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Exhibit 10.7  

Loan
Nos. 07-0004261

07-0024261

07~0034261

07-0044261 

THIRD
AMENDED AND RESTATED LOAN AGREEMENT 

for
a loan in the amount of 

$64,692,111.67

among 

VALLEY
HEALTH HOLDINGS LLC, SKY HOLDINGS AZ LLC, TERRACE HOLDINGS AZ LLC, ENSIGN HIGHLAND LLC, PLAZA HEALTH HOLDINGS LLC, RILLITO HOLDINGS LLC, MOUNTAINVIEW
COMMUNITYCARE LLC, MEADOWBROOK HEALTH ASSOCIATES LLC, CEDAR AVENUE HOLDINGS LLC, and GRANADA INVESTMENTS LLC 

as
Borrowers 

and

GENERAL
ELECTRIC CAPITAL CORPORATION as Agent and a Lender 

and 

THE
OTHER FINANCIAL INSTITUTIONS WHO ARE OR HEREAFTER BECOME

PARTIES TO THIS AGREEMENT 

as
Lenders 

Dated
as of December 29, 2006 

 
 

TABLE OF CONTENTS    

	ARTICLE I INCORPORATION OF RECITALS EXHIBITS AND SCHEDULES	 	2
	Section 1.1	 	Incorporation of Recitals	 	2
	Section 1.2	 	Incorporation of Exhibits and Schedules	 	2
	Section 1.3	 	Definitions	 	2
	ARTICLE II LOAN TERMS	 	2
	Section 2.1	 	Disbursements	 	2
	Section 2.2	 	Interest Rate; Late Charge	 	3
	Section 2.3	 	Payments	 	4
	Section 2.4	 	Maturity	 	5
	Section 2.5	 	Prepayment	 	5
	Section 2.6	 	Application of Payments	 	8
	Section 2.7	 	Reserved	 	8
	Section 2.8	 	Capital Adequacy; Increased Costs; Illegality	 	8
	Section 2.9	 	Sources and Uses	 	9
	Section 2.10	 	Security	 	9
	Section 2.11	 	Release of Collateral	 	9
	ARTICLE III INSURANCE, CONDEMNATION, AND IMPOUNDS	 	11
	Section 3.1	 	Insurance	 	11
	Section 3.2	 	Use and Application of Insurance Proceeds	 	13
	Section 3.3	 	Condemnation Awards	 	14
	Section 3.4	 	Insurance Impounds	 	14
	Section 3.5	 	Real Estate Tax Impounds	 	15
	Section 3.6	 	Replacement Reserves	 	16
	ARTICLE IV LEASING MATTERS	 	17
	Section 4.1	 	Representations and Warranties on Leases	 	17
	Section 4.2	 	Approval Rights	 	17
	Section 4.3	 	Covenants	 	17
	Section 4.4	 	Tenant Estoppels	 	18
	Section 4.5	 	Security Deposits	 	18
	 	 	 	 	 

 

	ARTICLE V REPRESENTATIONS AND WARRANTIES	 	19
	Section 5.1	 	Organization and Power	 	19
	Section 5.2	 	Members	 	19
	Section 5.3	 	Borrowers' Operating Agreement	 	19
	Section 5.4	 	Corporate Documents	 	19
	Section 5.5	 	Validity of Loan Documents	 	20
	Section 5.6	 	Liabilities; Litigation	 	20
	Section 5.7	 	Taxes and Assessments	 	20
	Section 5.8	 	Other Agreements; Defaults	 	21
	Section 5.9	 	Compliance with Law	 	21
	Section 5.10	 	Condemnation	 	21
	Section 5.11	 	Access	 	21
	Section 5.12	 	Flood Hazard	 	21
	Section 5.13	 	Property	 	21
	Section 5.14	 	Location of Borrowers	 	22
	Section 5.15	 	Margin Stock	 	22
	Section 5.16	 	Tax Filings	 	22
	Section 5.17	 	Solvency	 	22
	Section 5.18	 	Full and Accurate Disclosure	 	23
	Section 5.19	 	Single Purpose Entity	 	23
	Section 5.20	 	No Broker	 	23
	Section 5.21	 	Reserved	 	23
	Section 5.22	 	Labor Disputes	 	23
	Section 5.23	 	Employees	 	23
	Section 5.24	 	ERISA (Borrower)	 	23
	Section 5.25	 	Intellectual Property	 	24
	Section 5.26	 	Anti-Terrorism and Anti-Money Laundering Compliance	 	24
	Section 5.27	 	Master Lease	 	25
	Section 5.28	 	Property Management	 	25
	ARTICLE VI FINANCIAL REPORTING NOTICES	 	26
	Section 6.1	 	Financial Statements	 	26
	Section 6.2	 	Audits	 	27
	Section 6.3	 	Books and Records/Audits	 	27
	Section 6.4	 	Notice of Litigation or Default	 	28
	Section 6.5	 	Bank Accounts	 	28
	 	 	 	 	 

ii

 

