Borrower: (a) release any Person liable for the payment of the
indebtedness secured hereby; (b) extend or modify the terms of payment of the
indebtedness secured hereby; (c) accept additional real or personal property of
any kind as security or alter, substitute or release any property securing the
indebtedness secured hereby; (d) recover any part of the Property; (e) consent
in writing to the making of any subdivision map or plat thereof; (f) join in
granting any easement therein; or (g) join in any extension agreement of this
Security Instrument or any agreement subordinating the lien hereof.

     

    Section
4.4        Notices.  All
notices, demands, requests or other communications to be sent by one party to
the other hereunder or required by law shall be in writing and shall be deemed
to have been validly given or served by delivery of the same in person to the
intended addressee, or by depositing the same with Federal Express or another
reputable private courier service for next business day delivery, or by
depositing the same in the United States mail, postage prepaid, registered or
certified mail, return receipt requested, in any event addressed to the intended
addressee at its address set forth on the first page of this Security Instrument
or at such other address as may be designated by such party as herein
provided.  All notices, demands and requests shall be effective upon
such personal delivery, or one (1) Business Day after being deposited with the
private courier service, or two (2) Business Days after being deposited in the
United States mail as required above.  Rejection or other refusal to
accept or the inability to deliver because of changed address of which no notice
was given as herein required shall be deemed to be receipt of the notice, demand
or request sent.  By giving to the other party hereto at least fifteen
(15) days’ prior written notice thereof in accordance with the provisions
hereof, the parties hereto shall have the right from time to time to change
their respective addresses and each shall have the right to specify as its
address any other address within the United States of America.

    
      
         

      

      
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    Section
4.5       Successors and
Assigns.  The terms, provisions, indemnities, covenants and
conditions hereof shall be binding upon Borrower and the successors and assigns
of Borrower, including all successors in interest in and to all or any part of
the Property, and shall inure to the benefit of Lender, and its successors and
assigns and shall constitute covenants running with the land.  If
Borrower consists of more than one person or entity, each will be jointly and
severally liable to perform the obligations of Borrower.

     

    Section
4.6       Severability.  A
determination that any provision of this Security Instrument is unenforceable or
invalid shall not affect the enforceability or validity of any other
provision.

     

    Section
4.7       General Interpretative
Principles.  Within this Security Instrument, words of any
gender shall be held and construed to include any other gender, and words in the
singular shall be held and construed to include the plural, and vice versa,
unless the context otherwise requires.

     

    Section
4.8       Waiver; Discontinuance of
Proceedings.  Lender may waive any single default or Event of
Default by Borrower hereunder without waiving any other prior or subsequent
default or Event of Default, and may remedy any default or Event of Default by
Borrower hereunder without waiving the default or Event of Default
remedied.  Neither the failure or delay by Lender in exercising, any
right, power or remedy upon any default by Borrower hereunder shall be construed
as a waiver of such default or Event of Default or as a waiver of the right to
exercise any such right, power or remedy at a later date.  No single
or partial exercise by Lender of any right, power or remedy hereunder shall
exhaust the same or shall preclude any other or further exercise thereof, and
every such right, power or remedy hereunder may be exercised at any time and
from time to time.  No modification or waiver of any provision hereof
nor consent to any departure by Borrower therefrom shall in any event be
effective unless the same shall be in writing and signed by Lender, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose given.  No notice to nor demand on Borrower in
any case shall of itself entitle Borrower to any other or further notice or
demand in similar or other circumstances.  Acceptance by Lender of any
payment in an amount less than the amount then due on any of the secured
indebtedness shall be deemed an acceptance on account only and shall not in any
way affect the existence of a default or Event of Default
hereunder.

     

    Section
4.9       Section
Headings.  The headings of the sections and paragraphs of this
Security Instrument are for convenience of reference only, are not to be
considered a part hereof and shall not limit or otherwise affect any of the
terms hereof.

    
      
         

      

      
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    Section
4.10     Governing
Law.  This Security Instrument will be governed by and
construed in accordance with the laws of the State in which the Property is
located, provided that to the extent that any of such laws may now or hereafter
be preempted by Federal law, in which case such Federal law shall so govern and
be controlling.

     

    Section
4.11     Counting of
Days.  The term “days” when used herein shall mean calendar
days.  If any time period ends on a Saturday, Sunday or holiday
officially recognized by the State within which the Real Estate is located, the
period shall be deemed to end on the next succeeding business
day.  The term “business day” or “Business Day” when used herein shall
mean a weekday, Monday through Friday, except a legal holiday or a day on which
banking institutions in New York, New York are authorized by law to be
closed.

     

    Section
4.12     Application of the Proceeds
of the Note.  To the extent that proceeds of the Note are used
to pay indebtedness secured by any outstanding lien, security interest, charge
or prior encumbrance against the Property, such proceeds have been advanced by
Lender at Borrower’s request and Lender shall be subrogated to any and all
rights, security interests and liens owned by any owner or holder of such
outstanding liens, security interests, charges or encumbrances, irrespective of
whether said liens, security interests, charges or encumbrances are
released.

     

    Section
4.13     Unsecured Portion of
Indebtedness.  If any part of the secured indebtedness cannot
be lawfully secured by this Security Instrument or if any part of the Property
cannot be lawfully subject to the lien and security interest hereof to the full
extent of such indebtedness, then all payments made shall be applied on said
indebtedness first in discharge of that portion thereof which is unsecured by
this Security Instrument.

     

    Section
4.14     Cross
Default.  A default hereunder which has not been cured within
any applicable grace or cure period shall be an event of default under each of
the other Loan Documents.

     

    Section
4.15     Interest After
Sale.  In the event the Property or any part thereof shall be
sold upon foreclosure as provided hereunder, to the extent permitted by law, the
sum for which the same shall have been sold shall, for purposes of redemption
(pursuant to the laws of the State in which the Property is located), bear
interest at the Default Interest Rate.

     

    Section
4.16     Construction of this
Document.  This document may be construed as a mortgage,
security deed, deed of trust, chattel mortgage, conveyance, assignment, security
agreement, pledge, financing statement, hypothecation or contract, or any one or
more of the foregoing, in order to fully effectuate the liens and security
interests created hereby and the purposes and agreements herein set
forth.

     

    Section
4.17     No
Merger.  It is the desire and intention of the parties hereto
that this Security Instrument and the lien hereof do not merge in fee simple
title to the Property.

    
      
         

      

      
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    Section
4.18      Rights With Respect to
Junior Encumbrances.  Any person or entity purporting to have
or to take a junior mortgage or other lien upon the Property or any interest
therein shall be subject to the rights of Lender to amend, modify, increase,
vary, alter or supplement this Security Instrument, the Note or any of the other
Loan Documents and to extend the maturity date of the indebtedness secured
hereby and to increase the amount of the indebtedness secured hereby and to
waive or forebear the exercise of any of its rights and remedies hereunder or
under any of the other Loan Documents and to release any collateral or security
for the indebtedness secured hereby, in each and every case without obtaining
the consent of the holder of such junior lien and without the lien or security
interest of this Security Instrument losing its priority over the rights of any
such junior lien.

     

    Section
4.19      Lender May File Proofs of
Claim.  In the case of any receivership, insolvency,
bankruptcy, reorganization, arrangement, adjustment, composition or other
proceedings affecting Borrower or the principals or general partners in
Borrower, or their respective creditors or property, Lender, to the extent
permitted by law, shall be entitled to file such proofs of claim and other
documents as may be necessary or advisable in order to have the claims of Lender
allowed in such proceedings for the entire secured indebtedness at the date of
the institution of such proceedings and for any additional amount which may
become due and payable by Borrower hereunder after such date.

     

    Section
4.20      After-Acquired
Property.  All property acquired by Borrower after the date of
this Security Instrument which by the terms of this Security Instrument shall be
subject to the lien and the security interest created hereby, shall immediately
upon the acquisition thereof by Borrower and without further mortgage,
conveyance or assignment become subject to the lien and security interest
created by this Security Instrument.

     

    Section
4.21      No
Representation.  By accepting delivery of any item required to
be observed, performed or fulfilled or to be given to Lender pursuant to the
Loan Documents, including, but not limited to, any officer’s certificate,
balance sheet, statement of profit and loss or other financial statement,
survey, appraisal or insurance policy, Lender shall not be deemed to have
warranted, consented to, or affirmed the sufficiency, legality, effectiveness or
legal effect of the same, or of any term, provision or condition thereof, and
such acceptance of delivery thereof shall not be or constitute any warranty,
consent or affirmation with respect thereto by Lender.

     

    Section
4.22      Counterparts.  This
Security Instrument may be executed in any number of counterparts, each of which
shall be effective only upon delivery and thereafter shall be deemed an
original, and all of which shall be taken to be one and the same instrument, for
the same effect as if all parties hereto had signed the same signature
page.

     

    Section
4.23      Personal
Liability.  Notwithstanding anything to the contrary contained
in this Security Instrument, the liability of Borrower and its general partners
for the indebtedness secured hereby and for the performance of the other
agreements, covenants and obligations contained herein and in the Loan Documents
shall be limited as set forth in Sections 1.06 and
1.07 of the Note; provided, however, that nothing
herein shall be deemed to be a waiver of any right which Lender may have under
Sections 506(a), 506(b), 1111(b) or any other provisions of the U.S. Bankruptcy
Code to file a claim for the full amount of the indebtedness secured hereby or
to require that all collateral shall continue to secure all indebtedness owing
to Lender in accordance with the Note, this Security Instrument and the other
Loan Documents.

     

    
      
         

      

      
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    Section
4.24      Recording and
Filing.  Borrower will cause the Loan Documents and all
amendments and supplements thereto and substitutions therefor to be recorded,
filed, re-recorded and re-filed in such manner and in such places as Lender
shall reasonably request, and will pay on demand all such recording, filing,
re-recording and re-filing taxes, fees and other charges.  Borrower
shall reimburse Lender, or its servicing agent, for the costs incurred in
obtaining a tax service company to verify the status of payment of taxes and
assessments on the Property.

     

    Section
4.25      Entire Agreement and
Modifications.  This Security Instrument and the other Loan
Documents contain the entire agreements between the parties and supersede any
prior agreements (oral or written), and may not be amended, revised, waived,
discharged, released or terminated orally but only by a written instrument or
instruments executed by the party against which enforcement of the amendment,
revision, waiver, discharge, release or termination is asserted.

     

    Section
4.26      Maximum
Interest.  The provisions of this Security Instrument and of
all agreements between Borrower and Lender, whether now existing or hereafter
arising and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand or acceleration of
the maturity of the Note or otherwise, shall the amount paid, or agreed to be
paid (“Interest”), to
Lender for the use, forbearance or retention of the money loaned under the Note
exceed the maximum amount permissible under applicable law.  If, from
any circumstance whatsoever, performance or fulfillment of any provision hereof
or of any agreement between Borrower and Lender shall, at the time performance
or fulfillment of such provision shall be due, exceed the limit for Interest
prescribed by law or otherwise transcend the limit of validity prescribed by
applicable law, then ipso facto the obligation
to be performed or fulfilled shall be reduced to such limit and if, from
any circumstance whatsoever, Lender shall ever receive anything of value
deemed Interest by applicable law in excess of the maximum lawful amount, an
amount equal to any excessive Interest shall be applied to the reduction of the
principal balance owing under the Note in the inverse order of its maturity
(whether or not then due) or at the option of Lender be paid over to Borrower,
and not to the payment of Interest.  All Interest (including any
amounts or payments deemed to be Interest) paid or agreed to be paid to Lender
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full period until payment in full of the
principal balance of the Note so that the Interest thereon for such full period
will not exceed the maximum amount permitted by applicable law.  This
Section 5.26
will control all agreements between Borrower and Lender.

     

    Section
4.27      Application of Default
Interest Rate Not a Waiver.  Application of the Default
Interest Rate shall not be deemed to constitute a waiver of any default or any
rights or remedies of Lender under this Security Instrument, any other Loan
Document or applicable legal requirements, or a consent to any extension of time
for the payment or performance of any obligation with respect to which the
Default Interest Rate may be invoked.

     

    Section
4.28      Intentionally Reserved.

     

    
      
         

      

      
        67

        
          

        

      

      
         

      

    

    Section
4.29      Brokers and
Correspondents.  Borrower acknowledges, consents to and agrees
that in addition to any broker or correspondent fee payable by Borrower to the
broker or correspondent, Lender may pay additional compensation, fees or other
payments to the broker or correspondent in connection with or arising out of the
origination, closing, sale, securitization or servicing of the
Loan.  Such compensation may include, but is not limited to, direct
one time payments, payments based on volume, profit sharing, or an on going
financial interest in the Loan.  In addition, broker or correspondent
may act as a sub-servicer with respect to the Loan and receive additional fees
for doing so.  Borrower acknowledges and agrees that it is a
sophisticated Person capable of evaluating these and other circumstances
relevant to obtaining financing in the form of the Loan and that it has or will
obtain from any such broker or correspondent such information regarding any such
compensation as it deems relevant.

     

    Section
4.30      Relationship of the
Parties.  The relationship between Borrower and Lender is that
of a borrower and a lender only and neither of those parties is, nor shall it
hold itself out to be, the agent, employee, joint venturer or partner of the
other party.

     

    Section
4.31      Fixture
Filing.  This Security Instrument shall be effective from the
date of its recording as a financing statement filed as a fixture filing with
respect to all goods constituting part of the Property which are or are to
become fixtures.

     

    Section
4.32      Statutory Power of
Sale.  This Mortgage is upon the STATUTORY CONDITIONS and upon
the further condition that all covenants and agreements of the Borrower in the
Note, this Mortgage and the Loan Documents, and in all other mortgages, debts
and obligations of or from Borrower to or for benefit of Lender shall be kept
and fully performed and upon any breach of same, Lender shall have the STATUTORY
POWER OF SALE and any other powers given by statute.

     

    [No
Further Text on this Page; Signature Page Follows]

    
      
         

      

      
        68

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, Borrower, intending to be legally bound hereby, has duly
executed this Security Instrument under seal as of the day and year first above
written.

     

    
      
        
          
            	 
      	
                    NANTUCKET ACQUISITION
      LLC, a Delaware limited liability company

                  
	 
      	 
      
	 
      	
                    By:

                  	
                    Cornerstone Ventures,
      Inc., a California corporation, its Manager

                  
	 
      	 
      	 
      
	 
      	 
      	
                    By:

                  	 
      
	 
      	 
      	 
      	
                    Terry
      G. Roussel,
President

                  

          

        

      

    

     

    RECORD
AND RETURN TO:

     

    DLA Piper
LLP (US)

    203 N.
LaSalle Street, 19th floor

    Chicago,
Illinois  60601

    Attention:  Samuel
B. Stempel

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    THE STATE
OF ______________  §

     

    COUNTY OF
________________   §

     

    On this ______ day of December, 2009,
before me, the undersigned notary public, personally appeared Terry G. Roussel,
proved to me through satisfactory evidence of identification, which was my
personal knowledge, to be the person whose name is signed on the preceding
instrument and acknowledged the foregoing instrument to be his/her free act and
deed as President of Cornerstone Ventures, Inc., a
California corporation, Manager of NANTUCKET ACQUISITION LLC, a
Delaware limited liability company.

     

    
      
        
          	 
      	 
      
	 	 
	 
      	
                  Notary
      Public

                
	 	 
	 
      	
                  My
      Commission Expires:

                

        

      

    

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
A

    LEGAL
DESCRIPTION

     

    That
certain parcel or tract of land, with all buildings and improvements now or
hereafter located thereon, situated in the Town of Nantucket, County of
Nantucket, Commonwealth of Massachusetts and bounded and described as
follows:

     

    Parcel 1
on plan entitled "Plan of Land in Nantucket, Mass, prepared for the Town of
Nantucket" dated February 20, 2001 by Blackwell and Associates, Inc., and
recorded with the Nantucket Registry of Deeds as Plan No. 01-30.Unassociated Document

     

    Exhibit No.
10.4

     

    OPERATING
AGREEMENT

    FOR

    NANTUCKET
ACQUISITION LLC,

    A
DELAWARE LIMITED LIABILITY COMPANY

     

    THE
SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, NOR REGISTERED NOR QUALIFIED UNDER ANY STATE
SECURITIES LAWS.  SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND
REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, SUCH QUALIFICATION AND
REGISTRATION IS NOT REQUIRED.  ANY TRANSFER OF THE SECURITIES
REPRESENTED BY THIS AGREEMENT IS FURTHER SUBJECT TO OTHER RESTRICTIONS, TERMS
AND CONDITIONS WHICH ARE SET FORTH HEREIN.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    OPERATING
AGREEMENT

    FOR

    NANTUCKET ACQUISITION
LLC

    

    This
Agreement is made as of the Effective Date by and among the Persons listed on
the signature page hereof as the Members and Manager, with reference to the
following:

     

    A.           A
Certificate to form the Company was filed as set forth in Section
1.7(a).

     

    B.           The
Members and Manager desire to adopt and approve an operating agreement for the
Company pursuant to the Act as set forth in this Agreement.

