Document:

exv10w4

Exhibit 10.4

LOAN AND SECURITY AGREEMENT

(Loan A)

     THIS LOAN AND SECURITY AGREEMENT (the “Agreement”) is made as of August 28, 2007, by and
among SUNRISE CONNECTICUT AVENUE ASSISTED LIVING L.L.C., a limited liability company organized
and existing under the laws of the Commonwealth of Virginia (“Borrower”), and CHEVY CHASE BANK,
F.S.B., a federally chartered savings bank (“Agent” or in its individual capacity, “Chevy
Chase”), as Agent for the lenders party hereto (individually a “Lender” and collectively,
“Lenders”).

RECITALS

     A. Borrower has applied to Lenders for a term loan in the principal amount of Thirty
Million Dollars ($30,000,000) (the “Loan”), to be used by Borrower to (i) refinance existing
indebtedness which is secured by a lien on a 100 unit assisted living facility located at
5111
Connecticut Avenue, N.W., Washington, D.C., and known as “Sunrise of Connecticut Avenue”
(the “Facility”) and (ii) finance a portion of the costs of acquisition of membership
interests in
Borrower.

     B. Sunrise Senior Living, Inc., a Delaware corporation, has executed a Guaranty of
Payment — Loan A in favor of Agent pursuant to which it guarantees repayment and performance
of all of Borrower’s obligations to Agent and Lenders under the documents evidencing or
securing the Loan (the “Financing Documents”).

     C. Lenders are willing to make the loan to Borrower, each upon the terms and
subject to the conditions hereinafter set forth.

AGREEMENTS

     NOW, THEREFORE, in consideration of the premises, the mutual agreements herein contained,
and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower, Agent and Lenders hereby agree as follows:

ARTICLE I

DEFINITIONS

     Section 1.1 Certain Defined Terms.

     As used herein, the terms defined in the Preamble and Recitals hereto shall have the
respective meanings specified therein, and the following terms shall have the following
meanings:

     “Account,” individually, and, “Accounts,” collectively, mean all presently existing or
hereafter acquired or created accounts, accounts receivable, health care insurance receivables,
contract rights, notes, drafts, instruments, acceptances, chattel paper, leases and writings
evidencing a monetary obligation or a security interest in or a lease of goods, all rights
to receive

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the payment of money or other consideration under present or future contracts arising out of or
relating to the Facility (including, without limitation, all rights to receive the payment of
money or other consideration from, or on behalf of, any private pay patient), or by virtue of
services rendered, loans and advances made or other considerations given, by or set forth in, or
arising out of, any present or future chattel paper, note, draft, lease, acceptance, writing,
bond, insurance policy, instrument, document or general intangible, and all extensions and
renewals of any thereof, all rights under or arising out of present or future contracts,
agreements which gave rise to any or all of the foregoing insofar as they pertain to the
Facility, including all claims or causes of action now existing or hereafter arising in
connection with or under any agreement or document or by operation of law or otherwise, all
collateral security of any kind (including real property mortgages and deeds of trust) given by
any Person with respect to any of the foregoing, including, without limitation, all rights to
receive payment of money or other consideration from, or on behalf of, any private pay patient,
all rights to receive payments under all Resident Agreements, and all third-party payor contracts
(including Medicare and Medicaid to the extent permitted by Law), including, but not limited to,
the Veterans Administration, Participation Agreements, and any and all depository accounts (other
than resident trust accounts) into which the proceeds of all or any portion of such accounts may
be now or hereafter deposited, and all proceeds (cash and non-cash) of the foregoing.

     “Account Debtor” means any Person who is obligated on a Receivable and “Account Debtors”
mean all Persons who are obligated on the Receivables.

     “Act of Bankruptcy” means the filing of a petition in bankruptcy under the Bankruptcy Code
or the other commencement of a proceeding under any other applicable law concerning insolvency,
reorganization or bankruptcy, now or hereafter in effect.

     “Affiliate” means an entity with either revenues or assets in excess of $750,000 in which
an entity has an ownership interest equal to or greater than twenty-five percent (25%).

     “Agent” means the Person defined as the “Agent” in the preamble of this Agreement and shall
also include any successor Agent appointed pursuant to Section 11.7.3 (Successor Agent).

     “Agent’s Obligations” shall mean any and all Obligations payable solely to and for the
exclusive benefit of Agent by Borrower under the terms of this Agreement and/or any of the other
Financing Documents.

     “Agreement” means this Loan and Security Agreement (Loan A) and all amendments,
modifications and supplements hereto which may from time to time become effective in accordance
with the provisions of Section 12.2 (Amendments; Waivers).

     “Assignee” means any Person to which any Lender assigns all or any portion of its interests
under this Agreement, any Commitment, and any Loan, in accordance with the provisions of Section
12.5 (Assignments by Lenders), together with any and all successors and assigns of such Person;
“Assignees” means the collective reference to all Assignees.

     “Bankruptcy Code” Title 11 of the United States Code, as amended from time to time, and any
successor Laws.

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     “Business Day” shall mean any day that is not a Saturday, Sunday or banking holiday in the
State and must also be a day in which dealings are carried on in the applicable interbank
Eurodollar market.

     “Capital Adequacy Regulation” means any guideline, request or directive of any central bank
or other Governmental Authority, or any other law, rule or regulation, whether or not having the
force of law, in each case, regarding capital adequacy of any bank or of any corporation
controlling a bank.

     “Chattel Paper” means a writing or writings which evidence both a monetary obligation and a
security interest in or lease of specific goods, any returned, rejected or repossessed goods
covered by any such writing or writings and all proceeds (in any form including, without
limitation, accounts, contract rights, documents, chattel paper, instruments and general
intangibles) of such returned, rejected or repossessed goods, and all proceeds (cash and
non-cash) of the foregoing but only to the extent that any of the foregoing relates to the
Facility.

     “Closing Date” means the date of the closing of the Loans.

     “Collateral” shall mean all of Borrower’s Accounts, Chattel Paper, Equipment, General
Intangibles, documents, Instruments and Inventory, all right, title and interest of Borrower in
and to the Operating Agreements and Management Contracts (including, without limitation, the
Management Agreement), Resident Agreements, Physician Contracts, Participation Agreements, the
Licenses (whether or not designated with initial capital letters), as those terms are defined
herein and in the Uniform Commercial Code as presently adopted and in effect in the State, and
shall also cover, without limitation, (a) any and all property specifically included in those
respective terms in this Agreement or in the Financing Documents, (b) all right, title and
interest of Borrower in and to Leases or subleases, rents, royalties, issues, profits, revenues,
earnings, income or other benefits of the Property, or arising from the use or enjoyment of the
Property, or from any lease or other use and occupancy agreement pertaining to the Property, (c)
any and all property and/or collateral described in any of the Security Documents, and (d) all
proceeds (cash and non-cash, including, without limitation, insurance proceeds), of the
foregoing.

     “Commitment” means with respect to each Lender, such Lender’s Term Loan Commitment, and
“Commitments” means the Term Loan Commitments of all of Lenders.

     “Committed Amount” means with respect to each Lender, such Lender’s Term Loan Committed
Amount.

     “Commonly Controlled Entity” shall mean an entity, whether or not incorporated, which is
under common control with Borrower within the meaning of Section 414(b) or (c) of the Internal
Revenue Code of 1986, as amended and the regulations promulgated or issued thereunder.

     “Debt Service” means for any period of determination thereof an amount equal to the total of
the aggregate amount of all payments of principal and interest with respect to the Term Loan,
excluding any balloon payment.

     “Debt Service Ratio” means a ratio of Net Operating Income to Debt Service.

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     “Deed of Trust” means the Deed of Trust, Assignment, Security Agreement and Fixture Filing
(Loan A) of even date herewith, covering the Property, executed by Borrower in favor of Agent as
collateral for Loan A, as the same may from time to time be amended, restated, supplemented or
otherwise modified.

     “Default” means, with respect to each Financing Document, a default which, with the giving
of notice or the passage of time, or both, would constitute an Event of Default.

     “Enforcement Costs” means all expenses, charges, costs and fees whatsoever (including,
without limitation, reasonable attorney’s fees and expenses) of any nature whatsoever paid or
incurred by or on behalf of Agent in connection with (a) the collection or enforcement of any or
all of the Obligations, (b) the preparation of or changes to this Agreement, the Note, the
Security Documents and/or any of the other Financing Documents, (c) the creation, perfection,
collection, maintenance, preservation, defense, protection, realization upon, disposition, sale
or enforcement of all or any part of the Collateral, including, without limitation, those sums
paid or advanced, and costs and expenses, more specifically described in Section 10.5
(Performance by Agent) and Section 12.10 (Enforcement Costs), and (d) the monitoring,
administration, processing, servicing of any or all of the Obligations and/or the Collateral.

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

     “Equipment” shall mean all equipment, machinery, furniture and fixtures and supplies of
every nature pertaining to the Facility, presently existing or hereafter acquired or created and
wherever located, together with all accessions, additions, fittings, accessories, special tools,
and improvements thereto and substitutions therefor and all parts and equipment which may be
attached to or which are necessary for the operation and use of such personal property, whether
or not the same shall be deemed to be affixed to real property, and all rights under or arising
out of present or future contracts relating to the foregoing and all proceeds (cash and
non-cash) of the foregoing.

     “Event(s) of Default” shall mean the occurrence of any one or more of the events specified
in ARTICLE IX (Events of Default) or in the Deed of Trust and the continuance of such event
beyond the applicable grace and/or cure periods therefor, if any, set forth in ARTICLE IX.

     “Facility” has the meaning described in the Recitals of this Agreement.

     “Federal Funds Rate” means for any day of determination, the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day (or, if such day is not a Business Day) by the
Federal Reserve Bank for the next preceding Business Day) by the Federal Reserve Bank of Richmond
or, if such rate is not so published for any day that is a Business Day, the average of
quotations for such day on such transactions received by Agent from three (3) federal funds
brokers of recognized standing selected by Agent.

     “Financing Documents” means at any time collectively this Agreement, the Note, the
Deed of Trust, the Security Documents, and any other instrument, agreement or document

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previously, simultaneously or hereafter executed and delivered by Borrower and/or any other
Person, singly or jointly with another Person or Persons, evidencing, securing, guarantying or in
connection with any of the Obligations and/or in connection with this Agreement, the Note and/or
any of the Security Documents, as the same may from time to time be amended, restated,
supplemented or otherwise modified.

     “GAAP” shall mean generally accepted accounting principles in effect in the United States
of America in effect from time to time.

     “General Intangibles” shall mean any and all general intangibles of every nature, whether
presently existing or hereafter acquired or created arising out of or relating to the Facility,
including without limitation all books, correspondence, credit files, records, computer
programs, computer tapes, cards and other papers and documents in the possession or control of
Borrower, claims (including without limitation all claims for income tax and other refunds),
choses in action, judgments, patents, patent licenses, trademarks (excluding the “Sunrise”
trademark or tradename), trademark licenses, licensing agreements, rights in intellectual
property, goodwill, as that term is defined in accordance with GAAP (including all goodwill of
Borrower’s businesses symbolized by, and associated with, any and all trademarks, trademark
licenses, copyrights and/or service marks), royalty payments, contractual rights, rights as
lessee under any lease of real or personal property, literary rights, copyrights, service names,
service marks, logos, trade secrets, all amounts received as an award in or settlement of a suit
in damages, deposit accounts, interests in joint ventures or general or limited partnerships,
all Licenses, construction permits, Operating Agreements and Management Contracts, Participation
Agreements and Resident Agreements, and all proceeds (cash and non-cash) of the foregoing.

     “Governmental Authority or Authorities” shall mean any nation or government, the District
of Columbia, any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or pertaining to
government.

     “Guarantor” means SSLI, and its successors and assigns.

     “Guaranty” means the Guaranty of Payment dated of even date herewith executed by SSLI in
favor of Agent for the ratable benefit of Lenders, as amended, modified, substituted, extended,
and renewed from time to time.

     “Hazardous Materials” means any flammable explosives, radioactive materials, hazardous waste,
toxic substances or related materials, including, without limitation, asbestos, polychlorinated
biphenyls, urea-formaldehyde, radon, and any substance defined as or included in the definition of
(a) any “hazardous waste” as defined by the Resource Conservation Recovery Act of 1976, as amended
from time to time, and regulations promulgated thereunder; (b) any “hazardous substance” as
defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended from time to time, and regulations promulgated thereunder; (c) any “toxic substance” as
defined by the Toxic Substances Control Act, as amended from time to time, and regulations
promulgated thereunder; (d) any hazardous or infectious medical waste including, but not limited
to, cultures and stocks of infectious agents and associated biologicals, pathological wastes,
human and animal blood specimens and blood

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products, anatomical materials, blood, blood-soiled articles, contaminated materials,
microbiological laboratory wastes, sharps, chemical wastes, infectious wastes, chemotherapeutic
wastes, and radioactive wastes; (e) any substance, the presence of which on any property now or
hereafter owned, operated or acquired by any Borrower is prohibited or regulated under any
applicable Federal or state laws or regulations; and (f) any other substance, pollutant,
contaminant, chemical, or industrial toxic hazardous substance or waste, including without
limitation hazardous materials, which by law is prohibited or is otherwise regulated as a
hazardous material.

     “Hazardous Materials Contamination” means the contamination (whether presently existing or
occurring after the date of the Deed of Trust) of the Improvements, facilities, soil, ground
water, air or other elements on, in or constituting a part of, the Property by Hazardous
Materials, or the contamination of the buildings, facilities, soil, ground water, air or other
elements on, in or constituting a part of, any other property as a result of Hazardous Materials
at any time (whether before or after the date of the Deed of Trust) emanating from the Property.

     “Improvements” shall have the meaning given to that term in the Deed of Trust.

     “Instruments” means any and all notes, notes receivable, drafts, acceptances, and similar
instruments or documents, both now owned or hereafter created or acquired arising out of or
relating to the Facility (or any part thereof).

     “Inventory” means any and all inventory of Borrower and all right, title and interest of
Borrower in, and to, all of its now owned and hereafter acquired goods, merchandise and other
personal property furnished under any contract of service or intended for sale or lease arising
out of or relating to the Facility, including, without limitation, all supplies of any kind,
nature or description which are used or consumed in Borrower’s business and all documents of
title or documents representing the same and all proceeds (cash and non-cash) and products of the
foregoing.

     “Investment Property” means a security, whether certificated or uncertificated, security
entitlement, securities account, commodity contract or commodity account and all Proceeds of,
and Supporting Obligations with respect to, the foregoing.

     “Laws” means all ordinances, statutes, rules, regulations, orders, injunctions, writs or
decrees of any Governmental Authority or any court or similar entity established by any thereof.

     “Letter-of-credit right” means a right to payment or performance under a letter of credit,
whether or not the beneficiary has demanded or is at the time entitled to demand payment or
performance.

     “Licenses” means any and all licenses, certificates of need, operating permits, franchises,
and other licenses, authorizations, certifications, permits, or approvals, other than construction
permits, issued by, or on behalf of, any Governmental Authority now existing or at any time
hereafter issued, with respect to the acquisition, construction, renovation, expansion, leasing,
ownership management and/or operation of the Facility, accreditation of the Facility, and/or the
participation or eligibility for participation in any third party payment or reimbursement
programs (but specifically excluding any and all third-party payor
participation or

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reimbursement agreements now or at any time hereafter existing for the benefit of Borrower to the
extent required by Law), any and all operating licenses issued by any state Governmental
Authority, any and all pharmaceutical licenses and other licenses related to the purchase,
dispensing, storage, prescription or use of drugs, medications, and other “controlled substances,”
any and all licenses relating to the operation of food or beverage facilities or amenities, if
any, and any and all certifications and eligibility for participation in Medicare, Medicaid, Blue
Cross and/or Blue Shield, or any of the Managed Care Plans, private insurer, employee assistance
programs or other third party payment or reimbursement programs as the same may from time to time
be amended, renewed, restated, reissued, restricted, supplemented or otherwise modified.

     “Lien” means any mortgage, deed of trust, deed to secure debt, grant, pledge, security
interest, assignment, encumbrance, judgment, lien or charge of any kind, whether perfected or
unperfected, avoidable or unavoidable, consensual or non-consensual, including, without limitation,
any conditional sale or other title retention agreement, filed or unfiled tax liens, any lease in
the nature thereof, and the filing of or agreement to give any financing statement under the
Uniform Commercial Code of any jurisdiction.

     “Loan B” means a term loan in the principal amount of $10,000,000 made by Chevy Chase to
Borrower and evidenced by a Deed of Trust Note — Loan B of even date herewith executed by Borrower
in favor of Chevy Chase (“Note B”) and secured as provided in Note B.

     “Managed Care Plans” shall mean any health maintenance organization, preferred provider
organization, individual practice association, competitive medical plan, or similar arrangement,
entity, organization, or Person.

     “Management Agreement” shall mean the Management Agreement dated April 1, 2002, by and
between Borrower and the Management Company relating to the management of the Facility, as the
same may from time to time be amended, restated, supplemented or otherwise modified.

     “Management Company” means SSLMI, its successors and assigns and any other Person which may
become the manager of the Facility.

     “Material Adverse Change” means a significant adverse change in a Person’s financial position
or capacity including but not limited to significant adverse changes in (a) liquidity (b) gross
revenues (c) total expenses (d) such Person’s net worth or (e) ability to meet payment obligations
under such Person’s existing funded debt, existing Indebtedness, the Obligations and/or existing
contingent liabilities.

     “Multi-employer Plan” shall mean a Plan which is a multi-employer plan as defined in Section
4001(a)(3) of ERISA.

     “Net Operating Income” means for any period of determination thereof an amount equal to the
total of the sum of operating revenues less operating expenses plus depreciation and amortization
and a reserve of $300 per unit per annum.

     “Note” and “Notes” shall have the meanings set forth in Section 2.l(b) (The Loan).

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     “Notice” means a written communication delivered by hand, or sent by overnight courier, or
by certified or registered mail, postage prepaid, return receipt requested, to the Person to
whom such communication is to be given, at the addresses set forth in Section 12.1 (Notices).

     “Obligations” means all present and future debts, obligations, and liabilities, whether now
existing or contemplated or hereafter arising, of Borrower to Agent and Lenders under, arising
pursuant to, in connection with and/or on account of the provisions of this Agreement, the Notes,
each Security Document, and any of the other Financing Documents, any Swap Contract or the Loan,
including, without limitation, the principal of, and interest on, the Note, late charges,
Enforcement Costs, and other prepayment penalties (if any), letter of credit fees or fees charged
with respect to any guaranty of any letter of credit, any and all recording, transfer or other
taxes and costs of any kind required or incurred in connection with the recordation of a ground
lease of the Property (as defined in the Deed of Trust) and also means all other present and
future indebtedness, liabilities and obligations, whether now existing or contemplated or
hereafter arising, of Borrower to Agent of any nature whatsoever regardless of whether such
debts, obligations and liabilities be direct, indirect, primary, secondary, joint, several, joint
and several, fixed or contingent, and any and all renewals, extensions and rearrangements of any
such debts, obligations and liabilities.

     “Operating Agreements and Management Contracts” means any and all contracts and agreements
previously, now or at any time hereafter entered into by Borrower and/or the Management Company
other than Resident Agreements with respect to the acquisition, construction, renovation,
expansion, ownership, operation, maintenance, use or management of the Property or otherwise
concerning the operations and business of the Property, any and all service and maintenance
contracts, any employment contracts, any and all management agreements, any and all consulting
agreements, laboratory servicing agreements, pharmaceutical contracts, physician, other
clinician or other professional services provider contracts, patient admission agreements,
Resident Agreements, food and beverage service contracts, and other contracts for the operation
and maintenance of, or provision of services to, the Property, as the same may from time to time
be amended, restated or substituted from time to time.

     “Participation Agreements” means any and all third party payor participation or
reimbursement agreements now or at any time hereafter existing for the benefit of Borrower
relating to rights to payment or reimbursement from, and claims against, private insurers,
Managed Care Plans, material employee assistance programs, Blue Cross and/or Blue Shield,
federal, state and local Governmental Authorities, including without limitation, Medicare and
Medicaid, and other third party payors, as the same may from time to time be amended, restated,
extended, supplemented or modified.

     “Permitted Liens” means: (a) Liens for Taxes which are not delinquent or which Agent has
determined in the good faith exercise of its sole and absolute discretion (i) are being diligently
contested in good faith and by appropriate proceedings, (ii) Borrower have the financial ability
to pay, with all penalties and interest, at all times without materially and adversely affecting
Borrower, and (iii) are not, and will not be with appropriate filing, the giving of notice and/or
the passage of time, entitled to priority over any Lien of Agent; (b) deposits or pledges to
secure obligations under workers’ compensation, social security or similar laws, or under
unemployment insurance in the ordinary course of business; (c) Liens in favor of Agent or

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Lenders; (d) judgment Liens to the extent the entry of such judgment does not constitute an
Event of Default under the terms of this Agreement or result in the sale of, or levy of
execution on, any of the Collateral; and (e) Liens approved by Agent and Lenders which have been
created to secure permitted subordinated debt on a junior lien basis; and (f) such other Liens,
if any, as are identified as Permitted Encumbrances as defined in the Deed of Trust.

     “Person” shall mean and include an individual, a corporation, a partnership, a limited
liability company, a joint venture, a trust, an unincorporated association, any Governmental
Authority or any other entity.

     “Pledge Assignment and Security Agreement” means the Pledge, Assignment and Security
Agreement of even date herewith executed by SSLII in favor of Agent, pursuant to which SSLII
has pledged and assigned all of its interests in Borrower to Agent for the ratable benefit of
Lenders as additional security for the Loan.

     “Post Default Rate” means the interest rate on the Note plus three percent (3%) per annum.

     “Property” shall have the meaning given to that term in the Deed of Trust.

     “Receivables” means all of Borrower’s now or hereafter owned, acquired or created Accounts,
Chattel Paper, Contract Rights, General Intangibles and Instruments, and all cash and non-cash
proceeds and products thereof.

     “Reportable Event” shall mean any of the events set forth in Section 4043(b) of ERISA or
the regulations thereunder.

     “Requisite Lenders” means at any time of determination one or more Lenders holding at least
sixty-six and two thirds percent (66 2/3%) of the Commitments; provided, however, so long as
there are only two (2) Lenders, “Requisite Lenders” shall mean both Lenders.

     “Resident Agreements” means any and all contracts, authorizations, agreements and/or
consents executed by or on behalf of any resident or other person seeking services from the
Management Company or Borrower pursuant to which the Management Company or Borrower provides or
furnishes health or assisted living care and related services at the Property, including the
consent to treatment, assignment of payment of benefits by third party, as amended, restated or
substituted from time to time.

     “SSLI” means Sunrise Senior Living, Inc., a Delaware corporation.