	ARTICLE VII COVENANTS	 	28
	Section 7.1	 	Inspection	 	28
	Section 7.2	 	Due on Sale and Encumbrance, Transfers of Interests	 	29
	Section 7.3	 	Taxes; Charges	 	31
	Section 7.4	 	Control; Management	 	31
	Section 7.5	 	Operation; Maintenance; Inspection	 	31
	Section 7.6	 	Taxes on Security	 	31
	Section 7.7	 	Single Purpose Entity; Legal Existence, Name, Etc.	 	32
	Section 7.8	 	Affiliate Transactions	 	32
	Section 7.9	 	Limitation on Other Debt	 	32
	Section 7.10	 	Further Assurances	 	33
	Section 7.11	 	Estoppel Certificates	 	33
	Section 7.12	 	Notice of Certain Events	 	33
	Section 7.13	 	Indemnification	 	33
	Section 7.14	 	Use of Proceeds, Revenues	 	34
	Section 7.15	 	Bank Accounts: Notices to Tenants and Residents	 	34
	Section 7.16	 	Reserved	 	34
	Section 7.17	 	Reserved	 	34
	Section 7.18	 	Compliance with Laws and Contractual Obligations	 	34
	Section 7.19	 	Notice of Money. Laundering	 	35
	Section 7.20	 	Anti-Terrorism and Anti-Money Laundering Compliance	 	35
	Section 7.21	 	Employees	 	36
	Section 7.22	 	Post-Closing Obligations	 	36
	Section 7.23	 	Representations and Warranties	 	37
	Section 7.24	 	Cooperation	 	37
	Section 7.25	 	Master Leases	 	37
	Section 7.26	 	Property Management Agreements	 	37
	ARTICLE VIII HEALTH CARE MATTERS	 	38
	Section 8.1	 	Healthcare Laws	 	38
	Section 8.2	 	Representations, Warranties and Covenants Regarding Healthcare Matters	 	39
	Section 8.3	 	Cooperation	 	43
	ARTICLE IX EVENTS OF DEFAULT	 	43
	Section 9.1	 	Payments	 	44
	Section 9.2	 	Certain Covenants	 	44
	Section 9.3	 	Sale, Encumbrance, Etc.	 	44
	Section 9.4	 	Covenants	 	44
	Section 9.5	 	Representations and Warranties	 	44
	Section 9.6	 	Other Encumbrances	 	44
	Section 9.7	 	Involuntary Bankruptcy or Other Proceeding	 	45
	Section 9.8	 	Voluntary Petitions, etc.	 	45
	Section 9.9	 	Default Under the Accounts Receivable Loan Documents	 	45
	Section 9.10	 	False Reports	 	45
	Section 9.11	 	Reserved	 	45
	Section 9.12	 	Money Laundering	 	45
	Section 9.13	 	Loan Documents	 	46
	Section 9.14	 	Reserved	 	46
	Section 9.15	 	Master Leases	 	46
	Section 9.16	 	Operations	 	46
	 	 	 	 	 

iii

 

	ARTICLE X REMEDIES	 	46
	Section 10.1	 	Remedies — Insolvency Events	 	46
	Section 10.2	 	Remedies — Other Events	 	47
	Section 10.3	 	Agent's Right to Perform the Obligations	 	47
	ARTICLE XI MISCELLANEOUS	 	48
	Section 11.1	 	Notices	 	48
	Section 11.2	 	Amendments and Waivers	 	49
	Section 11.3	 	Limitation on Interest	 	49
	Section 11.4	 	Invalid Provisions	 	50
	Section 11.5	 	Reimbursement of Expenses: Portfolio Administration Fee	 	50
	Section 11.6	 	Approvals; Third Parties; Conditions	 	51
	Section 11.7	 	Lender Not in Control; No Partnership	 	51
	Section 11.8	 	Time of the Essence	 	51
	Section 11.9	 	Successors and Assigns	 	52
	Section 11.10	 	Renewal, Extension or Rearrangement	 	52
	Section 11.11	 	Waivers; Forbearance	 	52
	Section 11.12	 	Cumulative Rights	 	52
	Section 11.13	 	Singular and Plural	 	53
	Section 11.14	 	Phrases	 	53
	Section 11.15	 	Exhibits and Schedules	 	53
	Section 11.16	 	Titles of Articles, Sections and Subsections	 	53
	Section 11.17	 	Promotional Material	 	53
	Section 11.18	 	Survival	 	53
	Section 11.19	 	WAIVER OF JURY TRIAL	 	54
	Section 11.20	 	Waiver of punitive or Consequential Damages	 	55
	Section 11.21	 	Governing Law	 	55
	Section 11.22	 	Entire Agreement	 	55
	Section 11.23	 	Counterparts	 	55
	Section 11.24	 	Venue	 	55
	Section 11.25	 	Sale of Loan, Participation	 	56
	Section 11.26	 	Limitation on, Liability of Agent's and Lender's Officers, Employees, etc.	 	56
	Section 11.27	 	Effectiveness of Facsimile Documents and Signatures	 	56
	Section 11.28	 	Joint and Several Liability	 	56
	Section 11.29	 	Agency	 	57
	Section 11.30	 	California Waivers	 	57
	Section 11.31	 	Additional Waivers	 	58
	Section 11.32	 	Arizona Waiver	 	59

iv

 
 
 

LIST OF EXHIBITS AND SCHEDULES TO LOAN AGREEMENT    

Exhibits: 

	Exhibit A-1	 	Desert Sky Project
	Exhibit A-2	 	Desert Terrace Project
	Exhibit A-3	 	Highland Manor Project
	Exhibit A-4	 	North Mountain Medical and Rehabilitation Center Project
	Exhibit A-5	 	Park Manor Project
	Exhibit A-6	 	Catalina Project
	Exhibit A-7	 	Park View Gardens Project
	Exhibit A-8	 	Sabino Project
	Exhibit A-9	 	Upland Project
	Exhibit A-10	 	Camarillo Project
	Exhibit B	 	Intellectual Property
	Exhibit C	 	Form of Interest Holder Agreement
	Exhibit D	 	Provider Payment/Reimbursement Programs
	Exhibit E	 	Governmental Approvals
	Exhibit F	 	Required Repairs
	Exhibit G	 	UCC Financing Statements to be Terminated
	