     

    NOW,
THEREFORE, the Members and Manager by this Agreement set forth the operating
agreement for the Company upon the terms and subject to the conditions of this
Agreement.

     

    ARTICLE 1

    ORGANIZATIONAL
MATTERS

     

    1.1           Name. The
name of the Company shall be Nantucket Acquisition LLC.  The Company
may conduct business under that name or any other name approved by the
Manager.

     

    1.2           Term.  The
term of the Company commenced as of the date of the filing of the Certificate
with the Delaware Secretary of State, and shall terminate at the time set forth
in Section 8.1.

     

    1.3           Office.  The
principal office of the Company shall be at 1920 Main Street, Suite 400, Irvine,
CA 92614, or such other location as the Manager may determine.

     

    1.4           Purpose and Business of the
Company.  The
business of the Company shall be: (i) the acquisition and ownership of
membership interests in Sherburne; (ii) the acquisition, ownership and leasing
of the Property; and (iii) all activities related thereto, and any and all other
activities or business which a limited liability company is authorized to
engage; provided, however, that such business shall be limited to and be
conducted in a manner not to jeopardize those Members or their Affiliates that
are or in the future may become REITs from continuing to qualify as REITs by
reason of the Company’s business, unless all Members or Affiliates who are REITs
cease to qualify as REITs for reasons other than the conduct of the business of
the Company. 

     

    1.5           Definitions.  Capitalized
words and phrases used in this Agreement have the meanings set forth in Exhibit C attached
hereto or elsewhere in this Agreement.

     

    1.6           Tax
Classification.  The
Members intend that for federal income tax purposes under the Code, and the
corresponding provisions of state and local law, the Company shall be classified
as a partnership rather than a corporation.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    1.7          Filings; Agent for Service
of Process.

    

    (a)           The
Certificate was filed in the office of the Secretary of State of Delaware on the
Effective Date in accordance with the provisions of the Act to form the Company
as a limited liability company under the laws of the State of
Delaware.  The Manager (i) shall take any and all other actions
reasonably necessary to perfect and maintain the status of the Company as a
limited liability company under applicable laws, and (ii) shall cause amendments
to the Certificate to be filed whenever required by the Act.

    

    (b)           The
Manager shall cause to be filed original or amended Certificates and shall take
any and all other actions as may be reasonably necessary to perfect and maintain
the status of the Company as a limited liability company or similar type of
entity under the laws of any other states or jurisdictions in which the Company
engages in business.

    

    (c)           The
name and address of the agent for service of process shall be as set forth in
the Certificate, or any successor as appointed by the Manager.

    

    (d)           Upon
the dissolution of the Company, the Manager shall cause to be filed certificates
of dissolution in accordance with the Act and the laws of any other states or
jurisdictions in which the Company has filed certificates.

    

    ARTICLE 2

    CAPITAL
CONTRIBUTIONS

     

    2.1          Capital
Contributions.  The
Members identified on Exhibit A attached
hereto have made or may make such Capital Contributions, if any, to the Company
as set forth therein.  The Members acknowledge and agree
that:

     

    (a)           The
COP Loan is documented in the COP Documents representing a non-revolving line of
credit to the Company not exceeding $8,000,000, which for tax purposes shall be
treated as (i) a debtor-creditor loan of up to $6,640,000 to the extent drawn,
and (ii) an equity contribution and Capital Contribution to the Company (and
Capital Account credit for purposes of Regulations Section 1.704-1(b)(2)(iv)) of
$1,360,000, which promptly will be drawn in full;

     

    (b)           The
CPEF Loan is documented in the CPEF Documents representing a non-revolving line
of credit to the Company not exceeding $1,500,000, which for tax purposes shall
be treated to the extent drawn as an equity contribution and Capital
Contribution to the Company (and Capital Account credit for purposes of
Regulations Section 1.704-1(b)(2)(iv)); and

     

    (c)           No
Member shall take any tax-reporting position inconsistent with the
characterization of the COP Loan or CPEF Loan as set forth in this Section
2.1.

     

    (d)           Notwithstanding
any other provision of the Loan Documents and this Agreement: (i) any
distribution and any payment of a Guaranteed Payment to COP pursuant to this
Agreement shall be treated as a payment of an equal amount pursuant to the COP
Loan with respect to the Part B COP Transaction; (ii) any distribution and any
payment of a Guaranteed Payment to CPEF pursuant to this Agreement shall be
treated as a payment of an equal amount pursuant to the CPEF Loan; and (iii) the
aggregate of the payments and distributions to the Lenders pursuant to the Loan
Documents and this Agreement shall not exceed the aggregate amounts that would
be payable to the Lenders pursuant to the Loan Documents determined as if this
Agreement did not exist.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

     2.2        Extent of
Liability.  Except as otherwise provided by this Agreement or
applicable law:

     

     (a)           A
Member shall not be liable for the debts, liabilities, contracts or any other
obligations of the Company; and

    

     (b)           A
Member shall be liable only to make the Capital Contributions expressly provided
for herein and, except as provided in the Loan Documents, shall not be required
to lend any funds to the Company.

    

     No Member or Manager shall have
any personal liability for the repayment of any Capital Contributions of any
Member.

    

    2.3          Loans.  Subject
to Section 4.6 and the approval of the Class B Member and Class C Member to the
extent required under the Loan Documents, the Manager may borrow money on behalf
of the Company for the Company’s business from any source (including, without
limitation, any Member or Affiliate thereof) on such terms and conditions as the
Manager shall deem appropriate.

    

    2.4          Other
Matters. Except as otherwise provided in this Agreement or in the
Loan Documents, no Member shall demand or receive a return of such Member’s
Capital Contributions or withdraw from the Company.  Under
circumstances requiring a return of any Capital Contributions, no Member shall
have the right to receive property other than cash except as may be specifically
provided herein.

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    ARTICLE 3

    MEMBERS

     

    3.1          Members.  There
shall be six (6) classes of Members, as follows, with such rights and
obligations as set forth in this Agreement:

     

    (a)           Class
A.   CVI shall be the sole Class A Member.

     

    (b)           Class
B.   COP shall be the sole Class B Member.

     

    (c)           Class
C.   CPEF shall be the sole Class C Member.

     

    (d)           Class
D.   SH shall be the sole Class D Member.

     

    (e)           Class
E.   CRA shall be the sole Class E Member.

     

    (f)        
   Class
F.   CLRA shall be the sole Class F Member.

     

    3.2          Admission of Additional
Members.  Subject
to Section 6.2, additional Members may be admitted to the Company with the
approval of the Class A Member.  Additional Members shall participate
in the allocations and distributions of the Company on such terms as are
determined by the Class A Member.  This Agreement shall be amended
upon the admission of an additional Member as may be necessary as determined by
the Class A Member to reflect such admission and to set forth the rights,
obligations and Interests of all Members after such
admission.  Notwithstanding the foregoing or any other provision of
this Agreement, (i) the Interests of such additional Members shall be
subordinate to the Interests of the existing Members, and (ii) the rights and
obligations of any other Member other than the Class A Member shall not be
modified without the written approval of such other Member.

     

    3.3          Withdrawals or
Resignations.  Except
as otherwise specifically required by the Act, no Member may withdraw, retire or
resign from the Company in such Member’s capacity as a Member without the
approval of the Class A Member.

     

    3.4          Compensation; Expense
Reimbursement.  Except
pursuant to a transaction permitted by Section 4.6, no Member or Affiliate
thereof is entitled to remuneration for services rendered or goods provided to
the Company.  The Company shall reimburse Members or Affiliates
thereof for any expenses paid by them that properly are to be borne by the
Company.

     

    3.5          Member
Approval.  No
annual or regular meetings of the Members are required to be
held.  However, if such meetings are held, such meetings shall be
noticed, held and conducted pursuant to the Act.  In any instance in
which the approval of the Members is required under this Agreement, such
approval may be obtained in any manner permitted by the Act.  Unless
otherwise required pursuant to the Act, approval of the Members shall mean the
approval of the Class A Member.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    ARTICLE 4

    MANAGEMENT
AND CONTROL OF THE COMPANY

     

    4.1          Management of the Company by
Manager.

     

    (a)           Exclusive. Subject to
the terms and conditions of this Agreement including, without limitation, those
situations in which the approval of the Members is expressly required by this
Agreement,  the Manager, acting alone, shall be responsible for the
day-to-day decisions pertaining to the Company, and shall have full, complete
and exclusive authority, power, and discretion to manage and control the
business, Property and affairs of the Company, to make all decisions regarding
those matters, and to perform any and all other acts or activities customary or
incident to the management of the Company's business, Property and affairs
(including, without limitation, hiring employees or consultants, and terminating
the services of any service provider to the Company (including, without
limitation, any Member who provides services to the Company), subject to any
employment contract between the Officer and the Company).

     

    A Member who is not a Manager shall not
have the right to vote on any matter except as expressly provided in this
Agreement.  No Member in such Member’s capacity as a Member shall have
the right to bind the Company.

     

    (b)          Appointment of
Officers.  The
Manager may appoint (but shall not be required to appoint) one or more Officers
at any time.  The titles, powers, and duties of Officers shall be as
specified in Exhibit
B attached hereto.  Officers shall serve at the pleasure of the
Manager, subject to any rights which may exist pursuant to any employment
contract between the Officer and the Company.  Officers need not be
Members or members of the Manager.

     

    4.2           Manager.

     

    (a)          Number, Term, and
Qualifications  The
Company shall be managed by the Manager, who shall be CVI.  The
Manager shall continue as the Manager for all periods except as provided in this
Agreement.

     

    (b)          Resignation.  A
Manager may resign such position at any time by giving written notice to the
Members without prejudice to the rights, if any, of the Company under any
contract to which the Manager, or an Affiliate of such Person, is a party. The
resignation of a Manager shall take effect upon receipt of that notice or at
such later time as shall be specified in the notice.  Unless otherwise
specified in the notice, the acceptance of the resignation shall not be
necessary to make it effective.  The resignation of a Manager who is
also a Member shall not affect such Person’s rights as a Member and shall not
constitute a withdrawal of such Person as a Member.

     

    (c)          Removal.  A
Manager may be removed only upon the approval of the Class A
Member.  Any removal shall be without prejudice to the rights, if any,
of the Manager under any employment contract and, if a removed Manager is also a
Member, shall not affect such Person’s rights as a Member or constitute a
withdrawal of such Person as a Member.  

     

    (d)          Vacancies.  In
the event a Manager ceases to be a Manager for any reason, a successor Manager
may be appointed only upon the approval of the Class A Member.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (e)           Additional
Managers.  Additional Managers (in addition to the Manager
appointed pursuant to the foregoing provisions of this Section 4.2) may be
appointed only upon the approval of the Class A Member.

     

    (f)          
Vote of
Managers.  The actions of the Manager shall be pursuant to a
majority vote of the Managers in the event there is more than one
Manager.  If a majority of the Managers cannot agree on an action
proposed to be taken, any Manager may submit such matters to the determination
of the Class A Member, and in such event the Class A Member shall determine
whether such proposed action is to be taken.

     

    4.3          Limitations on Power of
Manager. The
Company (acting through its representatives, including the Manager and Officers
appointed pursuant to Section 4.1(b)) shall not have authority to cause the
Company to engage in the transactions set forth in this Section 4.3 without
first obtaining the approval of the Class A Member.  Any action which
is not a Major Decision may be taken by the Manager (or other Officer appointed
by the Manager), provided that: (i) such action is within the scope of authority
of such Person under this Agreement; and (ii) the Manager may first consult with
the Members (to the extent the Manager determines to be appropriate) before
taking an action.

     

    (a)          Subject
to Section 4.3(b), the Major Decisions are any matter set forth in this
Agreement as requiring the vote of the Members (including, without limitation,
the matters set forth in Sections 3.2, 4.2(c), 4.2(d), 4.2(e), 4.2(f), 4.3, 6.2,
8.1(b), 8.2, 8.4, 8.5 and 11.7).  

     

    (b)          Notwithstanding
any other provision of this Agreement, the following actions may not be taken by
the Manager or Members without the unanimous approval of the Manager and all
Members:

     

    (i)           Except
as provided in Section 8.1, any act which would make it impossible to carry on
the ordinary business of the Company;

     

    (ii)          The
occurrence by the Company of a debt not in the ordinary course of business and,
in any event any debt that is not subordinate to the COP Transaction and the
CPEF Transaction or expressly in accordance with the Loan Documents (during such
time as the Loans remaining outstanding in whole or in part); and

     

    (iii)         The
pledge or assignment for security reasons of any Property for a debt not in the
ordinary course of business and, in any event any debt that is not subordinate
to the COP Transaction and the CPEF Transaction or expressly in accordance with
the Loan Documents (during such time as the Loans remaining outstanding in whole
or in part);

     

    (c)          Notwithstanding
any other provision of this Agreement, in the event of a default under the Loan
Documents, or in the event any action taken on behalf of the Company may have a
material adverse effect on COP and/or CPEF, the approval of the Class B Member
and the Class C Member shall be required before the Manager or Class A Member
may engage in any action set forth in Section 4.2 or Section 4.3.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    4.4          Performance of Duties;
Liability of Managers and
Officers.  A
Manager or Officer shall not be liable to the Company or to any other Manager or
Member for any loss or damage sustained by the Company or any other member of
the Manager or Member, unless the loss or damage shall have been the result of a
breach of this Agreement, fraud, deceit, gross negligence, reckless or
intentional misconduct, or a knowing violation of law by such Manager or
Officer.  A Manager or Officer shall perform such Person’s duties in
good faith, in a manner such Person reasonably believes to be in the best
interests of the Company and its Members, and with such care, including
reasonable inquiry, as an ordinarily prudent person in a like position would use
under similar circumstances.  A Member who so performs the duties of a
Manager or Officer shall not have any liability by reason of being or having
been a Manager or Officer.

     

    In
performing duties under this Agreement, a Manager or Officer shall be entitled
to rely on information, opinions, reports, or statements, including financial
statements and other financial data, of the following Persons or groups unless
such Person has knowledge concerning the matter in question that would cause
such reliance to be unwarranted, and provided that such Person acts in good
faith and after reasonable inquiry when the need therefor is indicated by the
circumstances:

     

    (a)           One
or more employees or other agents of the Company whom a Manager or Officer
reasonably believes to be reliable and competent in the matters presented;
or

     

    (b)           Any
attorney, accountant, environmental consultant or other Person as to matters
which a Manager or Officer reasonably believes to be within such Person's
professional or expert competence.

     

    4.5          Devotion of
Time.  A
Manager or Officer shall devote whatever time or effort is reasonably
appropriate for the furtherance of the Company's business.

     

    4.6          Transactions between the
Company, Managers, Members,
Officers.  Notwithstanding
that it may constitute a conflict of interest, and subject to the terms and
provisions of this Agreement, the Members, Managers, Officers and their
Affiliates may engage in any transaction with the Company as may be approved by
the Manager so long as (i) such transaction is not expressly prohibited by this
Agreement, and (ii) the terms and conditions of such transaction, on an overall
basis, are fair and reasonable to the Company and are at least as favorable to
the Company as those that are generally available from Persons capable of
similarly performing them.  The Manager and Members expressly approve
the Loans and the Loan Documents.

     

    Notwithstanding
any other provision of this Agreement, no transaction shall be permitted
pursuant to this Section 4.6 to the extent such transaction would or is likely
to cause a    violation of any contract, loan or other
agreement or obligation to which the Company is a party.

     

    4.7          Compensation; Expense
Reimbursement. 

     

    (a)           Subject
to Section 4.6, no Manager, Officer or Affiliate thereof shall receive
compensation from the Company for services performed for the Company except as
may be approved by the Manager (subject to Section 4.3(c) and the last paragraph
of Section 4.6).  Any compensation to a Manager or Officer pursuant to
this Section 4.7(a) who is also a Member shall be treated as guaranteed payments
within the meaning of Code Section 707(c).

     

    (b)           The
Company shall reimburse the Managers, Officers and Affiliates thereof for any
expenses paid by them that properly are to be borne by the Company.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (c)           The
Manager shall be entitled to reimbursement of an allocable portion of the
general, administrative and overhead expenses of the Manager as reasonably
determined by the Manager taking into account all of the activities of the
Manager, including the Manager’s activities as the Manager of the
Company.

     

    ARTICLE 5

    ALLOCATIONS
AND DISTRIBUTIONS

     

    5.1          Allocations.  The
Profits, Losses and other items of the Company shall be allocated as set forth
in Exhibit D
attached hereto.

