Document:

exv10w8

Exhibit 10.8

DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FIXTURE FILING

(Loan A)

This document serves as a Fixture Filing under the District of Columbia Uniform Commercial Code.

Grantor’s Organizational Identification Number is S037833.

     THIS DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FIXTURE FILING is made as of August
28, 2007, by SUNRISE CONNECTICUT AVENUE ASSISTED LIVING, L.L.C., a limited liability company
organized and existing under the laws of the Commonwealth of Virginia (“Grantor”), ALEXANDRA JOHNS
and ELLEN-ELIZABETH LEE, as Trustees either of whom may act (the “Individual Trustees”), and CHEVY
CHASE BANK, F.S.B., a federally chartered savings bank, as Agent (“Beneficiary”).

RECITALS

     A. Grantor, Beneficiary and certain lenders named therein (individually a “Lender” and
collectively, “Lenders”) are parties to a Loan and Security Agreement (Loan A) dated of even date
herewith (as amended, extended, restated, supplemented or otherwise modified from time to time,
the “Loan Agreement”). Pursuant to the Loan Agreement the Lenders have agreed to make a loan
(herein referred to as the “Loan”) to Grantor in the principal amount of $30,000,000. The Loan
will be evidenced by Grantor’s Deed of Trust Notes of even date herewith (as amended, extended,
restated, supplemented or otherwise modified from time to time, herein referred to collectively as
the “Note”).

     B. As a condition precedent to making the Loan to Grantor, Lenders and Beneficiary required
that Grantor secure the payment and performance of all obligations of Grantor arising out of, or
in connection with, the Loan by the execution of this Deed of Trust.

     NOW, THEREFORE, in order to induce Lenders to make the Loan to Grantor, Grantor agrees as
follows:

ARTICLE I

DEFINITIONS, RULES OF CONSTRUCTION

     Section 1.1 Definitions.

     As used in this Deed of Trust, Assignment, Security Agreement and Fixture Filing, the terms
defined in the Preamble and Recitals hereto shall have the respective meanings specified therein,
and the following terms shall have the meanings indicated:

     “Accounts” means all presently existing or hereafter acquired or created accounts, accounts
receivable, 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 the payment of money or other consideration under present or future contracts

 

 

(including, without limitation, all rights to receive the payment of money or other consideration
from, or on behalf of, Medicare or Medicaid, except to the extent prohibited by law, any private
pay patient, and all rights to receive payments under presently existing or hereafter acquired or
created letters of credit), 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 or agreements which gave rise to any or all of the foregoing, 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) given by any person with respect to any of the foregoing, all
rights to receive payment under all admission agreements and all third-party payor contracts
(including Medicare and Medicaid except to the extent prohibited by law), and any and all
depository accounts, except 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.

     “Additions” means any and all alterations, additions, accessions and improvements to property,
substitutions therefor, and renewals and replacements thereof.

     “Casualty” means any act or occurrence of any kind or nature that results in damage, loss or
destruction to the Property.

     “Claim” means any liability, suit, action, claim, demand, loss, expense (including, without
limitation, attorney’s fees) or cost of any kind or nature whatsoever.

     “Condemnation” means any taking of title, of use, or of any other property interest under the
exercise of the power of eminent domain, whether temporarily or permanently, by any Governmental
Authority or by any Person acting under Governmental Authority.

     “Condemnation Awards” means any and all judgments, awards of damages (including, but not
limited to, severance and consequential damages), payments, proceeds, settlements, amounts paid
for a taking in lieu of Condemnation, or other compensation heretofore or hereafter made,
including interest thereon, and the right to receive the same, as a result of, or in connection
with, any Condemnation or threatened Condemnation.

     “Contracts of Sale” means any contracts for the sale of all or any part of the Property or
any interest therein, whether now or hereafter executed, including, without limitation, all of the
Proceeds thereof, any funds deposited thereunder to secure performance by the purchasers of their
obligations and the right, after the occurrence of an Event of Default, to receive and collect all
payments due under any contracts of sale.

     “Deed of Trust” means this Deed of Trust, Assignment, Security Agreement and Fixture Filing
(Loan A) executed by Grantor for the benefit of Beneficiary, as the same may from time to time be
extended, amended, restated, supplemented or otherwise modified.

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     “Default” means an event which, with the giving of Notice or lapse of time, or both, could or
would constitute an Event of Default under the provisions of this Deed of Trust.

     “Encumbrance” means any Lien, easement, right of way, roadway (public or private), common
area, condominium regime, cooperative housing regime, restrictive covenant, Lease or other matter
of any nature that would affect title to the Property.

     “Environmental Assessment” means a report of an environmental assessment of the Property of
such scope (including but not limited to the taking of soil borings and air and groundwater
samples and other above and below ground testing) as Beneficiary may request, prepared by a
recognized environmental consulting firm acceptable to Beneficiary in all respects and sufficient
in detail to comply with Beneficiary’s established guidelines and the guidelines of any
appropriate Governmental Authority.

     “Environmental Requirement” means any Law or other agreement or restriction, whether public or
private (including but not limited to any condition or requirement imposed by any insurer or surety
company), now existing or hereafter created, issued or enacted and all amendments thereto,
modifications thereof and substitutions therefor, which in any way pertains to human health, safety
or welfare, Hazardous Materials, Hazardous Materials Contamination or the environment (including
but not limited to ground, air, water or noise pollution or contamination, and underground or above
ground tanks) and shall include without limitation, the Resource Conservation and Recovery Act (the
Solid Waste Disposal Act), 42 U.S.C. § 6901 et seq.; the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et
seq. (“CERCLA”), as amended by the Superfund Amendments and Reauthorization Act of 1986
(“SARA”); the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq.; the
Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Clean Air Act,
42 U.S.C. § 7401 et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601
et seq.; and the Safe Drinking Water Act, 42 U.S.C. § 300f et seq.

     “Equipment” means all building materials, fixtures, equipment and other tangible personal
property of every kind and nature whatsoever (other than consumable goods, and trade fixtures or
other personal property owned by tenants occupying the Improvements), now or hereafter located or
contained in or upon, or attached to, the Real Property, whether now owned or hereafter acquired
by Grantor, together with all Additions to the Equipment and Proceeds thereof.

     “Event of Default” means the occurrence of any one or more of the events specified in ARTICLE
VI (Events of Default) and the continuance of such event beyond the applicable cure periods, if
any, set forth in ARTICLE VI.

     “Expenses” means all costs and expenses of any nature whatsoever incurred at any time and
from time to time (whether before or after an Event of Default) by Beneficiary or the Trustees in
exercising or enforcing any rights, powers and remedies provided in this Deed of Trust or any of
the other Financing Documents, including, without limitation, reasonable attorney’s fees, court
costs, receiver’s fees, management fees and costs incurred in the repair, maintenance and
operation of, or taking possession of, or selling, the Property.

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     “Facility” means an assisted living facility located on the Property and known as “Sunrise of
Connecticut Avenue.”

     “Financing Documents” means this Deed of Trust, the Note, the Loan Agreement, the Guaranty
and any and all other documents which Grantor, Guarantor or any other party or parties have
executed and delivered, or may hereafter execute and deliver, to evidence, secure or guarantee all
or any portion of the Obligations, as the same may from time to time be extended, amended,
restated or substituted from time to time.

     “Governmental Authority” means any governmental or quasi-governmental entity, including,
without limitation, any department, commission, board, bureau, agency, administration, service or
other instrumentality of any governmental entity.

     “Guarantor” means Sunrise Senior Living, Inc. and its successors and assigns.

     “Guaranty” means the Guaranty of Payment (Loan A) of even date hereof executed by Guarantor
for the benefit of the Agent and Lenders, as the same may from time to time be extended, amended,
restated, supplemented or otherwise modified.

     “Hazardous Materials” means any and all hazardous or toxic substances, wastes or materials
which, because of their quantity, concentration, or physical, chemical or infectious
characteristics, may cause or pose a present or potential hazard or nuisance to human health,
safety or welfare or to the environment when used, treated, stored, disposed of, generated,
manufactured, transported or otherwise handled, including without limitation, any substance, waste
or material which is or contains asbestos, radon, polychlorinated biphenyls, urea formaldehyde,
explosives, radioactive materials or petroleum products.

     “Hazardous Materials Contamination” means the contamination (whether presently existing or
occurring after the date of this 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 this Deed of Trust) emanating from the Property.

     “Improvements” means the Facility and all other buildings, structures and other improvements
now or hereafter existing, erected or placed on the Land, or in any way used in connection with
the use, enjoyment, occupancy or operation of the Land.

     “Land” means the land described in Exhibit A attached hereto, together with (a) all
estates, title interests, title reversion rights, increases, issues, profits, rights of way or
uses, additions, accretions, servitudes, gaps, gores, liberties, privileges, water rights, water
courses, alleys, streets, passages, ways, vaults, licenses, tenements, franchises, hereditaments,
appurtenances, easements and other rights, now or hereafter owned by Grantor, as lessee, and
belonging or appertaining to the Land, (b) all Claims whatsoever of Grantor with respect to the
Land, either in law or in equity, in possession or in expectancy, and (c) all estate, right, title
and interest of Grantor in and to all streets, roads and public places, opened or proposed, now or
hereafter adjoining or appertaining to, the Land.

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     “Laws” means federal, state and local laws, statutes, rules, ordinances, regulations, codes,
licenses, authorizations, decisions, injunctions, interpretations, orders or decrees of any court
or other Governmental Authority having jurisdiction as may be in effect from time to time.

     “Leases” means all leases, excluding Resident Agreements, license agreements and other
occupancy or use agreements (whether oral or written), now or hereafter existing, which cover or
relate to the Property, together with all options therefor, amendments thereto and renewals,
modifications and guarantees thereof, including, without limitation, any cash or securities
deposited under the Leases to secure performance by the tenants of their obligations under the
Leases, whether such cash or securities are to be held until the expiration of the terms of the
Leases or applied to one or more of the installments of rent coming due.

     “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 and/or operation of the Property, accreditation of the Property, 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 reimbursement agreements now
or at any time hereafter existing for the benefit of the Borrower), 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, 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, including, without limitation, any conditional sale or other
title retention agreement, 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 Agreement” means the Loan and Security Agreement (Loan A) of even date herewith among
Grantor, Lenders and Beneficiary which sets forth, among other things, the terms and conditions
upon which the Loan proceeds will be disbursed, as the same may from time to time be extended,
amended, restated, supplemented or otherwise modified.

     “Manager” means Sunrise Senior Living Management, Inc., a Virginia corporation, and its
successors and assigns, in its capacity as Manager and operator of the Facility.

     “Material Lease” means a Lease that generates $30,000 per year or more in revenue.

     “Net
Proceeds”, when used with respect to any Condemnation Awards or insurance proceeds allocable to the
Property, means the gross proceeds from any Casualty or Condemnation remaining after payment of all
expenses (including attorneys’ fees) incurred in the collection of such gross proceeds.

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

     “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 as follows:

	 	 	 
	Beneficiary:

	 	Chevy Chase Bank, F.S.B.,
	 

	 	7926 Jones Branch Drive
	 

	 	McLean, VA 22102
	 

	 	Attn: Richard L. Amador
	 

	 	          Group Vice President
	 
	 	 
	and:

	 	MB Financial, N.A.
	 

	 	6111 North River Road
	 

	 	Rosemont, Illinois 60018
	 

	 	Attn: Jack H. Sharp
	 

	 	         Senior Vice President
	 
	 	 
	Grantor:

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

	 	c/o Sunrise Senior Living, Inc.
	 

	 	7902 Westpark Drive
	 

	 	McLean, Virginia 22102
	 

	 	Attn: James S. Pope
	 
	 	 
	Guarantor:

	 	Sunrise Senior Living, Inc.
	 

	 	7902 Westpark Drive
	 

	 	McLean, Virginia 22102
	 

	 	Attention: General Counsel
	 
	 	 
	With a Courtesy Copy to:

	 	Wayne G. Tatusko, Esquire
	 

	 	Wayne G. Tatusko, PC
	 

	 	3016 Williams Drive
	 

	 	Suite 200
	 

	 	Fairfax, VA 22031
	 
	 	 
	Trustees:

	 	c/o Chevy Chase Bank, F.S.B.,
	 

	 	7501 Wisconsin Avenue
	 

	 	Bethesda, MD 20814

or at such other address as any party shall have notified the others of in the manner set forth in
this definition.

     “Obligations” means all present and future debts, obligations and liabilities of Grantor to
Beneficiary and/or the Trustees arising pursuant to, and/or on account of, the provisions of this
Deed of Trust, the Note, the Guaranty, any Swap Contract and any of the other Financing Documents,
including, without limitation, the obligations to (a) pay all principal (including, again without
limitation, any principal advanced after the date of this Deed of Trust and any principal

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that is repaid and readvanced), interest, late charges and prepayment premiums (if any) due at any
time under the Note, and (b) pay all Expenses, indemnification payments and other sums due at any
time under this Deed of Trust together with interest thereon as provided in Section 4.19
(Reimbursement; Interest), and (c) perform, observe and comply with all of the terms, covenants and
conditions, expressed or implied, with which Grantor and/or Guarantor is required by this Deed of
Trust and any of the other Financing Documents, to perform, observe or comply.

     “Operating Agreements and Management Contracts” means any and all contracts and agreements
previously, now or at any time hereafter entered into by Grantor and/or Manager 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.

     “Permitted Encumbrances” means (a) the Encumbrances set forth in the Commitment for Title
Insurance No. NCS-311032-DC72 issued by First American Title Insurance Company and furnished to
Beneficiary in connection with this Deed of Trust, as updated to the date of this Deed of Trust,
(b) this Deed of Trust, (c) any Leases so long as such Leases are subject and subordinate to this
Deed of Trust, (d) liens for Property Assessments which are either (i) not delinquent, or (ii)
being contested in accordance with the provisions of Section 4.20 (Permitted Contests) and (e) a
second lien Deed of Trust, Assignment, Security Agreement and Fixture Filing of even date herewith
granted by Grantor to Trustees to secure Loan B (as defined in the Loan Agreement).