     “SSLII” means Sunrise Senior Living Investments, Inc., a Virginia corporation.

     “SSLMI” means Sunrise Senior Living Management, Inc., a Virginia corporation.

     “Security Documents” shall mean, collectively, any assignment, including, without
limitation, the Pledge, Assignment and Security Agreement, the Guaranty and any assignment,
pledge agreement, security agreement, mortgage, deed of trust, leasehold mortgage, leasehold
deed of trust, deed to secure debt, financing statement and any similar instrument, document or

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agreement under or pursuant to which a Lien is now or hereafter granted to, or for the benefit of,
Agent on any collateral to secure the Obligations, as the same may from time to time be amended,
restated, supplemented or otherwise modified.

     “State” means the Commonwealth of Virginia.

     “Sunrise Bank Group” means the lenders from time to time under the Sunrise Senior Financing
Agreement.

     “Sunrise Senior Financing Agreement” means the Credit Agreement dated as of December 2, 2005
by and among Guarantor, certain subsidiaries of Guarantor, Bank of America, N.A., as
Administrative Agent, Swing Line Lender and L/C Issuer and the lenders named therein or any senior
credit facility substituted therefor from time to time.

     “Supporting Obligation” means a Letter-of-credit right, secondary obligation or obligation of
a secondary obligor or that supports the payment or performance of an account, chattel paper, a
document, a general intangible, an instrument or investment property.

     “Swap Contract” means any document, instrument or agreement between Borrower and Agent or any
affiliate of Agent, now existing or entered into in the future, relating to an interest rate swap
transaction, forward rate transaction, interest rate cap, floor or collar transaction, any similar
transaction, any option to enter into any of the foregoing, and any combination of the foregoing,
which agreement may be oral or in writing, including, without limitation, any master agreement
relating to or governing any or all of the foregoing and any related schedule or confirmation,
each as amended from time to time.

     “Taxes” means all taxes and assessments whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character (including all penalties or interest
thereon), which at any time may be assessed, levied, confirmed or imposed by any Governmental
Authority on Borrower or any of their properties or assets or any part thereof or in respect of
any of its franchises, businesses, income or profits.

     “Term Loan” and “Term Loans” have the meanings described in Section 2.1 (a) (The Term Loan).

     “Term Loan Commitment” and ‘Term Loan Commitments” have the meanings described in Section 2.1
(a) (The Term Loan).

     “Term Loan Committed Amount” has the meaning described in Section 2.1 (a) (The Term Loan).

     “Term Loan Facility” means the facility established by Lenders pursuant to Section 2.1 (The
Term Loan).

     “Term Loan Pro Rata Share” has the meaning described in Section 2.1 (a) (The Term Loan).

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     “Total Term Loan Committed Amount” has the meaning described in Section 2.1 (a) (The Term
Loan).

     “Uniform Commercial Code” means, unless otherwise provided in this Agreement, the Uniform
Commercial Code as adopted by and in effect from time to time in the State or in any other
jurisdiction, as applicable.

     Section 1.2 Accounting Terms and Other Definitional Provisions.

     Unless otherwise defined in this Agreement, as used in this Agreement and in any certificate,
report or other document made or delivered pursuant hereto, accounting terms not otherwise defined
in this Agreement, and accounting terms only partly defined in this Agreement, to the extent not
defined, shall have the respective meanings given to them under GAAP. Unless otherwise defined in
this Agreement, all terms used in this Agreement which are defined by the Uniform Commercial Code
shall have the same meanings as assigned to them by the Uniform Commercial Code unless and to the
extent varied by this Agreement. The words “hereof”, “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, section, subsection, schedule and exhibit references are
references to sections or subsections of, or schedules or exhibits to, as the case may be, this
Agreement unless otherwise specified. As used in this Agreement, the singular number shall include
the plural, the plural the singular and the use of the masculine, feminine or neutered gender shall
include all genders, as the context may require. Reference to any one or more of the Financing
Documents and any of the Financing Documents shall mean the same as the foregoing may from time to
time be amended, restated, substituted, extended, renewed, supplemented or otherwise modified.

ARTICLE II

BORROWING

     Section 2.1 The Term Loan.

          (a) Subject to and upon the provisions of this Agreement, each Lender severally agrees to make
a loan (each a “Term Loan”; and collectively, the “Term Loans”) to Borrower on the Closing Date in
the principal amount set forth below opposite such Lender’s name (herein called such Lender’s “Term
Loan Committed Amount”). The total of each Lender’s Term Loan Committed Amount is herein called the
“Total Term Loan Committed Amount”. The proportionate share set forth below opposite each Lender’s
name is herein called such Lender’s “Term Loan Pro Rata Share”:

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	 	 	Term Loan	 	 
	Lender
	 	Committed Amount	 	Term Loan Pro Rata Share
	Chevy Chase Bank, F.S.B.
	 	$	20,000,000	 	 	 	66.6666667	%
	 
	 	 	 	 	 	 	 	 
	MB Financial Bank,
N.A.
	 	$	10,000,000	 	 	 	33.3333333	%
	 
	 	 	 	 	 	 	 	 
	Total Term Loan Committed
Amount
	 	$	30,000,000	 	 	 	100	%

          The obligation of each Lender to make a Term Loan is several and is limited to its Term Loan
Committed Amount, and such obligation of each Lender is herein called its “Term Loan Commitment”.
The Term Loan Commitment of each Lender are herein collectively referred to as the “Term Loan
Commitments”. Agent shall not be responsible for the Term Loan Commitment of any Lender, except
to the extent Agent acts as a Lender; and similarly, none of Lenders shall be responsible for the
Term Loan Commitment of any of the other Lenders; the failure, however, of any Lender to perform
its Term Loan Commitment shall not relieve any of the other Lenders from the performance of their
respective Term Loan Commitments.

          (b) The obligation of Borrower to pay the Term Loans with interest shall be
evidenced by a series of promissory notes (each as from time to time extended, amended,
restated, supplemented or otherwise modified, the “Note” and collectively, the “Notes”)
substantially in the form of EXHIBIT A attached hereto and made a part hereof with
appropriate
insertions. Each Note shall be dated as of the Closing Date, shall be payable to the order
of a
Lender at the times provided in the Note, and shall be in the principal amount of such
Lender’s
Term Loan Committed Amount.

          (c) Borrower may voluntarily prepay the principal sum outstanding only in
accordance with the terms of the Note. Sums borrowed and repaid may not be readvanced.

     Section 2.2 Settlement Among Lenders.

          (a) Agent shall pay to each Lender on each payment date, such Lender’s
ratable share of all payments received by Agent in immediately available funds on account of
the
Term Loans, net of any amounts payable by such Lender to Agent, by wire transfer of same day
funds; the amount payable to each Lender shall be based on the principal amount of the Term
Loan owing to such Lender.

          (b) All other amounts received by Agent on account of, or applied by Agent to
the payment of, any Obligation owed to Lenders (including, without limitation, fees payable
to
Lenders and proceeds from the sale of, or other realization upon, all or any part of the
Collateral
following an Event of Default) that are received by Agent not later than 11:00 a.m. (Eastern
Time) on a Business Day will be paid by Agent to each Lender on the same Business Day, and

12

 

any such amounts that are received by Agent after 11:00 a.m. (Eastern Time) will be paid by
Agent to each Lender on the following Business Day.

          (c) Unless Agent shall have received notice from Borrower prior to the date on which any
payment is due to Agent that Borrower will not make such payment in full, Agent may assume that
Borrower has made such payment in full to Agent on such date and Agent in its sole discretion
may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an
amount equal to the amount then due such Lender. If and to the extent Borrower shall not have so
made such payment in full to Agent and Agent shall have distributed to any Lender all or any
portion of such amount, such Lender shall repay to Agent on demand the amount so distributed to
such Lender, together with interest thereon at the Federal Funds Rate, for each day from the date
such amount is distributed to such Lender until the date such Lender repays such amount to Agent.

ARTICLE III

GENERAL FINANCING PROVISIONS

     Section 3.1 Computation of Interest and Fees.

     All applicable fees and interest shall be calculated on the basis of a year of 365 days for
the actual number of days elapsed pursuant to the terms of the Note and Borrower’s election of
interest rate options thereunder and interest shall be payable in arrears.

     Section 3.2 Payment and Performance of Obligations.

     All payments of the Obligations shall be paid by Borrower without setoff or counterclaim to
Agent (except as otherwise provided herein) at Agent’s office specified in Section 12.1
(Notices) in immediately available funds not later than 2:00 p.m. (Eastern Time) on the due date
of such payment. All payments received by Agent after such time shall be deemed to have been
received by Agent for purposes of computing interest and fees and otherwise as of the next
Business Day. Payments shall not be considered received by Agent until such payments are paid to
Agent in immediately available funds.

     Section 3.3 Liens; Setoff.

     Borrower hereby grants to Agent and to Lenders a continuing Lien for all of the Obligations
(including, without limitation, Agent’s Obligations) upon any and all monies, Investment
Property, and other property of Borrower and the proceeds thereof, now or hereafter held or
received by or in transit to, Agent, any of Lenders, and/or any Affiliate of Agent and/or any of
Lenders, from or for the account of Borrower, and also upon any and all deposit accounts
(general or special) and credits of Borrower, if any, with Agent, any of Lenders or any
Affiliate of Agent or any of Lenders, at any time existing, excluding any deposit accounts held
by Borrower in its capacity as trustee for Persons who are not Affiliates of Borrower. Without
implying any limitation on any other rights Agent and/or Lenders may have under the Financing
Documents or applicable Laws, during the continuance of an Event of Default, Agent and the each
of Lenders, respectively, is hereby authorized by Borrower at any time and from time to time,
without notice to Borrower, to set off, appropriate and apply any or all items hereinabove
referred to against all Obligations (including, without limitation, Agent’s Obligations) then

13

 

outstanding (whether or not then due), all in such order and manner as shall be determined by
Agent in its sole and absolute discretion.

     Section 3.4 Requirements of Law.

     In the event that any Lender shall have determined in good faith that (i) the adoption of any
Capital Adequacy Regulation, or (ii) any change in any Capital Adequacy Regulation or in the
interpretation or application thereof or (iii) compliance by such Lender or any corporation
controlling such Lender with any request or directive regarding capital adequacy (whether or not
having the force of law) from any central bank or Governmental Authority, does or shall have the
effect of reducing the rate of return on the capital of such Lender or any corporation controlling
such Lender, as a consequence of the obligations of such Lender hereunder to a level below that
which such Lender or any corporation controlling such Lender would have achieved but for such
adoption, change or compliance (taking into consideration the policies of such Lender and the
corporation controlling such Lender, with respect to capital adequacy) by an amount deemed by such
Lender to be material, then from time to time, after submission by such Lender to Borrower of a
written request therefor and a statement of the basis for such determination, Borrower shall pay to
such Lender such additional amount or amounts in order to compensate such Lender or its controlling
corporation for such reduction. If rates have been increased pursuant to the foregoing, and
thereafter there is a change which has the effect of increasing the rate of return to a Lender,
then any additional amount that had been charged will appropriately reduce.

ARTICLE IV

COLLATERAL

     Section 4.1 Collateral.

     As security for the payment of all of the Obligations and for Borrower’s performance of, and
compliance with, all of the terms, covenants, conditions, stipulations and agreements contained in
the Financing Documents, Borrower hereby assigns, grants and conveys to Agent, for the ratable
benefit of Lenders, and agrees that Agent, for the ratable benefit of Lenders, shall have, to the
extent permitted by law a perfected, continuing security interest in, all of the Collateral.
Borrower further agrees that Agent shall have in respect of the Collateral all of the rights and
remedies of a secured party under the Uniform Commercial Code and under other applicable Laws as
well as those provided in this Agreement. Borrower covenants and agrees to execute and deliver
such financing statements and other instruments and filings as are necessary in the opinion of
Agent to perfect such security interest. Notwithstanding the fact that the proceeds of the
Collateral constitute a part of the Collateral, Borrower may not dispose of the Collateral, or any
part thereof, other than in the ordinary course of its business or as otherwise may be permitted
by this Agreement.

     Section 4.2 Assignment of Ownership Interests.

     The Obligations are further secured by the Pledge, Assignment and Security Agreement pursuant
to which SSLII has assigned to Agent, for the ratable benefit of Lenders, one hundred percent
(100%) of its ownership interests in Borrower.

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     Section 4.3 Costs.

     Borrower agrees to pay on demand, to the fullest extent permitted by applicable laws, all
reasonable fees, commissions, costs, charges and other expenses incurred by Agent in connection
with the taking, perfection, preservation, protection and/or release of any security interest or
lien on any of the Collateral.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

     Borrower represents and warrants to Agent and Lenders as follows:

     Section 5.1 Good Standing.

     Borrower (a) is a limited liability company duly organized, existing and in good standing
under the laws of the Commonwealth of Virginia, (b) has the power to own its property and to
carry on its business as now being conducted, and (c) is duly qualified to do business and is in
good standing in each jurisdiction in which the character of the properties owned by it therein
or in which the transaction of its business makes such qualification necessary.

     Section 5.2 Power and Authority.

     Borrower has full power and authority to execute and deliver this Agreement and each of the
other Financing Documents executed and delivered by it and to incur the Obligations, all of which
have been duly authorized by all proper and necessary action. No consent or approval of owners
of, or lenders to, Borrower, and no consent or approval of any Governmental Authority or any
third party payor on the part of Borrower, is required as a condition to the validity or
enforceability of this Agreement or any of the other Financing Documents executed and delivered
by Borrower or to the payment or performance by Borrower of the Obligations.

     Section 5.3 Binding Agreements.

     This Agreement and each of the other Financing Documents executed and delivered by Borrower
have been properly executed by Borrower, constitute valid and legally binding obligations of
Borrower, and are fully enforceable against Borrower in accordance with their respective terms,
subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general
applications affecting the rights and remedies of creditors and secured parties, and general
principles of equity regardless of whether applied in a proceeding in equity or at law.

     Section 5.4 Litigation.

     There are no proceedings pending before any court or arbitrator or before or by any Governmental
Authority which, in any one case or in the aggregate, will materially adversely affect the
financial condition or operations of Borrower or the authority of Borrower to enter into this
Agreement or any of the other Financing Documents executed and delivered by Borrower. There is no
pending revocation, suspension, termination, probation, restriction, limitation or non-renewal of
any License, Participation Agreement or any similar accreditation or approval from any
organization or Governmental Authority regulating healthcare providers, including, without
limitation, the issuance of any provisional License or other License with a term of less than
twelve (12) months, as a consequence of any sanctions imposed by any Governmental Authority,

15

 

nor is there any pending assessment of any civil or criminal penalties by any Governmental
Authority, the outcome of which, if determined adversely to Borrower, could materially impair
Borrower’s ability to pay the Obligations. Borrower has no appeals regarding rates or
reimbursements currently pending or contemplated before any Governmental Authority or any
administrator of any third party payor or preferred provider program or referral source, the
outcome of which, if determined adversely to Borrower, could materially impair Borrower’s ability
to pay the Obligations. There are no Medicare or Medicaid recoupments or recoupments of any other
third party payor being sought, requested or claimed, against Borrower, the outcome of which, if
determined adversely to Borrower could materially impair Borrower’s ability to pay the Obligations,
except as otherwise disclosed in writing to, and approved by, Agent.

     Section 5.5 No Conflicting Agreements.

     There is (a) no provision of the operating agreement of Borrower and no provision of any
existing mortgage, indenture, contract or agreement binding on Borrower or affecting its property,
and (b) to the knowledge of Borrower no provision of law or order of court binding upon Borrower,
which would conflict with or in any way prevent the execution, delivery, or performance of the
terms of this Agreement or of any of the other Financing Documents executed and delivered by
Borrower, or which would be violated as a result of such execution, delivery or performance, or,
if so, all necessary consents have been obtained.

     Section 5.6 Financial Information.

     All financial statements or information hereto furnished to Agent and Lenders with respect to
Borrower and the Facility is complete and correct in all material respects and fairly presents the
financial position of Borrower and the financial condition of the Facility. There are no
liabilities, direct or indirect, fixed or contingent, of Borrower which are not reflected in
Borrower’s financial statements or in the notes thereto. There has been no Material Adverse Change
in the financial condition or operations of Borrower or the Facility since the date of such
financial statements and information (and to Borrower’s knowledge, no such adverse change is
pending), and Borrower has not guaranteed the obligations of, or made any investments in or
advances to, any company, individual or other entity, except as disclosed in such information.

     Section 5.7 No Default.

     Borrower is not in default under or with respect to any obligation under any agreement to
which Borrower is a party in any respect which could materially adversely affect the ability of
Borrower to perform the Obligations. There is no Event of Default hereunder.

     Section 5.8 Taxes.

     Borrower has filed or has caused to have been filed all federal, state and local tax or
informational returns which are required by law to be filed, and have paid or caused to have been
paid all Taxes as shown on such returns or on any assessment received by Borrower, to the extent
that such Taxes have become due, or which are required by law to be paid, unless and to the extent
only that such Taxes, assessments and governmental charges are currently contested in good faith
and by appropriate proceedings by Borrower and adequate reserves therefor have been established as
required under GAAP.

16

 

     Section 5.9 Place(s) of Business and Location of Collateral.

     Borrower warrants that the address of its chief executive office is as specified in
EXHIBIT B attached hereto and made a part hereof and that the address of each of its
other places of business, if any, is as disclosed to Agent and Lenders in EXHIBIT B. The
Collateral and all books and records pertaining to the Collateral are and will be located at the
addresses indicated on EXHIBIT B. Borrower will immediately advise Agent and Lenders in
writing of the opening of any new place of business or the closing of any existing place of
business, and of any change in the location of the places where the Collateral, or any part
thereof, or the books and records concerning the Collateral, or any part thereof, are kept.

     Section 5.10 Title to Properties.

     Borrower has good and marketable title to all of its properties, including, without
limitation, the Collateral owned by it, and the Collateral is free and clear of mortgages,
pledges, liens, charges and other encumbrances other than the Permitted Liens.

     Section 5.11 Margin Stock.

     None of the Loan proceeds will be used, directly or indirectly, by Borrower for the purpose
of purchasing or carrying, or for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry, any “margin security” within the meaning of Regulation
G (12 CFR Part 207), or “margin stock” within the meaning of Regulation U (12 CFR Part 221), of
the Board of Governors of the Federal Reserve System (herein called “margin security” and
“margin stock”) or for any other purpose which might make the transactions contemplated herein a
“purpose credit” within the meaning of said Regulation G or Regulation U, or cause this
Agreement to violate any other regulation of the Board of Governors of the Federal Reserve
System or the Securities Exchange Act of 1934 or the Small Business Investment Act of 1958, as
amended, or any rules or regulations promulgated under any of such statutes.

     Section 5.12 ERISA.

     With respect to any “pension plan”, as defined in Section 3(2) of ERISA, which plan is now
or previously has been maintained or contributed to by Borrower and/or by any Commonly
Controlled Entity: (a) no “accumulated funding deficiency” as defined in Code §412 or ERISA §302
has occurred, whether or not that accumulated funding deficiency has been waived, that would
materially adversely affect the ability of Borrower to pay the Obligations; (b) no “reportable
event” as defined in ERISA §4043 has occurred with respect to which notice has not been waived
under 29 C.F.R. § 4043; (c) no termination of any plan subject to Title IV of ERISA has occurred
that would materially adversely affect the ability of Borrower to pay the Obligations; (d)
neither Borrower nor any Commonly Controlled Entity has incurred a “complete withdrawal” within
the meaning of ERISA §4203 from any multi-employer plan; (e) neither Borrower nor any Commonly
Controlled Entity has incurred a “partial withdrawal” within the meaning of ERISA §4205 with
respect to any multi-employer plan; (f) no multi-employer plan to which Borrower or any Commonly
Controlled Entity has an obligation to contribute is in “reorganization” within the meaning of
ERISA §4241 nor has notice been received by Borrower or any Commonly Controlled Entity that such
a multi-employer plan will be placed in
“reorganization”.

17

 

     Section 5.13 Governmental Consent.

     Neither the nature of Borrower or of its business or properties, nor any relationship between
Borrower and any other Person, nor any circumstance in connection with the making of the Loan, or
the offer, issue, sale or delivery of the Note is such as to require a consent, approval or
authorization of, or filing, registration or qualification with, any Governmental Authority, on the
part of Borrower, as a condition to the execution and delivery of this Agreement or any of the
other Financing Documents, the borrowing of the principal amount of the Loan or the offer, issue,
sale or delivery of the Note.

     Section 5.14 Full Disclosure.

     The financial statements referred to in this ARTICLE V do not, nor does this Agreement, nor
do any written statements furnished by Borrower to Agent in connection with the making of the
Loan, contain any untrue statement of fact or knowingly omit a material fact necessary to make the
statements contained therein or herein not materially misleading. Borrower has not, to the best of
its knowledge, failed to disclose any fact to Agent in writing which materially adversely affects
or, will or could prove to materially adversely affect the properties, business, prospects,
profits or condition (financial or otherwise) of Borrower or the ability of Borrower to perform
this Agreement.

     Section 5.15 Business Names and Addresses.

     Borrower has not conducted business under any name other than its current name, and has not
conducted its business in any jurisdiction other than the District of Columbia. Borrower intends
to operate the Facility under the name “Sunrise of Connecticut Avenue”. Borrower shall promptly
notify Agent of any change in the name of the Facility.

     Section 5.16 Licenses.

     Borrower further represents and warrants to Agent that, with respect to any License: (a) no
Default or Event of Default has occurred or is continuing under the terms of any of the Licenses,
or any condition to the issuance, maintenance, renewal and/or continuance of any License, (b)
Borrower has paid all fees, charges and other expenses to the extent due and payable with respect
to, and has provided all information and otherwise complied with all material conditions precedent
to, the issuance, maintenance, renewal, and continuance of all Licenses, (c) Borrower has not
received any notice from any Governmental Authority relating to any actual or pending suspension,
revocation, restriction, or imposition of any probationary use, of any License, nor has any
License been materially amended, supplemented, rescinded, terminated, or otherwise modified except
as otherwise disclosed in writing to, and approved by, Agent, (d) Borrower has not made any
previous assignment of any of the Licenses to any Person, and (e) no financing statement covering
any of the Licenses is on file in any public office except financing statements in favor of Agent.
The foregoing notwithstanding, Borrower, Agent and Lenders acknowledge and agree that the District
of Columbia does not currently require a license for the operation of an assisted living facility.
At such time as the District of Columbia implements laws or establishes regulations governing the
operation of the Facility which require licensure, Borrower shall provide Agent with a copy of the
License issued by the District of Columbia and comply with this Section 5.16 in all respects.

18

 

     Section 5.17 Operating Agreements and Management Contracts.