     

    5.2          Net Cash.  Except
as otherwise provided in Sections 5.3 and 8.2, the Manager shall distribute or
pay Operating Cash Flow and Extraordinary Cash Flow to the Members in the
following order and priority:

     

    (a)           Operating Cash
Flow.  Operating Cash Flow shall be distributed or paid in the
following order and priority:

     

    (i)           First,
to the Class B Member until all accrued and unpaid interest on the Part A COP
Transaction is paid in full;

     

    (ii)          Second,
to the Class B Member until all accrued and unpaid Guaranteed Payment on the
Part B COP Transaction is paid in full;

     

    (iii)     
   Third, to the Class C Member until all accrued and unpaid
Guaranteed Payment on the CPEF Transaction is paid in full;

     

    (iv)      
  Fourth, the remaining Operating Cash Flow, to the Class A Member;
and

     

    (v)        
 Notwithstanding the foregoing, to the extent (if at all) the Class B
Member and/or Class C Member do not receive the entire amounts due to them as
Additional Interest under the Loan Documents pursuant to Section 5.2(b), then
Operating Cash Flow shall be distributed under this Section 5.2(a) to the Class
B Member and Class C Member in the order and priority to which they are entitled
to distributions of Extraordinary Cash Flow pursuant to Section 5.2(b), until
they have received all amounts to which they are entitled pursuant to Section
5.2(b).

     

    (b)          Extraordinary Cash
Flow.  Extraordinary Cash Flow shall be distributed or paid in
the following order and priority:

     

    (i)           First,
to the Class B Member until all accrued and unpaid interest on the Part A COP
Transaction is paid in full;

     

    (ii)          Second,
to the Class B Member until to all accrued and unpaid Guaranteed Payment on the
Part B COP Transaction is paid in full;

     

    (iii)        
Third, to the Class B Member until all unpaid principal on the Part A COP
Transaction is paid in full;

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (iv)        Fourth,
to the Class B Member until its Adjusted Capital Contributions with respect to
the Part B COP Transaction are reduced to zero;

     

    (v)         Fifth,
to the Class C Member until all accrued and unpaid Guaranteed Payment on the
CPEF Transaction is paid in full;

     

    (vi)        Sixth,
to the Class C Member until its Adjusted Capital Contribution with respect to
the CPEF Transaction are reduced to zero;

     

    (vii)       Seventh,
to the Class B Member in an amount equal to its Tier 1 Shared Appreciation
Interest and the Class C Member in an amount equal to its Tier 1 Shared
Appreciation Interest (in proportion to their Tier 1 Shared Appreciation
Interests);

     

    (viii)      Eighth,
to the Class D Member, Class E Member and Class F Member (in proportion to their
Tier 1 Shared Appreciation Interests); and

     

    (ix)        Ninth,
the remaining Extraordinary Cash Flow, to the Class A Member, Class D Member,
Class E Member and Class F Member (in proportion to their Tier 2 Shared
Appreciation Interests).

     

    (c)           Definitions.  For
purposes of this Agreement, certain definitions relating to Shared Appreciation
are set forth in Exhibit C hereto
under the definition of Shared Appreciation.

     

    5.3          Amounts
Withheld.  If
required by applicable law, the Manager shall cause the Company to withhold such
amounts as may be required from any payment or distribution from the Company to
a Member, and the Company shall remit such amount on a timely basis to the tax
authority or other entity entitled to it.  Any (i) amounts so withheld
or (ii) estimated or other payments to tax authorities with respect to any
Profits or other items allocable to the Members, shall be treated as amounts
distributed to the Members pursuant to this Article 5 for all
purposes.  The Company shall allocate any such amounts among the
Members in accordance with applicable law.

     

    5.4          Additional
Provisions.  Notwithstanding any other provision of this
Agreement:

     

    (a)           If
upon the Maturity Date of the COP Transaction and CPEF Transaction there has not
been a Major Capital Event that produces cash proceeds sufficient to satisfy the
priority payments and distributions set forth in Section 5.2(b) with respect to
COP Transaction and CPEF Transaction, the Property shall be treated as sold for
its Fair Market Value pursuant to the terms and provisions set forth under the
definition of Shared Appreciation in Exhibit C attached
hereto, and COP and CPEF shall receive payments and distributions from the
Company pursuant to Section 5.2(a) in the amounts set forth in Section
5.2(b).

     

    (b)           Upon
the receipt by a Member of all payments or distributions to which such Member is
entitled pursuant to this Agreement, such Member shall cease to be a Member and
shall have no ongoing interest of any sort or manner pursuant to this
Agreement.

     

    (c)           At
any time after the complete payment and/or distributions to COP and CPEF
pursuant to this Agreement and the COP Transaction and CPEF Transaction, the
Manager may elect in its sole discretion to redeem the Interests of the Class D
Member, the Class E Member and/or the Class F Member including, without
limitation, their rights to distributions pursuant to Section 5.2(b), based on
the appraised value of such Member’s or Members’ Interests, as determined
pursuant to Exhibit
E attached hereto.  

     

    
      
        
        

      

      
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    ARTICLE 6

    TRANSFER
AND ASSIGNMENT OF INTERESTS

     

    6.1           Transfer and Assignment of
Interests.  Any
Member other than the Class D Member shall be entitled to Transfer all or any
part of such Member’s Interest.  Any Interest so Transferred shall
remain subject to all of the provisions and restrictions of this
Agreement.  Notwithstanding the foregoing, any Transfer otherwise
allowed pursuant to this Section 6.1 which would cause the termination of the
Company under the Code, in the sole discretion of the Manager, shall be null and
void.

     

    6.2           Substitution of
Members.  A
transferee of a Member's Interest pursuant to this Agreement shall have the
right to become a substitute Member only if approved by the Manager or, if there
is no Manager, by the Class A Member, (ii) such Person executes an instrument
satisfactory to the Manager or Class A Member, as the case may be) accepting and
adopting the terms and provisions of this Agreement, and (iii) such Person pays
any reasonable expenses in connection with such Person’s admission as a
substitute Member.  The admission of a substitute Member shall not
release the Member who assigned the Interest from any liability that such Member
may have to the Company.

     

    6.3           Distributions and Allocations in Respect to Transferred Interests.  If
any Interest is Transferred during any accounting period in compliance with the
provisions of this Article 6, Profits, Losses, each item thereof and all other
items attributable to the Transferred Interest for such period shall be divided
and allocated between the transferor and the transferee pursuant to an interim
closing of the books, as provided in Regulations Section
1.706-1(c)92)(ii).  All distributions on or before the date of such
Transfer shall be made to the transferor, and all distributions thereafter shall
be made to the transferee.  Solely for purposes of making such
allocations and distributions, the Company shall recognize such Transfer not
later than the end of the calendar month during which it is given notice of such
Transfer, provided that if the Company does not receive a notice stating the
date such Interest was Transferred and such other information as the Manager may
reasonably require within thirty (30) days after the end of the accounting
period during which the Transfer occurs, then all of such items shall be
allocated, and all distributions shall be made, to the Person who, according to
the books and records of the Company, on the last day of the accounting period
during which the Transfer occurs, was the owner of the
Interest.  Neither the Company nor any member of the Manager shall
incur any liability for making allocations and distributions in accordance with
the provisions of this Section 6.3, whether or not the Company or any
member of the Manager has knowledge of any Transfer of ownership of any
Interest.

     

    6.4           Transfers in Violation of
this Agreement.  Upon
a purported Transfer in violation of this Article 6, such Transfer shall be null
and void (unless such Transfer is required to be recognized under applicable
law).  Upon a Transfer in compliance with this Agreement, if the
transferee is not admitted as a substitute Member, the transferee shall have no
right to vote or participate in the management of the Company or to exercise any
rights of a Member.  Such transferee shall only be entitled to receive
the share of the allocations, payments and distributions of the Company to which
the transferor would otherwise be entitled with respect to the Transferred
Interest.

     

    
      
        
        

      

      
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    ARTICLE 7

    ACCOUNTING,
RECORDS, REPORTING BY MEMBERS

     

    7.1          Books and
Records.  The
books and records of the Company shall be kept in accordance with the accounting
methods followed for federal income tax purposes.  The Company shall
maintain at its principal office all of the following:

     

    (a)           A
current list of the full name and last known business or residence address of
each Member set forth in alphabetical order, together with the Capital
Contributions and Capital Account of each Member;

     

    (b)           A
current list of the full name and business or residence address of each Manager
and Officer;

     

    (c)           A
copy of the Certificate and any and all amendments thereto together with
executed copies of any powers of attorney pursuant to which the Certificate or
any amendments thereto have been executed;

     

    (d)           Copies
of the Company's federal, state, and local income tax or information returns and
reports, if any, for the six (6) most recent taxable years;

     

    (e)           A
copy of this Agreement and any and all amendments thereto together with executed
copies of any powers of attorney pursuant to which this Agreement or any
amendments thereto have been executed;

     

    (f)        
   Copies of the financial statements of the Company, if any, for
the six (6) most recent fiscal years; 

     

    (g)           The
Company's books and records as they relate to the internal affairs of the
Company for at least the current and past four (4) fiscal years;
and

     

    (h)           Any
other books and records as may be required pursuant to applicable
law.

     

    7.2          Reports.  The
Company:

     

    (a)           Shall
cause to be filed, in accordance with the Act, all reports and documents
required to be filed with any governmental agency;

     

    (b)           Shall
cause to be prepared at least annually information concerning the Company's
operations necessary for the completion of the Members' federal and state income
tax returns;

     

    (c)           Shall
send or cause to be sent to each Member within ninety (90) days after the end of
each taxable year such information as is necessary to complete the Member’s
federal and state income tax or information returns with respect to the Member’s
Interest; and

     

    
      
        
        

      

      
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    (d)           At
least thirty (30) days prior to the Company’s filing of any Tax Returns, the
Company shall provide to each Member for review and comment copies of the Tax
Returns proposed to be filed, and the Company shall take any such comments into
account, and may modify the Tax Returns, as the Manager may determine before the
Tax Returns are filed.  The Company shall provide to each Member
copies of the filed Tax Returns as soon as practicable after they are
filed.

     

    7.3          Bank
Accounts.  The
Manager shall maintain the funds of the Company in one or more separate bank
accounts in the name of the Company, and shall not permit the funds of the
Company to be commingled in any fashion with the funds of any other
Person.

     

    7.4          Tax
Matters.

     

    (a)           The
Manager shall designate a Member as the Tax Matters Partner to represent the
Company (at the Company's expense) in connection with all examination of the
Company's affairs by tax authorities and to expend Company funds for
professional services and costs associated therewith.

     

    (b)           Any
distributions to a Member pursuant to Sections 5.2(a)(iv), 5.2(b)(ix and
5.2(b)(x) shall be treated as distributions pursuant to Code Section
731(a).

     

    (d)           Any
distributions to a Member pursuant to Sections 5.2(b)(iv), 5.2(b)(v)
5.2(b)(vii), 5.2(b)(viii) and 5.4(c) shall be treated as distributions pursuant
to Code Section 736(b).

     

    (e)           Any
distributions to a Member pursuant to Sections 5.2(a)(ii), 5.2(a)(iii),
5.2(b)(ii) and 5.2(b)(vi)shall be treated as guaranteed payments pursuant to
Code Section 707(c).

     

    7.5          Inspection of Books and
Records.  The
books and records of the Company described in Section 7.1, the reports and
documents described in Section 7.2, the bank statements and related bank records
pertaining to the bank accounts described in Section 7.3, and all documents
generated or maintained with reference to the tax matters described in Section
7.4, shall all be and remain open and available for inspection and copying by
any Member, or any Member’s authorized representative, during normal business
hours on reasonable notice to the Company.  The costs of such
inspection and copying shall be borne by the Member.

     

    ARTICLE 8

    DISSOLUTION
AND WINDING UP

     

    8.1          Liquidating
Events.  The
Company shall dissolve and commence winding up and liquidating upon the first to
occur of any of the following (“Liquidating Events”):

     

    (a)           The
sale of all or substantially all of the Property;

     

    (b)           The
determination of the Class A Member to dissolve, wind up and liquidate the
Company (subject to the prior approval of the Class B Member and Class C Member,
as the case may be, for all periods during which they continue to be Members;
or

     

    (c)           Entry
of a decree of judicial dissolution of the Company pursuant to applicable
law.

     

    
      
        
        

      

      
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    The
Members hereby agree that, notwithstanding any provision of applicable law, the
Company shall not dissolve prior to the occurrence of a Liquidating
Event.  

     

    8.2          Winding
Up.  Upon
the occurrence of a Liquidating Event, the Company shall continue solely for the
purposes of winding up its affairs in an orderly manner, liquidating its assets,
and satisfying the claims of its creditors and Members.  No Member
shall take any action that is inconsistent with, or not necessary to or
appropriate for, the winding up of the Company's business and
affairs.  The Manager (or, in the event there is no remaining Manager,
any Person elected by the Class A Member) shall be responsible for overseeing
the winding up and dissolution of the Company and shall take full account of the
Company's liabilities and assets and the assets shall be liquidated as promptly
as is consistent with obtaining the fair value thereof, and the proceeds
therefrom, to the extent sufficient therefor, shall be applied and distributed
in the order and priority set forth in Section5.2(b).

     

    8.3          Rights of
Members.  Except
as otherwise provided in this Agreement or the Loan Documents, (i) each Member
shall look solely to the assets of the Company for the return of such Member’s
Capital Contribution and Company obligations owed to such Member, and shall have
no right or power to demand or receive property other than cash from the
Company, and (ii) no Member shall have priority over any other Member as to the
return of such Member’s Capital Contributions, payments, distributions or
allocations.

     

    8.4          Notice of
Dissolution.  In
the event a Liquidating Event occurs, the Manager (or, in the event there are no
remaining Manager, any Person elected by the Class A Member) shall provide
written notice thereof to each of the Members and to all known creditors and
claimants whose addresses appear on the records of the Company.  The
Company shall file such certificates and other documents as may be required by
applicable law to reflect the dissolution.

     

    8.5          Final
Accounting.  As
a part of the winding up process, the Manager (or, in the event there are no
remaining Manager, any Person elected by the Class A Member) shall provide to
each Member a final accounting of the assets and liabilities (if any) of the
Company, audited by the Company's accounting firm.  Such accounting
and audit shall be paid for by the Company before any final liquidating
distributions are paid to Members.  The requirement of this Section
8.5 may be waived only upon the approval of all Members.

     

    ARTICLE 9

    INDEMNIFICATION

     

    9.1          Indemnification.

     

    (a)           The
Company shall indemnify and hold harmless the Members, Managers, Officers and
their Affiliates and their respective officers, directors, employees, agents and
principals (individually, an “Indemnitee”) from and against any and all losses,
claims, demands, costs, damages, liabilities, joint and several, expenses of any
nature (including reasonable attorneys' fees and disbursements), judgments,
fines, settlements and other amounts arising from any and all claims, demands,
actions, suits or proceedings, whether civil, criminal, administrative or
investigative, in which the Indemnitee was involved or may be involved, or
threatened to be involved, as a party or otherwise, arising out of or incidental
to the business of the Company (including without limitation those incurred by
any Affiliate as a result of any such guarantees, warranties, joinders or other
agreements executed by such Affiliate for the benefit of the Company), excluding
liabilities to any Member, regardless of whether the Indemnitee continues to be
a Manager, Member, Officer, Affiliate, or an officer, director, employee, agent
or principal of such Person at the time any such liability or expense is paid or
incurred, to the fullest extent permitted by the Act and all other applicable
laws.

     

    
      
        
        

      

      
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    (b)           Notwithstanding
the provisions of Section 9.1(a), no Person shall be indemnified from any
liability for fraud, bad faith, willful misconduct or gross
negligence.

     

    (c)           Notwithstanding
anything to the contrary in any of Section 9.1(a), in the event that any
provision in any of this Article 9 is determined to be invalid in whole or in
part, Article 9 shall be enforced to the maximum extent permitted by applicable
law.

     

    9.2          Expenses.  Expenses
incurred by an Indemnitee in defending any claim, demand, action, suit or
proceeding subject to Section 9.1 shall, from time to time, be advanced by the
Company prior to the final disposition of such claim, demand, action, suit or
proceeding upon receipt by the Company of an undertaking by or on behalf of the
Indemnitee to repay such amount if it shall be determined that such Person is
not entitled to be indemnified as authorized in Section 9.1.

     

    9.3          Indemnification Rights
Non-Exclusive.  The
indemnification provided by Section 9.1 shall be in addition to any other rights
to which those indemnified may be entitled under any agreement, the vote of the
Managers or Members, as a matter of law or equity, or otherwise, both as to
action in the Indemnitee's capacity as a Member, Manager, Officer, Affiliate or
officer, director, employee, agent or principal of a Member, Manager or Officer
and as to any action in another capacity, and shall continue as to an Indemnitee
who has ceased to serve in such capacity and shall inure to the benefit of the
heirs, successors, assigns and administrators of the Indemnitee.

     

    9.4          Insurance.  The
Company may purchase and maintain insurance (including, without limitation,
directors’ and officer’s insurance), at the Company's expense, on behalf of the
Members, Managers, Officers and such other Persons as the Manager shall
determine, against any liability that may be asserted against, or any expense
that may be incurred by, such Person in connection with the activities of the
Company and/or the Members', Managers’ or Officers’ acts or omissions as the
Members, Managers or Officers of the Company regardless of whether the Company
would have the power to indemnify such Person against such liability under the
provisions of this Agreement.

     

    9.5          Assets of the
Company.  Any
indemnification under Section 9.1 shall be satisfied solely out of the assets of
the Company.  No Member, Manager, Officer or other Person shall be
subject to personal liability or required to fund or to cause to be funded any
obligation by reason of these indemnification provisions.