     “Person” means 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.

     “Personalty” means all of Grantor’s interest in personal property of any kind or nature
whatsoever, whether tangible or intangible and whether now owned or hereafter acquired, which is
used in the construction of, or is placed upon, or is derived from or used in connection with the
maintenance, use, occupancy or enjoyment of, the Property, including, without limitation, (a) the
Equipment, (b) the Accounts, (c) all Licenses and all Operating Agreements and Management Contracts
(provided all of such agreements with non-affiliated parties that are for more than one (1) year in
duration shall be subordinate to this Deed of Trust, and Beneficiary shall have no responsibility
for the performance of Grantor’s obligations thereunder), and (d) all plans and specifications,
contracts and subcontracts for the construction or repair of the Improvements, sewer and water
taps, allocations and agreements for utilities, bonds, permits, licenses, guarantees, warranties,
causes of action, judgments, Claims, profits, security deposits, utility deposits, refunds of
fees or deposits paid to any Governmental Authority, letters of credit and policies of
insurance, together with all Additions to the Personally and Proceeds thereof.

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     “Proceeds”, when used with respect to any of the collateral described in this Deed of Trust,
means all proceeds within the meaning of the Uniform Commercial Code of the State and shall also
include the proceeds of any and all insurance policies.

     “Property” means the Land, the Improvements and the Personalty, and all Additions to, and
Proceeds of, all of the foregoing.

     “Property Assessments” means all taxes, payments in lieu of taxes, water rents, sewer rents,
ground rents, assessments, condominium charges, maintenance charges and other governmental or
municipal or public or private dues, charges and levies and any Liens (including federal tax liens)
which are or may be levied, imposed or assessed upon the Property or any part thereof, or upon any
Leases or any Rents, whether levied directly or indirectly or as excise taxes, as income taxes, or
otherwise.

     “Real Property” means the Land and the Improvements, and all Additions to, and Proceeds of,
each of the foregoing.

     “Reimbursement Rate” means the Post Default Rate as defined in the Loan Agreement.

     “Rents”
means Grantor’s right to any of the rents, royalties, issues, profits, revenues, earnings, income
and other benefits of the Property, or arising from the use or enjoyment of the Property, or from
any Lease or other use, or occupancy pertaining to the Property.

     “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 Grantor or Manager
pursuant to which Grantor and/or Manager 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.

     “State” means the District of Columbia.

     “Swap Contract” means any document, instrument or agreement between Grantor and Beneficiary or
any affiliate of Beneficiary, 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, which at any time may be assessed, levied, confirmed or imposed on
Grantor or on any of its properties or assets or any part thereof or in respect of any of its
franchises, businesses, income or profits.

     “Transfer” means any direct or indirect sale, assignment, conveyance or transfer, including,
without limitation, any contract or agreement to sell, assign, convey or transfer, whether made
with or without consideration.

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     “Uniform Commercial Code” means the Uniform Commercial Code as adopted by the State, as
amended.

     “Trustees” means the Individual Trustees or their successors in trust who may be acting under
and pursuant to this Deed of Trust from time to time.

     Section 1.2 Rules of Construction.

     The words “hereof”, “herein”, “hereunder”, “hereto”, and other words of similar import refer
to this Deed of Trust in its entirety. The terms “agree” and “agreements” mean and include
“covenant” and “covenants”. The headings of this Deed of Trust are for convenience only and shall
not define or limit the provisions hereof. All references (a) made in the neuter, masculine or
feminine gender shall be deemed to have been made in all such genders, (b) made in the singular or
plural number shall be deemed to have been made, respectively, in the plural or singular number as
well, (c) to the Land, Improvements, Personalty, Real Property or Property shall mean all or any
portion of each of the foregoing, respectively, and (d) to Section numbers are to the respective
Sections contained in this Deed of Trust unless expressly indicated otherwise. Any term used or
defined in the Uniform Commercial Code of the State, as in effect from time to time, which is not
defined in this Deed of Trust has the meaning given to that term in the Uniform Commercial Code of
the State, as in effect from time to time, when used in this Deed of Trust. However, if a term is
defined in Article 9 of the Uniform Commercial Code of the State differently than in another
Article of the Uniform Commercial Code of the State, the term has the meaning specified in Article
9.

ARTICLE II

GRANTING CLAUSES; CONDITION OF GRANT

     In order to secure the prompt payment and performance of the Obligations, Grantor (a) grants,
bargains, sells and conveys the Real Property unto the Trustees in trust for the benefit of
Beneficiary, to have and to hold the Real Property unto the Trustees in fee simple forever;
provided that, Grantor may retain possession of the Real Property until the occurrence of an Event
of Default; and (b) grants Beneficiary a lien on, and security interest in, the Personalty; and (c)
unconditionally and absolutely assigns the Leases and Rents to Beneficiary (but subject to the
license for collection of Rents described in Section 4.14(b) (Leases)); and (d) assigns to, and
grants Beneficiary a security interest in, any Contracts of Sale; and (e) assigns to Beneficiary
all Condemnation Awards and any insurance proceeds payable with respect to any Casualty. If and
when Grantor has paid and performed all of the Obligations, the Trustees, upon request by
Beneficiary, will provide a release of this Deed of Trust to Grantor. Grantor shall be responsible
for the recordation of such release and payment of any recording costs.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

     Grantor makes the following representations and warranties to Beneficiary:

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     Section 3.1 Organization, Power and Authority of Grantor; Financing Documents.

     Grantor (a) is a limited liability company duly organized, and existing and in good standing
under the laws of the jurisdiction in which it is organized, and is duly qualified to do business
and in good standing in the State and in any other state in which Grantor conducts business, and
(b) has the power, authority and legal right to own its property and carry on the business now
being conducted by it and to engage in the transactions contemplated by the Financing Documents.
The execution and delivery of, and the carrying out of the transactions contemplated by, the
Financing Documents executed by Grantor, and the performance and observance of the terms and
conditions of such Financing Documents, have been duly authorized by all necessary action of
Grantor. The Financing Documents to which Grantor is a party constitute the valid and legally
binding obligations of Grantor and are fully enforceable against Grantor in accordance with their
respective terms.

     Section 3.2 Other Documents; Laws.

     The execution and performance of the Financing Documents executed by Grantor and the
consummation of the transactions contemplated thereby will not conflict with, result in any breach
of, or constitute a default under the operating agreement of Grantor, or any contract, agreement,
document or other instrument to which Grantor is a party or by which Grantor may be bound or
affected, and do not and will not violate or contravene any Law to which Grantor is subject.

     Section 3.3 Taxes.

     Grantor has filed all federal, state, county and municipal Tax returns required to have been
filed by Grantor and has paid all Taxes which have become due pursuant to such returns or pursuant
to any Tax assessments received by Grantor.

     Section 3.4 Legal Actions.

     There are no (a) Claims pending or, to the best of Grantor’s knowledge and belief, threatened,
against or affecting Grantor, Grantor’s business or the Property, or (b) investigations at law or
in equity, before or by any court or Governmental Authority, pending or, to the best of Grantor’s
knowledge and belief, threatened, against or affecting Grantor, Grantor’s business or the Property.
Grantor is not in default with respect to any order, writ, injunction, decree or demand of any
court or any Governmental Authority affecting Grantor or the Property.

     Section 3.5 Nature of Loan; Usury; Disclosures.

     Grantor is a business or commercial organization, and the Loan is being made solely for
business or investment purposes. The rate of interest charged on the Loan does 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.

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     Section 3.6 Trade Names.

     Grantor conducts its business solely under the name set forth in the Preamble to this Deed of
Trust and makes use of no trade names in connection therewith, unless such trade names have been
previously disclosed to Beneficiary in writing.

     Section 3.7 Warranty of Title.

     Grantor is (a) the owner of the fee simple legal title to the Real Property, (b) except for
the Permitted Encumbrances, the owner of all of the beneficial and/or equitable interest in and to
the Real Property and (c) lawfully seized and possessed of the Real Property. Grantor has the
right and authority to convey the Real Property and does hereby warrant specially, and agrees to
defend, the Real Property and the title thereto, whether now owned or hereafter acquired, against
all Claims by any Person claiming by, through, or under Grantor. The Real Property is subject to no
Encumbrances other than the Permitted Encumbrances.

     Section 3.8 Property Assessments.

     The Real Property is assessed for purposes of Property Assessments as a separate and distinct
parcel from any other property, such that the Real Property shall never become subject to the Lien
of any Property Assessments levied or assessed against any property other than the Real Property.

     Section 3.9 Independence of the Real Property.

     No building or other improvements on property not covered by this Deed of Trust rely on the
Real Property or any interest therein to fulfill any requirement of any Governmental Authority for
the existence of such property, building or improvements; and none of the Real Property relies, or
will rely, on any property not covered by this Deed of Trust or any interest therein to fulfill any
requirement of any Governmental Authority. The Real Property has been properly subdivided from all
other property in accordance with the requirements of any applicable Governmental Authorities.

     Section 3.10 Existing Improvements.

     The existing Improvements, if any, were constructed, and are being maintained, in accordance
with all applicable Laws, including, without limitation, zoning Laws.

     Section 3.11 Personalty.

     Grantor has good title to the Equipment, and the Personalty is not subject to any Encumbrance
other than the Permitted Encumbrances.

     Section 3.12 Leases, Rents, Contracts of Sale.

     The Leases, Rents and Contracts of Sale are not subject to any Encumbrance other than the
Permitted Encumbrances.

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     Section 3.13 Presence of Hazardous Materials or Hazardous Materials
Contamination; Compliance with Environmental Requirements.

     To the best of Grantor’s knowledge and belief, (a) no Hazardous Materials are currently
located on the Property, nor is the Property affected by any Hazardous Materials Contamination, (b)
the Property has never been used as a manufacturing, storage, treatment, processing, recycling or
disposal site for Hazardous Materials, and (c) no property in the vicinity of the Real Property has
ever been used as a manufacturing, storage, treatment, processing, recycling or disposal site for
Hazardous Materials, nor is any such property affected by Hazardous Materials Contamination. The
present condition and uses of, and activities on, the Property do not violate any Environmental
Requirement and the uses of the Property which Grantor and each tenant and subtenant, if any,
intend in the future to make of the Property comply and will comply with all applicable
Environmental Requirements. Neither Grantor, nor to Grantor’s knowledge, any tenant or subtenant,
has obtained or is required to obtain any permit or other authorization to construct, occupy,
operate, use or conduct any activity on, the Property by reason of any Environmental Requirement.
Grantor has received no notice, and is not aware, of any Claim involving a violation of any
Environmental Requirement with respect to the Property or any parcel in the vicinity of the Real
Property or any operation conducted on the Property or on any parcel in the vicinity of the Real
Property. There is no Environmental Requirement which requires any work, repair, construction,
capital expenditure, or other remedial work of any nature whatsoever to be undertaken with respect
to the Property.

     Section 3.14 Financial Statements.

     The financial statements heretofore delivered by Grantor and any other party or parties to
Beneficiary are true and correct in all respects, have been prepared in accordance with generally
accepted accounting principles consistently applied, and fairly present the respective financial
conditions of the subjects thereof as of the respective dates thereof. No material adverse change
has occurred in the financial conditions reflected therein since the respective dates thereof and
no material additional liabilities have been incurred by Grantor or any such other party or parties
since the date thereof other than the borrowings contemplated herein or as approved in writing by
Beneficiary.

ARTICLE IV

AFFIRMATIVE COVENANTS

     Section 4.1 Obligations.

     Grantor agrees to promptly pay and/or perform all of the Obligations, time being of the
essence in each case.

     Section 4.2 Insurance.

     Grantor shall maintain the following insurance at its sole cost and expense:

               (a) Insurance against Casualty to the Property under a policy or policies covering such risks
as are ordinarily insured against by similar businesses, but in any event including fire,
lightning, windstorm, hail, explosion, riot, riot attending a strike, civil commotion, damage from
aircraft, smoke, vandalism, malicious mischief and acts of terrorism. Unless

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otherwise agreed in writing by Beneficiary, such insurance shall be for the full replacement cost
of the Property. The deductible amount under such policy or policies shall not exceed $25,000. 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 replacement cost” means the actual replacement cost of the Property (excluding
foundation and excavation costs and costs of underground flues, pipes, drains and other uninsurable
items). The “full replacement cost” shall be determined from time to time at the request of
Beneficiary (but not more frequently than once every three (3) years) by a third party appraiser or
appraisal company or one of the insurers, who shall be selected and paid for by Grantor but subject
to Beneficiary’s approval. A combination of primary and umbrella policies can be used to satisfy
the limit requirements.

               (b) Comprehensive general public liability insurance for bodily injuries to Persons and damage
to property, in limits of not less than $2,000,000 for any one occurrence and $5,000,000 for the
aggregate of all occurrences during any given annual policy period. Such insurance shall name
Beneficiary as an additional insured.

               (c) Workers’ compensation insurance for all employees of Grantor in such amount as is required
by Law.

               (d) During any period of construction upon the Property, Grantor shall maintain, or cause
others to maintain, builder’s risk insurance (non-reporting form) of the type customarily carried
in the case of similar construction for the full replacement cost of work in place and materials
stored at or upon the Property.

               (e) If at any time the Property is in an area that has been identified as having special flood
and mudslide hazards, and flood insurance is available in such area, Grantor shall purchase and
maintain a flood insurance policy in form and amount acceptable to Beneficiary. In the event that
the Property is not in an area having special flood and mudslide hazards, Grantor shall deliver to
Beneficiary upon request evidence satisfactory to Beneficiary stating that the Property is not in
such a flood or mudslide hazard area.

               (f) Business interruption insurance in an amount acceptable to Beneficiary.

               (g) Grantor will obtain and keep in force such other and further insurance as may be required
from time to time by Beneficiary in order to comply with regular requirements and practices of
Beneficiary in similar transactions.