     Borrower has furnished or caused SSLMI to furnish to Agent photocopies of all material
Operating Agreements and Management Contracts entered into with respect to the Facility, and all
amendments, supplements and modifications thereto including, without limitation, the Management
Agreement. Borrower further represents and warrants to Agent that (a) all of the material
Operating Agreements and Management Contracts are or will be at the time of execution and
delivery thereof valid and binding on the parties thereto and in full force and effect, (b) no
Default or Event of Default has occurred or is continuing under the terms of any of the material
Operating Agreements and Management Contracts, and no party thereto has attempted or threatened
to terminate any Operating Agreement and Management Contract, (c) Borrower has not made any
previous assignment of the Operating Agreements and Management Contracts to any Person, and (d)
no financing statement covering any of the Operating Agreements and Management Contracts is on
file in any public office except financing statements in favor of Agent, for the ratable benefit
of Lenders.

     Section 5.18 Participation Agreements and Resident Agreements.

     Borrower has furnished or caused SSLMI to furnish to Agent, on or before the Closing Date,
the form of Resident Agreement used with respect to the Facility and, if requested by Agent,
copies of all current, executed Resident Agreements.

     Borrower further covenants to Agent that:

          (a) With respect to the Participation Agreements, if any, (i) to the best of its
knowledge, all Participation Agreements will be at the time of execution and delivery
thereof
valid and binding on the parties thereto and in full force and effect, and (ii) all
Participation
Agreements will provide for payment to or for the benefit of Borrower or the Management
Company for services rendered to residents of the Facility. Borrower represents and
warrants
that as of the date hereof it has not entered any Participation Agreement for the Facility.

          (b) To the extent Borrower participates or will participate in Medicare or
Medicaid payment and reimbursement programs, Borrower has complied and will comply with
all notice and other requirements under Title XVIII and Title XIX of the Social Security Act
to
enable Borrower to participate in the Medicare and Medicaid payment and reimbursement
programs.

     Section 5.19 Compliance with Laws.

     Borrower is not in violation of any applicable laws of any Governmental Authority
pertaining to employment practices, health standards or controls, environmental and occupational
standards or controls or order of any court or arbitrator, the violation of which, considered in the
aggregate, would materially adversely affect the ability of Borrower to pay the Obligations.
Borrower is in compliance with all accreditation standards and requirements to which it is
subject. Borrower has obtained all Licenses necessary to the ownership of its property or to the
conduct of its activities which, if not obtained, would materially adversely affect the ability of
Borrower to conduct its activities of operating the Facility as an assisted living facility,
including, without limitation if and as required by any Governmental Authorities for the
dispensing, storage, prescription, disposal, and use of drugs, medications and other “controlled

19

 

substances” and for the maintenance of cafeteria and other food and beverage facilities or
services or the condition (financial or otherwise) of Borrower. The foregoing notwithstanding,
Borrower, Agent and Lenders acknowledge and agree that the District of Columbia does not
currently require a license for the operation of an assisted living facility. At such time as the
District of Columbia implements laws or establishes regulations governing the operation of the
Facility which require licensure, Borrower shall provide Agent with a copy of the License issued
by the District of Columbia and comply with this Section 5.19 in all respects.

     Section 5.20 Presence of Hazardous Materials or Hazardous Materials
Contamination.

     Borrower has not placed Hazardous Materials on the Property. To the best of Borrower’s
knowledge, no Hazardous Materials are located on the Property, except for reasonable quantities
of necessary supplies for use by SSLMI in the ordinary course of its current line of business
and stored, used and disposed of in accordance with applicable Laws, and, to the best of
Borrower’s knowledge, the Property has never been used as a manufacturing, storage, or dump site
for Hazardous Materials nor is the Property affected in any materially adverse way by Hazardous
Materials Contamination.

     Section 5.21 Nature of Loan; Usury; Disclosures.

     Borrower is a business or commercial organization, and the Loan is being made solely for
the purpose of carrying on or acquiring a business or commercial enterprise. The rates of
interest charged on the Loan do not, and will not, violate any usury Law or interest rate
limitation. The Loan is not subject to the federal Consumer Credit Protection Act (15 U.S.C.
§1601 et. seq.) nor any other federal or state disclosure or consumer protection laws. The Loan
is being transacted solely for business or commercial purposes and not for personal, family or
household purposes.

     Section 5.22 Accounts.

     With respect to all of Borrower’s Accounts and to the best of Borrower’s knowledge (a) they
are genuine, and in all respects what they purport to be, and are not evidenced by a judgment, an
instrument, or chattel paper (unless such judgment has been assigned and such instrument or
chattel paper has been endorsed and delivered to Agent); (b) they represent undisputed, bona fide
transactions completed in accordance with the terms and provisions contained in the invoices
relating thereto; (c) the services rendered which resulted in the creation of the Accounts have
been delivered or rendered to and accepted by the Account Debtor; (d) the amounts shown on
Borrower’s books and records, with respect thereto are actually and absolutely owing to Borrower
and are not contingent for any reason; (e) there are no set-offs, counterclaims or disputes known
by Borrower or asserted with respect thereto, and Borrower has made no agreement with any Account
Debtor thereof for any deduction or discount of the sum payable thereunder except regular
discounts allowed by Borrower in the ordinary course of its business for prompt payment; (f)
there are no facts, events or occurrences known to Borrower which in any way impair the validity
or enforcement thereof or tend to reduce the amount payable thereunder; (g) all Account Debtors
thereof, to the best of Borrower’s knowledge, have the capacity to contract; (h) the services
furnished giving rise thereto are not subject to any Liens other than Permitted Liens; (i)
Borrower has no knowledge of any fact or circumstance which would impair the validity or
collectibility thereof; and (j) there are no proceedings or actions
known to Borrower which are pending against any Account Debtor which might result in any
material adverse change in its financial condition.

20

 

     Section 5.23 Survival; Updates of Representations and Warranties.

     All representations and warranties contained in or made under or in connection with this
Agreement and the other Financing Documents shall survive the date of this Agreement and the
Loan made hereunder. Each of Agent and Lenders acknowledges and agrees that any and all
representations and warranties contained in, or made under, or in connection with, this
Agreement may be amended, changed or otherwise modified by Borrower at any time and from time to
time after the date of this Agreement so as to accurately reflect the matters represented and
warranted therein; provided, that such amendments, changes and/or modifications are disclosed in
writing to Agent. Neither Agent nor Lenders shall have an obligation to waive any Event of
Default due to any present or future inaccuracy of such representation or warranty or to agree
to any amendment, change or modification of any such representation or warranty.

     Section 5.24 Compliance with Health Care Laws.

          (a) Without limiting the generality of any other provision of this Agreement,
including, without limitation, any other representation or warranty made herein, Borrower,
SSLMI and the Property and, to Borrower’s knowledge, each of Borrower’s or SSLMI’s licensed
employees and contractors (other than contracted agencies) in the exercise of their
respective
duties on behalf of Borrower or SSLMI (with respect to its operation of the Property) or
any
portion of the Property, is in material compliance with all applicable statutes, laws,
ordinances,
rules and regulations of any federal, state or local governmental authority with respect to
regulatory matters primarily relating to patient healthcare and/or patient healthcare
information,
including without limitation, if applicable, the Health Insurance Portability and
Accountability
Act of 1996, as amended, and the rules and regulations promulgated thereunder (“HIPAA”)
(collectively, “Healthcare Laws”)). Borrower and/or SSLMI, as applicable, has maintained in
all
material respects all records required to be maintained by any governmental agency or
authority
or otherwise under the Healthcare Laws and, to the knowledge of Borrower, there are no
presently existing circumstances which would result or likely would result in material
violations
of the Healthcare Laws. Borrower and/or SSLMI, as applicable, and its or their respective
Affiliates have such permits, licenses, franchises, certificates and other
approvals or
authorizations of governmental or regulatory authorities as are necessary under applicable
law to
own or lease, their respective Projects and to conduct their respective business in
connection
with the Projects (including without limitation such permits as are required under such the
Healthcare Laws).

          (b) To the extent that and for so long as (i) Borrower or SSLMI is a “covered
entity” within the meaning of HIPAA or (ii) Borrower or SSLMI (with respect to its
operation of
the Property) and/or their respective business and operations (with respect to the
Property) are
subject to or covered by the so-called “Administrative Simplification” provisions of HIPAA,
such entity (A) has undertaken or will undertake in a timely manner all necessary surveys,
audits,
inventories, reviews, analyses and/or assessments (including any necessary risk
assessments) or
all areas of its business and operations required by HIPAA and/or that could adversely
affected
by the failure of such entity to be HIPAA Compliant (as defined below); (B) has developed
or
will develop in a timely manner a detailed plan and time line for becoming HIPAA Compliant
(a
“HIPAA Compliance Plan”); and (C) has implemented or will implement those provisions of
such HIPAA Compliance Plan in all material respects necessary to ensure that such entity is
or becomes HIPAA Compliant. For purposes hereof, “HIPAA Compliant” shall mean that

21

 

Borrower or SSLMI, as applicable (1) is or will be in compliance 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”)
and (2) is 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 governmental 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 or SSLMI’s business, operations, assets, properties or condition (financial or
otherwise), in connection with any actual or potential violation by any such entity of the then
effective provisions of HIPAA.

ARTICLE VI

CONDITIONS OF LENDING

     The making of the Loan is subject to the following conditions precedent:

     Section 6.1 Opinion of Counsel for Borrower.

     On the date hereof, Agent shall receive one or more written opinions of counsel for Borrower
and SSLI satisfactory in all respects to Agent. Counsel to Borrower will also provide adequate
assurance that the Facility holds any necessary Licenses for its operation.

     Section 6.2 Approval of Counsel for Agent.

     All legal matters incident to the Loan and all documents necessary in the opinion of Agent to
make the Loan shall be satisfactory in all material respects to counsel for Agent.

     Section 6.3 Supporting Documents.

     Agent shall receive on the date hereof: (a) a certificate of the managing member of Borrower
in a form acceptable to Agent in all respects, dated as of the date hereof and certifying (i) that
attached thereto is a true, complete and correct copy of resolutions duly adopted by the members
of Borrower authorizing the execution and delivery of the Financing Documents to which it is a
party, the borrowing thereunder, and the performance of the Obligations, and (ii) as to the
incumbency and specimen signature of the authorized officer of the managing member of Borrower or
SSLI executing the Financing Documents to which it is a party; (b) a copy of the resolutions,
dated November 15, 2002, duly adopted by the board of directors of SSLI generally authorizing the
execution and delivery of the Financing Documents to which it is a party and the guarantee of the
Loan; (c) such other documents as Agent may reasonably require Borrower, SSLI, the managing member
of Borrower to execute, in form and substance acceptable to Agent; and (d) such additional
information, instruments, opinions, documents, certificates and reports as Agent may reasonably
deem necessary.

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     Section 6.4 Financing Documents.

     All of the Financing Documents required by Agent shall be executed and delivered to Agent.
The Deed of Trust and financing statements shall be recorded at the sole expense of Borrower.

     Section 6.5 Insurance.

     Agent shall have received all policies of insurance required by the terms hereof and by the
other Financing Documents to be in effect from a company or companies and in form and amount
reasonably satisfactory to Agent, including without limitation, flood insurance (in the amount
of the Loan or the maximum limit of coverage available on the Property, whichever is less or
evidence that flood insurance is not available or otherwise required with respect to the
Property), together with written evidence, in form and substance satisfactory to Agent, that all
fees and premiums due on account thereof have been paid in full.

     Section 6.6 Security Documents.

     In order to perfect the lien and security interest created by this Agreement, Borrower
shall have executed and delivered to Agent all Security Documents (in form and substance
acceptable to Agent in its sole discretion) deemed necessary by Agent, in a sufficient number of
counterparts for recordation, and, at Borrower’s sole expense, shall record all such financing
statements and Security Documents, or cause them to be recorded, in all public offices deemed
necessary by Agent.

     Section 6.7 Commitment Fee.

     In consideration for the making of the Loan, Borrower shall pay to Agent on or prior to the
Closing Date, a commitment fee in the amount of $187,500.00.

     Section 6.8 Management Agreement.

     Borrower shall have delivered to Agent an executed management agreement for the Facility by
and between Borrower and SSLMI, in all respects satisfactory to Agent and its counsel.

     Section 6.9 Title and Survey Matters.

     Agent shall have received a paid policy of title insurance (American Land Title Association
Standard Form “B” Loan Policy — Current Edition) or a valid and enforceable commitment to issue
the same from a company satisfactory to Agent in the amount of the Loan and which may be
endorsed or assigned to the successors and assigns of Agent without additional cost, insuring
the lien of the Deed of Trust to be a valid first lien on the Property, free and clear of all
defects, exceptions and encumbrances except Permitted Liens. Agent shall also have received and
approved a copy of a current as-built survey of the Property certified to Agent and to the title
insurance company and any recorded subdivision plat of the Property.

     Section 6.10 Appraisal.

     Agent shall have received and approved an appraisal of the Property in all respects
satisfactory to Agent.

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     Section 6.11 Environmental Reports.

     Agent shall have received evidence satisfactory to it regarding the current and past
pollution control practices at the Property in connection with the discharge, emission,
handling, disposal or existence of materials and substances controlled by federal, state or
local laws and regulations.

ARTICLE VII

AFFIRMATIVE COVENANTS OF BORROWER

     So long as any of the Obligations shall be outstanding hereunder, Borrower agrees with
Agent and Lenders as follows:

     Section 7.1 Financial Statements.

     Borrower shall furnish or cause to be furnished to Agent and Lenders:

          (a) As soon as available, but in no event more than twenty-five (25) days after
the close of each month, Borrower’s monthly operating and census reports, certified by
Borrower.

          (b) As soon as available but in no event more than thirty (30) days after the
date of filing, the federal and state income tax returns for Borrower for the year in
question as
well as any requests for extensions filed in connection therewith.

          (c) As soon as available but in no event later than the dates indicated,
consolidated, draft, internally-prepared financial statements of Guarantor for the fiscal
quarter
ending June 30, 2007, no later than September 30, 2007 and for the fiscal quarter ending
September 30, 2007, no later than December 31, 2007 and for each fiscal quarter
thereafter,
within ninety (90) days thereafter and income and expense statements of Guarantor for such
periods certified as to accuracy to the best of his or her knowledge by the chief
financial officer
of Guarantor, subject to additional adjustments that may arise as a result of final
quarterly
closing procedures and adjustments as a result of the pending Ernst & Young audit.
Adjustments
arising from final quarterly closing procedures will be reported to Agent within ninety
(90) days
of the date on which such statements were delivered.

          (d) As soon as available, but not later than June 30, 2008. restated audited
statements for any periods through fiscal year 2007.

          (e) Such additional information, reports or statements as Agent may from
time to time reasonably request.

     Section 7.2 Taxes and Claims.

     Borrower shall pay and discharge all taxes, assessments and governmental charges or
levies imposed upon it or any of its income or properties prior to the date on which penalties
attach thereto, and all lawful claims which, if unpaid, might become a lien or charge upon any of
its properties; provided, however, Borrower shall not be required to pay any such tax,

24

 

assessment, charge, levy or claim, the payment of which is being contested in good faith and by
proper proceedings.

     Section 7.3 Legal Existence.

     Borrower shall maintain its existence as a limited liability company in good standing in the
Commonwealth of Virginia and in each jurisdiction where it is required to register or qualify to
do business.

     Section 7.4 Conduct of Business and Compliance with
Laws. 

     Borrower shall:

          (a) do or cause to be done all things necessary to obtain, enter into, preserve
and to keep in full force and effect its material rights and any trade names, patents,
trademarks
and Licenses, Participation Agreements, and Operating Agreements and Management Contracts
which are necessary for the operation of the Facility as an adult assisted living facility
as
contemplated by Borrower and (b) comply with all applicable Laws, including, without
limitation, regulations issued under the Omnibus Budget Reconciliation Act of 1987 (OBRA’87)
(Pub.L.No. 100-203), as amended, and observe the valid requirements of Governmental
Authorities, and perform the terms of all Participation Agreements to which it is a party,
the non-
compliance with or the non-observance of which might materially interfere with the
performance
of its Obligations or the proper or prudent conduct of its business or the Property.

          (b) at such time as required by the District of Columbia, obtain and maintain
in full force and effect all Licenses necessary to the acquisition and/or ownership and/or
operation of the Facility including, without limitation, Licenses and other approvals
related to the
storage, dispensation, use, prescription and disposal of drugs, medications and other
“controlled
substances” and, to the extent offered by Borrower, the maintenance of cafeteria and other
food
and beverage facilities or services;

          (c) administer, maintain and operate (or will cause to be administered,
maintained and operated) the Facility as a revenue-producing assisted living facility;

          (d) to the extent Borrower participates in any such programs, maintain and
operate the Facility to meet the standards and requirements and to provide healthcare of
such
quality and in such manner as would enable Borrower to participate in, and provide services
in
connection with, recognized medical and healthcare insurance programs;

          (e) at such time as required by the District of Columbia, obtain, maintain and
comply with all conditions for the continuance of, all Licenses, including without
limitation,
Licenses which may at any time be required by the District of Columbia or other appropriate
governmental entity, necessary or desirable for the operation of the Facility as an adult
assisted
living facility; and

          (f) to the extent Borrower presently participates or in the future will
participate in such programs, obtain, maintain and comply with all conditions for the
continuance
of certification from each applicable Governmental Authority that Borrower meet all conditions
for participation in the Medicare and Medicaid programs.

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     Section 7.5 Use of Proceeds.

     Borrower shall use the proceeds of the Loan for the purpose or purposes set forth in Recital
A above and Section 2.1 (a) (The Term Loan) and, without the prior written consent of Lenders,
for no other purpose or purposes.

     Section 7.6 Insurance.

     Borrower shall maintain in full force and effect at all times during the term of the Loan,
such policies of insurance as may be required by the terms of the Financing Documents from a
company or companies, and in form and amounts satisfactory to Agent including, by way of example
and not by way of limitation, at least the following:

          (a) During any period of construction in or on the Property, “builder’s risk”
insurance, including vandalism and malicious mischief and collapse endorsements in amounts
not less than the replacement cost of the Improvements being constructed or of the Property
and
naming Agent as a loss payee in the mortgagee clause thereof;

          (b) Casualty or physical damage insurance coverage for the Property
affording protection against loss or damage by fire or other hazards covered by the standard
all-risk fire and hazard insurance policy with lender’s loss payable endorsement and such other
risks
as shall be customarily covered with respect to projects similar in construction, location
and use
as the Property, or as Agent may from time to time otherwise require in amounts not less
than the
greater of the full insurable value of the Improvements (as defined in the Deed of Trust) or
the
aggregate principal amount of the Obligations; no policy of insurance shall be written such
that
the proceeds thereof will produce less than the minimum coverage required by this Section by
reason of co-insurance provisions or otherwise; the term “full insurable value” means the
actual
replacement cost of the Property (as defined in the Deed of Trust) (excluding foundation and
excavation costs and costs of underground flues, pipes, drains and other uninsurable items);

          (c) General public liability insurance in amounts usually carried by similar
operations against claims for bodily injury or death and property damage insurance for
claims for
damage to property (including loss of use) occurring upon, in or about the Property, with
such
insurance to afford protection to the limit of not less than $5,000,000 for the aggregate of
all
occurrences during any given annual policy period;

          (d) Workers’ compensation insurance in accordance with the requirements of
applicable law or regulation;

          (e) Business interruption insurance with respect to the Facility in an amount
equal to at least twelve (12) months’ debt service on the Loan; and

          (f) To the extent that healthcare professionals are employed by Borrower,
medical liability, malpractice and other healthcare professional liability insurance
protecting
Borrower and their employees against claims arising from the professional services performed
by
Borrower and their employees with limits of (i) not less than One
Million Dollars
($1,000,000.00) with respect to injury or death for each person or occurrence, and (ii) not
less
than Three Million Dollars ($3,000,000.00) in the aggregate for claims made for injury or
death in any one year, and an umbrella policy insuring against such liability in an aggregate
amount of

26

 

Five Million Dollars ($5,000,000). In addition, Borrower shall ensure that all healthcare
providers with whom Borrower contract to provide services at the Facility are insured against
claims arising from such services with limits as set forth in clauses (i) and (ii) above.

     Borrower shall cause SSLMI to file with Agent, upon its request, a detailed list of the
insurance then in effect and stating the names of the insurance companies, the amounts and
rates of the insurance, dates of the expiration thereof and the properties and risks covered
thereby. Each policy of insurance shall (A) be issued by one or more recognized, financially
sound and responsible insurance companies approved by Agent and which are qualified or
authorized by the laws of the District of Columbia to assume the risk covered by such policy,
(B) with respect to the insurance described under the preceding subsections (a), (b) and (e)
have attached thereto standard noncontributing, non-reporting mortgagee clauses in favor of
and entitling Agent without contribution to collect any and all proceeds payable under such
insurance, (C) provide that such policy shall not be canceled or modified without at least
thirty (30) days prior written notice to the named insured, who will in turn within five (5)
days notify Agent, and (D) provide that any loss otherwise payable thereunder shall be payable
notwithstanding any act or negligence of Borrower which might, absent such agreement, result
in a forfeiture of all or a part of such insurance payment. Unless an escrow account has been
established for insurance premiums pursuant to the provisions of the Deed of Trust, Borrower
shall promptly pay all premiums when due on such insurance and, not less than ten (10) days
prior to the expiration date of each such policy, Borrower will deliver to Agent evidence of
payment satisfactory to Agent. Borrower will immediately give Agent notice of any cancellation
of, or change in, any insurance policy. Agent shall not, because of accepting, rejecting,
approving or obtaining insurance, incur any liability for (i) the existence, nonexistence,
form or legal sufficiency thereof, (ii) the solvency of any insurer, or (iii) the payment of
losses.

     Section 7.7 Flood Insurance.

     If required by applicable law or regulation, Borrower shall maintain and provide evidence
to Agent of a separate policy of flood insurance in the aggregate amount of the Loan or the
maximum limit of coverage available with respect to the Property, whichever is the lesser,
from a company or companies satisfactory to Agent and written in strict conformity with the
Flood Disaster Protection Act of 1973, as amended, and all applicable regulations
adopted pursuant thereto. In the event that flood insurance is not required by applicable law
or regulation to be provided in connection with the Loan or is not otherwise available with
respect to the Property, Borrower shall supply Agent with written evidence, in form and
substance satisfactory to Agent, to that effect. Lender acknowledges receipt of such written
evidence by Borrower. Any such policy shall provide that the policy may not be surrendered,
canceled or substantially modified (including, without limitation, cancellation for nonpayment
of premiums) without at least thirty (30) days’ prior written notice to the named insured, who
will in turn within five (5) days notify Agent.