     

    
      
        
        

      

      
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    ARTICLE 10

    REPRESENTATIONS

     

    10.1        Representations.  Each
Member hereby represents and warrants to, and agrees with, the Managers, the
Members and the Company as follows:

     

    (a)           Such
Member has a preexisting personal or business relationship with the Company or
one or more of its Officers or controlling Persons, or by reason of his or her
business or financial experience, or by reason of the business or financial
experience of his or her financial advisor who is unaffiliated with and who is
not compensated, directly or indirectly, by the Company or any Affiliate or
selling agent of the Company, such Member is capable of evaluating the risks and
merits of an investment in the Company and of protecting his own interests in
connection with this investment.

     

    (b)           Such
Member has not seen, received, been presented with, or been solicited by any
leaflet, public promotional meeting, article or any other form of advertising or
general solicitation with respect to the sale of the Interest.

     

    (c)           Such
Member is acquiring the Interest for investment purposes for its own account
only and not with a view to or for sale in connection with any distribution of
all or any part of the Interest.  No other Person will have any direct
or indirect beneficial interest in or right to the Interest (other than the
owners of a Member which is an entity with respect to the Interest of such
entity Member).

     

    (d)           Neither
any Manager, the Company, any Member nor any of their officers or counsel, nor
any federal or state agency, has passed upon the Interests acquired by such
Member or made any finding or determination concerning the fairness of the price
to be paid by such Member for such Interests pursuant to this
Agreement.  Such Member must bear the economic risk of the investment
in the Company for an indefinite period of time.  Such Member
acknowledges that the Interests being acquired by him pursuant to this Agreement
are being offered and sold without qualification or registration under the
California Corporate Securities Law of 1968 or any securities laws of any other
state or the Securities Act of 1933, as amended, in reliance upon exemptions
from the qualification and registration requirements.

     

    (e)           Such
Member is familiar with and has investigated the Company and its business, and
has carefully considered and understands the risks of, and other considerations
relating to, the Company’s business and the acquisition of
Interests.  Such Member and such Member’s representatives have been
furnished all materials relating to the Company and its business which they have
requested, and have been afforded the opportunity to obtain any additional
information necessary to verify the accuracy of any information made available
by the Company or its representatives.  Representatives of the Company
have answered all inquiries that such Member and representatives have put to
them concerning the Company, its business and all other matters relating to the
Company and such Member’s acquisition of Interests.

     

    (f)          
 Such Member has adequate means of providing for such Member’s current
needs and personal contingencies, has no need for liquidity in such Member’s
investment in the Interests, and could afford to lose the entire amount of such
Member’s investment in the Interests, and such Member’s commitment to all
non-liquid investments is reasonable in relation to such Member’s net
worth.

     

    
      
        
        

      

      
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    (g)           Such
Member is not relying on any Manager, Member, the Company or any Officer, nor
any of such Person’s officers, Affiliates or counsel for legal, accounting,
financial, investment, valuation or tax advice in connection with his evaluation
of the risks and merits of an investment in the Company and the consequences to
such Member of such an investment.  Such Member is relying on such
Member’s own advisors for legal, accounting, financial, investment, valuation
and tax advice in connection with such Member’s evaluation of the risks and
merits of an investment in the Company and the consequences to such Member of
such an investment.

     

    ARTICLE 11

    MISCELLANEOUS

     

    11.1        Complete
Agreement.  This
Agreement, the Loan Documents and all other documents referenced herein
constitute the complete and exclusive statement of agreement among the Members
and Manager with respect to the subject matter herein and therein and replace
and supersede all prior written and oral agreements among the Members and
Manager.  To the extent that any provision of the Certificate
conflicts with any provision of this Agreement, the Certificate shall
control.

     

    11.2        Binding
Effect.  Subject
to the provisions of this Agreement relating to transferability, this Agreement
will be binding upon and inure to the benefit of the Members, the Manager and
their respective successors and assigns.

     

    11.3        Interpretation.  All
pronouns shall be deemed to refer to the masculine, feminine, or neuter,
singular or plural, as the context in which they are used may
require.  All headings herein are inserted only for convenience and
ease of reference and are not to be considered in the interpretation of any
provision of this Agreement.  Numbered or lettered articles, sections
and subsections herein contained refer to articles, sections and subsections of
this Agreement unless otherwise expressly stated.  In the event any
claim is made by any Member or Manager relating to any conflict, omission or
ambiguity in this Agreement (or any document referenced herein), no presumption
or burden of proof or persuasion shall be implied by virtue of the fact that
this Agreement (or document) was prepared by or at the request of a particular
Member, Manager or such Person’s counsel.

     

    11.4        Dispute
Resolution.  Subject to Section 11.23, any controversy, dispute
or claim arising out of or relating to this Agreement or the breach thereof
shall be resolved by a general reference pursuant to California Code of Civil
Procedure Section 638 and in accordance with the provisions set forth
below.  It is the intent of the parties that this reference agreement
provision by specifically enforceable as follows:

     

    (a)           Such
controversy, dispute or claim shall be tried by a referee under an order of
general reference to try all issues of fact and law, whether legal or equitable,
to be chosen by counsel for the parties from a list of retired Superior Court
judges furnished by the Orange County Superior Court, with all parties hereby
waiving any right to a trial by jury.  If counsel are unable to agree,
then the referee shall be appointed by the Superior Court, in accordance with
California Code of Civil Procedure Section 640, with each party entitled to only
one disqualification pursuant to California Code of Civil Procedure Section
170.6.  The trial shall be conducted and the issues determined in
compliance with all judicial rules and all statutory and decisional law of the
Superior Court and not by way of a reference.  The prevailing party in
the reference shall be entitled to receive as part of the judgment in its favor
an award of its reasonable attorneys’ fees, costs and expenses incurred with
respect to the reference, plus interest at the highest rate permitted by law as
not being usurious from and as of the date of the alleged breach, provided that
prior to the determination of the prevailing party, the parties equally shall
bear the costs and expenses of the referee.

     

    
      
        
        

      

      
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     (b)          The
referee shall conduct and decide all pretrial and post-trial procedures which
may arise as if the matter were formally litigated in the Superior
Court.  The judgment entered upon the decision of the referee shall be
subject to all post-trial procedures and to appeal in the same manner as an
appeal from any order or judgment in a civil action.  All rules of
evidence as set forth in the California Evidence Code, all rules of discovery as
set forth in the California Code of Civil Procedure, other statutory and
decisional law of California and all Orange County Superior Court Rules and
California Rules of Court shall be applicable to any proceeding before the
referee.  The trial shall be conducted on consecutive dates, as
opposed to being conducted piecemeal in various dates separated by postponements
or adjournments.

     

    (c)           This
reference agreement may be specifically enforced by the filing of a complaint or
petition or motion seeking specific enforcement or by motion directed to the law
and motion department of the Orange County Superior Court or by such other
procedure to the same effect as may be directed by the Orange County Superior
Court Rules.

     

    (d)           For
the purposes of this Section 11.4:  (i) attorney fees shall include,
without limitation, fees incurred in the following:  (1) postjudgment
motions; (2) contempt proceedings; (3) garnishment, levy, and debtor and third
party examinations; (4) discovery; and (5) bankruptcy litigation; and (ii)
prevailing party shall mean the party who is determined in the proceeding to
have prevailed or who prevails by dismissal, default or otherwise.

     

    11.5         Severability.  If
any provision of this Agreement or the application of such provision to any
Person or circumstance shall be held invalid, the remainder of this Agreement or
the application of such provision to Persons or circumstances other than those
to which it is held invalid shall not be affected thereby.

     

    11.6         Notices.  Any
notice to be given or to be served upon the Company or any party hereto in
connection with this Agreement must be in writing and will be deemed to have
been given and received when delivered to the address specified by the party to
receive the notice.  Such notices will be given to a Member or Manager
at the address specified in Exhibit A hereto for
such Person.  Any party may, at any time by giving five (5) days'
prior written notice to the other Members and Managers, designate any other
address in substitution of the foregoing address to which such notice will be
given.

     

    11.7         Amendments.  Subject
to Section 3.2, all amendments to this Agreement must be approved by the Class A
Member and, so long as the Class B Member and/or Class C Member are Members, by
the Class B Member and/or Class C Member, as the case may be.

     

    11.8         Multiple
Counterparts. This
Agreement may be executed in two or more counterparts and by facsimile or
email/pdf signatures, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.

    
      
         

      

      
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    11.9         Special Power of
Attorney

     

    (a)           Attorney-in-Fact.  Subject
to such approvals of the Members as may be set forth in this Agreement, each
Member grants the Manager a special power of attorney irrevocably making,
constituting, and appointing the Manager as the Member's attorney in fact, with
full power of substitution, and with all power and authority to act in the
Member's name and on the Member's behalf to execute, acknowledge and deliver and
swear to in the execution, acknowledgment, delivery and filing of the following
documents, provided that any such action is in the ordinary course of business
of the Company, is permitted pursuant to this Agreement, and is not expressly
subject to the approval of the Members pursuant to this
Agreement:  

     

    (i)           Promissory
notes to be delivered pursuant to this Agreement;

     

    (ii)          Deeds,
trust agreements, management agreements, deeds of trust, mortgages, security
agreements, contracts, instruments, certificates, representations, or any other
agreements or documents to be delivered pursuant to this Agreement;

     

    (iii)         UCC
financing statements to be delivered pursuant to this Agreement and all
amendments thereto;

     

    (iv)         Assignments
of interests or other documents of transfer to be delivered pursuant to this
Agreement or in connection with the purchase of an Interest pursuant to this
Agreement;  and

     

    (v)         Any
other instrument or document that may be reasonably required by the Manager in
connection with any of the foregoing or to reflect any reduction in the Member's
Capital Account or Interest pursuant to this Agreement.

     

    (b)           Irrevocable
Power.  The special power granted in Section
11.9(a):  (i) is irrevocable, (ii) is coupled with an interest, and
(iii) shall survive a Member's death, incapacity or dissolution.

     

    (c)           Signatures.  The
Manager may exercise the special power of attorney granted in Section 11.9(a) by
a facsimile or email/pdf signature.

     

    11.10       Time.  Time
is of the essence with respect to this Agreement

     

    11.11       Waiver of Rights to
Partition.  Inasmuch
as all Property is owned by the Company as an entity, and no Member,
individually, has any ownership in such Property, during the term of the Company
none of the parties hereto shall have any right to partition any of the
Property, and all parties hereto hereby irrevocably waive any and all rights
that any Member might have to maintain any action for partition of any of the
Property, either as a partition in kind or a partition by sale, except with
respect to partition of Property upon dissolution and liquidation of the
Company.

     

    11.12       Violation.  The
failure of any party to seek redress for violation of or to insist upon the
strict performance of any covenant or condition of this Agreement shall not
prevent a subsequent act, which would have originally constituted a violation,
from having the effect of an original violation.  The rights and
remedies provided by this Agreement are cumulative, and the use of any one right
shall not preclude or waive the right to use any or all other
remedies.  Such rights and remedies are given in addition to any other
rights the parties may have by law, statute, ordinance, or
otherwise.

    
      
         

      

      
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    11.13       Business
Days.  Whenever
in connection with this Agreement any notice is required to be given, any
meeting is required to be held, any other act or event is to be done or occur on
or by a particular number of days and the date thus particularized or scheduled
is a Saturday, Sunday or legal holiday in the State of California, such date
shall be postponed to the next day which shall not be a Saturday, Sunday or
legal holiday in the State of California.

     

    11.14       Applicable
Laws.  Subject
to Section 11.23, this Agreement shall be enforced in accordance with the laws
of the State of California, which would apply if all Managers and Members were
residents of California, and the Agreement was made and performed in
California.

     

    11.15       Incorporation by
Reference.  Every
exhibit, schedule and other appendix attached to this Agreement and referred to
herein is hereby incorporated in this Agreement by reference.

     

    11.16       Further
Action.  Each
party, upon the request of another party, agrees to perform all further acts and
execute, acknowledge and deliver any documents which may be reasonably
necessary, appropriate or desirable to carry out the provisions of this
Agreement.

     

    11.17       Sole and Absolute
Discretion.  Except
as otherwise provided in this Agreement, all actions which any Person may take
and all determinations which such Person may make pursuant to this Agreement may
be taken and made in such Person’s sole and absolute discretion.

     

    11.18       Third
Parties.  Nothing
in this Agreement, expressed or implied, is intended to confer upon any Person
other than the parties any rights or remedies under or by reason of this
Agreement.

     

    11.19       Equitable
Relief.  Each
Manager and Member acknowledges that:

     

    (a)           Each
such Person’s obligations under this Agreement are unique; and

     

    (b)           If
any Person should default in any of such Person’s obligations under this
Agreement, (i) it would be extremely difficult or impossible to ascertain the
amount of money damages that would adequately compensate a nondefaulting party
for another party’s breach of any provision of this Agreement, and (ii) money
damages would not afford adequate relief for such a breach.

     

    Accordingly, if any Person breaches or
threatens to breach any provision of this Agreement, then, upon a satisfactory
showing of such breach or a threatened breach, all other Persons shall be
entitled to temporary and permanent injunctive relief (including specific
performance) to enforce the provisions of this Agreement, in addition to any
other right or remedy available under this Agreement, or otherwise and without
prejudice to their right to seek and recover monetary damages.  Each
Manager and Member hereby expressly waives the defense that a remedy in damages
would be adequate.

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    11.20       Confidentiality; Non-Use of
Trade Secrets.  Subject to Section 11.23, the Managers,
Officers and Members acknowledge that they will have access to certain
Confidential Information which they agree are proprietary or confidential in
nature.  Each Manager, Officer and Member acknowledges
that:

     

    (a)       
   The Confidential Information has been and will be developed
and/or acquired by the Company at great expense, is of great significance and
value to the Company, and constitutes trade secrets;

     

    (b)        
  The Confidential Information is material and critically important to
the effective and successful conduct of the Company’s business operations and
activities; and

     

    (c)       
   Any use of the Confidential Information by any Person other
than for the Company’s benefit will constitute a wrongful usurpation of the
Confidential Information by such Person.

     

    Subject to Section 11.23, each Manager,
Officer and Member hereby agrees to forever hold the Confidential Information in
strict confidence and secret and not to use the Confidential Information for
such Person’s own or any other Person’s benefit; provided, however, that such
Person may disclose any or all of the Confidential Information: (i) if compelled
by law to do so; (ii) if the Confidential Information becomes part of the public
domain through no wrongful act or omission by or on behalf of such Person; or
(iii) to any Person not affiliated with the Company if prior written consent of
the Manager is obtained by such Person.  If Manager, Officer or a
Member is requested in any judicial or administrative proceeding to disclose any
Confidential Information, such Person shall promptly notify the Manager in
writing of such request, so that the Company may oppose such disclosure or seek
an appropriate protective order or other remedy to prevent the
disclosure.  This Section 11.20 shall survive the cessation of such
Manager, Officer or Member providing services to the Company or ceasing to be a
Manager, Officer or Member.

     

    11.21       Independent
Activities.  Subject to Section 11.20, each Member, Manager,
Officer and Affiliate thereof may engage in whatever activities such Person
chooses and shall have no obligation to offer any interest in such activities to
the Company or to any other Person.  Neither this Agreement nor any
activity undertaken pursuant hereto shall prevent any Member, Manager, Officer
or Affiliate thereof from engaging in such activities, or require any such
Person to permit any other Person to participate in any such activities, and as
a material part of the consideration for the execution of this Agreement by each
Member and Manager, each Member, Manager and Officer hereby waives, relinquishes
and renounces any such right or claim of participation.

     

    11.22       Counsel.

    

     (a)            Each
Member and Manager acknowledges and consents to the fact that John E. James (and
his firm) is Counsel to CVI and the Company with respect to the preparation of
this Agreement, and does not represent any Member, Manager or Officer (other
than CVI) with respect to the Company, the preparation of this Agreement or the
transactions contemplated by this Agreement or undertaken by the
Company.  Accordingly, Counsel shall owe no duties to any Member,
Manager or Officer with respect thereto (other than CVI and the Company), and
the Members, Manager and Officers waive any such conflict of interest or
potential conflict.  Notwithstanding any adversity that may develop,
in the event any dispute or controversy arises between any Members, Managers or
Officers or between a Member or a Manager or Officer and the Company, each
Member, Manager and Officer agrees that Counsel may represent CVI and/or the
Company in any such dispute or controversy to the extent permitted by the
California Rules of Professional Conduct or similar rules in any other
jurisdiction, and each Member, Manager, Officer and the Company hereby consents
to such representation and waives any conflict of interest or potential conflict
with respect to such representation.

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    

    (b)           Each
Manager, Member, Officer and the Company acknowledges that such Person has had
the opportunity to be represented by counsel of such Person’s choice with
respect to all matters relating to this Agreement, the Company and its
business.

     

    11.23       Loan
Documents.  Notwithstanding any provision of this Agreement to
the contrary, to the extent any provisions of this Agreement conflict with or
are inconsistent with any provisions of the Loan Documents (during all periods
through the date the Class B Member and Class C Member cease to be Members), the
provisions of the Loan Documents shall apply with respect to the Class B Member
and Class C Member including, without limitation, Sections
11.4,  11.14 and 11.20.