               (h) To the extent that health care professionals are employed by Manager, medical liability,
malpractice and other health care professional liability insurance protecting Manager, as the case
may be, against claims arising from the professional services performed by Manager, as the case may
be, with limits of (A) not less than One Million Dollars
($1,000,000) with respect to bodily injury or death for each person or occurrence, and (B) not less
than Three Million Dollars ($3,000,000) 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 Five
Million Dollars ($5,000,000).

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               (i) Each policy of insurance shall (i) be issued by one or more recognized, financially sound
and responsible insurance companies, (ii) with respect to the insurance described under the
preceding subsections (a), (d), (e) and (f), have attached thereto standard non-contributing,
non-reporting mortgagee clauses in favor of and entitling Beneficiary without contribution to
collect any and all proceeds payable under such insurance, (iii) provide that such policy shall not
be canceled or modified without at least thirty (30) days prior written notice to Beneficiary, and
(iv) provide that any loss otherwise payable thereunder shall be payable notwithstanding any act or
negligence of Grantor 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 Section 4.5 (Property Assessments; Escrow), Grantor shall promptly pay all premiums
when due on such insurance and, not less than thirty (30) days prior to the expiration dates of
each such policy, Grantor will deliver to Beneficiary evidence of payment satisfactory to
Beneficiary. Grantor will within five (5) days give Beneficiary Notice of any cancellation of, or
change in, any insurance policy. Beneficiary 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 4.3 Adjustment of Condemnation and Insurance Claims.

     Grantor shall give prompt Notice to Beneficiary of any Casualty or any Condemnation or
threatened written Condemnation. Beneficiary is authorized, at its sole option, to commence,
appear in and prosecute, in its own or Grantor’s name, any action or proceeding relating to any
Condemnation or Casualty, and to settle or compromise any Claim in connection therewith. In such
case, Beneficiary may also deduct from any payment all of its Expenses. Beneficiary agrees,
however, that, so long as no Event of Default has occurred and is continuing, it will not settle or
compromise any such Claim without the prior written consent of Grantor, which consent shall not be
unreasonably withheld or delayed. If Beneficiary elects not to adjust a Claim, Grantor agrees to
promptly pursue the settlement and compromise of the Claim subject to Beneficiary’s approval that
will not be unreasonably withheld or delayed. If, prior to the receipt by
Beneficiary of any Condemnation Award or insurance proceeds, the Property shall have been sold
pursuant to the provisions of Section 7.2 (Foreclosure), Beneficiary shall have the right to
receive such funds to the extent of (a) any deficiency found to be due upon such sale with interest
thereon (whether or not a deficiency judgment on this Deed of Trust shall have been sought or
recovered or denied), and (b) necessary to reimburse Beneficiary for its Expenses. Grantor agrees
to execute and deliver from time to time, upon the request of Beneficiary, such further instruments
or documents as may be requested by Beneficiary to confirm the grant and assignment to Beneficiary
of any Condemnation Awards or insurance proceeds.

     Section 4.4 Application of Net Proceeds.

     Net Proceeds must be applied to either (a) the payment of the Obligations, or (b) the
restoration of the Property. If either an Event of Default has occurred or the cost to repair or
restore the Property exceeds $3,000,000, Beneficiary shall determine, in its sole discretion, the
manner in which Net Proceeds are to be applied. If no Event of Default has occurred and the cost to
repair or restore the Property is $3,000,000 or less, Grantor shall determine the manner in which
Net Proceeds are to be applied. In the event that, and to the extent that, Net Proceeds are

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to be applied to the restoration of the Property, each of the following conditions must also be met
and complied with if and to the extent required by Beneficiary:

               (a) An escrow account shall have been established with Beneficiary composed of Net Proceeds,
and, if necessary, additional deposits made by Grantor, which, in the sole judgment of Beneficiary,
is sufficient to restore the Property to its use, value and condition immediately prior to the
Casualty or Condemnation. Beneficiary shall be entitled, at the expense of Grantor, to consult such
professionals as Beneficiary may deem necessary, in its sole discretion, to determine the total
costs of restoring the Property. Interest will be paid on funds in the escrow account. Grantor
hereby assigns to, and grants Beneficiary a security interest in, such escrow account and the funds
therein to secure the payment and performance of the Obligations.

               (b) Either:

               (i) All Material Leases must continue in full force and effect (subject to rent
abatement during restoration as may be provided in the Material Leases) or, if terminated,
the terminated Material Leases must have been replaced with Material Leases of equal
quality in the reasonable judgment of Beneficiary. Any tenant having the right to terminate
its Material Lease due to the Casualty or Condemnation, and which has not exercised that
right, shall have confirmed in writing to Beneficiary its irrevocable waiver of such
termination right, or

               (ii) Proceeds from business interruption insurance must be available to Grantor in
such amounts as Beneficiary, in its reasonable judgment, considers sufficient to pay the
amortization under the Loan, and all Property Assessments, insurance premiums and other
sums becoming due from Grantor pursuant to this Deed of Trust during the time required for
restoration.

               (c) All restoration will be conducted under the supervision of an architect or engineer, or
both, selected and paid for by Grantor and approved in advance by Beneficiary, and by a general
contractor who shall be approved by Beneficiary and shall have executed a fixed price contract.

               (d) The restoration will be performed pursuant to the original plans and specifications
approved by Beneficiary.

               (e) If required by Beneficiary at its sole option, the contractor or contractors responsible
for the restoration shall have obtained payment and performance bonds from a corporate surety
acceptable to Beneficiary and naming Beneficiary as dual obligee.

               (f) Grantor shall have provided Beneficiary with reasonably satisfactory evidence that there
has been no adverse change in the economic viability of the Property since the date of this Deed of
Trust, such evidence to include, among other things, an appraisal and market study prepared by a
firm or firms acceptable to Beneficiary, but at Grantor’s expense.

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If any of the foregoing conditions are not satisfied, Beneficiary may, in its sole discretion,
apply Net Proceeds to the payment of the Obligations.

     If applied to restoration, Net Proceeds (and any other funds required to be deposited with
Beneficiary) shall be disbursed from time to time in accordance with the terms and conditions of
the construction loan agreement most commonly used by Beneficiary or other regionally recognized
construction lenders, at the time of the Casualty or Condemnation for major commercial construction
loans, and subject also to the following conditions (which shall control in the event of any
conflict with the provisions of such construction loan agreement):

               (a) Restoration shall commence within sixty (60) days following receipt of the Net Proceeds
by Beneficiary or such additional time as may be required by Grantor in obtaining the necessary
licenses, permits or approvals from the applicable Governmental Authorities provided Grantor has
and continues to diligently pursue obtaining the necessary licenses, permits and approvals, and
shall be completed within such time as may be determined by Beneficiary in view of the extent of
the Casualty or Condemnation but, in any event, shall be completed within a reasonable period after
the date the Net Proceeds are received.

               (b) At the time of each disbursement,

               (i) (1) no Leases (if any) shall have been terminated which either singularly or in
the aggregate affect more than ten percent (10%) of the leasable area of the Property
unless the same have been replaced with Leases of equal quality, in the reasonable judgment
of Beneficiary, and (2) no Default shall have occurred, or

               (ii) Proceeds from business interruption insurance or other moneys of Grantor must be
available to Grantor in such amounts as Beneficiary, in its reasonable judgment, considers
sufficient to pay the amortization under the Loan and all Property Assessments, insurance
premiums and other sums becoming due from Grantor pursuant to this Deed of Trust during the
time required for restoration.

               (c) Restoration shall be performed in accordance with the requirements of Section 5.4
(Additional Improvements).

               (d) With respect to each disbursement and accompanying each request therefor, there shall be
delivered to Beneficiary (i) a certificate addressed to Beneficiary from the architect or engineer
supervising the restoration stating that such disbursement is to pay the cost of restoration not
paid previously by any prior disbursement, that all restoration completed to the date of such
certificate has been completed in accordance with applicable Laws and the approved plans and
specifications, and that the amount of such disbursement, together with all other disbursements,
does not exceed ninety percent (90%) of the requisition for direct construction costs until such
time as fifty percent (50%) of the restoration has been completed, then such disbursements shall
not exceed ninety-five percent (95%) of the requisition for direct construction costs, and (ii)
evidence satisfactory to Beneficiary that all Claims then existing for

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labor, services and materials have been paid in full or will be paid in full from the proceeds of
the disbursement requested.

               (e) The final holdback shall be disbursed only upon delivery to Beneficiary, in addition to
the items required in paragraph (d) above, of the following:

               (i) Final waivers of Liens from all contractors and subcontractors.

               (ii) A certificate of the architect or engineer stating that the restoration has been
completed in a good and workmanlike manner, in accordance with the plans and specification
approved by Beneficiary and in accordance with all applicable Laws.

               (iii) An estoppel affidavit from each tenant occupying or leasing space under a
Material Lease in the Property stating that its Lease is in full force and effect.

               (f) Immediately upon the occurrence of any Event of Default, Beneficiary may apply Net
Proceeds and any other sums deposited with Beneficiary to the repayment of the Obligations.

     Section 4.5 Property Assessments; Escrow.

               (a) Unless an escrow account for payment of Property Assessments is created pursuant to
subsection (c) below, Grantor will (i) promptly pay in full and discharge all Property Assessments,
and (ii) exhibit to Beneficiary, upon demand, the receipted bills for such Property Assessments
prior to the day upon which the same shall become delinquent. Property Assessments shall be
considered delinquent as of the first day any interest or penalties commence to accrue thereon.

               (b) In the event of the passage of any Law subsequent to the date of this Deed of Trust in any
manner changing or modifying the Laws now in force governing the taxation of deeds of trust or
debts secured by deeds of trust or the manner of collecting any such taxes so as to adversely
affect Beneficiary (including, without limitation, a requirement that internal revenue stamps be
affixed to this Deed of Trust or any of the other Financing Documents), Grantor will promptly pay
any such tax. If Grantor fails to make such prompt payment, or if any Law prohibits Grantor from
making such payment or would penalize Beneficiary if Grantor makes such payment, then the entire
unpaid balance of the Obligations shall, without Notice, immediately become due and payable at the
sole option of Beneficiary. In no event, however, shall any
income taxes of Beneficiary or franchise taxes of Beneficiary measured by income, or taxes in
lieu of such income taxes or franchise taxes, be required to be paid by Grantor.

               (c) At any time following the occurrence and during the continuance of an Event of Default,
Beneficiary reserves the right to require Grantor to pay to Beneficiary monthly, on any date
selected by Beneficiary, such amount as Beneficiary from time to time estimates will generate
sufficient funds to pay all Property Assessments and premiums for

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the insurance required by Section 4.2 (Insurance) prior to the date such Property Assessments or
insurance premiums next become due. Beneficiary’s estimates shall be based on the amounts actually
payable or, if unknown, on the amounts actually paid for the year preceding that for which such
payments are being made. Any deficiencies shall be promptly paid by Grantor to Beneficiary on
demand. Grantor shall transmit or cause to be transmitted bills for the Property Assessments and
insurance premiums to Beneficiary as soon as received by Grantor. When Beneficiary has received
from Grantor, or on its account, funds sufficient to pay the same, Beneficiary shall, except as
provided below following an Event of Default, pay such bills. Payments for such purposes may be
made by Beneficiary at its discretion even though subsequent owners of the Property may benefit
thereby. Upon foreclosure or release of this Deed of Trust or, to the extent permitted by Law, upon
the occurrence of an Event of Default, Beneficiary may apply any sums so deposited to the payment
of the Obligations. If from time to time funds are accumulated under the terms of this Section in
excess of the amount needed to pay the Property Assessments and such insurance premiums, Grantor at
least annually shall be given the option of (i) receiving a refund of the excess funds, (ii)
applying the excess funds to the payment of the Obligations (provided prepayment is then permitted
without penalty pursuant to the Note), or (iii) permitting the excess funds to remain in the escrow
account established pursuant to this Section. If Grantor fails to give Notice to Beneficiary of its
intent with respect to the application of the excess funds as provided in this Section within sixty
(60) days from the date Beneficiary mailed notice of the accumulation of the excess funds,
Beneficiary shall promptly return the excess funds to Grantor. Within sixty (60) days after
receipt from Grantor of a Notice requesting a refund, Beneficiary shall also return excess funds to
Grantor.

     Section 4.6 Compliance with Laws.

     Grantor will comply with and not violate, and cause to be complied with and not violated, all
present and future Laws applicable to the Property and its use and operation.

     Section 4.7 Maintenance and Repair of the Property.

     Grantor, at Grantor’s sole expense, will (a) keep and maintain the Improvements and the
Equipment in good condition, working order and repair, and (b) make all necessary or appropriate
repairs and Additions to the Improvements and Equipment, so that each part of the Improvements and
all of the Equipment shall at all times be in good condition and fit and proper for the respective
purposes for which they were originally intended, erected, or installed.

     Section 4.8 Additions to Security.

     All right, title and interest of Grantor in and to all Improvements and Additions hereafter
constructed or placed on the Property and in and to any Equipment hereafter acquired shall, without
any further deed of trust, conveyance, assignment or other act by Grantor, become subject to the
Lien of this Deed of Trust as fully and completely, and
with the same effect, as though now owned by Grantor and specifically described in the
granting clauses hereof. Grantor agrees, however, to execute and deliver to the Trustees and/or
Beneficiary such further documents as may be required pursuant to Section 9.2 (Further Assurances).

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     Section 4.9 Inspection.

     Upon reasonable advance notice thereof by Beneficiary, Grantor will permit Beneficiary, or any
Person authorized by Beneficiary, to enter and make inspections of the Property at all reasonable
times and as often as may be requested by Beneficiary.

     Section 4.10 Management.

     Grantor shall at all times provide for the competent and responsible management and operation
of the Property. Each management contract affecting the Property must be approved in writing by
Beneficiary prior to the execution of the same.

     Section 4.11 Books and Records.

     Grantor will keep and maintain full and accurate records and books administered in accordance
with generally accepted accounting principles, consistently applied, showing in detail the earnings
and expenses of the Property and the operation thereof. Grantor shall permit Beneficiary, or any
Person authorized by Beneficiary, to inspect and examine such records and books (regardless of
where maintained) and all supporting vouchers and data and to make copies and extracts therefrom at
all reasonable times and as often as may be requested by Beneficiary. In addition, Grantor will
furnish or cause to be furnished to Beneficiary the financial information required under the Loan
Agreement.