Schedules:	
 	

 
	

Schedule 2.1	
 	

Advance Conditions
	Schedule 2.2	 	Treasury Rate
	Schedule 2.3(b)	 	Principal Payments
	Schedule 2.5(a)	 	Make-Whole Breakage Amount
	Schedule 2.9	 	Sources and Uses
	Schedule 3.2(a)	 	Allocated Loan Amounts
	Schedule 5.6	 	Litigation
	Schedule I	 	Certain Definitions

v

 

INDEX OF DEFINED TERMS 

	Agent	 	1	 	 	 	 
	Anti-Money Laundering Laws	 	25	 	 	 	 
	Anti-Money Laundering Measures	 	25	 	 	 	 
	Anti-Terrorism Laws	 	24	 	 	 	 
	Assignment Agreement	 	7	 	 	 	 
	Bankruptcy Party	 	45	 	 	 	 
	Beneficial Owner	 	31	 	 	 	 
	Borrower	 	1	 	 	 	 
	Borrower Anti-Terrorism Policies	 	35	 	 	 	 
	Borrowers	 	l	 	 	 	 
	BSA	 	25	 	 	 	 
	Change in Control	 	30	 	 	 	 
	Charges	 	31	 	 	 	 
	Collateral	 	9	 	 	 	 
	Commercial Payor Programs	 	40	 	 	 	 
	CON	 	39	 	 	 	 
	Defeasance	 	5	 	 	 	 
	Defeasance Deposit	 	7	 	 	 	 
	Deferred Repairs	 	36	 	 	 	 
	Designated Person	 	24	 	 	 	 
	Eamout Advance	 	3	 	 	 	 
	Earnout Interest Rate	 	4	 	 	 	 
	Earnout Request	 	3	 	 	 	 
	Environmental Indemnity — Sch. 2.1	 	1	 	 	 	 
	Exchange Act	 	30	 	 	 	 
	Executive Orders	 	24	 	 	 	 
	Existing Loan	 	1	 	 	 	 
	Existing Loan Agreement	 	1	 	 	 	 
	Expansion CON	 	36	 	 	 	 
	FIRREA — Sch. 2.1	 	4	 	 	 	 
	fiscal month	 	26	 	 	 	 
	Fourth Funding Interest Rate	 	4	 	 	 	 
	GECC	 	1	 	 	 	 
	Government Payor Program	 	41	 	 	 	 
	Guaranty — Sch. 2.1	 	l	 	 	 	 
	Healthcare Laws	 	38	 	 	 	 
	HIPAA	 	38	 	 	 	 
	HIPAA Compliance Date	 	38	 	 	 	 
	HIPAA Compliance Plan	 	38	 	 	 	 
	HIPAA Compliant	 	38	 	 	 	 
	Improvements	 	1	 	 	 	 
	Incorporation Documents	 	19	 	 	 	 
	Initial Advance	 	2	 	 	 	 
	Initial Funding Interest Rate	 	4	 	 	 	 
	Insurance Impound	 	14	 	 	 	 
	Interest Holder Agreement	 	35	 	 	 	 
	Interest Rate	 	4	 	 	 	 
	Investor Anti-Terrorism Policies	 	35	 	 	 	 
	 	 	 	 	 	 	 

vi

 

	Leases — Sch. 2.l	 	3	 	 	 	 
	Lender	 	1	 	 	 	 
	Licenses	 	39	 	 	 	 
	Lists	 	24	 	 	 	 
	Loan	 	1	 	 	 	 
	Loan Documents	 	2	 	 	 	 
	Make Whole Breakage Amount-Sch. 2.5	 	1	 	 	 	 
	Material Deficiency	 	41	 	 	 	 
	Material Violation	 	41	 	 	 	 
	Money Market Rate	 	15	 	 	 	 
	Monthly Reports	 	26	 	 	 	 
	Note	 	1	 	 	 	 
	Obligations	 	56	 	 	 	 
	OFAC	 	24	 	 	 	 
	OFAC Laws and Regulations	 	24	 	 	 	 
	Open Period	 	5	 	 	 	 
	Operating Agreement	 	19	 	 	 	 
	Other Lists	 	24	 	 	 	 
	Payment Date	 	7	 	 	 	 
	Person	 	30	 	 	 	 
	Prepayment Premium	 	5	 	 	 	 
	Project	 	1	 	 	 	 
	Projects	 	1	 	 	 	 
	Properties	 	1	 	 	 	 
	Property	 	1	 	 	 	 
	Release Date	 	5	 	 	 	 
	Replacement Deposit	 	16	 	 	 	 
	Replacement Reserve	 	16	 	 	 	 
	Replacement Treasury Yield — Sch. 2.5	 	1	 	 	 	 
	Security Agreement	 	6	 	 	 	 
	Scheduled Defeasance Payments	 	7	 	 	 	 
	SDN List	 	24	 	 	 	 
	Second Funding Interest Rate	 	4	 	 	 	 
	Secondary Market Transactions	 	38	 	 	 	 
	State Regulator	 	34	 	 	 	 
	Subordination Agreements — Sch. 2.1	 	1	 	 	 	 
	Successor Borrower	 	7	 	 	 	 
	Tax Impound	 	15	 	 	 	 
	Taxes	 	15	 	 	 	 
	Terrorism	 	12	 	 	 	 
	Third Funding Interest Rate	 	4	 	 	 	 
	Third-Party Payor Programs	 	40	 	 	 	 
	Title Policies — Sch. 2.1	 	2	 	 	 	 
	Treasury Rate	 	l	 	 	 	 
	U.S. Obligations	 	8	 	 	 	 
	U.S. Publicly-Traded Entity	 	25	 	 	 	 
	Violation	 	24	 	 	 	 
	Yield Maintenance Amount	 	8	 	 	 	 

vii

  