     

    [Signatures
on following pages]

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the Manager and Members have executed this Agreement as of the
Effective Date.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      
                                                                        
                                                                          
                                                                            
                                                                              
                                                                                	
                                                                                        MEMBERS:

                                                                                      
	 
      
	
                                                                                        CORNERSTONE
      VENTURES, INC.,

                                                                                      
	
                                                                                        a
      California corporation

                                                                                      
	 
      	 
      	 
	
                                                                                        By

                                                                                      	 
      
	 
      	
                                                                                        Terry
      G. Roussel, President

                                                                                      
	 
      	 
      	 
	
                                                                                        CORNERSTONE
      OPERATING

                                                                                      
	
                                                                                        PARTNERSHIP,
      L.P.

                                                                                      
	
                                                                                        a
      Delaware limited partnership

                                                                                      
	 
      	 
      	 
	
                                                                                        By:

                                                                                      	
                                                                                        Cornerstone
      Core Properties REIT, Inc.,

                                                                                      
	 
      	
                                                                                        a
      Maryland corporation, its sole general partner

                                                                                      
	 
      	 
      
	
                                                                                         

                                                                                      	
                                                                                        By 
      

                                                                                      	 
      
	 
      	
                                                                                         

                                                                                      	
                                                                                        Terry
      G. Roussel, President

                                                                                      
	 
      	 
      	 
	
                                                                                        CORNERSTONE
      PRIVATE EQUITY

                                                                                      
	
                                                                                        FUND
      OPERATING PARTNERSHIP, LP,

                                                                                      
	
                                                                                        a
      Delaware limited partnership

                                                                                      
	 
      	 
      	 
	
                                                                                        By:  

                                                                                      	
                                                                                        Cornerstone
      Healthcare Real Estate Fund, Inc.,

                                                                                        a
      Maryland corporation, its sole general partner

                                                                                      
	 
      	 
      
	
                                                                                          

                                                                                      	
                                                                                        By

                                                                                      	 
	 	 	
                                                                                        Terry
      G. Roussel, President 

                                                                                      
	 
      	 
      	 
	
                                                                                        SERVANT
      HEALTHCARE

                                                                                      
	
                                                                                        INVESTMENTS
      LLC,

                                                                                      
	
                                                                                        a
      Florida limited liability company

                                                                                      
	 
      	 
      	 
	
                                                                                        By  

                                                                                      	
                                                                                          
      

                                                                                      	 
       
	  
        	John
      Mark Ramsey,
CEO

                                                                              

                                                                            

                                                                          

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      
                                                                        
                                                                          
                                                                            
                                                                              
                                                                                
                                                                                  
                                                                                    
                                                                                      
                                                                                        	
                                                                                                CORNERSTONE
      REALTY ADVISORS, LLC,

                                                                                              
	
                                                                                                a
      Delaware limited liability company

                                                                                              
	 
      	 
      	 
	
                                                                                                By: 

                                                                                              	
                                                                                                Cornerstone
      Industrial Properties, LLC, a California
      limited liability company, its Managing
      Member

                                                                                              
	 	 	 
	
                                                                                                 

                                                                                              	
                                                                                                By:
      Cornerstone
      Ventures, Inc., a California corporation,
      its Managing
    Member

                                                                                              
	 	 	 
	 	
                                                                                                   By 

                                                                                              	 
	 	 	
                                                                                                Terry
      G. Roussel, President

                                                                                              
	 
      	 
      	 
	
                                                                                                CORNERSTONE
      LEVERAGED

                                                                                              
	
                                                                                                REALTY
      ADVISORS, LLC,

                                                                                              
	
                                                                                                a
      Delaware limited liability company

                                                                                              
	 
      	 
      	 
	
                                                                                                By:

                                                                                              	
                                                                                                CIP Leveraged Fund
      Advisors, LLC, a California
      limited liability company, its Managing
      Member

                                                                                              
	 	 
	
                                                                                                 

                                                                                              	
                                                                                                
                                                                                                  By:
      Cornerstone Ventures, Inc., a California corporation, its
      Managing Member

                                                                                                

                                                                                              
	 
      	 
      	 
	
                                                                                                  

                                                                                              	
                                                                                                   By 

                                                                                              	 
	 
      	
                                                                                                 

                                                                                              	
                                                                                                Terry
      G. Roussel, President 

                                                                                              
	 
      	 
      	 
	
                                                                                                MANAGER:

                                                                                              
	 
      	 
	
                                                                                                CORNERSTONE
      VENTURES, INC.,

                                                                                              
	
                                                                                                a
      California corporation

                                                                                              
	 
      	 
      	 
	
                                                                                                By

                                                                                              	 
      
	 
      	
                                                                                                Terry
      G. Roussel,
President

                                                                                              

                                                                                      

                                                                                    

                                                                                  

                                                                                

                                                                              

                                                                            

                                                                          

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

     

    OPERATING
AGREEMENT

    FOR

    NANTUCKET
ACQUISITION LLC,

    A DELAWARE LIMITED LIABILITY
COMPANY

     

    EXHIBIT
A

     

    CAPITAL
CONTRIBUTIONS

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          	
                                                  Members'
      Names

                                                	 	
                                                  Members' Addresses

                                                	 	
                                                  Members'

                                                  Capital

                                                  Contributions

                                                	 
	 
      	 	 
      	 	 	 
	
                                                  Cornerstone
      Ventures, Inc.

                                                	 	
                                                  1920
      Main Street, Suite 400

                                                  Irvine,
      CA  92614

                                                	 	$	1,000	 
	 
      	 	 
      	 	 	 	 
	
                                                  Cornerstone
      Operating Partnership, L.P.

                                                	 	
                                                  1920
      Main Street, Suite 400

                                                  Irvine,
      CA  92614

                                                	 	$	1,360,000
    	 
	 
      	 	 
      	 	 	 	 
	
                                                  Cornerstone
      Private Equity Fund Operating Partnership, LP

                                                	 	
                                                  1920
      Main Street, Suite 400

                                                  Irvine,
      CA  92614

                                                	 	
                                                  Zero1

                                                	 
	 
      	 	 
      	 	 	 	 
	
                                                  Servant
      Healthcare Investments LLC

                                                	 	
                                                  1000 Legion Place, Suite 1650

                                                  Orlando,
      FL  32801

                                                	 	
                                                  Zero

                                                	 
	 
      	 	 
      	 	 	 	 
	
                                                  Cornerstone
      Realty Advisors, LLC

                                                	 	
                                                  1920
      Main Street, Suite 400

                                                  Irvine,
      CA  92614

                                                	 	
                                                  Zero

                                                	 
	 
      	 	 
      	 	 	 	 
	
                                                  Cornerstone
      Leveraged Realty Advisors, LLC

                                                	 	
                                                  1920
      Main Street, Suite 400

                                                  Irvine,
      CA  92614

                                                	 	
                                                  Zero

                                                	 

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    

      
        

    

    
      
        	
                1

              	
                Until,
      if at all, amounts are drawn pursuant to Section 2.1(b), and then to the
      extent of such drawn
amounts.

              

      

    

    
      
         

      

      
        A-1

        
          

        

      

      
         

      

    

     

    OPERATING
AGREEMENT

    FOR

    NANTUCKET
ACQUISITION LLC,

    A DELAWARE LIMITED LIABILITY
COMPANY

     

    EXHIBIT
B

     

    OFFICERS

     

    1.        
   OFFICERS.  The
officers of the Company may be (but shall not be required to be) a Chief
Executive Officer, President, a Chief Operating Officer, a Secretary, and/or a
Chief Financial Officer.  The Company may also have, at the discretion
of the Manager, one or more Vice Presidents, one or more Assistant Secretaries,
one or more Assistant Treasurers, and such other officers as may be appointed in
accordance with the provisions of paragraph 3 hereof.  Any number of
offices may be held by the same person.

     

    2.          
 APPOINTMENT OF
OFFICERS.  The officers of the Company, except such officers as
may be appointed in accordance with the provisions of paragraphs 3 or 5 hereof,
shall be chosen by the Manager and serve at his pleasure, subject to the rights,
if any, of an officer under any contract of employment.

     

    3.           
SUBORDINATE
OFFICERS.  The Manager may appoint, or may empower the Chief
Executive Officer to appoint, such other officers as the business of the Company
may require, each of whom shall hold office for such period, have such
authority, and perform such duties as are provided herein or as the Manager may
from time to time determine.

     

    4.           
REMOVAL AND
RESIGNATION OF OFFICERS.  Subject to the rights, if any, of an
officer under any contract of employment, all officers serve at the pleasure of
the Manager, and any officer may be removed, either with or without cause, by
the Manager.  Any officer may resign at any time by giving written
notice to the Company.  Any resignation shall take effect at the date
of the receipt of that notice or at any later time specified in that notice;
and, unless otherwise specified in that notice, the acceptance of the
resignation shall not be necessary to make it effective.  Any
resignation is without prejudice to the rights, if any, of the Company under any
contract to which the officer is a party.

     

    5.          
 VACANCIES IN
OFFICES.  A vacancy in any office because of death,
resignation, removal, disqualification or any other cause may be filled in the
manner prescribed herein for regular appointments to that office.

     

    6.           
CHIEF EXECUTIVE
OFFICER.  The Chief Executive Officer shall be the Company’s
general manager and chief executive officer and, subject to the control of the
Manager, shall have general supervision, direction, and control over the
Company’s business and its officers.  The managerial powers and duties
of the Chief Executive Officer shall include, but are not limited to, all the
general powers and duties of management usually vested in the office of the
chief executive officer of a corporation, and shall have such other powers and
duties as may be prescribed by the Manager or herein.  The Chief
Executive Officer shall preside at all meetings of the Members and at meetings
of the Managers if requested to do so.  If the Company does not have a
separate individual as the President, the Chief Executive Officer shall also be
the President of the Company.

    
      
         

      

      
        B-1

        
          

        

      

      
         

      

    

     

    7.          
 PRESIDENT.  If
there is no Chief Executive Officer, then the President shall be the Company’s
general manager and chief executive officer and, subject to the control of the
Manager, shall have general supervision, direction, and control over the
Company’s business and its Officers, and shall have such other powers and duties
as may be prescribed by the Manager or herein.  If there is a separate
Chief Executive Officer, then the President shall be the Chief Operating Officer
of the Company.  In the absence or disability of the Chief Executive
Officer, the President shall perform all the duties of the Chief Executive
Officer.

     

    8.           
CHIEF OPERATING
OFFICER.  The Chief Operating Officer shall work in conjunction
with the Chief Executive Officer and Manager in determining and implementing the
direction and control of the Company.  In the absence or disability of
the Chief Executive Officer and President, the Chief Operating Officer shall
perform the duties of the Chief Executive Officer, and when so acting shall have
all the powers of, and be subject to all the restrictions upon, the Chief
Executive Officer.  The Chief Operating Officer shall be responsible
for the operational activities within the Company, including the establishment
of procedures for maintaining high standards of manufacturing operations,
product quality, reliability, and safety, and shall have such other powers and
perform such other duties as from time to time may be prescribed by the Manager,
herein, or the Chief Executive Officer.

     

    9.          
 VICE
PRESIDENTS.  In the absence or disability of the Chief
Executive Officer and President, the Vice Presidents, if any, in order of their
rank as fixed by the Manager or, if not ranked, a Vice President designated by
the Manager, shall perform all the duties of the Chief Executive Officer and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the Chief Executive Officer.  The Vice Presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the Manager.

     

    10.           SECRETARY.  The
Secretary shall keep or cause to be kept, at the principal executive office of
the Company or such other place as the Manager may direct, a book of minutes of
all meetings and actions of Manager and Members.  The minutes shall
show the time and place of each meeting, whether regular or special (and, if
special, how authorized and the notice given), the number of shares present or
represented at Members' meetings, and the proceedings thereof.

     

    The Secretary shall keep, or cause to
be kept, at the principal executive office of the Company or at the office of
the Company's transfer agent or registrar, as determined by resolution of the
Manager, a share register, or a duplicate share register, showing the names of
all Members and their addresses, the number and classes of interests held by
each, the number and date of certificates evidencing such interests, and the
number and date of cancellation of every certificate surrendered for
cancellation.  The Secretary shall give, or cause to be given, notice
of all meetings of the Members and Manager required to be given by law or
herein.

     

    11.           CHIEF FINANCIAL
OFFICER.  The Chief Financial Officer shall keep and maintain,
or cause to be kept and maintained, adequate and correct books and records of
accounts of the properties and business transactions of the Company, including
accounts of its assets, liabilities, receipts, disbursements, gains, losses,
capital, retained earnings, and shares, as well as business plans and
budgets.  In addition, the Chief Financial Officer shall also prepare,
or cause to be prepared, monthly and quarterly financial statements, and cause
the same to be delivered to the Members within ten business days after the end
of each month, or 20 business days after the end of each calendar
quarter.  The books of account shall at all reasonable times be open
to inspection by the Members and Manager.

    
      
         

      

      
        B-2

        
          

        

      

      
         

      

    

     

    The Chief Financial Officer shall
deposit all money and other valuables in the name and to the credit of the
Company with such depositories as may be designated by the
Manager.  The Chief Financial Officer shall disburse the funds of the
Company as may be ordered by the Manager, shall render to the Chief Executive
Officer and Manager, whenever they request it, an account of all of his or her
transactions as Chief Financial Officer and of the financial condition of the
Company, and shall have such other powers and perform such other duties as may
be prescribed by the Manager or herein.

    
      
         

      

      
        B-3

        
          

        

      

      
         

      

    

     

    OPERATING
AGREEMENT

    FOR

    NANTUCKET
ACQUISITION LLC,

    A DELAWARE LIMITED LIABILITY
COMPANY

     

    EXHIBIT
C

     

    DEFINITIONS

     

    Definitions.  Capitalized
words and phrases used in this Agreement have the meanings set forth in this
Section 1.5 or elsewhere in this Agreement:

     

    “Act” means the
Delaware Limited Liability Company Act, as amended from time to time, or any
corresponding provision or provisions of any succeeding law of the State of
Delaware.

     

    “Adjusted Capital Account
Deficit” means, with respect to any Member, the deficit balance, if any,
in such Person's Capital Account as of the end of the relevant fiscal year,
after giving effect to the following adjustments:

     

    (i)           Credit
to such Capital Account any amounts which such Person is obligated to restore
pursuant to any provision of this Agreement or is deemed to be obligated to
restore pursuant to the penultimate sentences of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5); and

     

    (ii)          Debit
to such Capital Account the items described in Sections 1.704-1(b)(2)(ii)(d)(4),
(5) and (6) of the Regulations.

     

    The foregoing definition of Adjusted
Capital Account Deficit is intended to comply with the provisions of Section
1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently
therewith.

     

    “Adjusted Capital
Contributions” means, as of any day with respect to the Class B Member or
the Class C Member, such Person’s Capital Contributions, adjusted as
follows:

     

    (i)           Increased
by the amount of any Company liabilities (if any) which, in connection with
distributions to such Person pursuant to Section 5.2(b)(iv), with respect to the
Class B Member, and Section 5.2(b)(vii), with respect to the Class C Member, are
assumed by  such Person or are secured by any Property distributed to
such Person; and

     

    (ii)          Reduced
by the amount of cash and the Gross Asset Value of any Property distributed to
such Person pursuant to Section 5.2(b)(iv), with respect to the Class B Member,
and Section 5.2(b)(vii), with respect to the Class C Member, and the amount of
any liabilities (if any) of such Person assumed by the Company or which are
secured by any property contributed by such Person to the Company.

     

    In the
event the Class B Member or the Class C Member Transfers all or any portion of
its Interest in accordance with the terms of this Agreement, the transferee
shall succeed to his Adjusted Capital Contributions to the extent it relates to
the Transferred Interest.

    
      
         

      

      
        C-1

        
          

        

      

      
         

      

    

     

    “Affiliate” means any
Person controlled by, controlling or under common control with another
Person.

     

    “Agreement” means this
Operating Agreement for Nantucket Acquisition LLC, as amended from time to
time.  Words such as “herein,” “hereinafter,” “hereof,” “hereto” and
“hereunder,” refer to this Agreement as a whole, unless the context otherwise
requires.

     

    “Capital Account”
means, with respect to any Member, the Capital Account maintained for such
Person in accordance with the following provisions:

    

    (i)           To
each Person's Capital Account there shall be credited such Person's Capital
Contributions, such Person's distributive share of Profits and any items in the
nature of income or gain which are specially allocated pursuant to Section 5.1
of Exhibit D
hereof, and the amount of any Company liabilities assumed by such Person or
which are secured by any Property distributed to such Person.