     Section 4.12 Estoppel Certificates.

     Within ten (10) days after any written request by Beneficiary or a proposed assignee or
purchaser of the Loan, Grantor shall certify in writing to Beneficiary, or to such proposed
assignee or purchaser, the then unpaid balance of the Loan and whether Grantor has any right of
defense or setoff to the payment or performance of any of the Obligations.

     Section 4.13 Subrogation.

     To the extent permitted by Law, Beneficiary shall be subrogated, notwithstanding its release
of record, to any Lien now or hereafter existing on the Property to the extent that such Lien is
paid or discharged by Beneficiary whether or not from the proceeds of the Loan. This Section shall
not be deemed or construed, however, to obligate Beneficiary to pay or discharge any Lien.

     Section 4.14 Leases.

               (a) Beneficiary shall approve any Material Lease executed after the date of this Deed of Trust
as to form, content and financial strength of the tenant. At any time, within thirty (30) days
after Notice from Beneficiary, Grantor will deliver to Beneficiary a written description in such
reasonable detail as Beneficiary may request of all of the Leases, including, without limitation,
the names of all tenants, the terms of all Leases and the Rents payable under all Leases. If any
Material Lease provides for the giving by the tenant of certificates with respect to the status of
such Lease, Grantor shall exercise its right to require such certificate within ten (10) days after
any request by Beneficiary. Following the occurrence of an Event of Default and notice from
Beneficiary, Grantor will notify all tenants under existing Leases, and agrees to notify all
tenants under future Leases, that (i) Grantor collects and receives

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all Rents pursuant to the license granted to it hereunder, and (ii) upon Notice from Beneficiary
that such license has been revoked, the tenants shall pay all unpaid Rent directly to Beneficiary.

               (b) So long as no Event of Default has occurred, Grantor shall have a license (which license
shall terminate automatically and without Notice upon the occurrence of an Event of Default) to
collect upon, but not prior to accrual, the Rents under the Leases and, where applicable,
subleases, such Rents to be held in trust for Beneficiary. Each month, provided no Event of
Default has occurred, Grantor may retain such Rents and proceeds from Resident Agreements as were
collected that month and held in trust for Beneficiary. Upon revocation of such license and
following notification to the tenants under the Leases by Beneficiary or the Trustees that Rents
are to be paid to Beneficiary, all Rents shall be paid directly to Beneficiary and not through
Grantor. A demand by Beneficiary on any tenant for the payment of Rent shall be sufficient to
warrant such tenant to make future payments of Rent to Beneficiary without the necessity of further
consent by Grantor.

               (c) Grantor, at its sole cost and expense, will use its best efforts to enforce or secure, or
cause to be enforced or secured, the performance of each and every obligation and undertaking of
the respective tenants under any Leases and will appear in and defend, at its sole cost and
expense, any action or proceeding arising under, or in any manner connected with, such Leases.

               (d) Grantor will not assign the whole or any part of the Leases or Rents without the prior
written consent of Beneficiary, and any assignment without such consent shall be null and void.

               (e) Grantor will promptly perform all of its obligations under any Leases. Grantor will not,
without the prior written consent of Beneficiary, (i) cancel, terminate, accept a surrender of,
reduce the payment of rent under any Material Leases, or accept any prepayment of rent for more
than one (1) month in advance under, any Lease or Resident Agreements, (ii) modify, amend or
substitute any Material Leases, or (iii) permit a Lien on the Property superior to any Lease, other
than this Deed of Trust. Beneficiary acknowledges that the community fee paid in connection with a
Resident Agreement is not a prepayment of rent.

               (f) If any Leases are subordinate (either by their date, their express terms, or by subsequent
agreement of the tenant) to this Deed of Trust, such Leases shall be subject to the condition (and
this Deed of Trust so authorizes) that, in the event of any sale of the Property pursuant to the
provisions of Section 7.2 (Foreclosure), the Leases shall, at the sole option of Beneficiary or any
purchaser at such sale, either (i) continue in full force and effect as set forth in the required
advertisement of sale, and the tenant or tenants thereunder will, upon request, attorn to and
acknowledge in writing the purchaser or purchasers at such sale or sales as landlord thereunder, or
(ii) upon notice to such effect from Beneficiary, the Trustees or any purchaser or purchasers,
terminate within ninety (90) days from the date of sale. As to any Lease, neither Beneficiary nor
any purchaser or purchasers at foreclosure shall be bound by any payment of rent for more than one
(1) month in advance or by any amendment or modification of the Lease made without the prior
written consent of Beneficiary or, subsequent to a foreclosure sale, such purchaser or purchasers.

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               (g) Neither the Trustees nor Beneficiary shall be obligated to perform or discharge any
obligation of Grantor under any Lease. This assignment of the Leases in no manner places on
Beneficiary or the Trustees any responsibility for (i) the control, care, management or repair of
the Property, (ii) the carrying out of any of the terms and conditions of the Leases, (iii) any
waste committed on the Property, or (iv) any dangerous or defective condition on the Property
(whether known or unknown). Grantor agrees to indemnify the Trustees and Beneficiary for, and
forever hold them harmless from, any and all Claims arising out of, or in connection with, any
Leases or any assignment thereof.

               (h) Unless otherwise agreed to by Beneficiary, each Lease shall (i) be at market rents, (ii)
be subordinate to the lien of this Deed of Trust, (iii) contain attornment language requiring each
tenant to attorn to any subsequent purchaser of the Property, (iv) not contain non-disturbance
language entitling such tenant to remain at the Property after any sale of the Property except as
specifically agreed to by Beneficiary in connection with specified Leases, and shall be in all
respects acceptable to Beneficiary and its counsel. Approved Material Leases may not be amended,
modified or terminated without the prior written consent of Beneficiary.

     Section 4.15 Contracts of Sale.

     Following the occurrence and during the continuance of an Event of Default, Grantor
irrevocably authorizes Beneficiary, at its sole option, to collect, in the name of Grantor or in
its own name as assignee, all payments due or to become due under any Contract of Sale. Grantor
agrees that it will facilitate in every reasonable way the collection by Beneficiary of such
payments, and will, upon written request by Beneficiary, execute a written notice and deliver the
same to each purchaser directing the purchaser to make such payments to Beneficiary. In no event
shall Beneficiary be accountable for more moneys than it actually receives pursuant to a Contract
of Sale, nor shall Beneficiary be liable for any failure to collect payments under any Contract of
Sale. The right to determine the method of collection and the extent to which the enforcement of
collection shall be prosecuted is reserved to the sole discretion of Beneficiary. Grantor, without
the prior written consent of Beneficiary, will not execute any assignment of any Contract of Sale
or the payments due thereunder. Grantor shall furnish to Beneficiary, within ten (10) days after a
written request from Beneficiary, a written certification containing the names of all contract
purchasers of the Property and shall attach to such certification a copy of any Contract of Sale.
Nothing contained in this Section shall (a) be construed as a consent by Beneficiary to any
Transfer of the Property, or (b) constitute a delegation to Beneficiary of any of Grantor’s duties
or obligations under any Contract of Sale. Grantor agrees to indemnify Beneficiary and the
Trustees for, and forever hold them harmless from, any Claim arising out of, or in connection with,
any Contract of Sale.

     Section 4.16 Taxes.

     Grantor shall pay and discharge all Taxes prior to the date on which penalties are attached
thereto unless and to the extent only that such Taxes are contested in accordance with Section 4.20
(Permitted Contests).

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     Section 4.17 Hazardous Materials; Contamination.

          (a) The Grantor agrees to (i) give Notice to the Beneficiary immediately upon the Grantor’s
acquiring knowledge of the presence of any Hazardous Materials on the Property or of any Hazardous
Materials Contamination or of any Claim made or threatened against the Grantor or the Property with
respect to any Environmental Requirement with a full description thereof; (ii) at the Grantor’s
sole cost and expense, promptly comply with any and all Environmental Requirements relating to the
Property or such Hazardous Materials or Hazardous Materials Contamination and provide the
Beneficiary with satisfactory evidence of such compliance; (iii) provide the Beneficiary, within
thirty (30) days after a demand by the Beneficiary, with a bond, letter of credit or similar
financial assurance evidencing to the Beneficiary’s satisfaction that the necessary funds are
available to pay the cost of complying with such Environmental Requirements and removing, treating
and disposing of such Hazardous Materials or Hazardous Materials Contamination and discharging any
Lien which may be established on the Property as a result thereof; and (iv) take whatever other
action as the Beneficiary may deem necessary or appropriate to restore to the Grantor the full use
and benefit of the Property as contemplated by the Financing Documents.

          (b) The Grantor shall immediately upon the receipt of Notice from the Beneficiary, which may
be given at any time and from time to time by the Beneficiary in its sole discretion (but not more
frequently than once during any twelve (12) month period), cause an Environmental Assessment to be
undertaken with respect to the Property and furnish the same to the Beneficiary within thirty (30)
days after the date of the Beneficiary’s request. The cost of any such Environmental Assessment
shall be borne exclusively by the Grantor. The Grantor shall cooperate with each environmental
consulting firm engaged to make any such Environmental Assessment and shall supply to each such
environmental consulting firm, from time to time and promptly on request, all information available
to the Grantor to facilitate the completion of the Environmental Assessment. Notwithstanding the
foregoing, the Beneficiary shall be under no duty to require the preparation of any Environmental
Assessment of the Property, and in no event shall any such Environmental Assessment by the
Beneficiary be or give rise to any representation or warranty by the Beneficiary that Hazardous
Materials are or are not present on the Property, or that there has been compliance by the Grantor
or any other Person with any Environmental Requirement.

          (c) The Grantor shall protect, indemnify, defend and hold the Beneficiary, the Trustees, any
Persons owned or controlled by, owning or controlling, or under the common control of or affiliated
with, the Beneficiary and/or the Trustees, any participants in the Loan, the directors, officers,
employees and agents of the Beneficiary, and/or such other Persons, and the heirs, personal
representatives, successors and assigns of each of the foregoing, harmless from and against any and
all Claims of any kind or nature whatsoever arising out of or in any way connected with any
investigative,
enforcement, cleanup, removal, containment, remedial or other private, governmental or
regulatory action at any time threatened, instituted or completed pursuant to any applicable
Environmental Requirement against the Grantor or the Beneficiary or against or with respect to the
Property or any condition, use or activity on the Property or at any time threatened or made by any
Person against the Grantor or the Beneficiary or against or with respect to the Property or any
condition, use or activity on the Property relating to any damage, contribution, cost recovery,
compensation, loss or injury resulting from or in any way arising in

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connection with any Hazardous Materials or Hazardous Materials Contamination. Upon demand by the
Beneficiary, the Grantor shall diligently defend any such Claim which affects the Property or is
made or commenced against the Beneficiary, whether alone or together with the Grantor or any other
Person, all at the Grantor’s sole cost and expense and by counsel to be approved by the Beneficiary
in the exercise of its reasonable judgment. In the alternative, the Beneficiary may at any time
elect to conduct its own defense through counsel selected by the Beneficiary and at the cost and
expense of the Grantor.

     Section 4.18 Right to Perform.

     If the Grantor fails to promptly pay or perform any of the Obligations, the Beneficiary,
without Notice to or demand upon the Grantor, and without waiving or releasing any Obligation or
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 the Grantor. The Beneficiary may enter upon
the Property for that purpose and take all action thereon as the Beneficiary considers necessary or
appropriate. All Expenses incurred by the Beneficiary pursuant to this Section, together with
interest thereon at the Reimbursement Rate, shall be paid by the Grantor to the Beneficiary as
provided in Section 4.19 (Reimbursement; Interest).

     Section 4.19 Reimbursement; Interest.

     If Beneficiary or the Trustees shall incur any Expenses or pay any Claims to which Beneficiary
or the Trustees become a party by reason of this Deed of Trust or the rights and remedies provided
hereunder (regardless of whether this Deed of Trust expressly provides for an indemnification
against such Claims by Grantor), such Expenses and Claims shall be (a) paid by Grantor to
Beneficiary on demand, together with interest thereon from the date incurred until paid in full by
Grantor at the Reimbursement Rate and (b) a part of the Obligations. Notwithstanding the foregoing,
however, in any action or proceeding to foreclose this Deed of Trust or to recover or collect the
Obligations, the provisions of Law governing the recovery of costs, disbursements and allowances
shall prevail unaffected by this Section. Whenever this Deed of Trust provides for interest to be
paid by Grantor at the Reimbursement Rate, the Reimbursement Rate shall be calculated on the basis
of a 365-day year factor applied to actual days elapsed.

     Section 4.20 Permitted Contests.

     Grantor shall not be required to pay any of the Property Assessments, or to comply with any
Law, so long as Grantor shall in good faith, and at its cost and expense, contest the amount or
validity thereof, or take other appropriate action with respect thereto, in good faith and in an
appropriate manner or by appropriate proceedings; provided that (a) such proceedings operate to
prevent the collection of, or other realization upon, such Property Assessments or enforcement of
the Law so contested, (b) there will be no sale, forfeiture or loss of the Property during the
contest, (c) neither Beneficiary nor the Trustees are subjected to any Claim, and (d) Grantor
provides assurances satisfactory to Beneficiary (including, without limitation, the establishment
of an appropriate reserve account with Beneficiary) of its ability to pay such Property Assessments
or comply with such Law in the event Grantor is unsuccessful in its contest. Each such contest
shall be promptly prosecuted to final conclusion or settlement, and Grantor shall indemnify and
save Beneficiary and Trustees harmless against all Claims in connection therewith. Promptly after

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the settlement or conclusion of such contest or action, Grantor shall comply with such Law and/or
pay and discharge the amounts which shall be levied, assessed or imposed or determined to be
payable, together with all penalties, fines, interests, costs and expenses in connection therewith.

     Section 4.21 Security Agreement.