     Section 7.8 Maintenance of Properties.

     Borrower shall keep its properties, whether owned in fee or otherwise, or leased,
including, without limitation, the Property, in good operating condition; make all proper repairs,
renewals, replacements, additions and improvements thereto needed to maintain such properties
in good operating condition; comply with the provisions of all leases to which it is a party or

27

 

under which it occupies property so as to prevent any loss or forfeiture thereof or thereunder;
and comply with all laws, rules, regulations and orders applicable to its properties or business
or any part thereof.

     Section 7.9 Maintenance of the Collateral.

     Borrower shall not permit anything to be done to the Collateral which may impair the value
thereof. Upon notice thereof, Agent or an agent designated by Agent, shall be permitted to enter
the premises of Borrower and examine, audit and inspect the Collateral at any reasonable time
and from time to time. Agent shall not have any duty to, and Borrower hereby releases Agent
from, all claims of loss or damage caused by the delay or failure to collect or enforce any of
the Accounts or Receivables or to preserve any rights against any other party with an interest
in the Collateral.

     Section 7.10 Other Liens, Security Interests, etc.

     Borrower shall keep the Collateral and the Property free from all liens, security interests
and claims of every kind and nature, other than Permitted Liens.

     Section 7.11 Defense of Title and Further Assurances.

     Borrower shall, at its expense, defend the title to the Collateral (or any part thereof),
and promptly upon request execute, acknowledge and deliver any financing statement, renewal,
affidavit, deed, assignment, continuation statement, security agreement, certificate or other
document Agent may reasonably require in order to perfect, preserve, maintain, protect, continue
and/or extend the lien or security interest granted to Agent under this Agreement and its
priority. Borrower shall pay to Agent, on demand all taxes, costs and expenses incurred by
Agent, in connection with the preparation, execution, recording and filing of any such document
or instrument.

     Section 7.12 Subsequent Opinion of Counsel as to Recording Requirements.

     Borrower shall provide to Agent a subsequent opinion of counsel as to the filing, recording
and other requirements with which Borrower has complied to maintain the lien and security
interest in favor of Agent in the Collateral in the event that Borrower shall transfer its
principal place of business or the office where it keeps its records pertaining to the Accounts
and Receivables.

     Section 7.13 Books and Records.

     Borrower shall (a) keep and maintain accurate books and records, (b) make entries on such
books and records in form reasonably satisfactory to Agent disclosing Agent’s assignment of, and
security interest in and lien on, the Collateral and all collections received by Borrower on its
Accounts, (c) furnish to Agent promptly upon request such information, reports, contracts,
invoices, lists of purchases of Inventory (showing names, addresses and amount owing) and other
data concerning Account Debtors and Borrower’s Accounts and Inventory and all contracts and
collection(s) relating thereto as Agent may from time to time specify, (d) unless Agent shall
otherwise consent in writing, keep and maintain all such books and records mentioned in (a) above
only at the addresses listed in EXHIBIT B, and (e) upon notice thereof, permit any person

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designated by Agent to enter the premises of Borrower and examine, audit and inspect the books and
records at any reasonable time and from time to time.

     Section 7.14 Collections.

     Until such time as Agent shall notify Borrower of the revocation of such privilege following
an Event of Default, Borrower shall (a) at its own expense have the privilege for the account of
and in trust for Agent of collecting its Accounts and receiving in respect thereto all items of
payment and shall otherwise completely service all of the Accounts including (i) the billing,
posting and maintaining of complete records applicable thereto, and (ii) the taking of such action
with respect to such Accounts as Agent may reasonably request or in the absence of such request, as
Borrower may deem advisable; and (b) in its discretion, grant, in the ordinary course of business,
to any Account Debtor, any rebate, refund or adjustment to which the Account Debtor may be lawfully
entitled, and may accept, in connection therewith, the return of goods, the sale or lease of which
shall have given rise to an Account. Agent may, at its option but solely in accordance with
applicable law, at any time or from time to time after the occurrence of an Event of Default
hereunder, revoke the collection privilege given to Borrower herein by either giving notice of its
assignment of, and lien on the Collateral, subject to the provisions of Section 4.1 (Collateral),
to the Account Debtors or giving notice of such revocation to Borrower.

     Section 7.15 Notice to Account Debtors and Escrow Account.

     In the event that (a) a Default or an Event of Default exists, or (b) demand has been made
for any or all of the Obligations, Borrower shall promptly upon the request of Agent in such form
and at such times as reasonably specified by Agent, give notice of Agent’s lien on the Accounts to
the Account Debtors requiring those Account Debtors which are permitted by applicable law to make
payments thereon directly to Agent.

     Section 7.16 Business Names.

     Borrower shall immediately notify Agent of any change in the name under which they conduct
their business.

     Section 7.17 ERISA.

     With respect to any pension plan which Borrower and/or any Commonly Controlled Entity
maintains or contributes to, either now or in the future, Borrower covenants that: (a) such
bonding as is required under ERISA §412 will be maintained; (b) as soon as practicable and in any
event within fifteen (15) days after Borrower or any Commonly Controlled Entity knows or has
reason to know that a “reportable event,” with respect to which notice has not been waived under
29 C.F.R. § 4043, has occurred or is likely to occur, Borrower will deliver to Agent a certificate
signed by its chief financial officer setting forth the details of such “reportable event”; (c)
neither Borrower nor any Commonly Controlled Entity will: (i) knowingly engage in or permit any
“prohibited transaction” (as defined in ERISA §406 or Code §4975) to occur; (ii) cause any
“accumulated funding deficiency” as defined in ERISA §302 and/or Code §412 if such deficiency
would materially adversely affect the ability of Borrower to pay the Obligations; (iii) terminate
any pension plan in a manner which could result in the imposition of a lien on the property of
Borrower pursuant to ERISA §4068 if such termination would materially adversely

29

 

affect the ability of Borrower to pay the Obligations; (iv) terminate or consent to the termination
of any multi-employer plan; (v) incur a complete or partial withdrawal with respect to any
multi-employer plan within the meaning of ERISA §§4203 and 4205; and (d) within fifteen (15) days
after notice is received by Borrower or any Commonly Controlled Entity that any multi-employer plan
has been or will be placed in “reorganization” within the meaning of ERISA §4241, Borrower will
notify Agent to that effect. Upon Agent’s request, Borrower will deliver to Agent a copy of the
most recent actuarial report, financial statements and annual report completed with respect to any
“defined benefit plan”, as defined in ERISA §3(35).

     Section 7.18 Change in Management.

     Borrower shall not change the Management Company for the Facility without the prior written
consent of Agent.

     Section 7.19 Management.

     Subject to the terms of that certain Management Fee Subordination Agreement by and among
Borrower, SSLMI and Agent of even date herewith, Borrower shall subordinate payment of any
management fees under, or in connection with, the Management Agreement (the “Management Fees”) to
payment of the Obligations, in accordance with the terms and conditions of one or more
subordination agreements in form and content acceptable to Agent in its reasonable discretion, and
(a) not amend, restate, supplement, terminate, cancel or otherwise modify any of the terms or
conditions of such Management Agreement, in any material respect, without the prior written
consent of Agent, and (b) following Borrower’s failure to make any payment due under the Loan
Documents, which failure continues for more than sixty (60) days or the occurrence of any event
which causes the District of Columbia to require the Facility to close or to cease operations as
an assisted living facility, terminate the Management Agreement upon receipt of notice from Agent
directing Borrower to terminate the Management Agreement after the occurrence of an Event of
Default, and, if requested to do so by Agent, enter into a management agreement for the management
of the Facility with an independent manager.

     Section 7.20 Fees and Expenses; Indemnity.

     Borrower shall pay all reasonable fees, charges, costs and expenses required to satisfy the
conditions of the Financing Documents. Borrower shall hold Agent and Lenders harmless and
indemnify Agent and Lenders against all claims of brokers and “finders” arising by reason of the
execution and delivery of the Financing Documents or the consummation of the transaction
contemplated hereby.

     Section 7.21 Surveys.

     Borrower shall furnish or cause SSLMI to furnish to Agent, within thirty (30) days of receipt
thereof, copies of any and all annual surveys or inspections performed by any Governmental
Authority or accreditation or certification organization with respect to the Facility.

     Section 7.22 Cost Reports.

     Borrower shall prepare and file or cause SSLMI to prepare and file all applicable cost
reports to all third-party payors, if any, to the extent required by any such third-party payor
and, within thirty (30) days thereafter, notify Agent of any settlement of any cost report
disclosed to

30

 

Agent as being open or unsettled as of the Closing Date to the extent any such cost report would
have a materially adverse effect on Borrower. Copies of any such cost reports shall be furnished
to Agent.

     Section 7.23 Notification of Certain Events, Events of Default and Adverse
Developments.

     Borrower shall promptly notify Agent upon obtaining knowledge of the occurrence of any of the
following:

               (a) any Event of Default under the Financing
Documents;

               (b) any event, development or circumstance whereby
the financial statements furnished under the Financing Documents fail in any
material respect to present fairly, the financial condition and operational
results
of Borrower;

               (c) any judicial, administrative or arbitral proceeding
commenced or pending against Borrower which, if adversely decided, could
cause a Material Adverse Change in Borrower;

               (d) (i) the revocation, suspension, probation, restriction,
limitation or refusal to renew, or the pending, revocation, suspension, probation,
restriction, limitation, or refusal to renew, of any License, or (ii)
the decertification, revocation, suspension, probation, restriction, limitation,
or refusal to renew, or the pending, decertification, revocation, suspension,
probation, restriction, limitation, or refusal to renew any participation or
eligibility in any third party payor program in which Borrower elects to
participate, including, without limitation, Medicare, Medicaid or
any accreditation of Borrower, or (iii) the issuance or pending issuance of any
License for a period of less than twelve (12) months, as a consequence of
sanctions imposed by any Governmental Authority, or (iv) the assessment or
pending assessment, of any civil or criminal penalties by any Government
Authority, any third party payor or any accreditation organization or Person,
which could materially adversely affect the financial condition or operations of
Borrower or an Affiliate (present or prospective) as determined by Agent, in its
sole but reasonable discretion;

               (e) any other development in the business or affairs of
Borrower results in a Material Adverse Change; and

               (f) any action, including, but not limited to, the filing
of any certificate of need application if required by law, the amendment of any
facility license or certification, or the issuance of any new license or
certification for the Facility, under which Borrower proposes (i) to develop a new facility or
service and/or (ii) eliminate, materially expand or materially reduce any
service;

31

 

in each case listed in clauses (a) through (f), inclusive, of this Section 7.23 describing in
detail satisfactory to Agent the nature thereof and, in the case, if any, of notification under
clause (a), the action Borrower proposes to take with respect thereto or a statement that Borrower
intends to take no action and an explanation of the reasons for such inaction. In addition,
Borrower will furnish to Agent immediately after receipt thereof copies of all administrative
notices material to Borrower’s business and operation of the Facility and all responses by or on
behalf of Borrower with respect to such administrative notices.

     Section 7.24 Compliance with Environmental Laws.

     If any Hazardous Materials are used, present or generated on the Property, Borrower shall
use, process, distribute, handle, maintain, treat, store, dispose of and transport such substance
in compliance with all applicable laws, including, but not limited to, those regulating PCBs,
underground storage tanks, radon and medical waste tracking, as well as any laws that are enacted
after the date of this Agreement.

     Section 7.25 Hazardous Materials; Contamination.

     Borrower shall (a) give notice to Agent within five (5) business days of Borrower acquiring
actual knowledge of the presence of any Hazardous Materials on the Property or of any Hazardous
Materials Contamination with a full description thereof, except for reasonable quantities of
necessary supplies for use by Borrower in the ordinary course of its current line of business and
stored, used and disposed of in accordance with applicable Laws; (b) promptly comply with any laws
requiring special handling, maintenance, servicing, removal, treatment or disposal of Hazardous
Materials or Hazardous Materials Contamination and provide Agent upon request with satisfactory
evidence of such compliance; (c) provide Agent, within thirty (30) days after a demand by Agent,
with a bond, letter of credit or similar financial assurance evidencing to Agent’s satisfaction
that funds are available to pay the cost of removing, treating, and disposing of such Hazardous
Materials or Hazardous Materials Contamination and discharging any lien which may be established
as a result thereof on any property owned, operated or controlled by Borrower or for which
Borrower is responsible; and (d) defend, indemnify and hold harmless Agent and each of its agents,
employees, trustees, successors and assigns from any and all claims which may now or in the future
(whether before or after the termination of this Agreement) be asserted as a result of the
presence of any Hazardous Materials on the Property.

     Section 7.26 Participation in Reimbursement Programs.

     In the event Borrower elects to participate in any or all plans and/or programs for third
party payment and/or reimbursement, and the revenues derived from a single plan or program exceed
ten percent (10%) of the gross revenues of the Facility, Borrower shall continue its participation
in any and all such plans and/or programs for third party payment and/or reimbursement from, and
claims against, private insurers or programs for payment and/or reimbursement from federal, state
and local governmental agencies and/or private or quasi-public insurers, including, without
limitation, Managed Care Plans, Medicaid and Medicare and the Veterans Administration (as
determined by Borrower in the good faith exercise of its prudent and commercially reasonable
business judgment). While participating in such plans, Borrower shall comply with any and all
rules, regulations, standards, procedures and decrees necessary to maintain Borrower’s
participation in any such third party payment or reimbursement program or plan.

32

 

     Section 7.27 Inspection and Other Reports and Notices.

     Borrower will or will promptly cause SSLMI to furnish to Agent copies of any and all annual
inspections performed by any Governmental Authority or accreditation or certification organization
with respect to the Facility. Borrower will also furnish to Agent copies of all reports or notices
from any Governmental Authority or other organization pertaining to the licensure of or
Participation Agreements or Operating Agreements for the Facility which (a) cite any deficiency,
(b) indicate that a penalty will be imposed unless a corrective action is taken, (c) impose a
penalty (including, but not limited to, a monetary penalty, a ban on admissions or a suspension of
a license) or (d) would be otherwise materially adverse to the business or operations of the
Facility, together with Borrower’s written response to any such report or notice.

     Section 7.28 Subordination of Distributions and Management Fees.

     Borrower shall subordinate, and cause the members of Borrower to subordinate:

          (a) any distributions of Borrower to principal and interest payments on the
Loan; and

          (b) the payment of management fees with respect to the Facility pursuant to
the terms of that certain Management Fee Subordination Agreement of even date herewith (as
the same may be modified from time to time) by and among Borrower, Agent and the
Management Company.

     Section 7.29 Debt Service Ratio.

     Commencing with the quarter ending December 31, 2007, Borrower shall maintain, tested as of
the end of each fiscal quarter during the term of the Loan, a Debt Service Ratio for the Facility
of not less than 1.20 to 1.0.

     Section 7.30 Occupancy Covenant.

     Borrower shall maintain at all times, tested as of the end of each fiscal quarter during the
term of the Loan, a minimum average daily occupancy of eighty-five percent (85%), measured on a
unit basis.

ARTICLE VIII

NEGATIVE COVENANTS OF BORROWER

     Until payment in full and the performance of all of the Obligations, without the prior
written consent of Agent and Lenders, Borrower will not directly or indirectly:

     Section 8.1 Borrowings.

     Other than Loan B, create, incur, assume or suffer to exist any liability for borrowed money
other than unsecured loans from Affiliates bearing interest at a rate no higher than that then
applicable to the Loan which are fully subordinated to the Loan under the terms of subordination
agreements acceptable to Agent. The proceeds of any loans obtained by Borrower from Affiliates
shall be used only to cover operating deficits, capital improvement or working

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capital for the Facility and may be repaid only if no Event of Default exists or would result from
such payment.

     Section 8.2 Merger or Acquisition.

     Enter into any merger or consolidation or amalgamation, windup or dissolve themselves (or
suffer any liquidation or dissolution) or acquire all or substantially all the assets of any
Person.

     Section 8.3 Deeds of Trust and Pledges.

     Other than as security for Loan B, create, incur, assume or suffer to exist any deed of trust,
mortgage, pledge, lien or other encumbrance of any kind upon, or any security interest in, any of
its property or assets, whether now owned or hereafter acquired. Agent agrees to review requests
for such encumbrances but shall not be bound to formally consider them.

     Section 8.4 Sale or Transfer of Assets.

     Other than cash distributions to its members, enter into any arrangement whereby Borrower
shall sell, lease, transfer, or otherwise dispose of more than $25,000 worth of its assets in any
one year or $100,000 in the aggregate during the term of the Loan, unless replaced with assets of
equivalent or greater value.

     Section 8.5 Advances and Loans.

     Make loans or advances to any Person, including, without limitation, partners and employees
of Borrower. Borrower shall disclose in writing to Agent any advances of loans described in this
section which are outstanding as of the date hereof.

     Section 8.6 Contingent Liabilities.

     Assume, guarantee, endorse, contingently agree to purchase or otherwise become liable upon
the obligation of any Person, except by the endorsement of negotiable instruments for deposit and
collection or similar transactions in the ordinary course of business and contingent obligations
in the aggregate not exceeding $25,000 at any time.

     Section 8.7 Licenses.

     Allow any Licenses, permit, right, franchise or privilege necessary for the ownership or
operation of the Facility for the purposes for which the Facility is intended to be used to lapse,
be suspended, be revoked, be denied renewal, be forfeited or be placed on probation.

     Section 8.8 ERISA Compliance.

     (a) Restate or amend any pension plan established and maintained by Borrower or any Commonly
Controlled Entity and subject to the requirements of ERISA, in a manner designed to disqualify
such plan and its related trusts under the applicable requirements of the Code; (b) permit any
officers of Borrower or any Commonly Controlled Entity to materially adversely affect the
qualified tax-exempt status of any pension plan or related trusts of Borrower or any Commonly
Controlled Entity under the Code; (c) knowingly engage in or permit any Commonly Controlled Entity
to engage in any “prohibited transaction” (as defined in ERISA §406 or Code

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§4975) with respect to any pension plan established and maintained by Borrower or any Commonly
Controlled Entity; (d) incur or permit any Commonly Controlled Entity to incur any “accumulated
funding deficiency” (as defined in ERISA §302 or Code §412), whether or not waived, in connection
with any pension plan, if such deficiency would materially adversely affect the ability of Borrower
to pay the Obligations; (e) take or permit any Commonly Controlled Entity to take any action or
fail to take any action which causes a termination of any Plan in a manner which could result in
the imposition of a lien on the property of Borrower or any Commonly Controlled Entity pursuant to
Section 4068 of ERISA if such termination would materially adversely affect the ability of Borrower
to pay the Obligations; (f) fail to notify Agent that notice has been received of a “termination”
(as defined in ERISA) of any Multi-employer Plan to which Borrower or any Commonly Controlled
Entity has an obligation to contribute; (g) incur or permit any Commonly Controlled Entity to incur
a “complete withdrawal” or “partial withdrawal” (as defined in ERISA) from any Multi-employer Plan
to which Borrower or any Commonly Controlled Entity has an obligation to contribute; or (h) fail to
notify Agent that notice has been received from the administrator of any Multi-employer Plan to
which Borrower or any Commonly Controlled Entity has an obligation to contribute that any such Plan
will be placed in “reorganization” (as defined in ERISA).

     Section 8.9 Transfer of Collateral.

     Transfer, or permit the transfer, to another location of any of the Collateral or the books
and records related to any of the Collateral; provided, however, that Borrower may transfer the
Collateral or the books and records related thereto to another location if Borrower shall have
provided to Agent prior to such transfer an opinion of counsel addressed to Agent to the effect
that Agent’s perfected security interest shall not be affected by such move or if it shall be
affected, setting forth the steps necessary to continue Agent’s perfected security interest
together with the commencement of such steps by Borrower at its expense.

     Section 8.10 Sale of Accounts or Receivables.

     Sell, discount, transfer, assign or otherwise dispose of any of their Accounts or
Receivables, such as accounts receivable, notes receivable, installment or conditional sales
agreements or any other rights to receive income, revenues or moneys, however evidenced.

     Section 8.11 Amendments; Terminations.

     Amend or terminate or agree to amend or terminate any License, the Management Agreement or,
except in the ordinary course of business or as otherwise agreed to herein, any participation
agreement, or any other Management Contracts and Operating Agreements, or consent to or waive any
material provisions thereof.

     Section 8.12 Prohibition on Hazardous Materials.

     Place, manufacture or store or permit to be placed, manufactured or stored, any Hazardous
Materials on the Property, except for reasonable quantities of necessary supplies for use by
Borrower in the ordinary course of its current line of business and stored, used and disposed of
in accordance with applicable Laws.

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     Section 8.13 Subsidiaries.

     Create or otherwise acquire any subsidiaries if such creation or acquisition would result in a
Material Adverse Change.

     Section 8.14 Single Purpose Entity.

     Engage in any activity which would cause Borrower to be other than a single purpose entity
for the purpose of the Loan.

     Section 8.15 Distributions.

     Pay distributions to members of Borrower.

ARTICLE IX

EVENTS OF DEFAULT

     The occurrence of one or more of the following events shall be “Events of Default” under this
Agreement, and the terms “Event of Default” shall mean, whenever they are used in this Agreement,
any one or more of the following events:

     Section 9.1 Failure to Pay and/or Perform the Obligations.

     Borrower shall fail to pay any of the Obligations including but not limited to the Expense
Payments and Liquidation Costs when due and payable. Agent shall endeavor to give notice of such
failure to Borrower; however, failure to give such notice shall not impair the rights of Lenders
hereunder.

     Section 9.2 Breach of Representations and Warranties.

     Any material representation or warranty made in this Agreement or in any report, certificate,
opinion, financial statement or other instrument furnished in connection with the Obligations or
with the execution and delivery of any of the Financing Documents, shall prove to have been false
or misleading when made in any material respect.

     Section 9.3 Failure to Comply with Certain Covenants.

     Borrower shall fail to perform, observe or comply with any covenant, condition or agreement
contained in Sections 7.1, 7.6, 7.7, 7.10, 7.15, 7.18, 7.19, 7.21, 7.22, 7.23, 7.25, 7.26, 7.27,
7.28, 7.29, 7.30 and all Article VIII of this Agreement.

     Section 9.4 Failure to Comply with Other Covenants.

     Borrower shall fail to perform, observe or comply with any other covenant, condition or
agreement contained in this Agreement, except those expressly described in other sections of this
Article IX, which failure continues for thirty (30) days after written notice thereof.

     Section 9.5 Default Under Other Financing Documents.

     A Default shall occur under any of the other Financing Documents, and such Default is not
cured within any applicable grace period provided therein.

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     Section 9.6 Receiver; Bankruptcy.