 
 

THIRD AMENDED AND RESTATED LOAN AGREEMENT    
    

        This Third Amended and Restated Loan Agreement is entered into as of December 29, 2006 among GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation
(in its individual capacity, "GECC" and in its capacity as agent for the Lenders, together with its successors, "Agent"), the financial institutions other than GECC who are or hereafter become parties
to this Agreement (together with GECC collectively, or individually, as the context may require, "Lender"), and VALLEY HEALTH HOLDINGS LLC, SKY HOLDINGS AZ LLC, TERRACE HOLDINGS AZ LLC, ENSIGN
HIGHLAND LLC, PLAZA HEALTH HOLDINGS LLC, RILLITO HOLDINGS LLC, MEADOWBROOK HEALTH ASSOCIATES LLC, MOUNTAINVIEW COMMUNITYCARE LLC, CEDAR AVENUE HOLDINGS LLC and GRANADA INVESTMENTS LLC, each a Nevada
limited liability company (each a "Borrower" and collectively, the "Borrowers"). 

 
 

RECITALS    
    

        A.    On
or about June 30, 2006, Lender made a loan to certain of the Borrowers (the "Existing Loan"), which Existing Loan is governed by that certain Second Amended and
Restated Loan Agreement dated as of June 30, 2006 (the "Existing Loan Agreement"). This Agreement restates and supersedes the, Existing Loan Agreement in its entirety. 

        B.    Lender
and Agent have agreed to amend and restate the Existing Loan and to make additional advances to Borrowers subject to the terms and conditions contained herein (the
Existing Loan, as amended and restated hereby, together with the additional amounts to be advanced pursuant to the terms hereof are collectively referred to as the "Loan"). The Loan is evidenced by
that certain Consolidated Amended and Restated Promissory Note of even date herewith in the face amount of Sixty-Four Million Six Hundred Ninety Two Thousand One Hundred Eleven and
67/100th Dollars ($64,692,111.67) (said note and all amendments thereto and substitutions therefor are hereinafter referred to collectively as the "Note"). The terms and provisions of the Note are
hereby incorporated herein by reference in this Agreement. 

        C.    On
the Closing late, each Borrower will be the owner of its respective real property more particularly described on Exhibit A-1 through
A-10 attached hereto (each a "Property" and collectively, the "Properties"), and the improvements located thereon (the "Improvements") including a skilled nursing facility. Each Property
along with its respective Improvements is referred to herein as a "Project" and collectively as the "Projects". 

        D.    Borrowers
will use the proceeds of the Loan for the purpose of refinancing the Projects. 

        E.    Borrowers'
obligations under the Loan will be secured by, among other things, the Security Documents. This Agreement, the Note, the Security Documents, the Environmental
Indemnity, the Business Associate Agreement, the Subordination Agreements and any other documents evidencing or securing the Loan or executed by Borrowers, Guarantor or Master Tenant in connection
therewith, and any modifications; renewals and extensions thereof, are referred to herein collectively as the "Loan Documents". 

        NOW,
THEREFORE, in consideration of the foregoing and the mutual conditions and agreements contained herein, the parties agree as follows: 

1

 
 
 

ARTICLE I
  INCORPORATION OF RECITALS EXHIBITS AND SCHEDULES    
    

        Section 1.1    Incorporation
of Recitals 

        The
foregoing preambles and all other recitals set forth herein are made a part hereof by this reference. 

        Section 1.2    Incorporation
of Exhibits and Schedules. 

        Exhibits
A-1 through F and Schedules 2.l through 5.6 and Schedule I to this Agreement, attached hereto are incorporated in this Agreement and expressly made a part
hereof by this reference. 

        Section 1.3    Definitions.

        All
terms defined in Schedule I or otherwise in this Agreement shall, unless otherwise defined therein, have the same meanings when used in any other Loan Document, or any
certificate or other document made or delivered pursuant hereto. The words "hereof ", "herein", and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as
a whole. The words "include" and "includes(s)" when used in this Agreement and the other Loan Documents means "include(s) without limitation," and the word "including" means "including, but not
limited to." 

 
 

ARTICLE II
  LOAN TERMS    
    

        Section 2.1    Disbursements.

        (a)   Initial
Funding. The Loan shall be funded in advances and repaid in accordance with this Agreement and the other Loan Documents. On the Closing Date, and subject to the
terms, provisions and conditions of this Agreement (including, without limitation Borrowers' satisfaction of the conditions to initial advance described in Schedule 2.1 attached hereto) and the
other Loan Documents, Lender shall disburse to Borrowers from the proceeds of the Loan the amount of Fifty-Five Million Six Hundred Ninety-Two Thousand One Hundred Eleven and
67/100 Dollars ($55,692,111.67) (the "Initial Advance"), a portion of which shall be used to repay the Existing Loan. 