     This Deed of Trust creates a security interest in the Personalty, and, to the extent the
Personalty is not real property, this Deed of Trust constitutes a security agreement from the
Grantor to the Beneficiary under the Uniform Commercial Code of the State. This Deed of Trust
constitutes a fixture filing under the Uniform Commercial Code of the State, as amended or
recodified from time to time, and covers property which includes goods that are or are to become
fixtures on the Property. “Fixtures” shall include all articles of personal property now or
hereafter attached to, placed upon for an indefinite term or used in connection with said real
property, appurtenances and improvements, together with all goods and other property which are or
at any time become so related to the Property that an interest in them arises under real estate
law. The respective mailing addresses of Grantor and Beneficiary are set forth in the definition of
“Notices” in Section 1.1 (Definitions).

     The Grantor hereby authorizes Beneficiary at any time and from time to time to file any
initial financing statements, amendments thereto and continuation statements as authorized by
applicable law, required by Beneficiary to establish or maintain the validity, perfection and
priority of the security interest granted in this Deed of Trust. For purposes of such filings,
Grantor agrees to furnish any information requested by Beneficiary promptly upon request by
Beneficiary. Grantor also ratifies its authorization
for Beneficiary to have filed any like initial financing statements, amendment thereto or
continuation statements if filed prior to the date of this Deed of Trust.

     Grantor shall pay all fees and costs that Beneficiary may incur in filing this or any other
documents in public offices and in obtaining such record searches as Beneficiary may reasonably
require. If any financing statement or other document is filed in the records normally pertaining
to personal property, that filing shall never be construed as in any way derogating from or
impairing this Deed of Trust or the rights or obligations of the parties under it. The Grantor
hereby agrees to execute and deliver on demand, and hereby irrevocably constitutes and appoints the
Beneficiary the attorney-in-fact of the Grantor, to execute, deliver and, if appropriate, to file
with the appropriate filing office or offices, such financing statements or other instruments as
the Beneficiary may request or require in order to perfect the security interest granted hereby or
to continue the effectiveness of the same.

     Section 4.22 Access Law.

               (a) Grantor agrees to use its best efforts to ensure that the Property shall at all times
comply with and remain in compliance with the requirements of the Americans with Disabilities Act
of 1990, all state and local Laws and ordinances related to handicapped access and all rules,
regulations, and orders issued pursuant to any of the foregoing, including, without limitation, the
Americans with Disabilities Act Accessibility Guidelines for Buildings and Facilities, all to the
extent applicable to the Property (collectively, “Access Laws”).

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               (b) Notwithstanding any provisions set forth herein or in any other document regarding
Beneficiary’s approval of alterations of the Property, Grantor shall not alter the Property in any
manner which would increase Grantor’s responsibilities for compliance with the applicable Access
Laws without the prior written approval of Beneficiary. The foregoing shall apply to tenant
improvements constructed by Grantor or by any of its tenants. Beneficiary may condition any such
approval upon receipt of a certificate of Access Law compliance from an architect, engineer, or
other person acceptable to Beneficiary.

               (c) Grantor agrees to give prompt notice to Beneficiary of the receipt by Grantor of any
complaints related to violations of any Access Laws and of the commencement of any proceedings or
investigations which relate to compliance with applicable Access Laws.

     Section 4.23 Appraisals.

     Beneficiary shall have the right, upon an Event of Default, but not the obligation to require
annual updated appraisals of the Property, which appraisals shall be prepared by an appraiser or
appraisers designated by Beneficiary and shall be in all respects acceptable to Beneficiary. The
basis of the appraisal calculations shown on such appraisal reports and all other aspects of the
appraisal reports must be satisfactory to
Beneficiary in all respects. A copy of such appraisal reports shall be released to Grantor.
Grantor shall reimburse Beneficiary upon demand for all costs and expenses incurred by Beneficiary
with respect to the preparation and review of all future appraisals required pursuant to the terms
hereof; provided, however, Grantor shall not be obligated to reimburse Beneficiary for more than
one (1) appraisal during the term of the Loan.

ARTICLE V

NEGATIVE COVENANTS 

     Section 5.1 Encumbrances.

     Without the prior written consent of Beneficiary, Grantor will not permit the Real Property or
the Personalty, or the Leases, Rents and Contracts of Sale, to become subject to any Encumbrances
other than the Permitted Encumbrances. Grantor shall give Beneficiary Notice of any default under
any Lien and Notice of any foreclosure or threat of foreclosure.

     Section 5.2 Transfer of the Property.

     Grantor will not Transfer, or contract to Transfer, all or any part of the Property or any
legal or beneficial interest therein (except for Transfers of the Equipment permitted by Section
5.3 (Removal, etc. of Equipment).

     Section 5.3 Removal, etc. of Equipment.

     Except to the extent permitted by the following sentence, none of the Improvements or
Equipment shall be removed, demolished or materially altered, without the prior written consent of
the Beneficiary. Grantor may remove and dispose of, free from the Lien of this Deed of Trust, such
Equipment as from time to time becomes worn out or obsolete, provided that, either (a) at the time
of, or prior to, such removal, any such Equipment is replaced with other Equipment

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which is free from Liens other than Permitted Encumbrances and has a value at least equal to that
of the replaced Equipment (and by such removal and replacement Grantor shall be deemed to have
subjected such Equipment to the Lien of this Deed of Trust), or (b) so long as a prepayment may be
made without penalty pursuant to the Note, such Equipment is sold at fair market value for cash and
the net cash proceeds received from such disposition are paid over promptly to Beneficiary to be
applied to the prepayment of the principal of the Loan.

     Section 5.4 Additional Improvements.

     Grantor will not construct or permit to be constructed any Improvements for which costs exceed
$1,000,000 in the aggregate other than those presently on the Land without the prior written
consent of Beneficiary, which consent shall not be unreasonably withheld. Grantor will complete
and pay for, within a reasonable time, any Improvements which Grantor is permitted to construct on
the Land. Grantor will construct and erect any permitted Improvements (a) strictly in accordance
with all applicable Laws and any private restrictive covenants, (b) entirely on lots or parcels of
the Land, (c) so as not to encroach upon any easement or right of way or upon the land of others,
and (d) wholly within any building restriction lines applicable to the Land.

     Section 5.5 Restrictive Covenants, Zoning, etc.

     Without the prior written consent of Beneficiary, which consent shall not be unreasonably
withheld, Grantor will not initiate, join in, or consent to any change in, any restrictive
covenant, easement, zoning ordinance, or other public or private restrictions, limiting or defining
the uses which may be made of the Property. Grantor will (a) promptly perform and observe, and
cause to be performed and observed, all of the terms and conditions of all material agreements
affecting the Property, and (b) do or cause to be done all things necessary to preserve intact and
unimpaired any and all easements, appurtenances and other interests and rights in favor of, or
constituting any portion of, the Property.

     Section 5.6 Prohibition on Hazardous Materials.

     The Grantor will not cause, commit, permit or allow to continue any violation of any
Environmental Requirement by any Person on or with respect to the Property. The Grantor will not
place, install, store, spill, leak, dispose of or release, or cause, commit, permit, or allow the
placement, installation, storage, spilling, leaking, disposal or release of, any Hazardous
Materials on the Property and will keep the Property free of all Hazardous Materials Contamination.

ARTICLE VI

EVENTS OF DEFAULT

     The occurrence of any one or more of the following shall constitute an “Event of Default”
under this Deed of Trust:

     Section 6.1 Representations and Warranties.

     Any representation or warranty contained in this Deed of Trust, or in any other document,
certificate or opinion delivered to Beneficiary in connection with the Loan, proves at any time to
be incorrect or misleading in any material respect.

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     Section 6.2 Payment Obligations.

     Grantor fails to promptly pay any of the Obligations when and as provided in the Financing
Documents, subject to the notice and cure provisions contained in the Financing Documents.

     Section 6.3 Transfer of the Property; Encumbrances.

     Grantor fails to comply with Section 5.1 (Encumbrances) or Section 5.2 (Transfer of the
Property).

     Section 6.4 Insurance Obligations.

     Grantor fails to promptly perform or comply with any of Grantor’s obligations in Section 4.2
(Insurance).

     Section 6.5 Hazardous Materials.

     Grantor fails to promptly perform or comply with any of the terms and conditions set forth in
Section 4.17 (Hazardous Materials; Contamination) or Section 5.6 (Prohibition on Hazardous
Materials).

     Section 6.6 Other Obligations.

     Grantor fails to promptly perform or comply with any of the Obligations (other than those
expressly described in other Sections of this ARTICLE VI), and such failure continues uncured for a
period of thirty (30) days after Notice from Beneficiary to Grantor, unless the nature of the
failure is such that (a) it cannot be cured within the thirty (30) day period, (b) Grantor
institutes corrective action within the thirty (30) day period and (c) Grantor diligently pursues
such action and completes the cure within ninety (90) days or as promptly as reasonably possible
under the circumstances.

     Section 6.7 Event of Default Under Other Financing Documents.

     An Event of Default (as defined therein) occurs under any of the Financing Documents other
than this Deed of Trust.

     Section 6.8 Change in Zoning or Public Restriction.

     Any change in any zoning ordinance or regulation or any other public restriction is enacted,
adopted or implemented, that limits or defines the uses which may be made of the Property such that
the present or intended use of the Property as a Facility, would be in violation of such zoning
ordinance or regulation or public restriction, as changed, and not permitted as a pre-existing,
non-conforming use.

     Section 6.9 Default Under Other Lien Documents.

     A default occurs under any other mortgage, deed of trust or security agreement covering all or
any portion of the Property, including, without limitation, any Permitted Encumbrances.

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     Section 6.10 Voluntary Bankruptcy, etc.

     Grantor or Guarantor (a) applies for, or consents in writing to, the appointment of a
receiver, trustee or liquidator of Grantor or Guarantor or the Property or of all or substantially
all of Grantor’s or Guarantor’s other assets, or (b) files a voluntary petition in bankruptcy or
admits in writing its inability to pay its debts as they become due, or (c) makes a general
assignment for the benefit of creditors, or (d) files a petition or an answer seeking a
reorganization (other than a reorganization not involving the liabilities of Grantor or Guarantor)
or an arrangement with creditors or takes advantage of any bankruptcy or insolvency law, or (e)
files an answer admitting the material allegations of a petition filed against Grantor or Guarantor
in any bankruptcy, reorganization or insolvency proceeding.

     Section 6.11 Involuntary Bankruptcy, etc.

     An order, judgment or decree is entered by any court of competent jurisdiction on the
application of a creditor adjudicating Grantor or Guarantor as bankrupt or insolvent, or appointing
a receiver, trustee or liquidator of Grantor, Guarantor or of the Property, or of all or
substantially all of Grantor’s or Guarantor’s other assets, and such order, judgment or decree
continues unstayed and in effect for a period of ninety (90) days from the date entered.

     Section 6.12 Execution; Attachment.

     Any execution or attachment is levied against the Property, and such execution or attachment
is not set aside, discharged or stayed within thirty (30) days after the same is levied.

     Section 6.13 Judgment.

     Unless adequately covered by insurance in the opinion of Beneficiary, the entry of a final,
non-appealable judgment for the payment of money involving more than $100,000 against Grantor or
Guarantor and the failure by Grantor or Guarantor, respectively, to discharge the same, or cause it
to be discharged, or bonded off to Beneficiary’s satisfaction, within thirty (30) days from the
date of the order, decree or process under which or pursuant to which such judgment was entered.

     Section 6.14 Change in Business Status.

     Unless the written consent of Beneficiary is previously obtained, the sale of all or
substantially all of the business assets of Grantor, or the commencement of any proceeding to
dissolve or liquidate Grantor, or the occurrence of any change in the form of business entity
through which Grantor presently conducts its business, or the occurrence of any merger or
consolidation involving Grantor.

     Section 6.15 Default Under Other Indebtedness.

     Grantor fails to pay any indebtedness of Grantor (other than the Loan) owed to Beneficiary
when and as due and payable (whether by acceleration or otherwise).

     Section 6.16 Swap Default.

     An event occurs which gives the Beneficiary the right or option to terminate any Swap Contract
which is secured by this Deed of Trust.

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     Section 6.17 Dissolution of Grantor, etc.

     Without Beneficiary’s prior express written consent thereto, (a) Grantor is dissolved either
pursuant to the provisions of its operating agreement, by operation of law, or in any other manner,
voluntarily or otherwise; (b) the operating agreement of Grantor is terminated pursuant to any of
its provisions or by operation of law, or amended or modified in any material respect; (c) if any
member of Grantor either directly or indirectly sells, assigns, mortgages, pledges, hypothecates,
transfers or otherwise encumbers or permits to be encumbered any or all of his, her or its interest
in Grantor (other than for the benefit of Beneficiary) or withdraws voluntarily or involuntarily
(by operation of law or otherwise) from Grantor; or (d) any new member is admitted to Grantor.

     Section 6.18 Management of the Facility.

     Sunrise Senior Living Management, Inc. or an entity controlled by Sunrise Senior Living, Inc.
ceases to operate and manage the Facility.

     Section 6.19 Appraisals.

     Grantor fails to promptly perform or comply with any of the terms and conditions set forth in
Section 4.23 (Appraisals).

ARTICLE VII

RIGHTS AND REMEDIES

     Upon the occurrence of any Event of Default, Beneficiary, or the Trustees at the direction of
Beneficiary, may at any time thereafter exercise any of the following rights, powers or remedies:

     Section 7.1 Acceleration.

     Beneficiary may declare (without Notice to Grantor and without presentment, demand, protest or
notice of protest or of dishonor, all of which Grantor hereby waives) the Obligations to be
immediately due and payable.

     Section 7.2 Foreclosure.