    

    (ii)          To
each Person's Capital Account there shall be debited the amount of cash and the
Gross Asset Value of any Property distributed to such Person pursuant to any
provision of this Agreement (other than with respect to (A) a Guaranteed
Payment, and (B) payment from Operating Cash Flow or Extraordinary Cash Flow
designated as the payment of accrued and unpaid interest or principal on the
Part A COP Transaction), such Person's distributive share of Losses and any
items in the nature of expenses or losses which are specially allocated pursuant
to Section 5.1 of Exhibit D hereof, and
the amount of any liabilities of such Person assumed by the Company or which are
secured by any property contributed by such Person to the Company.

     

    (iii)         In
the event any Interest is transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital Account of the transferor
to the extent it relates to the transferred Interest.

     

    (iv)         In
determining the amount of any liability for purposes of clauses (i) and (ii) of
the definition of Adjusted Capital Contributions and clauses (i) and (ii) of the
definition of Capital Account, there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and
Regulations.

     

    The foregoing provisions and the other
provisions of this Agreement relating to the maintenance of Capital Accounts are
intended to comply with Regulations Section 1.704-1(b), and shall be interpreted
and applied in a manner consistent with such Regulations.  In the
event the Manager shall determine that it is prudent to modify the manner in
which the Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed property or which are assumed by the Company or the
Members), are computed in order to comply with such Regulations, the Manager may
make such modification, provided that it is not likely to have a material effect
on the amounts distributable to any Member pursuant to Article 8 hereof upon the
dissolution of the Company.  The Manager also shall (i) make any
adjustments that are necessary or appropriate to maintain equality between the
Capital Accounts of the Members and the amount of Company capital reflected on
the Company's balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(g), and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section 1.704-1(b).

    
      
         

      

      
        C-2

        
          

        

      

      
         

      

    

     

    “Capital Contribution”
means, with respect to any Member, the amount of money and the initial Gross
Asset Value of any asset (other than money) contributed to the Company with
respect to the Interest held by such Member (and treated as an equity
contribution to the Company for tax purposes, rather than a loan, pursuant to
this Agreement) pursuant (without limitation) to Section 2.1.

     

    “Certificate” means
the Certificate of Formation filed with the Secretary of State of Massachusetts
to form the Company.

     

    “Class A Member” means
CVI.

     

    “Class B Member” means
COP.

     

    “Class C Member” means
CPEF.

     

    “Class D Member” means
SH.

     

    “Class E Member” means
CRA.

     

    “Class F Member” means
CLRA.

     

    “Code” means the
Internal Revenue Code of 1986, as amended from time to time (or any
corresponding provisions of succeeding law).

     

    “Company” means
Nantucket Acquisition LLC, a Delaware limited liability company, and the limited
liability company continuing the business of this Company in the event of
dissolution as herein provided.

     

    “Confidential
Information” means proprietary or confidential information, knowledge,
technology, data, methods, files, records, business plans, market development
strategies and programs, and client lists relating to the Company.

     

    “COP” means
Cornerstone Operating Partnership, L.P., a Delaware limited
partnership.

     

    “COP Documents” means
two promissory notes and related documents representing a non-revolving line of
credit to the Company not exceeding $8,000,000.

     

    “COP Loan” means the
loan set forth in the COP Documents.

     

    “COP Transaction”
means the transaction contemplated pursuant to the COP Documents.

     

    “Counsel” means John
E. James (and his firm).

     

    “CPEF” means
Cornerstone Private Equity Fund Operating Partnership, LP, a Delaware limited
partnership.

     

    “CPEF Documents” means
one promissory note and related documents representing a non-revolving line of
credit to the Company not exceeding $1,500,000.

    
      
         

      

      
        C-3

        
          

        

      

      
         

      

    

     

    “CPEF Loan” means the
loan set forth in the CPEF Documents.

     

    “CPEF Transaction” the
transaction contemplated pursuant to the CPEF Documents.

     

    “CRA” means
Cornerstone Realty Advisors, LLC a Delaware limited liability
company.

     

    “CLRA” means
Cornerstone Leveraged Realty Advisors, LLC, a Delaware limited liability
company.

     

    “CVI” means
Cornerstone Ventures, Inc., a California corporation.

     

    “Depreciation” means,
for each fiscal year or other period, an amount equal to the depreciation,
amortization or other cost recovery deduction allowable with respect to an asset
for such year or other period, except that if the Gross Asset Value of an asset
differs from its adjusted basis for federal income tax purposes at the beginning
of such year or other period, Depreciation shall be an amount which bears the
same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization or other cost recovery deduction for such year or
other period bears to such beginning adjusted tax basis; provided, however, that
if the federal income tax depreciation, amortization, or other cost recovery
deduction for such year is zero, Depreciation shall be determined with reference
to such beginning Gross Asset Value using any reasonable method selected by the
Manager.

     

    “Effective Date” means
December 14, 2009.

     

    “Extraordinary Cash
Flow” has the meaning set forth under the definition of Shared
Appreciation.

     

    “Fair Market Value”
has the meaning set forth under the definition of Shared
Appreciation.

     

    “Gross Asset Value”
means, with respect to any asset, the asset's adjusted basis for federal income
tax purposes, except as follows:

     

    (i)           The
initial Gross Asset Value of any asset contributed by a Member to the Company
shall be the gross fair market value of such asset, as determined by the
contributing Member and the Manager;

     

    (ii)          The
Gross Asset Values of all Company assets shall be adjusted to equal their
respective gross fair market values, as determined by the Managers, as of the
following times: (A) the acquisition of an additional interest by any new or
existing Member in exchange for more than a de minimis Capital Contribution; (B)
the distribution by the Company to a Member of more than a de minimis amount of
Property as consideration for an Interest (including, without limitation,
pursuant to Section 5.4(a) in connection with Shared Appreciation); and (C) the
liquidation of the Company within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); provided, however that the adjustments pursuant to clauses
(A) and (B) above shall be made only if the Manager reasonably determine that
such adjustments are necessary or appropriate to reflect the relative economic
interests of the Members in the Company;

    
      
         

      

      
        C-4

        
          

        

      

      
         

      

    

     

    (iii)         The
Gross Asset Value of any Property distributed to any Member shall be the gross
fair market value of such asset on the date of distribution; and

     

    (iv)         The
Gross Asset Values of all Property shall be increased (or decreased) to reflect
any adjustments to the adjusted basis of such Property pursuant to Code Section
734(b) or Code Section 743(b), but only to the extent that such adjustments are
taken into account in determining Capital Accounts pursuant to Regulation
Section 1.704-1(b)(2)(iv)(m) and clauses (vi) hereof and (vi) of the definition
of Profits and Losses; provided, however, that Gross Asset Values shall not be
adjusted pursuant to this clause (iv) to the extent the Manager determines that
an adjustment pursuant to clause (ii) of the definition of Gross Asset Value is
necessary or appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this clause (iv).

     

    If the Gross Asset Value of an asset
has been determined or adjusted pursuant to clause (i), (ii) or (iv) of the
definition of Gross Asset Value, such Gross Asset Value shall thereafter be
adjusted by Depreciation taken into account with respect to such asset for
purposes of computing Profits and Losses.

     

    “Guaranteed Payment”
means (i) with respect to COP, an 8.00% annual return (compounded annually) the
Adjusted Capital Contributions of COP, and (ii) with respect to CPEF, a 12.00%
annual return (compounded annually) the Adjusted Capital Contributions of
CPEF.  A Guaranteed Payment pursuant to this Agreement shall be
treated as a guaranteed payment within the meaning of Code Section
707(c).

     

    “Interest” means an
interest in the Company representing the rights and obligations under the
Agreement of the Member who holds such Interest.

     

    “Lender” or “Lenders” means COP
and/or CPEF, as the case may be.

     

    “Liquidating Events”
has the meaning set forth in Section 8.1.

     

    “Loans” means the
funds advanced to the Company pursuant to the Loan Documents.

     

    “Loan Documents” means
the COP Documents and CPEF Documents.

     

    “Major Capital Event”
has the meaning set forth under the definition of Shared
Appreciation.

     

    “Major Decisions”
means the decisions set forth in Section 4.3.

     

    “Manager(s)” means the
Person(s) determined pursuant to Section 4.2.

     

    “Maturity Date” has
the meaning set forth under the definition of Shared Appreciation.

     

    “Member” means any
Person who has been admitted as a Member or substitute Member pursuant to the
terms of this Agreement and who is the owner of an
Interest.  “Members” means all such Persons.  Subject to
Section 6.4, the term “Member” also means a transferee of an Interest who has
not become a substitute Member pursuant to Section 6.2.

    
      
         

      

      
        C-5

        
          

        

      

      
         

      

    

     

    “Member Nonrecourse
Debt” has the meaning set forth in Section 1.704-2(b)(4) of the
Regulations.

     

    “Member Nonrecourse Debt
Minimum Gain” means an amount, with respect to each Member Nonrecourse
Debt, equal to the Minimum Gain that would result if such Member Nonrecourse
Debt were treated as a Nonrecourse Liability, determined in accordance with
Section 1.704-2(i)(3) of the Regulations.

     

    “Member Nonrecourse
Deductions” has the meaning set forth in Sections 1.704-2(i)(1) and
1.704-2(i)(2) of the Regulations.

     

    “Minimum Gain” has the
meaning set forth in Regulations Sections 1.704-2(b)(2) and
1.704-2(d).

     

    “Net Value” has the
meaning set forth under the definition of Shared Appreciation.

     

    “Nonrecourse
Deductions” has the meaning set forth in Section 1.704-2(b)(1) of the
Regulations.

     

    “Nonrecourse
Liability” has the meaning set forth in Section 1.704-2(b)(3) of the
Regulations.

     

    “Officers” means the
officers (if any) appointed pursuant to Section 4.1(b).

     

    “Operating Cash Flow”
has the meaning set forth under the definition of Shared
Appreciation.

     

    “Part A COP
Transaction” means the portion of the COP Loan treated for tax purposes
as a debtor-creditor loan of up to $6,640,000 to the extent drawn.

     

    “Part B COP
Transaction” means the portion of the COP Loan treated for tax purposes
as an equity contribution and Capital Contribution to the Company (and Capital
Account credit for purposes of Regulations Section 1.704-1(b)(2)(iv)) of
$1,360,000.

     

    “Person” means any
individual, partnership, corporation, trust or other entity.

     

    “Profits” and “Losses” means, for
each fiscal year or other period beginning on or after the Effective Date, an
amount equal to the Company's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:

     

    (i)           Any
income of the Company that is exempt from federal income tax and not otherwise
taken into account in computing Profits or Losses pursuant to the definition of
Profits sand Losses shall be added to such taxable income or loss;

     

    (ii)          Any
expenditures of the Company described in Code Section 705(a)(2)(B) or treated as
Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits
or Losses pursuant to the definition of Profits and Losses shall be subtracted
from such taxable income or loss;

    
      
         

      

      
        C-6

        
          

        

      

      
         

      

    

     

    (iii)          In
the event the Gross Asset Value of any Company asset is adjusted pursuant to
clause (ii) or (iii) of the definition of Gross Asset Value, the amount of such
adjustment shall be taken into account as gain or loss from the disposition of
such asset for purposes of computing Profits or Losses;

     

    (iv)          Gain
or loss resulting from any disposition of Property with respect to which gain or
loss is recognized for federal income tax purposes shall be computed by
reference to the Gross Asset Value of the Property disposed of, notwithstanding
that the adjusted tax basis of such Property differs from its Gross Asset
Value;

     

    (v)           In
lieu of the depreciation, amortization and other cost recovery deductions taken
into account in computing such taxable income or loss, there shall be taken into
account Depreciation for such fiscal year or other period, computed in
accordance with the definition of Depreciation;

     

    (vi)          To
the extent an adjustment to the adjusted tax basis of any Property pursuant to
Code Section 734(b) or Code Section 743(b) is required pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital
Accounts as a result of a distribution other than in liquidation of a Member’s
Interest, the amount of such adjustment shall be treated as an item of gain (if
the adjustment increases the basis of the Property) or loss (if the adjustment
decreases the basis of the Property) from the disposition of the asset and shall
be taken into account for purposes of computing Profits or Losses;
and

     

    (vii)         Notwithstanding
any other provision of the definition of Profits and Losses, any items which are
specially allocated pursuant to Section 5.1 of Exhibit D hereof
shall not be taken into account in computing Profits or Losses.

     

    The amounts of the items of Company
income, gain, loss, or deduction available to be specifically allocated pursuant
to Sections 5.1(c) and 5.1(d) of Exhibit D hereof
shall be determined by applying rules analogous to those set forth in clauses
(i) through (vi) of the definition of Profits and Losses.

     

    “Property” means: (i)
for purposes of Section 1.4, such term as defined in the Loan Documents; and
(ii) for all other purposes of this Agreement, all real and personal property
interests acquired by the Company and any improvements thereto, and shall
include both tangible and intangible property.

     

    “Regulations” means
the Income Tax Regulations, including Temporary Regulations, promulgated under
the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).

     

    “REIT” or “REITs” means a real
estate investment trust or real estate investment trusts.

     

    “SH” means Servant
Healthcare Investments, LLC, a Florida limited liability
company.

    
      
         

      

      
        C-7

        
          

        

      

      
         

      

    

    “Shared Appreciation”
and related definitions:

     

    (i)           The
Members’ Shared
Appreciation Interests are:

     

    (A)          Class
A Member: 50.00% of Tier 2 Shared Appreciation;

     

    (B)           Class
B Member: 40.00% of Tier 1 Shared Appreciation (regardless of the amount drawn
pursuant to Section 2.1(a));

     

    (C)           Class
C Member: 10.00% of Tier 1 Shared Appreciation (regardless of the amount drawn
pursuant to Section 2.1(b));

     

    (D)           Class
D Member: 33.34% of Tier 1 Shared Appreciation and 33.40% of Tier 2 Shared
Appreciation;

     

    (E)           Class
E Member: 14.03% of Tier 1 Shared Appreciation and 14.80% of Tier 2 Shared
Appreciation; and

     

    (F)           Class
F Member: 2.63% of Tier 1 Shared Appreciation and 1.80% of Tier 2 Shared
Appreciation;

     

    (ii)          Shared Appreciation
means the aggregate of the Extraordinary Cash Flow and the Net
Value;

     

    (iii)         Tier 1 Shared
Appreciation means the Shared Appreciation for all periods through the
date the Loans are paid in full;

     

    (iv)         Tier 2 Shared
Appreciation means the Shared Appreciation for all periods after the date
the Loans are paid in full;

     

    (vii)        Extraordinary Cash Flow and
Net Value.  The following definitions shall apply in
determining Extraordinary Cash Flow and Net Value:  

     

    (A)          “Acceleration Default”
means the Lender’s acceleration of the indebtedness evidenced by the Loan
Documents after the occurrence of an Event of Default (as set forth in the Loan
Documents).

     

    (B)           “Determination Date”
means the first to occur of an Acceleration Default or the Maturity
Date.

     

    (C)           “Extraordinary Cash
Flow” means the net cash receipts realized by the Company from a Major
Capital Event, reduced by (to the extent not deducted in determining Operating
Cash Flow) (i) the out-of-pocket costs and expenses incurred by the Company in
connection with such Major Capital Event, including title, survey, appraisal,
recording, escrow, transfer tax and similar costs, brokerage expenses and
attorney’s and other professional fees, and (ii) to the extent not funded out of
Reserves, proceeds applied to rebuild, repair, or restore the
Property.

    
      
         

      

      
        C-8

        
          

        

      

      
         

      

    

    (D)           “Fair Market Value”
means (i) the gross sales price for which the Property is sold by the Company to
a bona fide third party purchaser pursuant to an arms length transaction, or
(ii) if the Property is not sold by the Company to a third party purchaser as
provided in (i) above, then the fair market value of the Property,
which  shall be determined as follows:  Within thirty (30)
days after the Determination Date, (i) the Company shall designate in writing to
the Lenders a person to act as an appraiser for the purpose of establishing the
fair market value of the Property (“Company Appraiser”), and (ii) the Lenders
shall designate (subject to the last paragraph of this paragraph (D)) in writing
to the Company a person to act as an appraiser for the purpose of establishing
the fair market value of the Property (“Lenders’ Appraiser”).  The
Company’s Appraiser and the Lenders’ Appraiser shall appoint a mutually agreed
upon third appraiser (“Third Appraiser”) (the Company’s Appraiser, the Lenders’
Appraiser and the Third Appraiser (each, an “Appraiser, and collectively, the
“Appraisers”).  Each Appraiser shall specialize in the appraisal of
real estate projects similar to the Property in the region where the Property is
located, shall have no less than five year’s experience in such field and shall
be recognized as ethical and reputable.  No Appraiser shall have any
personal or financial interest as would disqualify such appraiser from
exercising an independent and impartial judgment as to the value of the
Property.  In determining the Fair Market Value of the Property, each
Appraiser shall calculate the Fair Market Value using the then current occupancy
and income from the Property, or the occupancy and income from the Property
reflected on the proforma statement prepared in connection with the acquisition
of the Property by the Company, whichever results in a greater Fair Market
Value.  The Fair Market Value of the Property shall be equal to the
average of the valuations of the Property as determined by all of the
Appraisers; provided, however, that if any Appraiser’s valuation for the
Property deviates by more than twenty percent (20%) from the median valuation of
the three appraisers for the Property, the Fair Market Value of the Property
shall be determined by using the average of the other two Appraisers’ valuations
(unless the valuations of two Appraiser’s deviate by more than twenty percent
(20%) from the median valuation, in which event the Fair Market Value of the
Property shall be the value set forth in the median valuation).  The
determination of the fair market value of the Property in accordance with the
foregoing shall be binding and conclusive on the Company and
Lenders.