        (b)   Earnout
Advance. Subject to the conditions set forth in this Section 2.l(b) and the other provisions of this Agreement; and upon Borrowers' satisfaction of the
general conditions for advances described in Schedule 2.1, Lender shall make additional disbursements from the proceeds of the Loan to Borrowers up to the amount of Nine Million and No/100
Dollars ($9,000,000.00) (the "Earnout Advance"), in the aggregate, provided that there shall be no more than three (3) disbursements from the Earnout Advance. Absent an Event of Default or
Potential Default hereunder or under any of the other Loan Documents, Lender shall make disbursements of the Earnout Advance to Borrowers subject to the following conditions: 

2

 

        (i)    The
Earnout Advance shall not be available for disbursement to Borrowers after the date which is twelve (12) months after the date of this Agreement; 

        (ii)   No
default shall have occurred under any of the Loan Documents; 

        (iii)  Borrowers
shall, at Borrowers' expense, deliver to Agent a date-down or such other endorsement to the Title Policies to ensure that such Title Policies
shall provide Agent with title insurance for the Earnout Advance being disbursed; 

        (iv)  No
less than thirty (30) days prior to the date of the disbursement of the Earnout Advance, Borrowers shall submit a written request (the "Earnout Request") to
Agent for disbursement of the Earnout Advance along with operating statements for the Projects from which Project Yield and Debt Service Coverage Ratio may be calculated; 

        (v)   The
Projects shall have achieved a Debt Coverage Ratio of at least 1.86:1.00 for (A) the trailing twelve (12) full calendar month period ending prior to
the date of the proposed disbursement of the Earnout Advance, and (B) the trailing three (3) full calendar month period ending prior to the date of the proposed disbursement, annualized,
in each case taking into account the proposed disbursement of the Earnout Advance; 

        (vi)  The
Projects shall have achieved a Project Yield of at least sixteen and one-half percent (16.5%) for (A) the trailing twelve (12) full
calendar month period ending prior to the date of the proposed disbursement of the Earnout Advance, and (13) the trailing three (3) full calendar month period ending prior to the date of
the proposed disbursement, annualized, in each case taking into account the proposed disbursement of the Earnout Advance; 

        (vii) No
Material Adverse Change shall have occurred; and 

        (viii) Borrowers
shall have paid to Agent a, loan origination fee in the amount of 1% of the amount of the Earnout Advance being disbursed, which loan origination fee Agent
may pay out of the proceeds of the Earnout Advance being disbursed. 

        Section 2.2    Interest
Rate; Late Charge. 

        Unless
otherwise specified to the contrary in this Agreement, the outstanding principal balance of the Loan shall bear interest at the following rates: (a) the Initial Funding
Amount under and as defined in the Existing Loan Agreement, of which the outstanding principal balance as of the date hereof is $27,158,212.26, shall bear interest at a rate per annum of seven and
one-half percent (7.5%) (the "Initial Funding Interest Rate"), (b) the Second Funding under and as defined in the Existing Loan Agreement, of which the outstanding principal balance
as of the date hereof is $3,905,360.30, shall bear interest at a rate per annum of seven and eighteen one hundredths percent (7.18%) (the "Second Funding Interest Rate"), (c) the Third Funding
under and as defined in the Existing Loan Agreement, of which the outstanding principal balance as of the date hereof is $8,528,539.11, shall bear interest at a rate per annum of seven and six one
hundredths (7.06%) (the "Third Funding Interest Rate"), (d) the Initial Advance hall bear interest at a rate per annum of six and ninety-five one hundredths percent (6.95%) (the
"Fourth Funding Interest Rate"), and (e) each disbursement of the Earnout Advance shall bear interest at a rate per annum equal to the sum of two and one-quarter percent (2.25%)
plus the applicable Treasury Rate (as determined pursuant to Schedule 2.2) (each such applicable interest rate being referred to as an "Earnout Interest Rate", and collectively with the Initial
Funding Interest Rate, the Second Funding Interest Rate, the Third Funding Interest Rate, and the Fourth Funding Interest Rate, the "Interest Rate"). Interest shall be computed on the basis of a
fraction, the denominator of which is three hundred sixty (360) and the numerator of which is the actual number of days elapsed from the date of the initial advance or the date on which the
immediately preceding payment was due. If Borrowers fail to pay any installment of interest or principal within five (5) days after the date on which the same is due, Borrowers shall pay to
Agent a late charge on such past-due amount, as liquidated damages and not as a penalty, equal to the greater of (a) interest at the Default Rate on such amount from the date when
due until paid, and (b) five percent (5%) of such amount, but not in excess of the maximum amount of interest allowed by applicable law. While any Event of Default exists, the Loan shall bear
interest at the Default Rate. 

3

 

        Section 2.3    Payments.

        (a)   Payments
at Interest Rate. Commencing on January 1, 2007, Borrowers shall pay interest in arrears on the first day of each month until all amounts due under the
Loan Documents are paid in full. If the first day of a month is not a Business Day, then the applicable payment due hereunder shall be made on the first Business Day immediately following the first
day of such month. 