     An Act of Bankruptcy occurs with respect to Borrower or Borrower becomes generally unable to
pay its debts as they become due; provided, however, if a proceeding with respect to an Act of
Bankruptcy is filed or commenced against Borrower, the same shall not constitute an Event of
Default if such proceeding is dismissed within ninety (90) days from the date of such Act of
Bankruptcy.

     Section 9.7 Judgment.

     Any judgment against Borrower of $25,000 or more or any attachment or other levy against the
property of Borrower remains unpaid, unstayed on appeal, undischarged, unbonded or undismissed for
a period of thirty (30) days.

     Section 9.8 Execution; Attachment.

     Any execution or attachment shall be levied against the Collateral, or any part thereof, and
such execution or attachment shall not be set aside, discharged or stayed within thirty (30) days
after the same shall have been levied.

     Section 9.9 Default Under Other Borrowings.

     Default shall be made by Borrower with respect to any evidence of indebtedness or liability
for borrowed money (other than the Loan) if the effect of such default is to accelerate the
maturity of such evidence of indebtedness or liability or to permit the holder or obligee thereof
to cause any indebtedness to become due prior to its stated maturity; provided, however, the Event
of Default in Section 9.16 (Change of Control of Guarantor) of the Loan and Security Agreement
executed in connection with Loan B shall not constitute an Event of Default under this Agreement.

     Section 9.10 Material Adverse Change.

     If Agent in its reasonable discretion determines that a Material Adverse Change has occurred
in the financial condition of Borrower.

     Section 9.11 Impairment of Position.

     If Agent in its reasonable discretion determines that an event has occurred which impairs the
prospect of payment of the Obligations and/or the value of the Collateral.

     Section 9.12 Change in Status or Ownership.

     Borrower is dissolved, merged, consolidated or reorganized, or any change occurs in the
ownership or control of Borrower, without the prior written consent of Agent.

     Section 9.13 Zoning.

     Any change in any zoning ordinance or any other public restriction is enacted, limiting or
defining the uses which may be made of the Property or a part thereof, such that the current use
of the Property, as specified herein, would be in violation of such restriction or zoning change,
and not permitted as a prior non-conforming use.

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     Section 9.14 Change in Management.

     The Management Agreement is terminated without the prior written consent of Agent.

     Section 9.15 Licenses.

     The involuntary, imposed or required revocation, suspension, probation, restriction,
limitation or refusal to renew, or the pending revocation, suspension, probation, restriction,
limitation, of, or refusal to renew, of any License; other than in the ordinary course of business
or to the extent that Borrower deems such action to be, in the exercise of prudent business
judgment, in the best interest of Borrower; the decertification, revocation, suspension, probation,
restriction, limitation, or refusal to renew, or the pending, decertification, revocation,
suspension, probation, restriction, limitation, or refusal to renew any participation or
eligibility in any third party payor program in which Borrower elects to participate, including,
without limitation, the Medicaid or Medicare programs; or the issuance or pending issuance of any
License for a period of less than twelve (12) months as a consequence of any sanctions imposed by
any Governmental Authority; or the assessment or pending assessment, of any civil or criminal
penalties against Borrower by any Governmental Authority, any third party payor or any
accreditation organization or person.

     Section 9.16 Compliance with Law.

     Borrower fails to comply with any material requirement of any Governmental Authority having
jurisdiction within the time required by such Governmental Authority; or any proceeding is
commenced or action taken against Borrower to enforce any remedy for a material violation of any
requirement of a Governmental Authority or any restrictive covenant affecting the Property or any
part thereof, an adverse decision as to which would have a material adverse effect on Borrower.

ARTICLE X

RIGHTS AND REMEDIES UPON DEFAULT

     Upon the occurrence of any Event of Default, Agent shall, at the direction of the Requisite
Lenders, at any time thereafter exercise any one or more of the following rights, powers or
remedies.

     Section 10.1 Acceleration.

     Agent may declare any or all of the Obligations to be immediately due and payable,
notwithstanding anything contained in this Agreement or in any of the other Financing Documents to
the contrary, without presentment, demand, protest, notice of protest or of dishonor, or other
notice of any kind, all of which Borrower hereby waives.

     Section 10.2 Uniform Commercial Code.

     Agent shall have all of the rights and remedies of a secured party under the applicable
Uniform Commercial Code and other applicable Laws. Upon demand by Agent, Borrower shall assemble
the Collateral and make it available to Agent, at a place designated by Agent. Agent or its agents
may without notice from time to time enter upon Borrower’s premises to take

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possession of the Collateral, to remove it, to render it unusable, to process it or otherwise
prepare it for sale, or to sell or otherwise dispose of it.

     Any written notice of the sale, disposition or other intended action by Agent with respect to
the Collateral which is sent by regular mail, postage prepaid, to Borrower at the address set
forth in Section 12.1 (Notices), or such other address of Borrower which may from time to time be
shown on Agent’s records, at least ten (10) days prior to such sale, disposition or other action,
shall constitute commercially reasonable notice to Borrower. Agent may alternatively or
additionally give such notice in any other commercially reasonable manner. Nothing in this
Agreement shall require Agent to give any notice not required by applicable Laws.

     If any consent, approval, or authorization of any state, municipal or other Governmental
Authority or of any other Person or of any Person having any interest therein, should be necessary
to effectuate any sale or other disposition of the Collateral, Borrower agrees to execute all such
applications and other instruments, and to take all other action, as may be required in connection
with securing any such consent, approval or authorization.

     Borrower recognizes that Agent may be unable to effect a public sale of all or a part of the
Collateral consisting of Investment Property by reason of certain prohibitions contained in the
Securities Act of 1933, as amended, and other applicable Federal and state Laws. Agent may,
therefore, in its discretion, take such steps as it may deem appropriate to comply with such Laws
and may, for example, at any sale of the Collateral consisting of securities restrict the
prospective bidders or purchasers as to their number, nature of business and investment intention,
including, without limitation, a requirement that the Persons making such purchases represent and
agree to the satisfaction of Agent that they are purchasing such securities for their account, for
investment, and not with a view to the distribution or resale of any thereof. Borrower covenants
and agrees to do or cause to be done promptly all such acts and things as Agent may request from
time to time and as may be necessary to offer and/or sell the securities or any part thereof in a
manner which is valid and binding and in conformance with all applicable Laws. Upon any such sale
or disposition, Agent shall have the right to deliver, assign and transfer to the purchaser thereof
the Collateral consisting of securities so sold.

     Section 10.3 Specific Rights With Regard to Collateral.

     In addition to all other rights and remedies provided hereunder or as shall exist at law or
in equity from time to time, Agent may (but shall be under no obligation to), without notice to
Borrower, and Borrower hereby irrevocably appoints Agent as its attorney-in-fact, with power of
substitution, in the name of Agent and/or any or all of Lenders and/or in the name of Borrower or
otherwise, for the use and benefit of Agent and Lenders, but at the cost and expense of Borrower
and without notice to Borrower:

               (a) assign any and all Operating Agreements and Management Contracts to any
Person designated by Agent, and/or exercise all rights and privileges of Borrower
under such contracts and agreements for the purpose of realizing on the Collateral
and to the extent and for the time required to realize the value of the Collateral;

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               (b) to the extent permitted by applicable law, assume
such management, operation and control of the Property to the extent and for the
time necessary to realize the value of the Collateral;

               (c) cause Borrower to engage, contract with, and/or
hire qualified service, billing, collection and other such agents, organizations and
companies acceptable to Agent to collect and/or realize upon any or all of the
Collateral and to remit the proceeds to Agent;

               (d) subject to applicable state and federal laws
pertaining to resident confidentiality, request any Account Debtor obligated on
any of the Accounts to make payments thereon directly to Agent to the extent
permitted by applicable law, with Agent taking control of the cash and non-cash
proceeds thereof and/or direct Borrower to (and Borrower shall) turn over to
Agent immediately following receipt all payments with respect to the Collateral in
the form received (with the addition of all necessary endorsements) and not to
deposit, negotiate or otherwise deal with those payments;

               (e) compromise, extend or renew any of the Collateral
or deal with the same as it may deem advisable;

               (f) make exchanges, substitutions or surrenders of all
or any part of the Collateral;

               (g) remove from Borrower’s places of business all
books, records, ledger sheets, correspondence, invoices and documents, relating to
or evidencing any of the Collateral or without cost or expense to Agent, make
such use of Borrower’s place of business as may be reasonably necessary to
administer, control and collect the Collateral;

               (h) demand, collect, receipt for and give renewals, extensions, discharges and releases of
any of the Collateral;

               (i) institute and prosecute legal and equitable proceedings to enforce collection of, or
realize upon, any of the Collateral;

               (j) settle, renew, extend, compromise, compound, exchange or adjust claims in respect of any
of the Collateral or any legal proceedings brought in respect thereof;

               (k) endorse the name of Borrower upon any items of payment relating to the Collateral or on
any Proof of Claim in Bankruptcy against an Account Debtor; and

               (l) notify the Post Office authorities to change the address for the delivery of mail to
Borrower to such address or Post Office Box as Agent may designate and receive and open all mail
addressed to Borrower.

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     In addition, Borrower shall, following an Event of Default which remains uncured beyond any
applicable grace period, promptly, upon request, execute and deliver to Agent written assignments,
to the extent permitted by applicable law, in form and content acceptable to Agent, of specific
Accounts or groups of Accounts; provided, however, that the lien and/or security interest granted
to Agent under this Agreement shall not be limited in any way to or by the inclusion or exclusion
of Accounts within such assignments. Such Accounts shall secure payment of the Obligations and are
not sold to Agent whether or not any assignment thereof, which is separate from this Agreement, is
in form absolute.

     Without limiting Agent’s other rights and remedies under the Loan Documents, following
Borrower’s failure to make any payment due under the Loan Documents, which failure continues for
more than sixty (60) days or the occurrence of any event which causes the District of Columbia to
require the Facility to close or to cease operations as an assisted living facility, Agent may
also direct Borrower to appoint a manager for the Facility and enter into a management agreement
with a management company approved by Agent, the terms of which agreement shall be approved by
Agent.

     Section 10.4 Application of Proceeds.

     Any proceeds of sale or other disposition of the Collateral will be applied by Agent to the
payment first of any and all Agent’s Obligations, then to any and all Enforcement Costs, and any
balance of such proceeds will be remitted to Lenders in like currency and funds received ratably
in accordance with their respective Term Loan Pro Rata Shares of such balance. Each Lender shall
apply any such proceeds received from Agent to its Obligations in such order and manner as such
Lender shall determine. If the sale or other disposition of the Collateral fails to fully satisfy
the Obligations, Borrower shall remain liable to Agent and Lenders for any deficiency.

     Section 10.5 Performance by Agent.

     Agent without notice to or demand upon Borrower and without waiving or releasing any of the
Obligations or any Default or Event of Default, may (but shall be under no obligation to) at any
time thereafter make such payment or perform such act for the account and at the expense of
Borrower, and may enter upon the premises of Borrower for that purpose and take all such action
thereon as Agent may consider necessary or appropriate for such purpose and Borrower hereby
irrevocably appoints Agent as its
attorney-in-fact

to do so, with power of substitution, in the name of Agent, in the name of any or all of
Lenders, or in the name of Borrower or otherwise, for the use and benefit of Agent, but at the
cost and expense of Borrower and without notice to Borrower. All sums so paid or advanced by Agent
together with interest thereon from the date of payment, advance or incurring until paid in full
at the Post-Default Rate and all costs and expenses, shall be deemed part of the Enforcement
Costs, shall be paid by Borrower to Agent on demand, and shall constitute and become a part of
Agent’s Obligations.

     Section 10.6 Other Remedies.

     Agent may from time to time proceed to protect or enforce the rights of Agent and/or any of
Lenders by an action or actions at law or in equity or by any other appropriate proceeding,
whether for the specific performance of any of the covenants contained in this Agreement or in any
of the other Financing Documents, or for an injunction against the violation of any of the terms
of this Agreement or any of the other Financing Documents, or in aid of the exercise or

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execution of any right, remedy or power granted in this Agreement, the Financing Documents, and/or
applicable Laws. Agent and each of Lenders is authorized to offset and apply to all or any part of
the Obligations all moneys, credits and other property of any nature whatsoever of Borrower now or
at any time hereafter in the possession of, in transit to or from, under the control or custody of,
or on deposit with, Agent, any of Lenders or any Affiliate of Agent or any of Lenders.

     Section 10.7 Receiver or Other Court Order.

     Following an uncured Event of Default, as a matter of right, following ten (10) days notice
and without regard to the adequacy of the security, and upon application to a court of competent
jurisdiction, Agent shall be entitled to the immediate appointment of a receiver for all or any
part of the Collateral, and of the payments and proceeds thereof and therefrom, whether such
receivership be incidental to a proposed sale of the Collateral or otherwise, and Borrower hereby
consents to the appointment of such a receiver and to an order of court directing that payments,
including Medicare and Medicaid payments, be made directly to the receiver. Borrower will pay to
Agent, upon demand, all expenses, including reasonable receiver’s fees, reasonable attorney’s
fees, costs and agents compensation, advanced by Borrower and incurred pursuant to the provisions
contained in this Section.

ARTICLE XI

AGENT

     Section 11.1 Appointment.

     Each Lender hereby designates and appoints Chevy Chase as its agent under this Agreement and
the Financing Documents, and each Lender hereby irrevocably authorizes Agent to take such action
or to refrain from taking such action on its behalf under the provisions of this Agreement and the
Financing Documents and to exercise such powers as are set forth herein or therein, together with
such other powers as are reasonably incidental thereto. Agent agrees to act as such on the express
conditions contained in this ARTICLE XI. The provisions of this ARTICLE XI are solely for the
benefit of Agent and Lenders and neither Borrower nor any Person shall have any rights as a third
party beneficiary of any of the provisions hereof. In performing its functions and duties under
this Agreement, Agent shall act solely as an administrative representative of Lenders and does not
assume and shall not be deemed to have assumed any obligation toward or relationship of agency or
trust with or for Lenders, Borrower or any Person. Agent may perform any of its duties hereunder,
or under the Financing Documents, by or through its agents or employees.

     Section 11.2 Nature of
Duties.

          11.2.1 In General

          Agent shall have no duties, obligations or responsibilities except those expressly set forth
in this Agreement or in the Financing Documents. The duties of Agent shall be mechanical and
administrative in nature. Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender. Each Lender shall make its own independent investigation of
the financial condition and affairs of Borrower in connection with the extension of credit
hereunder and shall make its own appraisal of the credit worthiness of Borrower, and

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Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide
any Lender with any credit or other information with respect thereto, whether coming into its
possession before the Closing Date or at any time or times thereafter. If Agent seeks the consent
or approval of any of Lenders to the taking or refraining from taking of any action hereunder, then
Agent shall send notice thereof to each Lender. Agent shall promptly notify each Lender any time
that the applicable percentage of Lenders has instructed Agent to act or refrain from acting
pursuant hereto.

          11.2.2 Express Authorization

          Agent is hereby expressly and irrevocably authorized by each of Lenders, as agent on behalf of
itself and the other Lenders:

               (a) to receive on behalf of each of Lenders any
payment or collection on account of the Obligations and to distribute to each
Lender its Term Loan Pro Rata Share of all such payments and collections so
received as provided in this Agreement;

               (b) to receive all documents and items to be furnished
to Lenders under the Financing Documents (nothing contained herein shall relieve
Borrower of any obligation to deliver any item directly to Lenders to the extent
expressly required by the provisions of this Agreement);

               (c) to act or refrain from acting in this Agreement and
in the other Financing Documents with respect to those matters so designated for
Agent;

               (d) to act as nominee for and on behalf of Lenders in
and under this Agreement and the other Financing Documents;

               (e) to arrange for the means whereby the funds of
Lenders are to be made available to Borrower;

               (f) to distribute promptly to Lenders, if required by the
terms of this Agreement, all written information, requests, notices, payments,
prepayments, documents and other items received from Borrower or other Person;

               (g) to amend, modify, or waive any provisions of this
Agreement or the other Financing Documents on behalf of Lenders subject to the
requirement that certain of Lenders’ consent be obtained in certain instances as
provided in Section 12.2.2 (Circumstances Where Consent of all of Lenders is
Required);

               (h) to deliver to Borrower and other Persons, all requests, demands, approvals,
notices, and consents received from any of Lenders;

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               (i) to exercise on behalf of each Lender all rights and remedies of
Lenders upon the occurrence of any Event of Default and/or Default specified
in this Agreement and/or in any of the other Financing Documents or
applicable Laws;

               (j) to execute any of the Security Documents and any other documents on
behalf of Lenders as the secured party for the benefit of
Agent and Lenders; and

               (k) to take such other actions as may be requested by the Requisite
Lenders.

     Section 11.3 Rights, Exculpation, Etc.

     Neither Agent nor any of its officers, directors, employees or agents shall be liable
to any Lender for any action taken or omitted by them hereunder or under any of the
Financing Documents, or in connection herewith or therewith, except that Agent shall be
obligated on the terms set forth herein for performance of its express obligations
hereunder, and except that Agent shall be liable with respect to its own gross negligence or
willful misconduct. Agent shall not be liable for any apportionment or distribution of
payments made by it in good faith and if any such apportionment or distribution is
subsequently determined to have been made in error the sole recourse of any Lender to whom
payment was due but not made, shall be to recover from the other Lenders any payment in
excess of the amount to which they are determined to be entitled (and such other Lenders
hereby agree to return to such Lender any such erroneous payments received by them). Agent
shall not be responsible to any Lender for any recitals, statements, representations or
warranties herein or for the execution, effectiveness, genuineness, validity,
enforceability, collectible, or sufficiency of this Agreement or any of the Financing
Documents or the transactions contemplated thereby, or for the financial condition of any
Person. Agent shall not be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this Agreement or any of the
Financing Documents or the financial condition of any Person, or the existence or possible
existence of any Default or Event of Default. Agent may at any time request instructions
from Lenders with respect to any actions or approvals which by the terms of this Agreement
or of any of the Financing Documents Agent is permitted or required to take or to grant, and
Agent shall be absolutely entitled to refrain from taking any action or to withhold any
approval and shall not be under any liability whatsoever to any Person for refraining from
any action or withholding any approval under any of the Financing Documents until it shall
have received such instructions from the applicable percentage of Lenders. Without limiting
the foregoing, no Lender shall have any right of action whatsoever against Agent as a result
of Agent acting or refraining from acting under this Agreement or any of the other Financing
Documents in accordance with the instructions of the applicable percentage of Lenders and
notwithstanding the instructions of Lenders, Agent shall have no obligation to take any
action if it, in good faith believes that such action exposes Agent to any liability.

     Section 11.4 Reliance.

     Agent shall be entitled to rely upon any written notices, statements, certificates,
orders or other documents or any telephone message or other communication (including any
writing, telex,

44

 

telecopy or telegram) believed by it in good faith to be genuine and correct and to have been
signed, sent or made by the proper Person, and with respect to all matters pertaining to this
Agreement or any of the Financing Documents and its duties hereunder or thereunder, upon advice of
counsel selected by it. Agent may deem and treat the original Lenders as the owners of the
respective Notes for all purposes until receipt by Agent of a written notice of assignment,
negotiation or transfer of any interest therein by Lenders in accordance with the terms of this
Agreement. Any interest, authority or consent of any holder of any of the Notes shall be
conclusive and binding on any subsequent holder, transferee, or assignee of such Notes. Agent
shall be entitled to rely upon the advice of legal counsel, independent accountants, and other
experts selected by Agent in its sole discretion.

     Section 11.5 Indemnification.

     Each Lender, severally, agrees to reimburse and indemnify Agent for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses,
advances or disbursements including, without limitation, Enforcement Costs, of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against Agent in any way relating to
or arising out of this Agreement or any of the Financing Documents or any action taken or omitted
by Agent under this Agreement for any of the Financing Documents, in proportion to each Lender’s
Term Loan Pro Rata Share, all of the foregoing as they may arise, be asserted or be imposed from
time to time; provided, however, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses,
advances or disbursements resulting from Agent’s gross negligence or willful misconduct. The
obligations of Lenders under this Section 11.5 shall survive the payment in full of the
Obligations and the termination of this Agreement. Notwithstanding the foregoing, if Agent, after
having received any such reimbursement from any or all of Lenders, shall later recover, from a
source other than a Lender, all or any portion of the amount reimbursed, Agent shall share such
recovery with the reimbursing Lenders in proportion to their contribution to such reimbursement.

     Section 11.6 Chevy Chase Individually.

     With respect to its Commitments and the Loans made by it, and the Note issued to it, Chevy
Chase shall have and may exercise the same rights and powers hereunder and is subject to the same
obligations and liabilities as and to the extent set forth herein for any other Lender. The terms
“Lenders” or “Requisite Lenders” or any similar terms shall, unless the context clearly otherwise
indicates, include Chevy Chase in its individual capacity as a Lender or one of the Requisite
Lenders. Chevy Chase and its Affiliates may lend money to, accept deposits from and generally
engage in any kind of banking, trust or other business with Borrower, any Affiliate of Borrower, or
any other Person or any of their officers, directors and employees as if Chevy Chase were not
acting as Agent pursuant hereto and Agent may accept fees and other consideration from Borrower,
any Affiliate of Borrower or any of their officers, directors and employees for services in
connection with this Agreement or otherwise without having to account for or share the same with
Lenders.

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     Section 11.7 Successor Agent.

          11.7.1 Resignation.

          Agent may resign from the performance of all its functions and duties
hereunder at any time by giving at least thirty (30) Business Days’ prior written notice to
Borrower and Lenders. Such resignation shall take effect upon the acceptance by a successor
Agent of appointment pursuant to Section 11.7.2 (Appointment of Successor) or as otherwise
provided below.

          11.7.2 Appointment of Successor.

          Upon any such notice of resignation pursuant to Section 11.7.1 (Resignation), the Requisite
Lenders shall appoint a successor to Agent. If a successor to Agent shall not have been so
appointed within said thirty (30) Business Day period, Agent retiring, upon notice to Borrower,
shall then appoint a successor Agent who shall serve as Agent until such time, as the Requisite
Lenders appoint a successor Agent as provided above.

          11.7.3 Successor Agent.

          Upon the acceptance of any appointment as Agent under the Financing Documents by a successor
Agent, such successor to Agent shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of Agent retiring, and Agent retiring shall be discharged from its
duties and obligations under the Financing Documents. After any Agent’s resignation as Agent under
the Financing Documents, the provisions of this Section 11.7 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under the Financing Documents.

     Section 11.8 Collateral Matters.