     

    In the event the Lenders are unable to
agree on a single Lenders’ Appraiser pursuant to the foregoing provisions, each
Lender shall appoint an Appraiser, and the average of the fair market value as
determined by such two Appraisers shall be treated as the appraisal of the
Lenders’ Appraiser for purposes of the foregoing provisions.

     

    (E)           “Major Capital Event”
means one or more of the following:  (i) sale of all or any part of an
interest in the Property (other than dispositions of tangible personal property
in the ordinary course of business); (ii) funding of any indebtedness of the
Company of $100,000 or more secured by all or any material portion of the
Property, excluding, however, the Loans and any disbursement of the Loans from
time to time; or (iii) receipt by the Company of net proceeds resulting from
condemnation of any part of or an interest in the Property having a value of
$9,000,000 or more
through the exercise of the power of eminent domain or any loss of all or a
portion of the Property or an interest in the Property having a value of
$9,000,000 or more by casualty, failure of title or otherwise, which net
proceeds are not applied to repair or restoration of the Property in accordance
with each of those certain Leasehold Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing made by the Company in favor of the
Lenders encumbering the Property.

    
      
         

      

      
        C-9

        
          

        

      

      
         

      

    

    (F)          “Maturity Date” means
January 1, 2015.

     

    (G)          “Net Value” means the
Fair Market Value of the Property plus the Reserves less (i) an allowance
for actual normal and customary sales costs not to exceed five percent (5.0%) of
the Fair Market Value, (ii) the costs and charges of any appraisers in
connection with the valuation process, and (iii) the outstanding principal
amount of the Loans and any other indebtedness of the Company described in
paragraph (E)(ii) above.

     

    (H)         “Operating Cash Flow”
means the net income or loss of the Company from the Property for the fiscal
period in question, as determined in accordance with generally accepted
accounting principles consistently applied, and adjusted as
follows:

     

    (1)           Additions.  There
shall be added to such net income or subtracted from such loss, without
duplication, the following items:  (i) the amount charged during such
period for depreciation, amortization or any other deduction not involving a
cash expenditure, (ii) the amount of cash expenditures paid out of Reserves
during such period to the extent such expenditures were deducted in determining
net income or loss, (iii) rental receipts, collection of receivable and other
cash receipts during such period which were included (whether or not received)
in determining net income or loss in a prior accounting period, (iv) the costs
and expenses incurred by the Company during such period in connection with a
Major Capital Event to the extent deducted from gross income in the
determination of net income or loss, except to the extent that net receipts of
the Company from such Major Capital Event were insufficient to pay such costs
and expenses, (v) proceeds of short term borrowings in the ordinary course of
business during such period (excluding, in any event, the Loans and any
disbursement of the Loans from time to time and (vi) any amount during such
period by which cash reserves previously established by the Company in order to
retain sufficient working capital in the Company or to properly reserve for
actual or contingent obligations of the Company or improvements to the Property
have been reduced (other than through payment of expenses).

     

    (2)           Deductions.  There
shall be subtracted from such net income or added to such loss, without
duplication, the following items:  (i) the amount of payments of
principal and regular interest made during such period on the Loans or any other
financing which was a Major Capital Event, (ii) capital expenditures and any
other cash sums expended during such period for items not deducted in
determining net income or loss of the Company, except to the extent paid from
proceeds of a Major Capital Event, (iii) any amount included in net income or
loss but not received in cash by the Company during such period, (iv) the
proceeds during such period of a Major Capital Event to the extent including in
determining net income or loss during such period, (v) any amount to establish,
replenish or increase during such period cash reserves (together, “Reserves”) pursuant
to a reasonable determination by the Company reasonably approved by the Lenders
that such Reserves and the amount thereof is necessary in order to retain
sufficient working capital in the Company or to properly reserve for other
actual or contingent obligations of or improvements to the Property, and (vi)
amounts funded by the Company out of sources other than Reserves or Property
revenues for the payment of operating expenses or debt service during any
previous period.

     

    “Sherburne” means
Sherburne Commons Residences, LLC, a Massachusetts limited liability
Company.

    
      
         

      

      
        C-10

        
          

        

      

      
         

      

    

    “Tax Matters Partner”
has the meaning set forth in Code Section 6231.

     

    “Tax Returns” means
federal or state income or franchise tax returns.

     

    “Transfer” and “Transferred” means
transfer, assign, convey, sell, encumber or in any other way
alienate.

    
      
         

      

      
        C-11

        
          

        

      

      
         

      

    

     

    OPERATING
AGREEMENT

    FOR

    NANTUCKET
ACQUISITION LLC,

    A DELAWARE LIMITED LIABILITY
COMPANY

     

    EXHIBIT
D

     

    ALLOCATIONS; ADDITIONAL
LIQUIDATION PROVISIONS

     

    5.1          Allocations.

     

    (a)          Profits.  After
giving effect to the special allocations set forth in Sections 5.1(c) and 5.1(d)
hereof, Profits for any fiscal year or other period shall be allocated to the
Members in the following order and priority:

     

    (i)           First,
to the Members in an amount equal to the excess, if any, of (i) the cumulative
Losses allocated pursuant to Section 5.1(b)(i) hereof for all prior fiscal years
or other periods, over (ii) the cumulative Profits allocated pursuant to this
Section 5.1(a)(i) for the current and all prior fiscal years or other periods
(pro rata among them in proportion to each Member's excess amount);

     

    (ii)          Second,
to the Class A Member to the extent of Profits not attributable either to (A)
the disposition of Property or (B) book-up gain pursuant to clause (iii) of the
definition of Profits and Losses, provided that Profits pursuant to this Section
5.1(a)(ii) shall be allocable first to the Class B Member and/or Class C Member
to the extent (if at all) distributions of Operating Cash Flow are distributed
to Class B Member and/or Class C Member pursuant to Section
5.2(a)(v);  

     

    (iii)         Third,
to the extent not already allocated pursuant to Section 5.1(a)(ii), to the Class
B Member and Class C Member to the extent of their Tier 1 Shared Appreciation
(pro rata among them in proportion to their Tier 1 Shared Appreciation
percentages);

     

    (iv)         Fourth,
to the Class D Member, Class E Member and Class F Member  to the
extent of their Tier 1 Shared Appreciation (pro rata among them in proportion to
their Tier 1 Shared Appreciation percentages); and

     

    (v)      
   Fifth, to the Class A Member, Class D Member, Class E Member
and Class F Member  to the extent of their Tier 2 Shared Appreciation
(pro rata among them in proportion to their Tier 2 Shared Appreciation
percentages).

     

    
      
         

      

      
        D-1

        
          

        

      

      
         

      

    

    (b)          Losses.  After
giving effect to the special allocations set forth in Sections 5.1(c) and 5.1(d)
hereof, Losses for any fiscal year or other period shall be allocated in the
following order and priority:

     

    (i)       
    Except as provided in Sections 5.1(b)(ii) and
5.1(b)(iii) hereof, Losses shall be allocated to the Members
in  proportion to their Capital Contributions.

     

    (ii)           Except
as provided in Sections 5.1(b)(iii) hereof:

     

    (A)          To
the extent Profits not attributable either to (1) the disposition of Property or
(2) book-up gain pursuant to clause (iii) of the definition of Profits and
Losses, have been allocated pursuant to Section 5.1(a)(ii) hereof for any prior
fiscal year or other period, Losses not attributable either to (1) the
disposition of Property or (2) book-down losses pursuant to clause (iii) of the
definition of Profits and Losses, shall be allocated to offset any Profits
allocated pursuant to Section 5.1(a)(ii).

     

    (B)      
    To the extent Profits attributable either to (1) to the
disposition of Property or (2) book-up gain pursuant to clause (iii) of the
definition of Profits and Losses, have been allocated pursuant to Section
5.1(a)(iii), Section 5.1(a)(iv),  Section 5.1(a)(v), or Section
5.1(a)(vi) hereof for any prior fiscal year or other period, Losses attributable
either to (1) the disposition of Property or (2) book-down losses pursuant to
clause (iii) of the definition of Profits and Losses, shall be allocated first
to offset any Profits allocated pursuant to Section 5.1(a)(vi), next to offset
any Profits allocated pursuant to Section 5.1(a)(v), next to offset any Profits
allocated pursuant to Section 5.1(a)(iv), and next to offset any Profits
allocated pursuant to Section 5.1(a)(iii) (in each case, pro rata among the
Members in proportion to their shares of the Profits being offset).

     

    (iii)          The
Losses allocated pursuant to Sections 5.1(b)(i) and (5.1(b)(ii) hereof shall not
exceed the maximum amount of Losses that can be so allocated without causing any
Member to have an Adjusted Capital Account Deficit at the end of any fiscal
year.  In the event some but not all of the Members would have
Adjusted Capital Account Deficits as a consequence of an allocation of Losses
pursuant to Section 5.1(b)(i) or Section 5.1(b)(ii) hereof, the limitation set
forth in this Section 5.1(b)(iii) shall be applied on a Member-by-Member basis
so as to allocate the maximum permissible Losses to each Member under Section
1.704-1(b)(2)(ii)(d) of the Regulations.

     

    (c)          Special
Allocations.  The following special allocations shall be made
in the following order:

     

    (i)          
 Minimum Gain
Chargeback.  Except as provided in Section 1.704-2(f) of the
Regulations, notwithstanding any other provision of this Section 5.1, if there
is a net decrease in Minimum Gain during any fiscal year, each Member shall be
specially allocated items of Company income and gain for such year (and, if
necessary, subsequent years) in an amount equal to the portion of such Member's
share of the net decrease in Minimum Gain, determined in accordance with
Regulations Section 1.704-2(g).  Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto.  The items to be so
allocated shall be determined in accordance with Sections 1.704-2(f)(6) and
1.704-2(j)(2) of the Regulations.  This Section 5.1(c)(i) is intended
to comply with the minimum gain chargeback requirement in Section 1.704-2(f) of
the Regulations and shall be interpreted consistently
therewith.

    
      
         

      

      
        D-2

        
          

        

      

      
         

      

    

    (ii)           Member Nonrecourse Debt
Minimum Gain Chargeback.  Except as otherwise provided in
Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision of
this Section 5.1 except Section 5.1(c)(i), if there is a net decrease in Member
Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during
any Company fiscal year, each Member who has a share of the Member Nonrecourse
Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Section 1.704-2(i)(5), shall be specially allocated items of
Company income and gain for such year (and, if necessary, subsequent years) in
an amount equal to such Member's share of the net decrease in Member Nonrecourse
Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(4).  Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto.  The
items to be so allocated shall be determined in accordance with Sections
1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations.  This Section
5.1(c)(ii) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(i)(4) of the Regulations and shall be interpreted consistently
therewith.

     

    (iii)          Qualified Income
Offset.  In the event any Member unexpectedly receives any
adjustments, allocations or distributions described in Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, items of Company income
and gain shall be specially allocated to each such Member in an amount and
manner sufficient to eliminate, to the extent required by the Regulations, the
Adjusted Capital Account Deficit of such Member as quickly as possible, provided
that an allocation pursuant to this Section 5.1(c)(iii) shall be made only if
and to the extent that such Member would have an Adjusted Capital Account
Deficit after all other allocations provided for in this Section 5.1 have been
tentatively made as if this Section 5.1(c)(iii) were not in the
Agreement.

     

    (iv)          Gross Income
Allocation.  In the event any Member has a deficit Capital
Account at the end of any Company fiscal year which is in excess of the sum of
(i) the amount such Member is obligated to restore pursuant to any provision of
this Agreement, and (ii) the amount such Member is deemed to be obligated to
restore pursuant to the penultimate sentences of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially allocated
items of Company income and gain in the amount of such excess as quickly as
possible, provided that an allocation pursuant to this Section 5.1(c)(iv) shall
be made if and only to the extent that such Member would have a deficit Capital
Account in excess of such sum after all other allocations provided for in
Section 5.1 have been tentatively made as if Section 5.1(c)(iii) hereof and this
Section 5.1(c)(iv) were not in the Agreement.

     

    (v)           Nonrecourse
Deductions.  Nonrecourse Deductions for any fiscal year or
other period shall be specially allocated among the Members in proportion to
their Capital Contributions.

    
      
         

      

      
        D-3

        
          

        

      

      
         

      

    

    (vi)          Member Nonrecourse
Deductions.  Any Member Nonrecourse Deductions for any fiscal
year or other period shall be specially allocated to the Member who bears the
economic risk of loss with respect to the Member Nonrecourse Debt to which such
Member Nonrecourse Deductions are attributable in accordance with Regulations
Section 1.704-2(i)(1).

     

    (vii)         Section 754
Adjustment.  To the extent an adjustment to the adjusted tax
basis of any Property pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Regulations
Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as the result of a distribution to a Member in complete liquidation of
his Interest, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
Property) or loss (if the adjustment decreases such basis) and such gain or loss
shall be specially allocated to the Members in accordance with their interests
in the Company in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(2)
applies, or to the Members to whom such distribution was made in the event that
Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies. 

     

    (viii)        Final
Allocations.  Notwithstanding any provision to the contrary in
this Agreement, it is the intent of the Members that, upon the dissolution of
the Company and the making of distributions pursuant to Section 8.2(c), the
Members' Capital Accounts shall be in proportion to the amounts they will
receive pursuant to Sections 8.2(c) and 5.2.  Accordingly, the Manager
shall modify the allocations pursuant to this Exhibit D in such
manner and to such extent as may be necessary to cause the Members' Capital
Accounts upon the dissolution of the Company to be in the ratios that they will
receive final distributions pursuant to Sections 8.2(c) and 5.2, with the result
that, after liquidating distributions are made to the Members, each Member's
Capital Account balance shall be zero (to the extent possible).

     

    (d)           Curative
Allocations.  The allocations set forth in Sections 5.1(b)(ii)
hereof and the foregoing provisions of Section 5.1(c) (other than Section
5.1(c)(viii)) (the “Regulatory Allocations”) are intended to comply with certain
requirements of the Regulations.  It is the intent of the Members
that, to the extent possible, all Regulatory Allocations shall be offset either
with other Regulatory Allocations or with special allocations of other items of
Company income, gain, loss or deduction pursuant to this Section 5.1(d).
Therefore, notwithstanding any other provision of this Section 5.1 (other than
the Regulatory Allocations), the Manager shall make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner they
determine appropriate so that, after such offsetting allocations are made, each
Member’s Capital Account balance is, to the extent possible, equal to the
Capital Account balance such Member would have had if the Regulatory Allocations
were not part of the Agreement and all Company items were allocated pursuant to
this Exhibit D
other than the Regulatory Allocations.  In exercising their
discretion under this Section 5.1(d), the Manager shall take into account future
Regulatory Allocations under Sections 5.1(c)(i) and 5.1(c)(ii) hereof that,
although not yet made, are likely to offset other Regulatory Allocations
previously made under Sections 5.1(c)(v) and 5.1(c)(vi) hereof.

    
      
         

      

      
        D-4

        
          

        

      

      
         

      

    

    (e)          Other Allocations
Rules.

     

    (i)    
       For purposes of determining the
Profits, Losses or any other items allocable to any period, Profits, Losses and
any such other items shall be determined as provided in Section
6.3.

     

    (ii)           Except
as otherwise provided in this Agreement, all items of Company income, gain,
loss, deduction, credit and any other allocations for any fiscal year or other
period not otherwise provided for shall be divided among the Members in the same
proportions as they share Profits or Losses, as the case may be, for such year
or other period.

     

    (iii)          The
Members are aware of the income tax consequences of the allocations made by this
Section 5.1 and hereby agree to be bound by the provisions of this Section 5.1
in reporting their shares of Company income and loss for income tax
purposes.

     

    (iv)          Solely
for purposes of determining a Member’s proportionate share of the “excess
nonrecourse liabilities” of the Company within the meaning of Regulations
Section 1.752-3(a)(3), the Members’ interests in Company profits are in
proportion to their Capital Contributions.

     

    (v)           To
the extent permitted by Section 1.704-2(h)(3) of the Regulations, the Manager
shall endeavor to treat distributions of Net Cash as having been made from the
proceeds of a Nonrecourse Liability or a Member Nonrecourse Debt only to the
extent that such distributions would cause or increase an Adjusted Capital
Account Deficit for any Member.

     

    (f)           Tax Allocations: Code
Section 704(c).  In accordance with Code Section 704(c) and the
Regulations thereunder, income, gain, loss and deduction with respect to any
property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its initial Gross Asset Value (computed in accordance with
clause (i) of the definition of Gross Asset Value.

     

    In the
event the Gross Asset Value of any Property is adjusted pursuant to clause (ii)
of the definition of Gross Asset Value, subsequent allocations of income, gain,
loss and deduction with respect to such Property shall take account of any
variation between the adjusted basis of such Property for federal income tax
purposes and its Gross Asset Value in the same manner as under Code Section
704(c) and the Regulations thereunder.