     The Trustees, personally or by their agent or attorneys, may sell the Property, or any part or
parts thereof, and all estate, right, title, interest, claim and demand therein, at public auction
at such time and place and upon such terms and conditions as the Trustees may deem appropriate or
as may be required or permitted by applicable law, after having first advertised the time, place
and terms of sale in accordance with applicable law. In
the event of any such sale, the Beneficiary may bid for and purchase the Property (or such
portion thereof as may be offered for sale) and shall be entitled to apply all or any part of the
amount secured by this Deed of Trust as a credit to the purchase price. At any foreclosure sale,
such portion of the Property as is offered for sale may, at the Beneficiary’s option, be offered
for sale for one total price, and the proceeds of such sale accounted for in one account without
distinction between the items of security or without assigning to them any proportion of such
proceeds, the Grantor hereby waiving the application of any doctrine of marshalling. If less than
all of the Property is sold at foreclosure and any of the

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Obligations remain outstanding after the sale proceeds are applied thereto, this Deed of Trust
shall continue as a lien on the Property remaining unsold, and the Beneficiary may at any time
thereafter direct the Trustees to sell the same as provided above.

     Section 7.3 Application of Proceeds.

     In the event of a foreclosure sale of the Property, either judicially or by private power of
sale, the proceeds of said sale shall be applied, unless applicable statutes shall specify
otherwise, first, to the expenses of such sale and of all proceedings in connection therewith,
including attorneys’; and trustee’s fees, then to insurance premiums, liens, assessments, taxes and
charges including utility charges advanced by the Beneficiary together with interest at the
interest rate provide in the Note, this Deed of Trust or the Financing Documents, and finally the
remainder, if any, shall be paid to the Grantor or as otherwise may be required by the provisions
of applicable law.

     Section 7.4 No Reinstatement.

     Except as otherwise provided by applicable law, if a Default shall have occurred and the
Beneficiary or the Trustees shall have commenced to exercise any of the remedies permitted
hereunder, then a tender of payment by the Grantor or by anyone on behalf of the Grantor of the
amount necessary to satisfy all sums due hereunder, or the acceptance by the Beneficiary of any
such payment so tendered, shall not, without the prior consent of the Beneficiary, constitute a
reinstatement of the Note or this Deed of Trust.

     Section 7.5 Taking Possession or Control of the Property.

     As a matter of right without regard to the adequacy of the security, and to the extent
permitted by law without Notice to Grantor, Beneficiary shall be entitled, upon application to a
court of competent jurisdiction, to the immediate appointment of a receiver for all or any part of
the Property and the Rents, whether such receivership be incidental to a proposed sale of the
Property or otherwise, and Grantor hereby consents to the appointment of such a receiver. In
addition, to the extent permitted by Law, and with or without the appointment of a receiver, or an
application therefor, Beneficiary may (a) enter upon, and take possession of (and Grantor shall
surrender actual possession of), the Property or any part thereof, without Notice to Grantor and
without bringing any legal action or proceeding, or, if necessary by force, legal proceedings,
ejectment or otherwise, and (b) remove and exclude Grantor and its agents and employees therefrom.

     Section 7.6 Management of the Property.

     Upon obtaining possession of the Property or upon the appointment of a receiver as described
in Section 7.5 (Taking Possession or Control), Beneficiary, the Trustees or the receiver, as the
case may be, may, at their sole option, (a) make all necessary or proper repairs and Additions to
or upon the Property, (b) operate, maintain, control, make
secure and preserve the Property, (c) receive all Rents, and (d) complete the construction of
any unfinished Improvements on the Property and, in connection therewith, continue any and all
outstanding contracts for the erection and completion of such Improvements and make and enter into
any further contracts which may be necessary, either in their or its own name (the cost of
completing the Improvements shall be Expenses secured by this Deed of Trust and accrue interest as
set forth in Section 4.19

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(Reimbursement; Interest)). In so doing, Beneficiary, the Trustees or such receiver shall have the
right to manage the Property and to carry on the business of Grantor and may exercise all of the
rights and powers of Grantor, including, but without limiting the generality of the foregoing, the
right to lease the Property, to cancel, modify, renew or extend any Lease or sub-lease of the
Property and to carry on any contracts entered into by Grantor with respect to the Property.
Beneficiary, the Trustees or such receiver shall be under no liability for, or by reason of, any
such taking of possession, entry, holding, removal, maintaining, operation or management, except
for willful misconduct. Any Rents received shall be applied (a) first, to pay all Expenses, and (b)
the balance, if any, to payment of the other Obligations. Grantor shall pay on demand to
Beneficiary, the receiver or the Trustees (as the case may be) the amount of any deficiency between
(a) the Rents received by Beneficiary, the receiver or the Trustees, and (b) all Expenses incurred
together with interest thereon at the Reimbursement Rate as provided in Section 4.19
(Reimbursement; Interest). The exercise of the remedies provided in this Section shall not cure or
waive any Event of Default, and the enforcement of such remedies, once commenced, shall continue
for so long as Beneficiary shall elect, notwithstanding the fact that the exercise of such remedies
may have, for a time, cured the original Event of Default.

     Section 7.7 Uniform Commercial Code.

     Beneficiary may proceed under the Uniform Commercial Code as to all or any part of the
Personalty, and in conjunction therewith may exercise all of the rights, remedies and powers of a
secured creditor under the Uniform Commercial Code. Upon the occurrence of any Event of Default,
Grantor shall assemble all of the Equipment and make the same available within the Improvements.
Any notification required by the Uniform Commercial Code with respect to a sale or other
disposition of Personalty shall be deemed reasonably and properly given if sent in accordance with
the Notice provision of this Deed of Trust at least ten (10) days before any such sale or
disposition. Disposition of the Personalty shall be deemed commercially reasonable if made
pursuant to a public sale advertised at least twice in a newspaper of general circulation in the
community where the Property is located. Proceeds from any such sale shall be applied as follows:
(a) first, to pay all Expenses incurred in connection with the sale, and (b) the balance, if any,
to payment of the other Obligations.

     Section 7.8 Other Remedies.

     Beneficiary shall have the right from time to time to enforce any legal or equitable remedy
against Grantor and to sue Grantor for any sums (whether interest, damages for failure to pay
principal or any installments thereof, taxes, or any other sums required to be paid under the terms
of this Deed of Trust, as the same become due), without regard to whether or not any other of the
Obligations shall be due, and without prejudice to the right of Beneficiary thereafter to enforce
any appropriate remedy against Grantor, including, without limitation, an action of foreclosure or
an action for specific performance for a Default by Grantor existing at the time such earlier
action was commenced.

     Section 7.9 Remedies, etc. Cumulative.

     Each right, power and remedy of Beneficiary or the Trustees as provided for in this Deed of
Trust, or in any of the other Financing Documents or now or hereafter existing by Law, shall be
cumulative and concurrent and shall be in addition to every other right, power or remedy

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provided for in this Deed of Trust, or in any of the other Financing Documents or now or hereafter
existing by Law, and the exercise or beginning of the exercise by Beneficiary or the Trustees of
any one or more of such rights, powers or remedies shall not preclude the simultaneous or later
exercise by Beneficiary or the Trustees of any or all such other rights, powers or remedies.

     Section 7.10 No Waiver by Beneficiary etc.

     No course of dealing or conduct between Beneficiary, the Trustees and Grantor shall be
effective to amend, modify or change any provisions of this Deed of Trust or the other Financing
Documents. No failure or delay by Beneficiary or the Trustees to insist upon the strict
performance of any term, covenant or agreement of this Deed of Trust 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 of any such term, covenant or agreement or of any such breach, or
preclude Beneficiary or the Trustees from exercising any such right, power or remedy at any later
time or times. By accepting payment after the due date of any of the Obligations, Beneficiary or
the Trustees shall not be deemed to waive the right either to require prompt payment when due of
all other Obligations, or to declare an Event of Default for failure to make prompt payment of any
such other Obligations. Neither Grantor nor any other Person now or hereafter obligated for the
payment of the whole or any part of the Obligations shall be relieved of such liability by reason
of (a) the failure of Beneficiary to comply with any request of Grantor or of any
other Person to take action to foreclose this Deed of Trust or otherwise enforce any of the
provisions of this Deed of Trust, or (b) any agreement or stipulation between any subsequent owner
or owners of the Property and Beneficiary, or (c) Beneficiary extending the time of payment or
modifying the terms of this Deed of Trust or any of the other Financing Documents without first
having obtained the consent of Grantor or such other Person. Regardless of consideration, and
without the necessity for any notice to or consent by the holder of any subordinate Lien on the
Property, Beneficiary may release any Person at any time liable for any of the Obligations or any
part of the security for the Obligations, and may extend the time of payment or otherwise modify
the terms of this Deed of Trust or any of the other Financing Documents without in any way
impairing or affecting the Lien of this Deed of Trust or the priority of this Deed of Trust over
any subordinate Lien. The holder of any subordinate Lien shall have no right to terminate any Lease
regardless of whether or not such Lease is subordinate to this Deed of Trust. Beneficiary may
resort to the security or collateral described in this Deed of Trust or any of the other Financing
Documents in such order and manner as Beneficiary may elect in its sole discretion.

     Section 7.11 Waivers and Agreements Regarding Remedies.

     To the full extent Grantor may do so, Grantor hereby:

               (a) agrees that it will not at any time plead, claim or take advantage of any Laws now or
hereafter in force providing for any appraisement, valuation, stay, extension or redemption, and
waives and releases all rights of redemption, valuation, appraisement, stay of execution, extension
and notice of election to accelerate the Obligations;

               (b) waives all rights to a marshalling of the
assets of Grantor, including without limitation, the Property, or to a sale in the inverse order of
alienation in the

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event of a foreclosure of the Property, and agrees not to assert any right under any Law pertaining
to the marshalling of assets, the sale in inverse order of alienation, the exemption of homestead,
the administration of estates of decedents, or other matters whatsoever to defeat, reduce or affect
the right of Beneficiary under the terms of this Deed of Trust to a sale of the Property without
any prior or different resort for collection, or the right of Beneficiary to the payment of the
Obligations out of the proceeds of sale of the Property in preference to every other claimant
whatsoever;

               (c) waives any right to bring or utilize any defense, counterclaim or setoff, other than one which
denies the existence or sufficiency of the facts upon which any foreclosure action is grounded. If
any defense, counterclaim or setoff, other than one permitted by the preceding clause, is timely
raised in a foreclosure action, such defense, counterclaim or setoff shall be dismissed. If such
defense, counterclaim or setoff is based on a Claim which could be tried in an action for money
damages, such Claim may be brought in a separate action which shall not thereafter be
consolidated with the foreclosure action. The bringing of such separate action for money damages
shall not be deemed to afford any grounds for staying the foreclosure action;

               (d) waives and relinquishes any and all rights and remedies which Grantor may have or be able
to assert by reason of the provisions of any Laws pertaining to the rights and remedies of
sureties; and

               (e) any requirement that the Beneficiary or the Trustees present evidence or otherwise proceed
before any court, clerk or other judicial or quasi-judicial body before exercising the power of
sale contained in this Deed of Trust.

     Section 7.12 Setoff.

     Beneficiary may set off against and apply any funds of Grantor on deposit with, or under the
control of, Beneficiary to the payment of the Obligations, without Notice and without resort to any
judicial proceeding.

ARTICLE VIII

THE TRUSTEES

     Section 8.1 Liability of the Trustees.

     The Trustees shall have no liability or responsibility for, and make no warranties in
connection with, the validity or enforceability of any of the Financing Documents or the
description, value or status of title to the Property. The Trustees shall be protected in acting
upon any notice, request, consent, demand, statement, note or other paper or document believed by
them to be genuine and to have been signed by the party or parties purporting to sign the same. The
Trustees shall not be liable for any error of judgment, nor for any act done or step taken or
omitted, nor for any mistakes of law or fact, nor for anything which the Trustees may do or refrain
from doing in good faith, nor generally shall either of the Trustees have any accountability
hereunder except for willful misconduct and/or gross negligence. The powers and duties of the
Trustees hereunder may be exercised through such attorneys, agents or servants as they may appoint,
and the Trustees shall have no liability or responsibility for any act, failure to act,

33

 

negligence or willful conduct of such attorney, agent or servant, so long as they were selected
with reasonable care. In addition, the Trustees may consult with legal counsel selected by them and
the Trustees shall have no liability or responsibility by reason of any act or failure to act in
accordance with the opinions of such counsel. The Trustees may act hereunder and may sell or
otherwise dispose of the Property or any part thereof as herein provided, although the Trustees
have been, may now be or may hereafter be, attorneys, officers, agents or employees of Beneficiary,
in respect of any matter of business whatsoever. The Trustees, however, shall have no obligation to
sell all or any
part of the Property following an Event of Default or to take any other action authorized to be
taken by them hereunder except upon the demand of Beneficiary.

     Section 8.2 Substitution of Trustees, etc.

     Beneficiary shall have, and is hereby granted with warranty of further assurances, the
irrevocable power to appoint a new or replacement or substitute Trustee or Trustees. Such power
may be exercised at any time without notice, without cause and without specifying any reason
therefor, by filing for record in the office where this Deed of Trust is recorded a Deed of
Appointment. The power of appointment of a successor Trustee or Trustees may be exercised as often
as and whenever Beneficiary may choose, and the exercise of the power of appointment, no matter how
often, shall not be an exhaustion thereof. Upon the recordation of such Deed or Deeds of
Appointment, the Trustee or Trustees so appointed shall thereupon, without any further act or deed
of conveyance, become fully vested with identically the same title and estate in and to the
Property and with all the rights, powers, trusts and duties of their, his or its predecessor in the
trust hereunder with like effect as if originally named as Trustees or as one of the Trustees
hereunder. Whenever in this Deed of Trust reference is made to the Trustees, it shall be construed
to mean the Trustee or Trustees for the time being, whether original or successors or successor in
trust. All title, estate, rights, powers, trusts and duties hereunder given or appertaining to or
devolving upon the Trustees shall be in each of the Trustees so that any action hereunder or
purporting to be hereunder of any one of the original or any successor Trustees shall for all
purposes be considered to be, and as effective as, the action of all the Trustees.

ARTICLE IX

MISCELLANEOUS

     Section 9.1 Application of Moneys.

     Whenever it is provided in this Deed of Trust for any moneys to be applied to payment of the
Obligations, and no express order of payment is set forth, such moneys shall be applied to the
Obligations in such order and manner as Beneficiary may determine in its sole discretion.

     Section 9.2 Further Assurances.