          11.8.1 Release of Collateral.

          Lenders hereby irrevocably authorize Agent, at its option and in its discretion, to release
any Lien granted to or held by Agent upon any property covered by this Agreement or the Financing
Documents:

               (a) upon termination of the Commitments and payment
and satisfaction of all Obligations;

               (b) constituting property being sold or disposed of if
Borrower certifies to Agent that the sale or disposition is made in compliance
with the provisions of this Agreement (and Agent may rely in good faith
conclusively on any such certificate, without further inquiry);

               (c) constituting property leased to Borrower under a
lease which has expired or been terminated in a transaction permitted under this
Agreement or is about to expire and which has not been, and is not intended by
Borrower to be, renewed or extended; or

               (d) constituting property covered by Permitted Liens
with lien priority superior to those Liens in favor or for the benefit of
Lenders.

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          11.8.2 Confirmation of Authority, Execution of Releases.

          Without in any manner limiting Agent’s authority to act without any specific or further
authorization or consent by Lenders as set forth in Section 11.8.1 (Release of Collateral), each
Lender agrees to confirm in writing, upon request by Borrower, the authority to release any
property covered by this Agreement or the Financing Documents conferred upon Agent under Section
11.8.1 (Release of Collateral). So long as no Event of Default is then continuing, upon receipt by
Agent of confirmation from the requisite percentage of Lenders, of its authority to release any
particular item or types of property covered by this Agreement or the Financing Documents, and upon
at least five (5) Business Days prior written request by Borrower, Agent shall (and is hereby
irrevocably authorized by Lenders to) execute such documents as may be necessary to evidence the
release of the Liens granted to Agent for the benefit of Lenders herein or pursuant hereto upon
such Collateral; provided, however, that (a) Agent shall not be required to execute any
such document on terms that, in Agent’s opinion, would expose Agent to liability or create any
obligation or entail any consequence other than the release of such Liens without recourse or
warranty, and (b) such release shall not in any manner discharge, affect or impair the Obligations
or any Liens upon (or obligations of any Person, in respect of), all interests retained by any
Person, including, without limitation, the proceeds of any sale, all of which shall continue to
constitute part of the property covered by this Agreement or the Financing Documents.

          11.8.3 Absence of Duty.

          Agent shall have no obligation whatsoever to any Lender, Borrower or any other Person to
assure that the property covered by this Agreement or the Financing Documents exists or is owned
by Borrower or is cared for, protected or insured or has been encumbered or that the Liens granted
to Agent on behalf of Lenders herein or pursuant hereto have been properly or sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any particular priority, or
to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity,
or to continue exercising, any of the rights, authorities and powers granted or available to Agent
in this Section 11.8.3 or in any of the Financing Documents, it being understood and agreed that
in respect of the property covered by this Agreement or the Financing Documents or any act,
omission or event related thereto, Agent may act in any manner it may deem appropriate, in its
discretion, given Agent’s own interest in property covered by this Agreement or the Financing
Documents as one of Lenders and that Agent shall have no duty or liability whatsoever to any of
the other Lenders.

     Section 11.9 Agency for Perfection.

     Each Lender hereby appoints Agent and each other Lender as agent for the purpose of
perfecting Lenders’ Liens in Collateral which, in accordance with Article 9 of the Uniform
Commercial Code in any applicable jurisdiction or otherwise, can be perfected only by possession.
Should any Lender (other than Agent) obtain possession of any such Collateral, such Lender shall
notify Agent thereof, and, promptly upon Agent’s request therefore, shall deliver such Collateral
to Agent or in accordance with Agent’s instructions.

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     Section 11.10 Exercise of Remedies.

     Each Lender agrees that it will not have any right individually to enforce or seek to enforce
this Agreement or any Financing Document or to realize upon any collateral security for the Loans,
it being understood and agreed that such rights and remedies may be exercised only by Agent.

     Section 11.11 Consents.

     In the event Agent requests the consent of a Lender and does not receive a written denial
thereof, or a written notice from a Lender that due course consideration of the request requires
additional time, in each case, within ten (10) Business Days after such Lender’s receipt of such
request, then such Lender will be deemed to have given such consent.

     Section 11.12 Dissemination of Information.

     Agent will provide Lenders with any information received by Agent from Borrower which is
required to be provided to Agent or to Lenders hereunder; provided, however, that Agent
shall not be liable to any one or more Lenders for any failure to do so, except to the extent that
such failure is attributable to Agent’s gross negligence or willful misconduct.

ARTICLE XII 

MISCELLANEOUS

     Section 12.1 Notices.

     All notices, requests and demands to or upon the parties to this Agreement shall be in writing
and shall be deemed to have been given or made when delivered by hand on a Business Day, or two (2)
days after the date when deposited in the mail, postage prepaid by registered or certified mail,
return receipt requested, or when sent by overnight courier, on the Business Day next following the
day on which the notice is delivered to such overnight courier, addressed as follows:

	 	 	 	 	 
	 

	 	Agent/Chevy Chase:
	 	Chevy Chase Bank, F.S.B.,
	 

	 	 	 	7926 Jones Branch Drive
	 

	 	 	 	Suite 230
	 

	 	 	 	McLean, VA 22102
	 

	 	 	 	Attn:   Richard L. Amador
	 

	 	 	 	           Group Vice President
	 
	 	 	 	 
	 

	 	With a courtesy copy to:
	 	Margaret Ann Brown, Esquire
	 

	 	 	 	Troutman Sanders Mays & Valentine LLP
	 

	 	 	 	1660 International Drive, Suite 600
	 

	 	 	 	McLean, Virginia 22102

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	 	MB Financial:
	 	MB Financial Bank, N.A.
	 

	 	 	 	6111 North River Road
	 

	 	 	 	Rosemont, Illinois 60018
	 

	 	 	 	Attn: Jack H. Sharp, Senior Vice President
	 
	 	 	 	 
	 

	 	Borrower:
	 	Sunrise Connecticut Avenue Assisted Living, L.L.C.
	 

	 	 	 	c/o Sunrise Senior Living, Inc.
	 

	 	 	 	7902 Westpark Drive
	 

	 	 	 	McLean, Virginia 22102
	 

	 	 	 	Attn: James S. Pope
	 
	 	 	 	 
	 

	 	and:
	 	Sunrise Senior Living, Inc.
	 

	 	 	 	7902 Westpark Drive
	 

	 	 	 	McLean, Virginia 22102
	 

	 	 	 	Attn: General Counsel
	 
	 	 	 	 
	 

	 	With a Courtesy Copy to:
	 	Wayne G. Tatusko, Esquire
	 

	 	 	 	Wayne G. Tatusko, PC
	 

	 	 	 	3016 Williams Drive
	 

	 	 	 	Suite 200
	 

	 	 	 	Fairfax, VA 22031

          Section 12.2 Amendments; Waivers.

          12.2.1 In General.

          This Agreement and the other Financing Documents may not be amended, modified, or changed
in any respect except by an agreement in writing signed by Agent, the Requisite Lenders and
Borrower, and, to the extent provided in Section 12.2.2 (Circumstances Where Consent of all of
Lenders is Required), by an agreement in writing signed by Agent, all of Lenders and Borrower.
No waiver of any provision of this Agreement or of any of the other Financing Documents, nor
consent to any departure by Borrower therefrom, shall in any event be effective unless the same
shall be in writing signed by the Requisite Lenders. No course of dealing between Borrower and
Agent and/or any of Lenders and no act or failure to act from time to time on the part of Agent
and/or any of Lenders shall constitute a waiver, amendment or modification of any provision of
this Agreement or any of the other Financing Documents or any right or remedy under this
Agreement, under any of the other Financing Documents or under applicable Laws. Without
implying any limitation on the foregoing, and subject to the provisions of Section 12.2.2
(Circumstances Where Consent of all of Lenders is Required):

          (a) Any waiver or consent shall be effective only in the
specific instance, for the terms and purpose for which given, subject to such
conditions as Agent and Lenders may specify in any such instrument.

          (b) No waiver of any Default or Event of Default shall extend
to any subsequent or other Default or Event of Default, or impair any right
consequent thereto.

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          (c) No notice to or demand on Borrower in any case shall
entitle Borrower to any other or further notice or demand in the same, similar or
other circumstance.

          (d) No failure or delay by Lenders to insist upon the strict
performance of any term, condition, covenant or agreement of this Agreement or
of any of the other Financing Documents, or to exercise any right, power or
remedy consequent upon a breach thereof, shall constitute a waiver, amendment
or modification of any such term, condition, covenant or agreement or of any such
breach or preclude Lenders from exercising any such right, power or remedy at any
time or times.

          (e) By accepting payment after the due date of any amount
payable under this Agreement or under any of the other Financing Documents,
Lenders shall not be deemed to waive the right either to require prompt payment
when due of all other amounts payable under this Agreement or under any of the
other Financing Documents, or to declare a default for failure to effect such
prompt payment of any such other amount.

          12.2.2 Circumstances Where Consent of all of Lenders is Required.

               Notwithstanding anything to the contrary contained herein, no amendment, modification, change
or waiver shall be effective without the consent of all of Lenders to:

          (a) extend the maturity of the principal of, or interest on, any
Note or of any of the other Obligations;

          (b) reduce the principal amount of any Note or of any of the
other Obligations, the rate of interest thereon or the fees due to Lenders,
except as
expressly permitted therein;

          (c) change the aggregate Commitments;

          (d) change the date of payment of principal of, or interest on,
any Note or of any of the other Obligations;

          (e) change the method of calculation utilized in connection
with the computation of interest and fees;

          (f) change the manner of pro rata application by Agent of
payments made by Borrower, or any other payments required hereunder or under
the other Financing Documents;

          (g) modify this Section, Section 11.8.1 (Release of Collateral),
Section 11.12 (Dissemination of Information), or the definition of “Requisite
Lenders”;

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          (h) release or agree to subordinate any material portion of any Collateral or
Financing Document (except to the extent provided herein or therein); or

          (i) waive the performance, observance or compliance with or amend Section 7.29
(Debt Service Ratio) or Section 7.30 (Occupancy Covenant).

     Additionally, no change may be made to the amount of a Leader’s Commitment or to
Lender’s percentage of all Commitments without the prior written consent of that Lender.

     Section 12.3 Cumulative Remedies.

     The rights, powers and remedies provided in this Agreement and in the other Financing
Documents are cumulative, may be exercised concurrently or separately, may be exercised from time
to time and in such order as Agent shall determine, subject to the provisions of this Agreement,
and are in addition to, and not exclusive of, rights, powers and remedies provided by existing or
future applicable Laws. In order to entitle Agent to exercise any remedy reserved to it in this
Agreement, it shall not be necessary to give any notice, other than such notice as may be
expressly required in this Agreement. Without limiting the generality of the foregoing and subject
to the terms of this Agreement, Agent may:

          (a) proceed against Borrower with or without proceeding
against any other Person (including, without limitation, any one or more of the
Guarantors) who may be liable (by endorsement, guaranty, indemnity or
otherwise) for all or any part of the Obligations;

          (b) proceed against Borrower with or without proceeding under
any of the other Financing Documents or against any Collateral or other collateral
and security for all or any part of the Obligations;

          (c) without reducing or impairing the obligation of Borrower
and without notice, release or compromise with any guarantor or other Person
liable for all or any part of the Obligations under the Financing Documents or
otherwise;

          (e) without reducing or impairing the obligations of Borrower and without
notice thereof:

               (i) fail to perfect the Lien in any or all Collateral or to release
any or all the Collateral or to accept substitute Collateral;

               (ii) approve the making of advances under the Revolving
Loan under this Agreement;

               (iii) waive any provision of this Agreement or the other Financing
Documents;

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               (iv) exercise or fail to exercise rights of set-off or other rights;
or

               (v) accept partial payments or extend from time to time the maturity
of all or any part of the Obligations.

     Section 12.4 Severability. 

     In case one or more provisions, or part thereof,
contained in this Agreement or in the
other Financing Documents shall be invalid, illegal or unenforceable in any respect under any Law,
then without need for any further agreement, notice or action:

          (a) the validity, legality and enforceability of the remaining
provisions shall remain effective and binding on the parties thereto and shall not
be affected or impaired thereby;

          (b) the obligation to be fulfilled shall be reduced to the limit of
such validity;

          (c) if such provision or part thereof pertains to repayment of
the Obligations, then, at the sole and absolute discretion of Agent, all of the
Obligations of Borrower to Agent and Lenders shall become immediately due and
payable; and

          (d) if the affected provision or part thereof does not pertain to
repayment of the Obligations, but operates or would prospectively operate to
invalidate this Agreement in whole or in part, then such provision or part thereof
only shall be void, and the remainder of this Agreement shall remain operative
and in full force and effect.

     Section 12.5 Assignments by Lenders.

     Any Lender may, with the prior written consent of Agent (which consent shall not be
unreasonably withheld), but without notice to or consent of Borrower, assign to any Person (each
an “Assignee” and collectively, the “Assignees”) all or a portion of such Lender’s Commitments;
provided that, unless such Lender has assigned all of its Commitments, after giving effect to such
assignment, such Lender must continue to hold a Pro Rata Share of the Commitments at least equal
to Five Million Dollars ($5,000,000). Any Lender that elects to make such an assignment shall pay
to Agent, for the exclusive benefit of Agent, an administrative fee for processing each such
assignment in the amount of Three Thousand Five Hundred Dollars ($3,500.00). Such Lender and its
Assignee shall notify Agent and Borrower in writing of the date on which the assignment is to be
effective (the “Adjustment Date”). On or before the Adjustment Date, the assigning Lender, Agent,
Borrower and the respective Assignee shall execute and deliver a written assignment agreement in a
form acceptable to Agent, which shall constitute an amendment to this Agreement to the extent
necessary to reflect such assignment. Upon the request of any assigning Lender following an
assignment made in accordance with this Section 12.5, Borrower shall issue new Notes to the
assigning Lender and its Assignee reflecting such assignment, in exchange for the existing Notes
held by the assigning Lender. Agent will

52

 

continue to hold at least a fifty-one percent (51%) Pro Rata Share of the Commitments and at no
time shall there be more than three (3) Lenders including Agent and MB Financial Bank, N.A..

     In addition, notwithstanding the foregoing, any Lender may at any time pledge all or any
portion of such Lender’s rights under this Agreement, any of the Commitments or any of the
Obligations to a Federal Reserve Bank.

     Section 12.6  Participations by Lenders.

     Any Lender may at any time sell to one or more
financial institutions participating interests in any of such Lender’s Obligations or Commitments;
provided, however, that (a) no such participation shall relieve such Lender from its obligations
under this Agreement or under any of the other Financing Documents to which it is a party, (b)
such Lender shall remain solely responsible for the performance of its obligations under this
Agreement and under all of the other Financing Documents to which it is a party, and (c) Borrower,
Agent and the other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement and the other Financing
Documents.

     Section 12.7 Disclosure of Information by Lenders.

     In connection with any sale, transfer, assignment or participation by any Lender in
accordance with Section 12.5 (Assignments by Lenders) or Section 12.6 (Participations by Lenders),
each Lender shall have the right to disclose to any actual or potential purchaser, assignee,
transferee or participant all financial records, information, reports, financial statements and
documents obtained in connection with this Agreement and/or any of the other Financing Documents
or otherwise.

     Section 12.8 Successors and Assigns.

     This Agreement and all other Financing Documents shall be binding upon and inure to the
benefit of Borrower, Agent and Lenders and their respective heirs, personal representatives,
successors and assigns, except that Borrower shall not have the right to assign its rights
hereunder or any interest herein without the prior written consent of Agent and the Requisite
Lenders of Lenders.

     Section 12.9 Continuing Agreements.

     All covenants, agreements, representations and warranties made by Borrower in this Agreement,
in any of the other Financing Documents, and in any certificate delivered pursuant hereto or
thereto shall survive the making by Lenders of the Loans and the execution and delivery of the
Notes, shall be binding upon Borrower regardless of how long before or after the date hereof any
of the Obligations were or are incurred, and shall continue in full force and effect so long as
any of the Obligations are outstanding and unpaid. From time to time upon Agent’s request, and as
a condition of the release of any one or more of the Security Documents, Borrower and other
Persons obligated with respect to the Obligations shall provide Agent with such acknowledgments
and agreements as Agent may require to the effect that there exists no defenses, rights of setoff
or recoupment, claims, counterclaims, actions or causes of action of any kind or nature whatsoever
against Agent, any or all of Lenders, and/or any of its or their agents and others, or to the
extent there are, the same are waived and released.

53

 

     Section 12.10 Enforcement Costs.

     Borrower agrees to pay to Agent on demand all Enforcement Costs, together with
interest thereon from the date incurred or advanced until paid in full at a per annum rate
of interest equal at all times to the Post-Default Rate. Enforcement Costs shall be
immediately due and payable at the time Borrower received notice that Enforcement Costs
have been advanced or incurred, whichever is earlier. Without implying any limitation on
the foregoing, Borrower agrees, as part
of the Enforcement Costs, to pay upon demand any and all stamp and other Taxes and fees
payable or determined to be payable in connection with the execution and delivery of this
Agreement and the other Financing Documents and to save Agent and Lenders harmless from
and against any and all liabilities with respect to or resulting from any delay in paying
or omission to pay any Taxes or fees referred to in this Section. The provisions of this
Section shall survive the execution and delivery of this Agreement, the repayment of the
other Obligations and shall survive the termination of this Agreement.

     Section 12.11
Applicable Law; Jurisdiction.

          12.11.1 Applicable Law.

          Borrower acknowledges and agrees that the Financing Documents, including, this
Agreement, shall be governed by the Laws of the State, as if each of the Financing
Documents and this Agreement had each been executed, delivered, administered and performed
solely within the State even though for the convenience and at the request of Borrower,
one or more of the Financing Documents may be executed elsewhere. Agent and Lenders
acknowledge, however, that remedies under certain of the Financing Documents that relate
to property outside the State may be subject to the laws of the state in which the
property is located.

          12.11.2 Submission to Jurisdiction.

          Borrower irrevocably submits to the jurisdiction of any state or federal court
sitting in the State over any suit, action or proceeding arising out of or relating to
this Agreement or any of the other Financing Documents. Borrower irrevocably waives, to
the fullest extent permitted by law, any objection that it may now or hereafter have to
the laying of the venue of any such suit, action or proceeding brought in any such court
and any claim that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. Final judgment in any such suit, action or proceeding
brought in any such court shall be conclusive and binding upon Borrower and may be
enforced in any court in which Borrower is subject to jurisdiction, by a suit upon such
judgment, provided that service of process is effected upon Borrower in one of the manners
specified in this Section or as otherwise permitted by applicable Laws.

          12.11.3 Appointment of Agent for Service of Process.

          Borrower hereby irrevocably designates and appoints CT Corporation, 4701 Cox Road,
Suite 301, Glen Allen, Virginia 23060, as Borrower’s authorized agent to receive on
Borrower’s behalf service of any and all process that may be served in any suit, action or
proceeding of the nature referred to in this Section in any state or federal court sitting
in the State. If such agent shall cease so to act, Borrower shall irrevocably designate
and appoint without delay another such agent in the State satisfactory to Agent and shall
promptly deliver to

54

 

Agent evidence in writing of such other agent’s acceptance of such appointment and its agreement
that such appointment shall be irrevocable.

          12.11.4 Service of Process.

          Borrower
hereby consents to process being served in any suit, action or proceeding of the nature referred to in this Section by (a) the mailing of a copy thereof by registered or certified
mail, postage prepaid, return receipt requested, to Borrower at Borrower’s address designated in or
pursuant to Section 12.1 (Notices), and (b) serving a copy thereof upon Agent, if any, designated
and appointed by Borrower as Borrower’s agent for service of process by or pursuant to this
Section. Borrower irrevocably agrees that such service (y) shall be deemed in every respect
effective service of process upon Borrower in any such suit, action or proceeding, and (z) shall,
to the fullest extent permitted by law, be taken and held to be valid personal service upon
Borrower. Nothing in this Section shall affect the right of Agent to serve process in any manner
otherwise permitted by law or limit the right of Agent otherwise to bring proceedings against
Borrower in the courts of any jurisdiction or jurisdictions.

     Section 12.12 Duplicate Originals and Counterparts.

     This Agreement may be executed in any number of duplicate originals or counterparts, each of
such duplicate originals or counterparts shall be deemed to be an original and all taken together
shall constitute but one and the same instrument.

     Section 12.13 Headings.

     The headings in this Agreement are included herein for convenience only, shall not constitute
a part of this Agreement for any other purpose, and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.

     Section 12.14 No Agency.

     Nothing herein contained shall be construed to constitute Borrower as agent of Agent or any of
Lenders for any purpose whatsoever or to permit Borrower to pledge any of the credit of Agent or
any of Lenders. Neither Agent nor any of Lenders shall be responsible or liable for any shortage,
discrepancy, damage, loss or destruction of any part of the Collateral wherever the same may be
located and regardless of the cause thereof. Neither Agent nor any of Lenders shall, by anything
herein or in any of the Financing Documents or otherwise, assume any of Borrower’s obligations
under any contract or agreement assigned to Agent and/or Lenders, and neither Agent nor any of
Lenders shall be responsible in any way for the performance by Borrower of any of the terms and
conditions thereof.

     Section 12.15 Date of Payment.

     Should the principal of or interest on the Notes become due and payable on other than a
Business Day, the maturity thereof shall be extended to the next succeeding Business Day and in
the case of principal, interest shall be payable thereon at the rate per annum specified in the
Notes during such extension.

55

 

     Section 12.16 Entire Agreement.

     This Agreement is intended by Agent, Lenders and Borrower to be a complete, exclusive and
final expression of the agreements contained herein. Neither Agent, Lenders nor Borrower shall
hereafter have any rights under any prior agreements pertaining to the matters addressed by this
Agreement but shall look solely to this Agreement for definition and determination of all of their
respective rights, liabilities and responsibilities under this Agreement.

     Section 12.17 Waiver of Trial by Jury.

     BORROWER, AGENT AND LENDERS HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO WHICH BORROWER AND AGENT AND/OR ANY OR ALL OF LENDERS MAY BE PARTIES, ARISING OUT OF
OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING DOCUMENTS, OR (C) THE
COLLATERAL. THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO
SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS
AGREEMENT.

     This waiver is knowingly, willingly and voluntarily made by Borrower, Agent and Lenders, and
Borrower, Agent and Lenders hereby represent that no representations of fact or opinion have been
made by any individual to induce this waiver of trial by jury or to in any way modify or nullify
its effect. Borrower, Agent and Lenders further represent that they have been represented in the
signing of this Agreement and in the making of this waiver by independent legal counsel, selected
of their own free will, and that they have had the opportunity to discuss this waiver with
counsel.

     Section 12.18 Liability of Agent and Lenders.

     Borrower hereby agrees that neither Agent nor any of Lenders shall be chargeable for any
negligence, mistake, act or omission of any accountant, examiner, agency or attorney employed by
Agent and/or any of Lenders in making examinations, investigations or collections, or otherwise in
perfecting, maintaining, protecting or realizing upon any lien or security interest or any other
interest in the Collateral or other security for the Obligations.