     

    Any
elections or other decisions relating to such allocations shall be made by the
Managers in any manner that reasonably reflects the purpose and intention of
this Agreement.  Allocations pursuant to this Section 5.1(f) are
solely for purposes of federal, state and local taxes and shall not affect, or
in any way be taken into account in computing, any Member's Capital Account or
share of Profits, Losses, other items or distributions pursuant to any provision
of this Agreement.

    
      
         

      

      
        D-5

        
          

        

      

      
         

      

    

    5.2          Compliance with Timing
Requirements of Regulations.  In the event the Company is
“liquidated” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), (i)
distributions shall be made pursuant to Article 8 to the Members who have
positive Capital Accounts in compliance with Regulations Section
1.704-1(b)(2)(ii)(b)(2), and (ii) if a Member's Capital Account has a deficit
balance (after giving effect to all contributions, distributions and allocations
for all taxable years, including the year during which such liquidation occurs),
such Member shall have no obligation to make any contribution to the capital of
the Company with respect to such deficit, and such deficit shall not be
considered a debt owed to the Company or any other Person for any purpose
whatsoever.  In the discretion of the Manager, a pro rata portion of
the distributions that would otherwise be made to the Members pursuant to
Article 8 may be:

     

    (a)           distributed
to a trust established for the benefit of the Members for the purposes of
liquidating Company assets, collecting amounts owed to the Company, and paying
any contingent or unforeseen liabilities or obligations of the Company or of the
Members arising out of or in connection with the Company.  The assets
of any such trust shall be distributed to the Members from time to time, in the
reasonable discretion of the Manager, in the same proportions as the amount
distributed to such trust by the Company would otherwise have been distributed
to the Members pursuant to this Agreement; or

     

    (b)           withheld
to provide a reasonable reserve for Company liabilities (contingent or
otherwise) and to reflect the unrealized portion of any installment obligations
owed to the Company, provided that such withheld amounts shall be distributed to
the Members as soon as practicable.

     

    5.3          Deemed Distribution and
Recontribution.  Notwithstanding any other provision of Article
8, in the event the Company is liquidated within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g) but no Liquidating Event has occurred, the
Company’s assets shall not be liquidated, the Company's liabilities shall not be
paid or discharged, and the Company's affairs shall not be wound
up.  Instead, solely for federal income tax purposes, the Company
shall be deemed to have distributed its assets in kind to the Members, who shall
be deemed to have assumed and taken subject to all Company liabilities, all in
accordance with their respective Capital Accounts.  Immediately
thereafter, the Members shall be deemed to have recontributed the assets in kind
to the Company, which shall be deemed to have assumed and taken subject to all
such liabilities.

    
      
         

      

      
        D-6

        
          

        

      

      
         

      

    

     

    OPERATING
AGREEMENT

    FOR

    NANTUCKET
ACQUISITION LLC,

    A DELAWARE LIMITED LIABILITY
COMPANY

     

    EXHIBIT
E

     

    PROVISIONS PURSUANT TO
SECTION 5.4(C)

     

    1.1          Fair Market
Value.  

     

    (a)           Appointment.  Within
thirty (30) days after the Manager gives notice to the Class D Member, the Class
E Member and/or the Class E Member (individually or collectively, the
“Redemption Member” or “Redemption Members”), (i) the Company shall appoint an
appraiser, and (ii) the Redemption Member or Redemption Members collectively
shall appoint (based on the majority vote of the Redemption Members, or in the
event of only two Redemption Members, the Redemption Member who holds the larger
Tier 1 Shared Appreciation Interest) a single appraiser, to determine the Fair
Market Value (as defined below) of the Membership Interests of the applicable
Redemption Member or Redemption Members.  Each such appraiser shall
have at least five years of full-time experience in the appraisal of
closely-held businesses and interests in entities holding such businesses whose
primary business is similar or related to the business of the Company and
Sherburne.  The Company and the Redemption Member or Redemption
Members shall deliver to the other party notice of such
appointment.

     

    (b)           One
Appraiser.  If a party who may appoint an appraiser fails
within the 30-day period set forth in Section 1.1(a) to designate an appraiser
in accordance with Section 1.1(a), the single appraiser appointed shall
determine within thirty (30) days after such appointment such Fair Market
Value.

     

    (c)           Two
Appraisers.  If two appraisers are appointed in accordance with
Section 1.1(a) and they are unable to agree on the Fair Market Value within
thirty (30) days after the second appraiser is appointed, and if the lower
appraisal is greater than or equal to eighty percent (80%) of the higher
appraisal, then the Fair Market Value shall be the average of the two
appraisals.  If two appraisers are so appointed and they agree on the
Fair Market Value , that Fair Market Value shall be the Fair Market Value, as
the case may be.

     

    (d)           Three
Appraisers.  If the lower appraisal is less than eighty percent
(80%) of the higher appraisal under Section 1.1(c), the two appraisers shall
attempt to select a third appraiser meeting the qualifications stated in Section
1.1(a) within thirty (30) days after the second appraiser is
appointed.  Unless they select a third appraiser and notify the
Company of such selection within that thirty (30)-day period, the Company shall
select a third appraiser who meets the qualifications stated in Section
1.1(a).  The third appraiser, however selected, shall be a person who
has not previously acted in any capacity for any Manager, Officer, Member or
Affiliate thereof.  Within thirty (30) days after the selection of the
third appraiser, each appraiser shall submit his or her determination of the
Fair Market Value.  The Fair Market Value shall be the average of the
two determinations that are closest in amount (so that if, for example, the
determinations were 5.0, 8.0 and 10.0, the Fair Market Value would 9.0 (the
average of 8.0 and 10.0)); provided that if one of the appraisals (“Middle
Appraisal”) is exactly the average of the other two appraisals, the Fair Market
Value shall be the Middle Appraisal (so that if, for example, the determinations
were 5.0, 7.5 and 10.0, the Fair Market Value would be 7.5).

    
      
         

      

      
        E-1

        
          

        

      

      
         

      

    

    (e)        
  Agreed
Value.  If the parties agree in writing as to the Fair Market
Value, then no appraisers shall be appointed pursuant to this Exhibit E or, if such
appraisers have been appointed, they shall be dismissed.

     

    (f)           Fair Market
Value.  The Fair Market Value of the Membership Interests of an
applicable Redemption Member determined by an appraiser pursuant to this Exhibit E shall be
the excess of (“Excess Value”) (i) the fair market value of such Membership
Interest determined on a going concern basis of the Company and Sherburne and
shall include all of the Property including, without limitation, goodwill, minus
(ii) appropriate discounts for lack of marketability and minority interests of
such Membership Interests.

     

    (g)           Appraisal
Costs.  The costs of any appraisals required under this Exhibit E shall be
borne fifty percent (50%) by the Company and fifty percent (50%) by the
Redemption Members (in proportion to each Redemption Member’s Excess
Value).

     

    (h)           Payment of Fair Market
Value.  The Company shall pay the Fair Market Value of a
Redemption Member’s Membership Interests in immediately available funds at
closing.  The closing for the redemption of a Redemption Member's
Interest pursuant to this Exhibit E shall be
held at the principal office of Company within thirty (30) days after the
determination of the Fair Market Value.  At the closing, the
Redemption Member shall deliver to the Company an instrument of transfer
(containing warranties (including warranties of title) of title and no
encumbrances) conveying the Redemption Member’s Membership
Interests.  The Redemption Member and the Company shall do all things
and execute and deliver all papers as may be reasonably necessary fully to
consummate such sale and purchase in accordance with the terms and provisions of
this Agreement.

    
      
         

      

      
        E-2

        
          

        

      

      
         

      

    

    TABLE OF
CONTENTS

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                	 
      	 	
                                        PAGE

                                      
	 	 	 
	
                                        ARTICLE
      1 ORGANIZATIONAL MATTERS

                                      	 	
                                        1

                                      
	
                                        1.1

                                      	
                                        Name

                                      	 	
                                        1

                                      
	
                                        1.2

                                      	
                                        Term

                                      	 	
                                        1

                                      
	
                                        1.3

                                      	
                                        Office

                                      	 	
                                        1

                                      
	
                                        1.4

                                      	
                                        Business
      of the Company

                                      	 	
                                        1

                                      
	
                                        1.5

                                      	
                                        Definitions

                                      	 	
                                        1

                                      
	
                                        1.6

                                      	
                                        Tax
      Classification

                                      	 	
                                        1

                                      
	
                                        1.7

                                      	
                                        Filings;
      Agent for Service of Process

                                      	 	
                                        2

                                      
	 	 	 	 
	
                                        ARTICLE
      2 CAPITAL CONTRIBUTIONS

                                      	 	
                                        2

                                      
	
                                        2.1

                                      	
                                        Capital
      Contributions

                                      	 	
                                        2

                                      
	
                                        2.2

                                      	
                                        Extent
      of Liability

                                      	 	
                                        3

                                      
	
                                        2.3

                                      	
                                        Loans

                                      	 	
                                        3

                                      
	
                                        2.4

                                      	
                                        Other
      Matters.

                                      	 	
                                        3

                                      
	 	 	 
	
                                        ARTICLE
      3 MEMBERS

                                      	 	
                                        4

                                      
	
                                        3.1

                                      	
                                        Members

                                      	 	
                                        4

                                      
	
                                        3.2

                                      	
                                        Admission
      of Additional Members

                                      	 	
                                        4

                                      
	
                                        3.3

                                      	
                                        Withdrawals
      or Resignations

                                      	 	
                                        4

                                      
	
                                        3.4

                                      	
                                        Compensation;
      Expense Reimbursement

                                      	 	
                                        4

                                      
	
                                        3.5

                                      	
                                        Member
      Approval

                                      	 	
                                        4

                                      
	 	 	 
	
                                        ARTICLE
      4 MANAGEMENT AND CONTROL OF THE COMPANY

                                      	 	
                                        5

                                      
	
                                        4.1

                                      	
                                        Management
      of the Company by Manager

                                      	 	
                                        5

                                      
	
                                        4.2

                                      	
                                        Manager.

                                      	 	
                                        5

                                      
	
                                        4.3

                                      	
                                        Limitations
      on Power of Manager

                                      	 	
                                        6

                                      
	
                                        4.4

                                      	
                                        Performance
      of Duties; Liability of Managers and Officers

                                      	 	
                                        7

                                      
	
                                        4.5

                                      	
                                        Devotion
      of Time

                                      	 	
                                        7

                                      
	
                                        4.6

                                      	
                                        Transactions
      between the Company, Managers, Members, Officers

                                      	 	
                                        7

                                      
	
                                        4.7

                                      	
                                        Compensation;
      Expense Reimbursement

                                      	 	
                                        7

                                      
	 	 	 
	
                                        ARTICLE
      5 ALLOCATIONS AND DISTRIBUTIONS

                                      	 	
                                        8

                                      
	
                                        5.1

                                      	
                                        Allocations

                                      	 	
                                        8

                                      
	
                                        5.2

                                      	
                                        Net
      Cash

                                      	 	
                                        8

                                      
	
                                        5.3

                                      	
                                        Amounts
      Withheld

                                      	 	
                                        9

                                      
	
                                        5.4

                                      	
                                        Additional
      Provisions

                                      	 	
                                        9

                                      
	 	 	 
	
                                        ARTICLE
      6 TRANSFER AND ASSIGNMENT OF INTERESTS

                                      	 	
                                        10

                                      
	
                                        6.1

                                      	
                                        Transfer
      and Assignment of Interests

                                      	 	
                                        10

                                      
	
                                        6.2

                                      	
                                        Substitution
      of Members

                                      	 	
                                        10

                                      
	
                                        6.3

                                      	
                                        Distributions
      and Allocations in Respect to Transferred Interests

                                      	 	
                                        10

                                      
	
                                        6.4

                                      	
                                        Transfers
      in Violation of this Agreement

                                      	 	
                                        10

                                      

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
        
        

      

      
        i

        
          

        

      

      
        
        

      

    

     

    
      
        
          
            
              
                
                  
                    	
                            ARTICLE
      7 ACCOUNTING, RECORDS, REPORTING BY MEMBERS

                          	 	
                            11

                          
	
                            7.1

                          	
                            Books
      and Records

                          	 	
                            11

                          
	
                            7.2

                          	
                            Reports

                          	 	
                            11

                          
	
                            7.3

                          	
                            Bank
      Accounts

                          	 	
                            12

                          
	
                            7.4

                          	
                            Tax
      Matters

                          	 	
                            12

                          
	
                            7.5

                          	
                            Inspection
      of Books and Records

                          	 	
                            12

                          
	 	 	 
	
                            ARTICLE
      8 DISSOLUTION AND WINDING UP

                          	 	
                            12

                          
	
                            8.1

                          	
                            Liquidating
      Events

                          	 	
                            12

                          
	
                            8.2

                          	
                            Winding
      Up

                          	 	
                            13

                          
	
                            8.3

                          	
                            Rights
      of Members

                          	 	
                            13

                          
	
                            8.4

                          	
                            Notice
      of Dissolution

                          	 	
                            13

                          
	
                            8.5

                          	
                            Final
      Accounting

                          	 	
                            13

                          
	 	 	 
	
                            ARTICLE
      9 INDEMNIFICATION

                          	 	
                            13

                          
	
                            9.1

                          	
                            Indemnification

                          	 	
                            13

                          
	
                            9.2

                          	
                            Expenses

                          	 	
                            14

                          
	
                            9.3

                          	
                            Indemnification
      Rights Non-Exclusive

                          	 	
                            14

                          
	
                            9.4

                          	
                            Insurance

                          	 	
                            14

                          
	
                            9.5

                          	
                            Assets
      of the Company

                          	 	
                            14

                          
	 	 	 
	
                            ARTICLE
      10 REPRESENTATIONS

                          	 	
                            15

                          
	
                            10.1

                          	
                            Represeentations

                          	 	
                            15

                          
	 	 	 
	
                            ARTICLE
      11 MISCELLANEOUS

                          	 	
                            16

                          
	
                            11.1

                          	
                            Complete
      Agreement

                          	 	
                            16

                          
	
                            11.2

                          	
                            Binding
      Effect

                          	 	
                            16

                          
	
                            11.3

                          	
                            Interpretation

                          	 	
                            16

                          
	
                            11.4

                          	
                            Dispute
      Resolution

                          	 	
                            16

                          
	
                            11.5

                          	
                            Severability

                          	 	
                            17

                          
	
                            11.6

                          	
                            Notices

                          	 	
                            17

                          
	
                            11.7

                          	
                            Amendments

                          	 	
                            17

                          
	
                            11.8

                          	
                            Multiple
      Counterparts

                          	 	
                            17

                          
	
                            11.9

                          	
                            Special
      Power of Attorney

                          	 	
                            18

                          
	
                            11.10

                          	
                            Time

                          	 	
                            18

                          
	
                            11.11

                          	
                            Waiver
      of Rights to Partition

                          	 	
                            18

                          
	
                            11.12

                          	
                            Violation

                          	 	
                            18

                          
	
                            11.13

                          	
                            Business
      Days

                          	 	
                            19

                          
	
                            11.14

                          	
                            Applicable
      Laws

                          	 	
                            19

                          
	
                            11.15

                          	
                            Incorporation
      by Reference

                          	 	
                            19

                          
	
                            11.16

                          	
                            Further
      Action

                          	 	
                            19

                          
	
                            11.17

                          	
                            Sole
      and Absolute Discretion

                          	 	
                            19

                          
	
                            11.18

                          	
                            Third
      Parties

                          	 	
                            19

                          
	
                            11.19

                          	
                            Equitable
      Relief

                          	 	
                            19

                          
	
                            11.20

                          	
                            Confidentiality;
      Non-Use of Trade Secrets

                          	 	
                            20

                          
	
                            11.21

                          	
                            Independent
      Activities

                          	 	
                            20

                          
	
                            11.22

                          	
                            Counsel

                          	 	
                            20

                          
	
                            11.23

                          	
                            Loan
      Documents

                          	 	
                            21

                          

                  

                

              

            

          

        

      

    

     

    
      
        
        

      

      
        ii

        
          

        

      

      
        
        

      

    

     

    
      
        
          
            
              
                
                  	
                          EXHIBIT
      A  CAPITAL CONTRIBUTIONS

                        	 
      	
                          A-1

                        
	 	 	 
	
                          EXHIBIT
      B  OFFICERS

                        	 
      	
                          B-1

                        
	 	 	 
	
                          EXHIBIT
      C  DEFINITIONS

                        	 
      	
                          C-1

                        
	 	 	 
	
                          EXHIBIT
      D  ALLOCATIONS; ADDITIONAL LIQUIDATION
PROVISIONS

                        	 
      	
                          D-1

                        
	 	 	 
	
                          EXHIBIT
      E  PROVISIONS PURSUANT TO SECTION 5.4(C)

                        	
                            

                        	
                          E-1

                        

                

              

            

          

        

      

    

     

    
      
         

      

      
        iii

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00166-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00166-of-00352.parquet"}]]