     At any time, and from time to time, upon request by Beneficiary, Grantor will, at Grantor’s
expense, (a) correct any defect, error or omission which may be discovered in the form or content
of any of the Financing Documents, and (b) make, execute, deliver and record, or cause to be made,
executed, delivered and recorded, any and all further instruments, certificates, and other
documents as may, in the opinion of Beneficiary, be necessary or desirable in order to complete,
perfect or continue and preserve the Lien of
this Deed of Trust. Upon any failure by Grantor to do so, Beneficiary may make, execute and
record any and all such instruments,

34

 

certificates and documents for and in the name of Grantor, all at the sole expense of Grantor, and
Grantor hereby irrevocably appoints Beneficiary the agent and attorney-in-fact of Grantor to do so,
this appointment being coupled with an interest. With respect to any financing statement, Grantor
agrees that a carbon, photographic or other reproduction of a security agreement or a financing
statement is sufficient as a financing statement for purposes of Section 28.9-402 of the Uniform
Commercial Code of the State.

     Section 9.3 Notices.

     All Notices shall be deemed to have been received when delivered by hand, when delivered to an
overnight courier, or three (3) days following deposit of such Notice in the mail in the manner
provided for in the definition of Notices in ARTICLE I (Definitions; Rules of Construction).

     Section 9.4 Successors and Assigns.

     All of the grants, covenants, terms, provisions and conditions of this Deed of Trust shall run
with the Land and shall apply to and bind the successors and assigns of Grantor (including any
permitted subsequent owner of the Property), and inure to the benefit of Beneficiary, its
successors and assigns and to the successors in trust of the Trustees.

     Section 9.5 No Warranty by Beneficiary or Trustees.

     By inspecting the Property or by accepting or approving anything required to be observed,
performed or fulfilled by Grantor or to be given to Beneficiary or the Trustees pursuant to this
Deed of Trust or any of the other Financing Documents, Beneficiary and the Trustees shall not 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 Beneficiary or the Trustees.

     Section 9.6 Amendments.

     This Deed of Trust may not be modified or amended except by an agreement in writing, signed by
the party against whom enforcement of the change is sought.

     Section 9.7 Illegality.

     If fulfillment of any provision of this Deed of Trust or any transaction related hereto shall
at any time involve transcending the limit of validity prescribed by Law, then ipso facto, the
obligation to be fulfilled shall be reduced to the limit of such validity; and
if any clause or provision herein contained, other than the provisions requiring Grantor to
pay the Obligations, operates or would prospectively operate to invalidate this Deed of Trust in
whole or in part, then such clause or provision only shall be void, as though not herein contained,
and the remainder of this Deed of Trust shall remain operative and in full force and effect; and if
such clause or provision requires Grantor to pay any of the Obligations, then at the sole option of
Beneficiary, all of the Obligations shall become due and payable.

35

 

     Section 9.8 Assignments by Beneficiary.

     Beneficiary may, without notice to, or consent of, Grantor, sell, assign or transfer to or
participate with any Person or Persons all or any part of the Obligations, and each such Person or
Persons shall have the right to enforce the provisions of this Deed of Trust and any of the other
Financing Documents as fully as Beneficiary, provided that Beneficiary shall continue to have the
unimpaired right to enforce the provisions of this Deed of Trust and any of the other Financing
Documents as to so much of the Obligations that Beneficiary has not sold, assigned or transferred.
In connection with the foregoing, Beneficiary shall have the right to disclose to any such actual
or potential purchaser, assignee, transferee or participant all financial records, information,
reports, financial statements and documents obtained in connection with this Agreement and any of
the other Financing Documents or otherwise. Notwithstanding the foregoing provisions of this
Section 9.8, Beneficiary shall give notice to Grantor of any sale, assignment, transfer or
participation to a Person who is an affiliate or successor of Beneficiary either before or after
the transaction has occurred as Beneficiary shall determine; however, Beneficiary shall give notice
to Grantor in advance of any such transaction with a non-affiliate.

     Section 9.9 Governing Law.

     This Deed of Trust shall be construed, governed and enforced in accordance with the Laws in
effect from time to time in the State.

     Section 9.10 Counterparts.

     This Deed of Trust may be executed in any number of duplicate originals, each of which shall
be an original but all of which together shall constitute one and the same instrument.

36

 

     IN WITNESS WHEREOF, Grantor has caused this Deed of Trust to be executed under seal as of the
day and year first written above.

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

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

	 	 	 	 	 	 
	 	 	 	 
	/s/
Kelly L. Hayden 	 	By:  	/s/
James S. Pope	(SEAL)
	 	 	 	Name:  	James S. Pope	 
	 	 	 	Title:  	Vice President	 
	 

COMMONWEALTH OF VIRGINIA, COUNTY OF FAIRFAX, TO WIT:

     On August ___, 2007, before me,                                         , a Notary Public in and for the
Commonwealth shown above, appeared                                         , personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose signature is subscribed to the within
instrument, and acknowledged to me that he executed the same in his authorized capacity as
                                         of Sunrise Senior Living Investments, Inc., sole Member of Sunrise Connecticut
Avenue Assisted Living, L.L.C., and that by his signature on the instrument the entity upon behalf
of which he acted, executed the instrument.

     WITNESS my hand and official seal.

	 	 	 	 	 
	 

	 	/s/ 

Notary Public
	 	 

My Commission Expires:                                        

37

 

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.

 

Names and Addresses of All Parties to Deed of Trust:

	 	 	 
	Grantor:

	 	Sunrise Connecticut Avenue Assisted Living L.L.C.
	 

	 	c/o Sunrise Senior Living, Inc.
	 

	 	7902 Westpark Drive
	 

	 	McLean, Virginia 22102
	 
	 	 
	Trustee(s):

	 	Alexandra Johns and Ellen-Elizabeth Lee
	 

	 	7926 Jones Branch Drive
	 

	 	McLean, VA 22102
	 
	 	 
	Grantee:

	 	Chevy Chase Bank, F.S.B.
	 

	 	7926 Jones Branch Drive
	 

	 	McLean, VA 22102exv10w9

Exhibit 10.9

LOAN AND SECURITY AGREEMENT

(Loan B)

     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 “Lender”).

RECITALS

     A. Borrower has applied to Lender for a term loan in the principal amount of Ten
Million Dollars ($10,000,000) (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 B in favor of Lender pursuant to which it guarantees repayment and
performance of all of Borrower’s obligations to Lender under the documents evidencing or
securing the Loan (the “Financing Documents”).

     C. Lender is willing to make the loan to Borrower 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 and Lender 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 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%).

     “Agreement” means this Loan and Security Agreement (Loan B) and all amendments, modifications
and supplements hereto which may from time to time become effective in accordance with the
provisions of Section 11.2 (Amendments; Waivers).

     “Assignee” means any Person to which Lender assigns all or any portion of its interests under
this Agreement, any Commitment, and any Loan, in accordance with the provisions of Section 11.5
(Assignments by Lender), 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.

     “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.

2

 

     “Change of Control” has the meaning given to such term in the Sunrise Senior Financing
Agreement.

     “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 Lender’s Term Loan Commitment.

     “Committed Amount” means
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.

     “Deed of Trust” means the Deed of Trust, Assignment, Security Agreement and Fixture Filing
(Loan B) of even date herewith, covering the Property, executed by Borrower in favor of Lender as
collateral for the Loan, 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.

3

 

     “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 Lender 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
Lender) and Section 11.10 (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 Lender from three (3) federal funds brokers of
recognized standing selected by Lender.

     “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 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.

4

 

     “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 Lender, 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 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

5

 

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 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

6

 

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 A” means a term loan in the principal amount of $30,000,000 made pursuant to a Loan and
Security Agreement (Loan A) by and among Borrower, Chevy Chase Bank, F.S.B. as agent and the
lenders party thereto and evidenced by a series of Deed of Trust Notes — Loan A of even date
executed by Borrower in favor of such lenders and secured as provided such Loan and Security
Agreement (Loan A).

     “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” shall have the meaning set forth in Section 2.2 (The Loan).

     “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 11.1 (Notices).

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     “Obligations” means all present and future debts, obligations, and liabilities, whether now
existing or contemplated or hereafter arising, of Borrower to Lender 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 Lender 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 Lender 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 Lender; (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 Lender; (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 Lender which have been created to secure permitted

8

 

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 Lender, pursuant to which SSLII has
pledged and assigned all of its interests in Borrower to Lender 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.

     “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 the 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 Delaware 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 agreement under or
pursuant to which a Lien is now or hereafter granted to, or for the benefit of, Lender 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.

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     “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 in any senior credit facility
substituted therefore from time to time.

     “Sunrise Financing Agreement” means the Credit Agreement dated as of December 2, 2005 by and
among Guarantor, Subsidiaries of Guarantor, Bank of America, N.A., as Administrative Agent, Swing
Line Lender and L/C Issuer, and others, as amended, extended, restated, supplemented or otherwise
modified 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 Lender or
any affiliate of Lender, 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” has the meaning described in 0 (The Term Loan).

     “Term Loan Commitment” has the meaning described in 0 (The Term Loan).

     “Term Loan Committed Amount” has the meaning described in 0 (The Term Loan).

     “Term Loan Facility” means the facility established by Lender pursuant to Section 2.1 (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

10

 

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.

     Subject to and upon the provisions of this Agreement, Lender agrees to make a loan (the “Term
Loan”) to Borrower on the Closing Date in the principal amount of Ten Million Dollars
($10,000,000) (the “Term Loan Committed Amount”). The obligation of Lender to make the Term Loan
is herein called its “Term Loan Commitment”.

     Section 2.2 Note.

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

     Section 2.3 Use of Proceeds.

     The proceeds of the Term Loan shall be used by Borrower for the following purpose and, unless
prior written consent of Lender is obtained, for no other purpose: to refinance an existing
mortgage loan from PNC Bank, to finance the purchase of membership interests in Borrower from
investors and the associated closing costs, including, without limitation, the cost of recording
the Deed of Trust.

     Section 2.4 Prepayment.

     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.

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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
Lender (except as otherwise provided herein) at Lender’s office specified in Section 11.1
(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 Lender after such time shall be deemed to have been
received by Lender for purposes of computing interest and fees and otherwise as of the next
Business Day. Payments shall not be considered received by Lender until such payments are paid to
Lender in immediately available funds.

     Section 3.3 Liens; Setoff.

     Borrower hereby grants to Lender a continuing Lien for all of the 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, Lender, and/or any Affiliate of Lender, 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 Lender or any Affiliate of Lender, 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 Lender may have under
the Financing Documents or applicable Laws, during the continuance of an Event of Default, Lender
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
then outstanding (whether or not then due), all in such order and manner as shall be determined by
Lender in its sole and absolute discretion.

     Section 3.4 Requirements of Law.

     In the event that 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 Lender or any corporation controlling
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 Lender or any corporation controlling Lender, as a consequence of
the obligations of Lender hereunder to a level below that which Lender or any corporation
controlling Lender would have achieved but for such adoption, change or compliance (taking into
consideration the policies of Lender and the corporation controlling Lender, with respect to
capital adequacy) by an amount deemed by Lender to be material, then from time to time, after
submission by Lender to Borrower of a written request therefor and a statement of the basis for
such determination, Borrower shall pay to Lender such additional amount or amounts in order to
compensate Lender or its controlling corporation for such

12

 

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
the effect had on the rate of return to a Lender, then any additional amount that had been charged
will be appropriately reduced.

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 Lender, and agrees that
Lender, shall have, to the extent permitted by law a perfected, continuing security interest in,
all of the Collateral. Borrower further agrees that Lender 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 Lender 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 Lender, one hundred percent (100%) of its ownership interests in
Borrower.

     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 Lender 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 Lender 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.

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     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, 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, Lender.

     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

14

 

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 Lender 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.

     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 Lender 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 Lender 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.

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     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”.

     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 Lender 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

16

 

the best of its knowledge, failed to disclose any fact to Lender 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 Lender of any change in the name of the Facility.

     Section 5.16 Licenses.

     Borrower further represents and warrants to Lender 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, Lender, (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
Lender. The foregoing notwithstanding, Borrower and Lender 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 Lender with a copy of
the License issued by the District of Columbia and comply with this Section 5.16 in all respects.

     Section 5.17 Operating Agreements and Management Contracts.

     Borrower has furnished or caused SSLMI to furnish to Lender 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 Lender 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 Lender.

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     Section 5.18 Participation Agreements and Resident Agreements.

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

     Borrower further covenants to Lender 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 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 and Lender
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 Lender 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

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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 Lender); (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.

     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. Lender 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 Lender. Lender shall have no
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.

19

 

     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
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.

20

 

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, Lender shall receive one or more written opinions of counsel for Borrower
and SSLI satisfactory in all respects to Lender. 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 Lender.

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

     Section 6.3 Supporting Documents.

     Lender shall receive on the date hereof: (a) a certificate of the managing member of Borrower
in a form acceptable to Lender 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 Lender may reasonably require Borrower, SSLI, the managing
member of Borrower or the board of directors of SSLI to execute, in form and substance acceptable
to Lender; and (d) such additional information, instruments, opinions, documents, certificates and
reports as Lender may reasonably deem necessary.

     Section 6.4 Financing Documents.

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

     Section 6.5 Insurance.

     Lender 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 Lender, 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 Lender, that all fees and
premiums due on account thereof have been paid in full.

21

 

     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 Lender all Security Documents (in form and substance acceptable to
Lender in its sole discretion) deemed necessary by Lender, 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 Lender.

     Section 6.7 Commitment Fee.

     In consideration for the making of the Loan, Borrower shall pay to Lender on or prior to the
Closing Date, a commitment fee in the amount of $62,500.00.

     Section 6.8 Management Agreement.

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

     Section 6.9 Title and Survey Matters.

     Lender 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 Lender in the amount of the Loan and which may be endorsed
or assigned to the successors and assigns of Lender without additional cost, insuring the lien of
the Deed of Trust to be a valid second lien on the Property, free and clear of all defects,
exceptions and encumbrances except Permitted Liens. Lender shall also have received and approved a
copy of a current as-built survey of the Property certified to Lender and to the title insurance
company and any recorded subdivision plat of the Property.