        (b)   Principal
Amortization Payments. Commencing on January l, 2007 and on the first (1st) day of each month thereafter until the Maturity Date, Borrowers shall
make a monthly principal amortization payment in accordance with Schedule 2.3(b) attached hereto; provided, however, at the time each disbursement of the Earnout Advance (if any) is made, Agent
shall revise Schedule 2.3 (b) by increasing the principal amount set forth therein to take into account the increased principal amount of each disbursement of the Earnout Advance, each
applicable Earnout Interest Rate and a twenty-five (25) year amortization period. Upon receipt by Borrowers of such revised Schedule 2.3(b) from Agent, the new schedule shall
automatically and without further action by any party be deemed to replace the then existing Schedule 2.3(b) to this Agreement. If the first day of a month is not a Business Day, then the
applicable payment due hereunder shall be made on the first Business Day immediately following the first day of such month. 

4

 

        Section 2.4    Maturity.

        The
Loan shall mature and Borrowers shall pay to Agent all outstanding principal, accrued and unpaid interest, and any other amounts due under the Loan Documents on June 29, 2016. 

        Section 2.5    Prepayment.

        (a)   No
Prepayments. Borrowers may not prepay any of the outstanding principal balance of the Loan prior to the Maturity Date; provided, however, Defeasance pursuant to
Section 2.5(b) below shall be available at any time after the end of the second Loan Year (the "Open Period") subject to the terms and conditions provided therein. If the Loan is accelerated by
Agent in accordance with the terms of this Agreement for any reason, Borrowers shall pay to Agent the Make Whole Breakage Amount calculated as provided in Schedule 2.5(a) and all other amounts
outstanding under the Loan Documents together with a prepayment premium ("Prepayment Premium") equal to one percent (1%) of the outstanding balance of the Loan. Notwithstanding anything to the
contrary, if Defeasance occurs during the Open Period in accordance with Section 2.5(b), no Make Whole Breakage Amount or Prepayment Premium shall be due and payable by Borrowers to Agent.
Notwithstanding anything to the contrary, provided no Event of Default has occurred and is continuing, Borrowers may prepay the Loan in full, but not in part, at any time during the six
(6) month period immediately preceding the scheduled Maturity Date, without payment of a Prepayment Premium or Make Whole Breakage Amount, upon thirty (30) days prior written notice to
Agent. 

        (b)   Defeasance.
At any time during the Open Period, so long as no default or Event of Default is then continuing, Borrowers may obtain the release of the Projects from the
lien of the Security Documents upon the satisfaction of the following conditions precedent ("Defeasance"): 

        (i)    not
less than thirty (30) days prior written notice to Agent specifying the first day of a calendar month (or if not a Business Day, the first Business Day of
such calendar month) (the "Release Date") on which the Defeasance Deposit (hereinafter defined) is to be made; 

        (ii)   the
payment to Agent of interest accrued and unpaid on the principal balance of the Loan to and including the Release Date; 

        (iii)  the
payment to Agent of all other sums, not including scheduled interest or principal payments, due under the Note, the Security Documents and the other Loan
Documents; 

        (iv)  the
payment to Agent of the Defeasance Deposit and a $5,000 nonrefundable processing fee; 

5

 

        (v)   the
delivery by Borrowers to Agent at Borrowers' sole cost and expense of: 

        (A)  a
security agreement in form and substance reasonably satisfactory to Agent, creating a first priority lien in favor of Agent on the Defeasance Deposit and the U.S.
Obligations (hereinafter defined) purchased on behalf of Borrowers with the Defeasance Deposit in accordance with this Section 2.5(b) (the "Security Agreement"); 

        (B)  releases
of the Projects from the lien of the Security Documents (for execution by Agent) in a form appropriate for the jurisdiction in which each Project is located and
otherwise reasonably acceptable to Agent; 

        (C)  an
officer's certificate of Borrowers certifying that the requirements set forth in this clause (v) have been satisfied; 

        (D)  an
opinion of counsel in form and substance, and rendered by counsel, reasonably satisfactory to Agent, at Borrowers' expense, stating, among other things, that Agent
has a perfected first priority security interest in the Defeasance Deposit and the U.S. Obligations purchased by or on behalf of Borrowers and pledged to Agent and as to enforceability of the
Assignment Agreement, the Security Agreement and other documents delivered in connection therewith, and if required by the Agent, a substantive nonconsolidation opinion with respect to the Successor
Borrower, in form and substance, and rendered by counsel, reasonably satisfactory to Agent; and 

        (E)  such
other certificates, documents, opinions or instruments as Agent may reasonably request; and 

        (vi)  Agent
shall have received, at Borrowers' expense, a certificate from a nationally or regionally recognized independent certified public accountant acceptable to Agent,
in form and substance reasonably satisfactory to Agent, certifying that the U.S. Obligations purchased with the Defeasance Deposit will generate sufficient sums to satisfy the obligations of Borrowers
under this Agreement, the Note and this Section 2.5(b) as and when such obligations become due. 

        In
connection with the conditions set forth above, Borrowers hereby appoint Agent as their agent and attorney-in-fact for the purpose of using the Defeasance
Deposit to purchase or cause to be purchased U.S. Obligations which provide payments on or prior to, but as close as possible to, all successive scheduled Payment Dates (as defined below) after the
Release Date upon which interest and principal payments are required under this Agreement and the Note, including the amounts due on the Maturity Date, and in amounts equal to the scheduled payments
due on such dates under this Agreement and the Note plus Agent's reasonable estimate of administrative expenses and applicable federal income taxes associated with or to be incurred by the Successor
Borrower during the remaining term of, and applicable to, the Loan (the "Scheduled Defeasance Payments"). Borrowers, pursuant to the Security Agreement or other appropriate document, shall authorize
and direct that the payments received from the U.S. Obligations may be made directly to Agent and applied to satisfy the obligations of Borrowers under this Agreement, the Note and this
Section 2.5(b). "Payment Date" shall mean the first Business Day of each calendar month and the Maturity Date. 