     By inspecting the Collateral or any other properties of Borrower or by accepting or approving
anything required to be observed, performed or fulfilled by Borrower or to be given to Agent
and/or any of Lenders pursuant to this Agreement or any of the other Financing Documents, neither
Agent nor any of Lenders shall be deemed to have warranted or represented the condition,
sufficiency, legality, effectiveness or legal effect of the same, and such acceptance or approval
shall not constitute any warranty or representation with respect thereto by Agent and/or Lenders.

     Section 12.19 Indemnification.

     Borrower agrees to indemnify and hold harmless, Agent, Lenders, the respective parent and
Affiliates of Agent and Lenders and the respective parent’s and Affiliates’ officers, directors,
shareholders, employees and agents (each an “Indemnified Party,” and collectively, the
“Indemnified Parties”), from and against any and all claims, liabilities, losses, damages, costs

56

 

and expenses (whether or not such Indemnified Party is a party to any litigation), including
without limitation, reasonable attorney’s fees and costs and costs of investigation, document
production, attendance at depositions or other discovery, incurred by any Indemnified Party with
respect to, arising out of or as a consequence of (a) this Agreement or any of the other Financing
Documents, including without limitation, any failure of Borrower to pay when due (at maturity, by
acceleration or otherwise) any principal, interest, fee or any other amount due under this
Agreement or the other Financing Documents, or any other Event of Default; (b) the use by Borrower
of any proceeds advanced hereunder; (c) the transactions
contemplated hereunder; or (d) any claim,
demand, action or cause of action being asserted against (i) Borrower or any of its Affiliates by
any other Person, or (ii) any Indemnified Party by Borrower in connection with the transactions
contemplated hereunder. Notwithstanding anything herein or elsewhere to the contrary, Borrower
shall not be obligated to indemnify or hold harmless any Indemnified Party from any liability, loss
or damage resulting from the gross negligence, willful misconduct or unlawful actions of such
Indemnified Party. Any amount payable to Agent and/or Lenders under this Section will bear interest
at the Post- Default Rate from the due date until paid.

     Section 12.20 Electronic Transmission of Data.

     Agent, Lenders and Borrower agree that certain data related to the Loans (including
confidential information, documents, applications and reports) may be transmitted electronically,
including transmission over the Internet. This data may be transmitted to, received from or
circulated among agents and representatives of Borrower and/or Agent and Lenders and their
affiliates and other Persons involved with the subject matter of this Agreement. Borrower
acknowledges and agrees that (a) there are risks associated with the use of electronic
transmission and that neither Agent nor any Lender controls the method of transmittal or service
providers, (b) neither Agent nor any Lender has any obligation or responsibility whatsoever and
assumes no duty or obligation for the security, receipt or third party interception of any such
transmission, and (c) Borrower will release, hold harmless and indemnify Agent and each Lender
from any claim, damage or loss, including that arising in whole or part from Agent or a Lender’s
strict liability or sole, comparative or contributory negligence, which is related to the
electronic transmission of data.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

57

 

     IN WITNESS WHEREOF, the parties hereto have signed and sealed this Agreement on the
day and year first above written.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	BORROWER:
	 
	 	 	 	 	 	 	 	 
	WITNESS OR ATTEST:	 	 	 	 	 	SUNRISE CONNECTICUT AVENUE ASSISTED
	 	 	 	 	 	 	LIVING, L.L.C.
	 

	 	 	 	 	 	By:
	 	Sunrise Senior Living Investments, Inc., its sole Member

	 	 	 	 	 	 	 	 	 
	/s/ Kelly L.
Hayden 

	 	 
	 	By:
	 	/s/ James Pope	 	(SEAL)
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name : James Pope	 	 
	 

	 	 	 	 	 	Title: Vice President	 	 

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	LENDERS:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	WITNESS:	 	 	 	 	 	CHEVY CHASE BANK, F.S.B., as Agent and Lender	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	/s/ Kelly L. Hayden
 

	 	 
	 	 	 	By:
	 	/s/ Richard L. Amador
	 	(SEAL)
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Richard L. Amador	 	 
	 

	 	 	 	 	 	 	 	Group Vice President	 	 

	 	 	 	 	 	 	 	 	 	 	 
	WITNESS:	 	 	 	 	 	MB FINANCIAL BANK, N.A., as Lender	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	/s/

	 	 	 	 	 	By:
	 	/s/ Jack Sharp
 

	 	(SEAL) 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Name: Jack Sharp	 	 
	 

	 	 	 	 	 	 	 	Title: Senior Vice President	 	 

 

 

LIST OF EXHIBITS

	 	 	A            Form of Note
	 
	 	 	B            Places of Business

59

 

EXHIBIT A

FORM OF NOTE

			
	 	 	 
	$                    
	 	McLean, Virginia

                    ,
___

     FOR VALUE RECEIVED, SUNRISE CONNECTICUT AVENUE ASSISTED LIVING, L.L.C., a limited liability
company organized under the laws of the Commonwealth of Virginia
(the “Borrower”), promises to pay to the order of
                     , a                     , its
successors and assigns (the “Lender”), the principal sum of
                     ($                    ) (the “Principal Sum”), together with interest thereon at the rate
hereinafter provided, in accordance with the Loan Agreement (as hereinafter defined) and the
following:

     1. Interest.

     Commencing as of the date hereof and continuing until repayment in full of all sums due
hereunder, the unpaid Principal Sum shall bear interest at the fluctuating rate based on an
independent index which is the average of interbank offered rates for one-month dollar deposits in
the London Market as reported in The Wall Street Journal (the “Index”) plus 175 basis
points per annum (the “LIBOR Rate”) which rate shall be adjusted for any reserve requirements
imposed upon the Lender from time to time. The LIBOR Rate does not necessarily represent the
lowest rate of interest charged by the Lender to borrowers. If the Index becomes unavailable
during the term of this Note, the Lender may designate a substitute index after giving notice to
the Borrower. The LIBOR Rate will be adjusted on the first day of each month, based on the value
of the Index as published in The Wall Street Journal as of the first business day of each
month. All interest payable under the terms of this Note shall be calculated on the basis of a
365-day year. The LIBOR Rate shall be in effect for a period of the number of days indicated (each
a “LIBOR Period”), in any case extended to the next succeeding Business Day (as defined in the
Loan and Security Agreement of even date herewith) when necessary, beginning on the date hereof or
the expiration date of the then-current LIBOR Period.

     2. Payments and Maturity.

     The unpaid Principal Sum, together with interest thereon at the rate or rates provided above,
shall be payable as follows:

     (a)
Commencing on
                    ,
___ and continuing on the same
day of each and every month thereafter, to and including                      ,___, interest
only;

     (b)
Commencing
on                    , ___and continuing on the same
day of each and every month thereafter, to and
including                    , ___, principal
shall be due and payable in equal monthly payments of $                    , plus all accrued and
unpaid interest on the outstanding principal balance; and

60

 

     (c) Unless sooner paid, the unpaid Principal Sum, together with interest accrued and
unpaid thereon, shall be due and payable in full on August 28, 2009.

     3. Default Interest.

     Upon the occurrence of an Event of Default (as hereinafter defined) the unpaid Principal Sum
shall bear interest thereafter until such Event of Default is cured at the Post Default Rate (as
defined in the Loan Agreement).

     4. Late Charges.

     In the event that any payment due under the terms of this Note is not received by the Lender
within fifteen (15) days of the date such payment is due (inclusive of the date when due), the
Borrower shall pay to the Lender on demand a late charge equal to five percent (5%) of such
payment.

     5. Application and Place of Payments.

     All payments made on account of this Note, including prepayments, shall be applied first to
the payment of any prepayment fee due hereunder, second to any late charge then due hereunder,
third to the payment of accrued and unpaid interest then due hereunder, and the remainder, if any,
shall be applied to the unpaid Principal Sum, with application first made to all principal
installments then due hereunder, next to the outstanding principal balance due at maturity and
thereafter to the unpaid principal installments in the inverse order of maturity. All payments on
account of this Note shall be paid in lawful money of the United States of America in immediately
available funds during regular business hours of the Lender at its principal office in Chevy
Chase, Maryland or at such other times and places as the Lender may at any time and from time to
time designate in writing to the Borrower.

     6. Prepayment.

     (a) The Borrower may prepay the Principal Sum in whole or in part, at any
time or from time to time, upon ten (10) days prior written notice to the Lender, without
premium or penalty.

     (b) Payment of the indebtedness evidenced by this Note in whole or in part
subsequent to the occurrence of an Event of Default shall be deemed to be a prepayment of the
Principal Sum subject to any prepayment fee due hereunder.

     7. Other Financing Documents.

     The term “Financing Documents” as used in this Note shall mean collectively this Note, the
Deed of Trust (as hereinafter defined) and any other instrument, agreement, or document
previously, simultaneously, or hereafter executed and delivered by the Borrower and/or any other
person, singularly or jointly with any other person, evidencing, securing, guaranteeing, or in
connection with this Note or the Principal Sum evidenced hereby.

61

 

     8. Security.

     This Note is secured by, among other things, a Deed of Trust, Assignment, Security Agreement
and Fixture Filing (Loan A) of even date herewith from the Borrower to Alexandra Johns and
Ellen-Elizabeth Lee, trustees (the “Deed of Trust”), covering the Borrower’s fee simple interest
in certain real property located in the District of Columbia, described in Exhibit A
attached hereto and made a part hereof and all other property, real and personal, more
particularly described in the Deed of Trust (the “Property”).

     9. Events of Default.

     The occurrence of any one or more of the following events shall constitute an event of default
(individually, an “Event of Default” and collectively, the “Events of Default”) under the terms of
this Note:

          (a) The failure of the Borrower to pay to the Lender when due any and all amounts payable by the Borrower to the Lender under the terms of this Note; or

          (b) The occurrence of a default or an event of default under the terms and
conditions of any of the other Financing Documents, which default or event of default remains
uncured beyond any applicable grace and/or cure period provided therefor.

     10. Remedies.

     Upon the occurrence of an Event of Default, at the option of the Lender, all amounts payable
by the Borrower to the Lender under the terms of this Note shall immediately become due and
payable by the Borrower to the Lender without notice to the Borrower or any other person, and the
Lender shall have all of the rights, powers, and remedies available under the terms of this Note,
any of the other Financing Documents and all applicable laws. The Borrower and all endorsers,
guarantors, and other parties who may now or in the future be primarily or secondarily liable for
the payment of the indebtedness evidenced by this Note hereby severally waive presentment, protest
and demand, notice of protest, notice of demand and of dishonor and non-payment of this Note and
expressly agree that this Note or any payment hereunder may be extended from time to time without
in any way affecting the liability of the Borrower, guarantors and endorsers.

     11. Consent to Jurisdiction.

     The Borrower irrevocably submits to the jurisdiction of any state or federal court sitting in
the Commonwealth of Virginia over any suit, action, or proceeding arising out of or relating to
this Note. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection
that the Borrower may now or hereafter have to the laying the venue of any such suit, action, or
proceeding brought in any such court and any claim that any such suit, action, or proceeding
brought in any such court has been brought in an inconvenient forum. Final judgment in any such
suit, action, or proceeding brought in any such court shall be conclusive and binding upon the
Borrower and may be enforced in any court in which the Borrower is subject to jurisdiction by a
suit upon such judgment provided that service of process is effected upon the Borrower as provided
in this Note or as otherwise permitted by applicable law.

62

 

     12. Service of Process.

          (a) The Borrower hereby irrevocably designates and appoints CT
Corporation, 4701 Cox Road, Suite 301, Glen Allen, Virginia 23060, as the Borrower’s
authorized agent to accept and acknowledge on the Borrower’s behalf service of any and all
process that may be served in any suit, action, or proceeding instituted in connection with
this
Note in any state or federal court sitting in the Commonwealth of Virginia. If such agent
shall
cease so to act, the Borrower shall irrevocably designate and appoint without delay another
such
agent in the Commonwealth of Virginia satisfactory to the Lender and shall promptly deliver to
the Lender evidence in writing of such agent’s acceptance of such appointment and its
agreement
that such appointment shall be irrevocable.

          (b) The Borrower hereby consents to process being served in any suit, action,
or proceeding instituted in connection with this Note by (i) the mailing of a copy thereof by
certified mail, postage prepaid, return receipt requested, to the Borrower and (ii) serving a
copy
thereof upon the agent, if any, hereinabove designated and appointed by the Borrower as the
Borrower’s agent for service of process. The Borrower irrevocably agrees that such service
shall
be deemed to be service of process upon the Borrower in any such suit, action, or proceeding.
Nothing in this Note shall affect the right of the Lender to serve process in any manner
otherwise
permitted by law and nothing in this Note will limit the right of the Lender otherwise to
bring
proceedings against the Borrower in the courts of any jurisdiction or jurisdictions.

     13. Expenses.

     The Borrower promises to pay to the Lender on demand by the Lender all costs and expenses
incurred by the Lender in connection with the collection and enforcement of this Note, including,
without limitation, all reasonable attorneys’ fees and expenses and all court costs.

     14. Notices.

     Any notice, request, or demand to or upon the Borrower or the Lender shall be deemed to have
been properly given or made when delivered in accordance with Section 9.3 of the Deed of Trust.

     15. Miscellaneous.

     Each right, power, and remedy of the Lender as provided for in this Note or any of the other
Financing Documents, or now or hereafter existing under any applicable law or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power, or remedy provided
for in this Note or any of the other Financing Documents or now or hereafter existing under any
applicable law, and the exercise or beginning of the exercise by the Lender of any one or more of
such rights, powers, or remedies shall not preclude the simultaneous or later exercise by the
Lender of any or all such other rights, powers, or remedies. No failure or delay by the Lender to
insist upon the strict performance of any term, condition, covenant, or agreement of this Note or
any of the other Financing Documents, or to exercise any right, power, or remedy consequent upon a
breach thereof, shall constitute a waiver of any such term, condition, covenant, or agreement or
of any such breach, or preclude the Lender from exercising any such right, power, or remedy at a
later time or times. By accepting payment after the due

63

 

date of any amount payable under the terms of this Note, the Lender shall not be deemed to waive
the right either to require prompt payment when due of all other amounts payable under the terms of
this Note or to declare an Event of Default for the failure to effect such prompt payment of any
such other amount. No course of dealing or conduct shall be effective to amend, modify, waive,
release, or change any provisions of this Note.

     16. Partial Invalidity.

     In the event any provision of this Note (or any part of any provision) is held by a court of
competent jurisdiction to be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality, or unenforceability shall not affect any other provision (or remaining part of the
affected provision) of this Note; but this Note shall be construed as if such invalid, illegal, or
unenforceable provision (or part thereof) had not been contained in this Note, but only to the
extent it is invalid, illegal, or unenforceable.

     17. Captions.

     The captions herein set forth are for convenience only and shall not be deemed to define,
limit, or describe the scope or intent of this Note.

     18. Governing Law.

     The provisions of this Note shall be construed, interpreted and enforced in accordance with
the laws of the Commonwealth of Virginia as the same may be in effect from time to time.

     19. Waiver of Trial by Jury.

     The Borrower and the Lender hereby waive trial by jury in any action or proceeding to which
the Borrower and the Lender may be parties, arising out of or in any way pertaining to (a) this
Note, (b) the other Financing Documents or (c) the Property. It is agreed and understood that this
waiver constitutes a waiver of trial by jury of all claims against all parties to such actions or
proceedings, including claims against parties who are not parties to this Note. This waiver is
knowingly, willingly and voluntarily made by the Borrower, and the Borrower hereby represents that
no representations of fact or opinion have been made by any individual to induce this waiver of
trial by jury or to in any way modify or nullify its effect. The Borrower further represents that
it has been represented in the signing of this Note and in the making of this waiver by
independent legal counsel, selected of its own free will, and that it has had the opportunity to
discuss this waiver with counsel.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

64

 

     IN WITNESS WHEREOF, the Borrower has caused this Note to be executed under seal by its duly
authorized member as of the date first written above.

	 	 	 	 	 	 	 	 	 
	WITNESS OR ATTEST	 	 	 	SUNRISE CONNECTICUT AVENUE ASSISTED
	 	 	 	 	LIVING, L.L.C.
	 
	 

	 	 	 	 	 	By:	 	 
	 

	 	 	 	 	 	 	 	Sunrise Senior Living Investments,
	 

	 	 	 	 	 	 	 	Inc., sole Member

	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	By:
	 	 	 	(SEAL)
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	Title:	 	 

     THIS IS TO CERTIFY that this is a Deed of Trust Note A described in the Deed of Trust,
Assignment, Security Agreement and Fixture Filing (Loan A) from the Borrower to Alexandra Johns
and Ellen-Elizabeth Lee, trustees, securing the Lender and bearing even date herewith, said Deed
of Trust Note and Deed of Trust, Assignment, Security Agreement and Fixture Filing having been
executed in my presence.

	 	 	 	 	 
	 

	 	 

Notary Public
	 	 

My Commission expires:

65

 

EXHIBIT A

PROPERTY DESCRIPTION

Lot 162 in Square 1989 in a subdivision made by Sunrise Connecticut
Avenue Assisted Living, LLC, and others, as per plat recorded in
Liber
No. 194 at folio 37 among the Records of the Office of the Surveyor of
the District of Columbia.

 

 

     EXHIBIT B

PLACES OF BUSINESS

	 	 	 
	Borrower’s Chief Executive Office is:

	 	7902 Westpark Drive
	 

	 	McLean, Virginia 22102
	 
	Location of Borrower’s Collateral:

	 	511 Connecticut Avenue, NW
	 

	 	Washington, D.C.exv10w5

Exhibit 10.5

GUARANTY OF PAYMENT

(Loan A)

     THIS GUARANTY OF PAYMENT (this “Agreement”) is made as of August 28, 2007, by SUNRISE SENIOR
LIVING, INC., a corporation organized under the laws of the State of Delaware (“Guarantor”) in
favor of CHEVY CHASE BANK, F.S.B., a federal savings bank, its successors and assigns, as Agent
(“Agent”) for Lenders (individually a “Lender” and collectively, “Lenders”) party to the Loan
Agreement (as hereinafter defined).

     IN ORDER to induce Lenders to make a loan in the principal amount of $30,000,000 (the “Loan”)
to Sunrise Connecticut Avenue Assisted Living, L.L.C., a limited liability company organized under
the laws of the Commonwealth of Virginia (“Borrower”) and in connection therewith to accept one or
more Deed of Trust Notes (as amended, extended, restated, supplemented or otherwise modified from
time to time, collectively, the “Note”) and a Deed of Trust, Assignment, Security Agreement and
Fixture Filing (Loan A) (as amended, extended, restated, supplemented or otherwise modified from
time to time, the “Deed of Trust”), all of even date herewith, made by Borrower in the aggregate
principal sum of $30,000,000, which Loan is to be advanced pursuant to the terms of a Loan and
Security Agreement (Loan A) of even date herewith by and among Borrower, Agent and Lenders named
therein and party thereto (as amended, extended, restated, supplemented or otherwise modified from
time to time, the “Loan Agreement”), Guarantor hereby covenants and agrees with Agent and Lenders
as follows:

     1. Guaranty.

     Guarantor hereby unconditionally and irrevocably guarantees to Agent and Lenders: (a) the due
and punctual payment in full (and not merely the collectibility) of the principal of the Note and
the interest thereon, in each case when due and payable, whether on any installment payment date
or at the stated or accelerated maturity, all according to the terms of the Note and the Deed of
Trust; and (b) the due and punctual payment in full (and not merely the collectibility) of all
other sums and charges which may at any time be due and payable in accordance with, or secured by,
the Note, the Deed of Trust or any other document evidencing or securing the Loan (together with
the Note and the Deed of Trust, the “Financing Documents”); and (c) the due and punctual
performance of all of the other terms, covenants and conditions contained in the Note and the
other Financing Documents, on the part of Borrower or any subsequent owner of the property more
particularly described in the Deed of Trust (the “Property”) to be performed.

     2. Guaranty Unconditional.

     Guarantor expressly agrees that Agent may, in its sole and absolute discretion, without notice
to or further assent of Guarantor, except as specifically set forth herein, and without in any way
releasing, affecting or impairing the obligations and liabilities of Guarantor hereunder: (a) waive
compliance with, or any defaults under, or grant any other indulgences with respect to, the
Financing Documents; (b) with Guarantor’s prior written consent, modify, amend, change or terminate
any provisions of the Financing Documents; (c) with Guarantor’s prior written consent, grant
extensions or renewals of or with respect to the Note or the other Financing Documents; (d) with
Guarantor’s prior written consent, effect any release, subordination,

 

 

compromise or settlement in connection with the Note and the other Financing Documents; (e) with
Guarantor’s prior written consent, agree to the substitution, exchange, release or other
disposition of all or any part of the Property, or any other collateral for the Loan; (f) make
advances for the purpose of performing any term or covenant contained in any of the Financing
Documents with respect to which Borrower or the then owner of the Property shall be in default; (g)
with Guarantor’s prior written consent, assign or otherwise transfer the Financing Documents or
this Agreement or any interest therein or herein; and (h) deal in all respects with Borrower or the
then owner of the Property as if this Agreement were not in effect. The obligations of Guarantor
under this Agreement shall be unconditional, irrespective of the genuineness, validity, regularity
or enforceability of the Note or the Deed of Trust, or any security given therefor or in connection
therewith, or any other circumstances which might otherwise constitute a legal or equitable
discharge of a surety or guarantor.

     3. Guaranty Primary.

     The obligations and liability of Guarantor under this Agreement shall be primary, direct and
immediate; shall not be conditional or contingent upon pursuit by Agent of any remedies it may
have against Borrower with respect to the Financing Documents, whether pursuant to the terms
thereof or by law; and shall not be subject to any counterclaim, recoupment, set-off, reduction or
defense based upon any claim that Guarantor may have against Borrower, Agent or any Lender.
Without limiting the generality of the foregoing, Agent shall not be required to make any demand
on Borrower and/or the then owner of the Property, or to sell at foreclosure or otherwise pursue
or exhaust its remedies against the Property or any part thereof and/or against Borrower or the
then owner of the Property, before, simultaneously with or after enforcing its rights and remedies
hereunder against Guarantor. Any one or more successive and/or concurrent actions may be brought
hereon against Guarantor either in the same action, if any, brought against Borrower and/or the
then owner of the Property or in separate actions, as often as Agent may deem advisable.