     Section 6.10 Appraisal.

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

     Section 6.11 Environmental Reports.

     Lender 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 Lender
as follows:

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     Section 7.1 Financial Statements.

     Borrower shall furnish or cause to be furnished to Lender:

          (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 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 Lender 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 Lender 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, 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

23

 

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.

     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 0 (The Term Loan) and, without the prior written consent of Lender, 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 Lender including, by way of example
and not by way of limitation, at least the following:

24

 

          (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 Lender 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 Lender 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
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 Lender, 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 Lender 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

25

 

standard noncontributing, non-reporting mortgagee clauses in favor of and entitling Lender 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 Lender, 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 Lender evidence of payment satisfactory to Lender. Borrower will
immediately give Lender notice of any cancellation of, or change in, any insurance policy. Lender
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
Lender 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 Lender 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 Lender with written evidence, in form and substance satisfactory to Lender, 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 Lender.

     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 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, Lender or an agent designated by Lender, 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. Lender shall not have any duty to, and Borrower hereby releases Lender from,
all claims of loss or damage caused by the delay or failure to collect or enforce any

26

 

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 Lender may reasonably require in order to perfect, preserve, maintain, protect, continue
and/or extend the lien or security interest granted to Lender under this Agreement and its
priority. Borrower shall pay to Lender, on demand all taxes, costs and expenses incurred by
Lender, 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 Lender 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 Lender 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 Lender disclosing Lender’s assignment of, and
security interest in and lien on, the Collateral and all collections received by Borrower on its
Accounts, (c) furnish to Lender 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 Lender may from time to time specify, (d) unless Lender 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
designated by Lender 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 Lender 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 Lender 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 Lender may reasonably request or in the absence of such request,
as Borrower may deem advisable; and (b) in its discretion, grant, in the ordinary

27

 

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. Lender 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 Lender in such form
and at such times as reasonably specified by Lender, give notice of Lender’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 Lender.

     Section 7.16 Business Names.

     Borrower shall immediately notify Lender 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 Lender 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 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 Lender
to that effect. Upon Lender’s request, Borrower will deliver to Lender 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).

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     Section 7.18 Change in Management.

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

     Section 7.19 Management.

     Subject to the terms of that certain Management Fee Subordination Agreement by and among
Borrower, SSLMI and Lender 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 Lender 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 Lender, 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 Lender
directing Borrower to terminate the Management Agreement after the occurrence of an Event of
Default, and, if requested to do so by Lender, 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 Lender harmless and indemnify Lender
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 Lender, 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 Lender of any settlement of any cost report
disclosed to Lender 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 Lender.

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

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

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          (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 Lender, 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;

in each case listed in clauses (a) through (f), inclusive, of this Section 7.23 describing in
detail satisfactory to Lender 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 Lender 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.

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     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 Lender 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 Lender upon request with satisfactory
evidence of such compliance; (c) provide Lender, within thirty (30) days after a demand by Lender,
with a bond, letter of credit or similar financial assurance evidencing to Lender’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 Lender 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.

     Section 7.27 Inspection and Other Reports and Notices.

     Borrower will or will promptly cause SSLMI to furnish to Lender 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 Lender copies of all reports or
notices from any Governmental Authority or other organization pertaining to the

31

 

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, Lender 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 Lender, Borrower will not directly or indirectly:

     Section 8.1 Borrowings.

     Other than Loan A, 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 Lender. The proceeds of any loans obtained by Borrower from Affiliates
shall be used only to cover operating deficits, capital improvement or working capital for the
Facility and may be repaid only if no Event of Default exists or would result from such payment.

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     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 A, 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. Lender 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 Lender 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 §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

33

 

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 Lender 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 Lender 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 Lender prior to such transfer an opinion of counsel addressed to Lender to the effect
that Lender’s perfected security interest shall not be affected by such move or if it shall be
affected, setting forth the steps necessary to continue Lender’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.

     Section 8.13 Subsidiaries.

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

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     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. Lender 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.

     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

35

 

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.

     Section 9.10 Material Adverse Change.

     If Lender 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 Lender 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 Lender.

     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..

     Section 9.14 Change in Management.

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

     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

36

 

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.”

     Section 9.17 Change of Control in Guarantor.

     If a Change of Control occurs in Guarantor.

ARTICLE X

RIGHTS AND REMEDIES UPON DEFAULT

     Upon the occurrence of any Event of Default, Lender 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.

     Lender 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.

     Lender 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 Lender, Borrower shall assemble
the Collateral and make it available to Lender, at a place designated by Lender. Lender or its
agents may without notice from time to time enter upon Borrower’s premises to take 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 Lender with respect
to the Collateral which is sent by regular mail, postage prepaid, to Borrower at the address set

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forth in Section 11.1 (Notices), or such other address of Borrower which may from time to time be
shown on Lender’s records, at least ten (10) days prior to such sale, disposition or other action,
shall constitute commercially reasonable notice to Borrower. Lender may alternatively or
additionally give such notice in any other commercially reasonable manner. Nothing in this
Agreement shall require Lender 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 Lender 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. Lender 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 Lender 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 Lender 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, Lender 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, Lender may (but shall be under no obligation to), without notice to
Borrower, and Borrower hereby irrevocably appoints Lender as its attorney-in-fact, with power of
substitution, in the name of Lender and/or in the name of Borrower or otherwise, for the use and
benefit of Lender, 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 Lender, 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;

          (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

38

 

          companies acceptable to Lender to collect and/or realize upon any or all of the
Collateral and to remit the proceeds to Lender;

          (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 Lender to the extent
permitted by applicable law, with Lender taking control of the cash and non-cash
proceeds thereof and/or direct Borrower to (and Borrower shall) turn over to
Lender 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 Lender, 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 Lender may designate and
receive and open all mail addressed to Borrower.

     In addition, Borrower shall, following an Event of Default which remains uncured beyond any
applicable grace period, promptly, upon request, execute and deliver to Lender written assignments,
to the extent permitted by applicable law, in form and content acceptable to Lender, of specific
Accounts or groups of Accounts; provided, however, that the lien and/or security interest granted
to Lender 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

39

 

payment of the Obligations and are not sold to Lender whether or not any assignment thereof, which
is separate from this Agreement, is in form absolute.

     Without limiting Lender’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, Lender may
also direct Borrower to appoint a manager for the Facility and enter into a management agreement
with a management company approved by Lender, the terms of which agreement shall be approved by
Lender.

     Section 10.4 Application of Proceeds.

     Any proceeds of sale or other disposition of the Collateral will be applied by Lender to the
payment first of any and all Enforcement Costs, and any balance of such proceeds will be applied
in such order and manner as Lender shall determine. If the sale or other disposition of the
Collateral fails to fully satisfy the Obligations, Borrower shall remain liable to Lender for any
deficiency.

     Section 10.5 Performance by Lender.

     Lender 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 Lender may consider necessary or appropriate for such purpose and Borrower hereby
irrevocably appoints Lender as its attorney-in-fact to do so, with power of substitution, in the
name of Lender, or in the name of Borrower or otherwise, for the use and benefit of Lender, but at
the cost and expense of Borrower and without notice to Borrower. All sums so paid or advanced by
Lender 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 Lender on demand, and shall constitute and become a part of
the Obligations.

     Section 10.6 Other Remedies.

     Lender may from time to time proceed to protect or enforce the rights of Lender 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 execution of any right, remedy or
power granted in this Agreement, the Financing Documents, and/or applicable Laws. Lender 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 Lender or any Affiliate of
Lender.

40

 

     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, Lender 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
Lender, 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

MISCELLANEOUS

     Section 11.1 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:

	 	 	 
	Lender:

	 	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
	 
	 	 
	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

41

 

	 	 	 
	     With a Courtesy Copy to:

	 	Wayne G. Tatusko, Esquire
 Wayne G.
Tatusko, PC 
3016 Williams Drive

Suite 200 
Fairfax, VA 22031

     Section 11.2 Amendments; Waivers.

     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 Lender 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 Lender. No course of dealing between Borrower and Lender and no act or failure to
act from time to time on the part of Lender 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:

          (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 Lender 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.

          (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 Lender 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 Lender 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,
Lender 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.

42

 

     Section 11.3 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 Lender 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 Lender 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, Lender 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;

          (a) 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;

          (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 11.4 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:

43

 

          (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 Lender, all of the
Obligations of Borrower to Lender 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 11.5 Assignments by Lender.

     Lender may, without notice to or consent of Borrower, assign to any Person (each an “Assignee”
and collectively, the “Assignees”) all or a portion of Lender’s Commitment; provided that, unless
Lender has assigned all of its Commitment, after giving effect to such assignment, Lender must
continue to hold a Pro Rata Share of the Commitment at least equal to Five Million Dollars
($5,000,000). Lender and its Assignee shall notify Borrower in writing of the date on which the
assignment is to be effective (the “Adjustment Date”). On or before the Adjustment Date, Lender,
Borrower and the respective Assignee shall execute and deliver a written assignment agreement in a
form acceptable to Lender, which shall constitute an amendment to this Agreement to the extent
necessary to reflect such assignment. Upon the request of Lender following an assignment made in
accordance with this Section 11.5, Borrower shall issue new Notes to Lender and its Assignee
reflecting such assignment, in exchange for the existing Note held by Lender.

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

     Section 11.6 Participations by Lender.

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

44

 

     Section 11.7 Disclosure of Information by Lender.

     In connection with any sale, transfer, assignment or participation by Lender in accordance
with Section 11.5 (Assignments by Lender) or Section 11.6 (Participations by Lender), 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 11.8 Successors and Assigns.

     This Agreement and all other Financing Documents shall be binding upon and inure to the
benefit of Borrower and Lender 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 Lender.

     Section 11.9 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 Lender of the Loan 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 Lender’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 Lender with such acknowledgments
and agreements as Lender 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 Lender, and/or any of its agents and others, or to the extent there are, the same are
waived and released.

     Section 11.10 Enforcement Costs.

     Borrower agrees to pay to Lender 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 Lender 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.

45

 

     Section 11.11 Applicable Law; Jurisdiction.

               11.11.1 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. Lender acknowledges, 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.

               11.11.2 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.

               11.11.3 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 Lender and shall promptly deliver to Lender evidence in writing of such
other agent’s acceptance of such appointment and its agreement that such appointment shall be
irrevocable.

               11.11.4 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 11.1 (Notices), and (b) serving a copy thereof upon Lender, 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 Lender to serve process in any manner
otherwise permitted by law or limit the right of Lender otherwise to bring proceedings against
Borrower in the courts of any jurisdiction or jurisdictions.

46

 

     Section 11.12 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 11.13 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 11.14 No Agency.

     Nothing herein contained shall be construed to constitute Borrower as agent of Lender for any
purpose whatsoever or to permit Borrower to pledge any of the credit of Lender. Lender shall not 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. Lenders shall not,
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 Lender, and Lender shall not be responsible
in any way for the performance by Borrower of any of the terms and conditions thereof.

     Section 11.15 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.

     Section 11.16 Entire Agreement.

     This Agreement is intended by Lender and Borrower to be a complete, exclusive and final
expression of the agreements contained herein. Neither Lender 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 11.17 Waiver of Trial by Jury.

     BORROWER AND LENDER HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO WHICH BORROWER AND LENDER 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 and Lender, and Borrower
and Lender hereby represent that no representations of fact or opinion have been made

47

 

by any individual to induce this waiver of trial by jury or to in any way modify or nullify its
effect. Borrower and Lender 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 11.18 Liability of Lender.

     Borrower hereby agrees that Lender shall not be chargeable for any negligence, mistake, act
or omission of any accountant, examiner, agency or attorney employed by Lender 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 Lender
pursuant to this Agreement or any of the other Financing Documents, Lender shall not 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 Lender.

     Section 11.19 Indemnification.

     Borrower agrees to indemnify and hold harmless, Lender, the parent and Affiliates of Lender
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 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
Lender under this Section will bear interest at the Post- Default Rate from the due date until
paid.

     Section 11.20 Electronic Transmission of Data.

     Lender 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 Lender and their affiliates and other Persons
involved with the subject matter of this Agreement. Borrower acknowledges and agrees

48

 

that (a) there are risks associated with the use of electronic transmission and that Lender does
not control the method of transmittal or service providers, (b) Lender has no 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 Lender from any claim, damage or loss, including that arising in whole or part from
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

49

 

     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

Managing Member	 	 
	/s/ Kelly L. Hayden

	 	 	By: 	/s/ James Pope	 	(SEAL)
	 

	 	 	 	 

Name: James Pope
	 	
	 

	 	 	 	Title: Vice President	 	 
	 
	 	 	 	 	 	 
	WITNESS:	 	LENDER:	 	 
	 
	 	 	 	 	 	 
	 
	 	 	CHEVY CHASE BANK, F.S.B.	 	 
	 
	/s/ Kelly L. Hayden

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

	 	 	 	 

Richard L. Amador
	 	
	 

	 	 	 	Group Vice President	 	 

50

 

LIST OF EXHIBITS

	 	 	A            Form of Note
	 
	 	 	B            Places of Business

51

 

EXHIBIT A

FORM OF NOTE

DEED OF TRUST NOTE B

			
	 	 	 
	$                                        
	 	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 C                    , 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 225 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 provided above, shall be
payable as follows:

          (a) Interest only commencing on                 
    ,                      
and continuing on the same day of each and every month thereafter, to and including                     ,                     ;

          (b) Unless sooner paid, the unpaid Principal Sum, together with interest
accrued and unpaid thereon, shall be due and payable in full on August 29, 2009.

52

 

     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.

     8. Security.

     This Note is secured by, among other things, a Deed of Trust, Assignment, Security Agreement
and Fixture Filing (Loan B) of even date herewith from the Borrower to Alexandra

53

 

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.

54

 

     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

55

 

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

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

	 	 	 
	 

	 	 
	 

	 	Notary Public

My Commission expires:

57

 

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, N.W.

Washington, D.C.

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