6

 

        Upon
compliance with the requirements of this Section 2.5(b), the Guaranty shall be released (except as to obligations thereunder arising from circumstances existing or occurring
prior to the Defeasance and which obligations would otherwise survive the repayment of the Loan) and the Projects shall be released of record from the lien of the Security Documents and the pledged
U.S. Obligations shall be the sole source of collateral securing the repayment of the Loan and the Note. Any portion of the Defeasance Deposit in excess of the amount necessary to purchase the U.S.
Obligations required by the preceding paragraph and to otherwise satisfy the Borrowers' obligations under this Section 2.5(b) shall be remitted to Borrowers with the release of the Projects
from the lien of the Security Documents. In connection with such release, a successor entity meeting Agent's then applicable single purpose entity requirements and otherwise reasonably acceptable to
Agent, adjusted, as applicable, for the Defeasance
contemplated by this Section 2.5(b) (the "Successor Borrower"), shall be established by Borrowers subject to Agent's approval (or at Agent's option, by Agent) and Borrowers shall transfer and
assign all obligations, rights and duties under and to the Note together with the pledged U.S. Obligations to such Successor Borrower pursuant to an assignment and assumption agreement in form and
substance reasonably satisfactory to Agent (the "Assignment Agreement"). Such Successor Borrower, shall assume the obligations under the Note, the Security Agreement and the other Loan Documents and
Borrowers shall be relieved of its obligations thereunder, except (i) that Borrowers shall be required to perform their obligations pursuant to this Section 2.5(b), including maintenance
of the Successor Borrower, if applicable, and (ii) for those obligations of Borrowers which survive repayment of the Loan. Borrowers shall pay $1,000.00 to any such Successor Borrower as
consideration for assuming the obligations under the Note, the Security Agreement and the other Loan Documents pursuant to the Assignment Agreement. Borrowers shall pay all reasonable costs and
expenses incurred by Agent or Lender in connection with this Section 2.5(b), including Agent's and Leader's reasonable attorneys' fees and expenses, and any administrative and tax expenses
associated with or incurred by the Successor Borrower. 

        For
purposes of this Section 2.5(b), the following terms shall have the following meanings: 

        (x)   The
term "Defeasance Deposit" shall mean an amount equal to the Yield Maintenance Amount, any costs and expenses incurred or to be incurred in the purchase of U.S.
Obligations necessary to meet the Scheduled Defeasance Payments (including Agent's estimate of administrative expenses and applicable federal, state or local income taxes associated with or to be
incurred by the Successor Borrower during the remaining term of, and applicable to, the Loan) and any revenue, documentary stamp or intangible taxes or any other tax or charge due in connection with
the transfer of the Note or otherwise required to accomplish the agreements of this Section 2.5(b), all as reasonably estimated by Agent. 

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        (y)   The
term "Yield Maintenance Amount" shall mean the amount estimated by Agent which will be sufficient to purchase U.S. Obligations providing the required Scheduled
Defeasance Payments. 

        (z)   The
term "U.S. Obligations" shall mean "Government Securities" as defined in the REMIC regulations, specifically, Treasury Regulation §
1.860G-2(a)(8)(i), as chosen by Agent. 

        Section 2.6    Application
of Payments. 

        All
payments received by Agent or Lender under the Loan Documents shall be applied: first, to any fees, expenses and indemnification payments due to Agent or Lender under the Loan
Documents; second, to any Default Rate interest or late charges; third, to other accrued and unpaid interest; fourth, to the principal sum and other amounts due under the Loan Documents, and fifth to
the Prepayment Premium. 

        Section 2.7    Reserved. 

        Section 2.8    Capital
Adequacy; Increased Costs; Illegality. 

        (a)   If
Agent determines that any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy, reserve requirements or
similar requirements or compliance by Lender with any request or directive regarding capital adequacy, reserve requirements or similar requirements (whether or not having the force of law), in each
case, adopted after the Closing Date, from any central bank or other governmental authority increases or would have the effect of increasing the amount of capital, reserves or other funds required to
be maintained by Lender and thereby reducing the rate of return on Lender's capital as a consequence of its obligations hereunder, then Borrowers shall from time to time upon demand by Agent, pay to
Lender, additional amounts sufficient to compensate Lender for such reduction. A certificate as to the amount of that reduction and showing the basis of the computation thereof submitted by Agent to
Borrowers shall, absent manifest error, be final, conclusive and binding for all purposes. Lender agrees that, as promptly as practicable after it becomes aware of any circumstances referred to above
which would result in any such increased cost, Lender shall, to the extent not inconsistent with such Lender's internal policies of general application, use reasonable commercial efforts to minimize
costs and expenses incurred by it and payable to it by Borrowers pursuant to this Section 2.8(a). 