     4. Waivers by Guarantor.

     Guarantor hereby unconditionally and irrevocably waives: (a) presentment and demand for
payment of the principal of or interest on the Note and protest of non-payment; (b) notice of
acceptance of this Agreement and of presentment, demand and protest; (c) except as set forth
below, notice of any default under this Agreement or any of the Financing Documents and notice of
all indulgences; (d) except as set forth below, demand for observance, performance, or enforcement
of any terms or provisions of this Agreement or any of the Financing Documents; (e) any right or
claim of right to cause a marshalling of the assets of Borrower; and (f) all other notices and
demands otherwise required by law which Guarantor may lawfully waive.

     5. Reimbursement for Expenses.

     If Agent shall commence any action or proceeding for the enforcement of this Agreement,
Guarantor shall reimburse Agent promptly upon demand, for all expenses incurred in connection
therewith, including, without limitation, reasonable attorneys’ fees.

2

 

     6. Acceleration.

     Anything in this Agreement or in any of the Financing Documents to the contrary
notwithstanding, Agent, at its option, may, as to Guarantor, accelerate the indebtedness evidenced
and secured by the Financing Documents in the event of: (a) the making by Guarantor of an
assignment for the benefit of creditors; (b) the appointment of a custodian for Guarantor, or for
any property of Guarantor; (c) the commencement of any proceeding by Guarantor under any
bankruptcy, reorganization, arrangement, insolvency, readjustment, receivership or like law or
statute; or (d) the commencement of any proceeding against Guarantor under any bankruptcy,
reorganization, arrangement, insolvency, readjustment, receivership or like law or statute which is
not discharged or dismissed within ninety (90) days after institution thereof; or (e) the
termination, dissolution or, liquidation of Guarantor, without the prior written consent of Agent.
A change of control of Guarantor will not be a default hereunder or under any other Financing
Document for this Loan so long as Guarantor continues to own one hundred percent (100%) of Sunrise
Senior Living Management, Inc., Sunrise Senior Living Investments, Inc. and Sunrise Development,
Inc. and the contracts between these entities and the Borrower remain in full force and effect.

     7. Subordination; Subrogation.

     If Guarantor shall advance any sums to Borrower or if Borrower shall hereafter become
indebted to Guarantor, such sums and indebtedness shall be subordinate in all respects to the
amounts then or thereafter due and owing to Lenders under the Financing Documents. Nothing herein
contained shall be construed to give Guarantor any right of subrogation in and to the Note or the
Deed of Trust or all or any part of Lenders’ interest therein, until all amounts owing to Lenders
shall have been paid in full. Notwithstanding any provision of this Paragraph to the contrary, if
Guarantor is or becomes an “insider” (as defined from time to time in Section 101 of the Federal
Bankruptcy Code) with respect to Borrower, then Guarantor irrevocably and absolutely waives any
and all rights of subrogation, contribution, indemnification, reimbursement or any similar rights
against Borrower with respect to this Agreement, whether such rights arise under an express or
implied contract or by operation of law. It is the intention of the parties hereto that Guarantor
shall not be deemed to be a “creditor” (as defined in Section 101 of the Federal Bankruptcy Code)
of Borrower by reason of the existence of this Agreement in the event that Borrower becomes a
debtor in any proceeding under the Federal Bankruptcy Code.

     8. Representations and Warranties.

     Guarantor represents and warrants to Agent as follows:

          (a) Good Standing. Guarantor (a) is a corporation duly organized, existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the power to own its
property and to carry on its business as now being conducted, and (c) is duly qualified to do
business and is in good standing in each jurisdiction in which the character of the properties
owned by it therein or in which the transaction of its business makes such qualification
necessary.

          (b) Power and Authority. Guarantor has full corporate power and authority to execute and
deliver this Agreement and the other Financing Documents to which it is a party and

3

 

to incur and perform the Obligations (as defined in the Deed of Trust) whether under this
Agreement, the other Financing Documents or otherwise, all of which have been duly authorized by
all proper and necessary corporate action. No consent or approval of shareholders or any creditors
of Guarantor, and no consent, approval, filing or registration with or notice to any Governmental
Authority on the part of Guarantor, is required as a condition to the execution, delivery, validity
or enforceability of this Agreement or the other Financing Documents or the performance by
Guarantor of the Obligations.

          (c) Binding Agreements. This Agreement and the other Financing Documents executed and
delivered by Guarantor have been properly executed and delivered and constitute the valid and
legally binding obligations of Guarantor and are fully enforceable against Guarantor in accordance
with their respective terms.

          (d) No Conflicts. Neither the execution, delivery and performance of the terms of this
Agreement or of any of the other Financing Documents executed and delivered by Guarantor nor the
consummation of the transactions contemplated by this Agreement will conflict with, violate or be
prevented by (i) the charter or bylaws of Guarantor, (ii) any existing mortgage, indenture,
contract or agreement binding on Guarantor or affecting its property, or (iii) any Laws.

          (e) Compliance with Laws. Guarantor is not in violation of any applicable Laws (including,
without limitation, any Laws relating to employment practices, to environmental, occupational and
health standards and controls) or order, writ, injunction, decree or demand of any court,
arbitrator or any Governmental Authority affecting Guarantor or its properties, the violation of
which, considered in the aggregate, are reasonably likely to materially adversely affect the
business, operations or properties of Guarantor.

          (f) Litigation. Except as shown on the Form 8K provided to Lender, there are no proceedings,
actions or investigations pending or, so far as Guarantor knows, threatened before or by any
court, arbitrator or any Governmental Authority which, in any one case or in the aggregate, if
determined adversely to the interests of Guarantor, would have a material adverse effect on the
business, properties, condition (financial or otherwise) or operations, present or prospective, of
Guarantor.

          (g) Financial Condition. On the date delivered, the draft financial statements of Guarantor
dated June 30, 2006 were complete and correct and fairly presented the financial position of
Guarantor and the results of its operations and transactions in its surplus accounts as of the
date and for the period referred to and were prepared in accordance with GAAP applied on a
consistent basis throughout the period involved. Subsequently the Guarantor provided additional
information including cash and debt levels as of June 30, 2007 and there has been no material
adverse change in the cash or debt levels of Guarantor since such reports. The representations and
warranties contained in this Section shall also cover financial statements furnished from time to
time to Agent pursuant to the Loan Agreement. Notwithstanding the foregoing, except as provided in
Section 7.1 of the Loan Agreement, Guarantor will not be required to deliver financial statements
or operating statement until ten (10) days after such statements have been made publicly available
by the Securities and Exchange Commission.

4

 

          (h) Full Disclosure. The financial statements referred to in Section 8(g), and the statements,
reports or certificates furnished by Guarantor in connection with this Agreement (i) do not contain
any untrue statement of a material fact and (ii) when taken in their entirety, do not omit any
material fact necessary to make the statements contained therein not misleading. There is no fact
known to Guarantor which Guarantor has not disclosed to Agent in writing prior to the date of this
Agreement which materially and adversely affects or in the future could, in the reasonable opinion
of Guarantor materially adversely affect the condition, financial or otherwise, results of
operations, business, or assets of Guarantor.

          (i) Financial Interest. Financial Interest. Guarantor will derive a benefit from the credit
facilities extended to and the Obligations incurred by Borrower, and hereby waives any claim that
Agent violated the Equal Credit Opportunity Act (15 U.S.C. 1691 et seq.) in connection with the
Loan, any of the Financing Documents or any of the other Obligations or security for any obligation
which is the subject thereto.

     9. Covenants.

          (a) Guarantor covenants and agrees that until the Obligations are repaid in full Guarantor
shall at all times directly or indirectly own one hundred percent (100%) or more of the membership
interests of Borrower.

          (b) Guarantor covenants and agrees that until the Obligations are repaid in full Guarantor or
an entity controlled by Guarantor shall operate and manage the Property.

          (c) Guarantor hereby covenants and agrees that it will comply with (i) the following
financial covenants contained in the Sunrise Senior Financing Agreement (as defined in the Loan
Agreement) provided that Lenders hereby agree that it will consent to any waiver or modification
of such covenants to which the Sunrise Bank Group (as defined in the Loan Agreement) consents so
long as Agent is a member of the Sunrise Bank Group and Guarantor, Borrower and Lenders shall
negotiate replacement covenants acceptable to Lenders if Agent ceases to be a member of the
Sunrise Bank Group:

          (i) Consolidated Net Worth. Guarantor will at all times maintain,
tested as of the end of each of the Borrower’s fiscal quarters beginning with the
quarter ending December 31, 2007, a Consolidated Net Worth of not less than the sum
of $450,000,000 (which is eighty percent (80%) of consolidated GAAP Shareholder
Equity as of the date hereof) plus seventy-five percent (75%) of the net proceeds to
Guarantor of any equity capital transaction received during any subsequent quarter
(except for all exercises of employee stock options, issuance or sale of restricted
stock and operation of the employee stock purchase program), less $110,000,000
associated with stock repurchases.

          (ii) Leverage Ratio. Guarantor will maintain, tested as of the end of
each of Guarantor’s fiscal quarters beginning with the quarter ending December 31,
2007, a ratio of Total Funded Indebtedness to Consolidated EBITDA so that it is not
more than 4.25 to 1.0.

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          (iii) Fixed Charge Coverage Ratio. Guarantor will maintain, tested as
of the end of each of the Guarantor’s fiscal quarters beginning with the quarter
ending December 31, 2007, a ratio of Consolidated EBITDAR to Consolidated Fixed
Charges of not less than 1.75 to 1.0.

The following definitions shall apply to this Section 9(c):

  “Capitalized Cash Interest Expense” means capitalized interest on construction or
development loans, to the extent not funded from an interest reserve as part of third party
construction financing.

  “Consolidated EBITDA” means the sum of: (a) (i) net income; (ii) Consolidated Interest
Expense; (iii) income taxes; (iv) depreciation and amortization; (v) the non-cash component of any
unusual or non-recurring item of loss or expense which was deducted in determining net income (in
accordance with GAAP), and (vi) income (or loss) in respect of minority interest (assuming it was
deducted in the calculation of net income); minus (b) “other income — operating properties” as
shown on Guarantor’s financial statements in accordance with GAAP as of the date hereof (or as such
category may be categorized in future financial statements) in each case for Guarantor and its
Subsidiaries on a consolidated basis. For purposes of calculating the leverage ratio only,
Consolidated EBITDA will be adjusted to reflect actual transition costs (post-closing) or
pre-closing on a pro forma basis to reflect (i) material acquisitions and dispositions of property
and (ii) material acquisitions and dispositions of management contracts, provided that
documentation of such acquisitions and dispositions satisfactory to the Agent in its sole
discretion is delivered to the Agent. Transition costs shall be subject to the approval of the
Agent.

  “Consolidated EBITDAR” means the sum of: (a) Consolidated EBITDA plus (b) rent paid or
payable under all operating leases as determined in accordance with GAAP.

  “Consolidated Fixed Charges” means the sum of: (a) Consolidated Interest Expense, (b)
Capitalized Cash Interest Expense (c) scheduled payments of principal on Total Funded Indebtedness
(excluding balloon payments), (d) rent payable under all operating leases (other than capital
leases) as determined in accordance with GAAP, and (e) dividends payable on stock.

  “Consolidated Interest Expense” means total interest expense (whether paid or
accrued), including the amortization of debt discounts and premiums as well as the interest
component under capital leases, on a consolidated basis in accordance with GAAP.

  “Consolidated Net Worth” means Shareholders’ Equity of Guarantor and its Subsidiaries
on a consolidated basis in accordance with GAAP.

  “Continuing Care Retirement Community” means a senior living facility which provides
or arranges housing and health-related services that are effective for the life of the resident or
for an extended, specified period in excess of one year, including mutually terminable contracts,
in consideration for the payment of an entrance fee, which services are provided on a comprehensive
continuum of care basis which includes a skilled nursing facility.

  “Development Joint Venture” means an entity which owns a Development Joint
Venture Investment.

  “Development Joint Venture Investments” means (a) Investments which are (i) less than
fifty percent (50%) owned and unconsolidated by any of the Loan Parties and (ii) have a ratio of

6

 

EBITDAR (as defined by GAAP) to Fixed Obligations (as defined by GAAP) of less than 1.20 to 1.0
for any fiscal quarter plus (b) any amounts funded by any of the Loan Parties under operating
deficit guaranties or construction completion guaranties.

  “GAAP” means generally accepted accounting principles in the United States set forth
in the opinions and pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board or such other principles as may be approved by a significant segment of the
accounting profession in the United States, that are applicable to the circumstances as of the date
of determination, consistently applied.

  “Investment” means, as to any Person, any direct or indirect acquisition or investment
by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other
securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or
assumption of debt of, or purchase or other acquisition of any other debt or equity participation
or interest in, another Person, including any partnership or joint venture interest in such other
Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions)
of assets of another Person that constitute a business unit. For purposes of covenant compliance,
the carrying value of such Investment determined in accordance with GAAP.

  “Lifecare Bond” means a surety bond, irrevocable letter of credit or other financial
assurance required by a Governmental Authority as evidence of the financial responsibility of the
owner or operator of a Continuing Care Retirement Community.

  “Loan Parties” means, collectively, Guarantor, each Subsidiary Guarantor (as defined
in the Sunrise Financing Agreement), and each Designated Borrower.

  “Person” means any natural person, corporation, limited liability company, trust,
joint venture, association, company, partnership, Governmental Authority or other entity.

  “Shareholders’ Equity” means, as of any date of determination, consolidated
shareholders’ equity of the Company and its Subsidiaries as of that date determined in accordance
with GAAP.

  “Total Funded Indebtedness” means all indebtedness and guarantees including recourse
and non-recourse mortgage debt, capitalized leases, letters of credit, unsecured debt, guarantees
(including all debt guarantees, but excluding all development completion guarantees and operating
deficit guarantees which will be captured in the limitation on Development Joint Ventures),
purchase obligations treated as liabilities per GAAP, subordinated debt, unfunded obligations
(including total Lifecare Bond obligations at GAAP book value, subject to certain exclusions as
discussed below), all as defined in accordance with GAAP. Total Funded Indebtedness shall not
include security deposits, accounts payable, accrued liabilities, any prepaid rent and any
outstanding balance under the Convertible Debt only to the extent that the Company’s common stock
market price remains at least $2.50 per share above the Convertible Debt conversion price.
Furthermore, certain Lifecare Bond obligations may be excluded from Total Funded Indebtedness to
the extent the Borrower is not obligated to refund these obligations prior to receiving proceeds of
new Lifecare Bonds. Total Funded Indebtedness will be reduced by unrestricted cash balances, cash
equivalents and short-term marketable securities in excess of $50,000,000.

7

 

     10. Financial Statements.

     Guarantor shall provide to Agent, the financial statements of Guarantor more fully described
in Section 7.1 of the Loan Agreement.

     Guarantor also agrees to provide Agent with such other financial information at such other
times as may be reasonably requested by Agent.

     11. Governing Law.

     The provisions of this Agreement shall be construed, interpreted and enforced in accordance
with the laws of the Commonwealth of Virginia as the same may be in effect from time to time.

     12. Consent to Jurisdiction.

     Guarantor irrevocably submits to the jurisdiction of any state or federal court sitting in the
Commonwealth of Virginia over any suit, action, or proceeding arising out of or relating to this
Agreement. Guarantor irrevocably waives, to the fullest extent permitted by law, any objection that
it may now or hereafter have to the laying of the venue of any such suit, action, or proceeding
brought in any such court and any claim that any such suit, action, or proceeding brought in any
such court has been brought in an inconvenient forum. Final judgment in any such suit, action, or
proceeding brought in any such court shall be conclusive and binding upon Guarantor and may be
enforced in any court to whose jurisdiction Guarantor is subject, by a suit upon such judgment
provided that service of process is effected upon Guarantor in a manner specified in this Agreement
or as otherwise permitted by applicable law.

     13. Service of Process.

     Guarantor hereby irrevocably designates and appoints CT Corporation, 4701 Cox Road, Suite
301, Glen Allen, Virginia 23060, as its authorized agent to accept and acknowledge on its behalf
service of any and all process that may be served in any suit, action, or proceeding instituted in
connection with this Agreement in any state or federal court sitting in the Commonwealth of
Virginia. If such agent shall cease so to act, Guarantor shall irrevocably designate and appoint
without delay another such agent in the Commonwealth of Virginia satisfactory to Agent and shall
promptly deliver to Agent evidence in writing of such agent’s acceptance of such appointment and
its agreement that such appointment shall be irrevocable.

     Guarantor hereby consents to process being served in any suit, action, or proceeding
instituted in connection with this Agreement by (a) the mailing of a copy thereof by certified
mail, postage prepaid, return receipt requested, to it at its address designated herein and (b)
serving a copy thereof upon Agent, hereinabove designated and appointed by Guarantor as Guarantor’s
agent for service of process. Guarantor irrevocably agrees that such service shall be deemed in
every respect to be effective service of process in any such suit, action, or proceeding. Nothing
in this Agreement shall affect the right of Agent to serve process in any manner otherwise
permitted by law and nothing in this Agreement will limit the right of Agent otherwise to bring
proceedings against Guarantor, in the courts of any other appropriate jurisdiction or
jurisdictions.

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     14. Waiver of Jury Trial.

     Guarantor and Agent hereby, jointly and severally, waive trial by jury in any action or
proceeding to which Guarantor and Agent may be parties, arising out of or in any way pertaining to
(a) this Agreement, (b) the Loan or (c) the other Financing Documents. It is agreed and understood
that this waiver constitutes a waiver of trial by jury of all claims against all parties to such
actions or proceedings, including claims against parties who are not parties to this Agreement.
This waiver is knowingly, willingly and voluntarily made by Guarantor, and Guarantor hereby
represents and warrants that no representations of fact or opinion have been made by any
individual to induce this waiver of trial by jury or to in any way modify or nullify its effect.
Guarantor further represents and warrants that it has been represented in the signing of this
Agreement and in the making of this waiver by independent legal counsel, selected of its own free
will, and that it has had the opportunity to discuss this waiver with counsel.

     15. Voidable Preference; Fraudulent Conveyance.

     If at any time any payment, or portion thereof, made by, or for the account of, Guarantor on
account of any of the obligations and liabilities hereunder is set aside by any court or trustee
having jurisdiction as a voidable preference or fraudulent conveyance or must otherwise be restored
or returned by Agent under any insolvency, bankruptcy or other federal and/or state laws or as a
result of any dissolution, liquidation or reorganization of Borrower or upon, or as a result of,
the appointment of any receiver, intervenor or conservator of, or trustee or similar officer for,
Borrower or any substantial part of its properties or assets, Guarantor hereby agrees that this
Agreement shall continue and remain in full force and effect or be reinstated, as the case may be,
all as though such payment(s) had not been made.

     16. Notices.

     Notice, demand, request or other communication which either party may desire to give to the
other with respect to this Agreement, shall be deemed to have been properly given if in writing
and delivered by hand, sent by overnight courier or mailed by certified mail, postage prepaid,
addressed as follows:

	 	 	 	 	 
	 

	 	Agent:
	 	Chevy Chase Bank, F.S.B.
	 

	 	 	 	7926 Jones Branch Drive
	 

	 	 	 	McLean, VA 22102
	 

	 	 	 	Attention:     Richard L. Amador
	 

	 	 	 	                     Group Vice President
	 
	 	 	 	 
	 

	 	If to Guarantor, at:
	 	Sunrise Senior Living, Inc.
	 

	 	 	 	c/o Sunrise Senior Living Investments, Inc.
	 

	 	 	 	7902 Westpark Drive
	 

	 	 	 	McLean, Virginia 22102
	 

	 	 	 	Attention:     James S. Pope
	 
	 	 	 	 
	 

	 	and:
	 	Sunrise Senior Living, Inc.
	 

	 	 	 	7902 Westpark Drive
	 

	 	 	 	McLean, Virginia 22102
	 

	 	 	 	Attn:   General Counsel

9

 

	 	 	 	 	 
	 

	 	With a Courtesy Copy to:
	 	Wayne G. Tatusko, Esquire
	 

	 	 	 	 Wayne G. Tatusko, PC
	 

	 	 	 	3016 Williams Drive
	 

	 	 	 	Suite 200
	 

	 	 	 	Fairfax, VA 22031

     Any of the parties hereto may designate a change of address by notice in writing to the other
parties. Whenever in this Agreement the giving of notice by mail or otherwise is required, the
giving of such notice may be waived in writing by the person or persons entitled to receive such
notice.

     17. Remedies Cumulative.

     All rights and remedies afforded to Agent by reason of this Agreement, the Financing
Documents, or by law are separate and cumulative and the exercise of one shall not in any way
limit or prejudice the exercise of any other such rights or remedies. Every right, power and
remedy given by this Agreement to Agent shall be concurrent and may be pursued separately,
successively or together against Guarantor; and each such right, power and remedy may be exercised
from time to time as often as Agent may deem expedient. No delay or omission by Agent in
exercising any such right or remedy shall operate as a waiver thereof. No waiver of any rights and
remedies hereunder, and no modification or amendment hereof, shall be deemed made by Agent unless
in writing and duly signed by Agent. Any such written waiver shall apply only to the particular
instance specified therein and shall not impair the further exercise of such right or remedy or of
any other right or remedy of Agent and no single or partial exercise of any right or remedy
hereunder shall preclude any other or further exercise thereof or any other right or remedy.

     18. Severability.

     If any provision (or any part of any provision) contained in this Agreement shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision (or remaining part of the affected
provision) of this Agreement, but this Agreement shall be construed as if such invalid, illegal or
unenforceable provision (or part thereof) had never been contained herein but only to the extent it
is invalid, illegal or unenforceable.

     19. Successors and Assigns.

     This Agreement shall inure to the benefit of, and be enforceable by, Agent and its successors
and assigns as holder of the Note, and shall be binding upon, and enforceable against, Guarantor
and its successors and assigns.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

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     WITNESS the signature and seal of Guarantor as of the day and year first above written.

	 	 	 	 	 	 	 	 	 
	WITNESS OR ATTEST:	 	SUNRISE SENIOR LIVING, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ Kelly L. Hayden	 	By:	 	/s/ Carl Adams	 	(SEAL)
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Carl Adams	 	 
	 

	 	 	 	Title:
	 	Treasurer	 	 

COMMONWEALTH OF VIRGINIA, COUNTY OF FAIRFAX, TO WIT:

     I HEREBY CERTIFY, that on this 28th day of August, 2007, before me, the undersigned
Notary Public of said Commonwealth, personally appeared Carl Adams, who acknowledged himself to be
the Treasurer of Sunrise Senior Living, Inc., a corporation, known to me (or satisfactorily proven)
to be the person whose name is subscribed to the within instrument, and acknowledged that he
executed the same for the purposes therein contained as the duly authorized Treasurer of said
corporation by signing the name of the corporation by himself as Treasurer.

     WITNESS my hand and Notarial Seal.

	 	 	 	 	 

	

	 	/s/ Marguerite W. Capen
	 	 
	 	Notary Public	 	 
	 		 	 

11

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