        (b)   If,
due to either (i) the introduction of or any change in any law or regulation (or any change in the interpretation thereof) or (ii) the compliance with
any guideline or request from any central bank or other governmental authority (whether or not having the force of law), in each case adopted after the Closing Date, there shall be any increase in the
cost to Lender of agreeing to make or making, funding or maintaining the Loan, then Borrowers shall from time to time, upon demand by Agent, pay to Lender, additional amounts sufficient to compensate
Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to Borrowers by Agent, shall be conclusive and binding on Borrowers for all purposes, absent manifest
error. Lender agrees that, as promptly as practicable after it becomes aware of any circumstances referred to above which would result in any such increased cost, Lender shall, to the extent not
inconsistent with such Lender's internal policies of general application, use reasonable commercial efforts to minimize costs and expenses incurred by it and payable to it by Borrowers pursuant to
this Section 2.8(b). 

8

 

        Section 2.9    Sources
and Uses. 

        The
sources and uses of funds for the contemplated transaction are as described on Schedule 2.9 attached hereto. Borrowers shall deliver such information and documentation as
Agent shall request to verify that the sources and uses are as indicated on Schedule 2.9. A reduction in the amounts necessary for any of the uses may, at Agent's election, shall result in an
equal reduction in the amount of the Loan. 

        Section 2.10    Security.

        The
Loan and all other indebtedness and obligations under the Loan Documents shall be secured by the following (collectively, the "Collateral"): (a) the mortgaged property and
other collateral as set forth in the Security Document, and (b) any other collateral or security described in this Agreement, the other Loan Documents or required by Agent or Lender in
connection with the Loan. 

        Section 2.11    Release
of Collateral. 

        (a)   Subject
to the conditions set forth in subsection (b) below, Borrowers may obtain from Agent the release (each of the following shall be referred to herein as a
"Release") from the lien of the Mortgage (and the release of all other collateral exclusively relating to such Release Project, as defined below) with respect to individual Projects (any such project
for which a Release is obtained being referred to herein as a "Release Project" and collectively, the "Release Projects") and the Release Project(s) shall not be included in the Collateral for any
period thereafter for purposes of the Loan Documents, provided that Borrowers shall be permitted to obtain Releases under this Section 2.11 no more often than one (1) time in any six
(6) month period and provided further that after each Release no less than four (4) Projects must remain subject to the Loan. 

        (b)   Borrower
may only obtain a release of a Release Project upon satisfaction of the following conditions: 

        (i)    Any
Release under this Section 2.11 shall be subject to Borrower's satisfaction of the terms and conditions of Section 2.5(b), as such terms and conditions
are modified by this subsection (b), and any payments made by Borrowers to Agent for any Release shall be applied towards the partial Defeasance of the Loan as set forth herein; 

        (ii)   The
Defeasance Deposit to be paid by Borrower to Agent for such Release Project shall be an amount equal to the sum of (A), (B) and (C), as follows: 

        (A)  the
Yield Maintenance Amount, as determined by Agent, which is sufficient to Defease a portion of the principal balance of the Loan equal to the Allocated Loan Amount
for the applicable Release Project; 

9

 

        (B)  any
costs and expenses incurred or to be incurred in the purchase of U.S. Obligations necessary to meet the Scheduled Defeasance Payments (including Agent's estimate of
administrative expenses and applicable federal, state or local income taxes associated with or to be incurred by the Successor Borrower during the remaining term of, and applicable to, the Loan) to
Defease the applicable portion of the principal balance of the Loan as set forth herein; and 

        (C)  any
revenue, documentary stamp or intangible taxes or any other tax or charge due in connection with the Release or otherwise required to accomplish the following, all
as reasonably estimated by Agent; 

        (iii)  As
of the date of the proposed Release, the Project Yield, measured solely with respect to the remaining Projects is equal to or greater than seventeen and
one-tenth percent (17.1%); 

        (iv)  As
of the date of the proposed Release, the Debt Service Coverage Ratio, measured solely with respect to the remaining Projects is equal to or greater than 2.10:1.00; 

        (v)   As
of the date of the proposed Release, no Material Adverse Change has occurred (other than a Material Adverse Change related solely to the applicable Release Project(s)
such that the requested Release would have the effect of curing the Material Adverse Change with respect to the remaining Projects following such Release); 

        (vi)  As
of the date of the proposed Release of any Release Project, no default or Event of Default shall have occurred and shall be continuing under any of the Loan
Documents (other than a default or Event of Default related solely to the applicable Release Project(s) such that the requested Release would have the effect of curing the default or Event of Default,
as applicable, with respect to the remaining Projects following such Release); 

        (vii) If
requested by Agent, the Successor Borrower(s) and the remaining Borrowers shall executed one or more new promissory notes, substantially in the form of the Note, to
separate the portion of the Loan being Defeased from the portion of the Loan not being Defeased; and 

        (viii) Borrower
shall have paid Agent all of Agent's reasonable out-of-pocket fees and expenses, including reasonable attorneys' fees and expenses,
incurred in connection with the Release. 

        Notwithstanding
anything contained in Section 2.5(b), the Guaranty shall not be released in connection with Releases under this Section 2.11. 

10

 
 
 

ARTICLE III
  INSURANCE, CONDEMNATION, AND IMPOUNDS,    
    

        Section 3.1    Insurance. 

        Borrowers
shall maintain insurance as follows: 

        (a)   Property.
Borrowers shall keep the Projects insured against damage by fire and the other hazards covered by a standard extended coverage and "special perils" insurance
policy (including a separate policy for broad form boiler and machinery coverage (without exclusion for explosion)) for the full insurable value thereof the term "full insurable value" to mean the
actual replacement cost of the improvements and the personal property (without taking into account depreciation or co-insurance), and shall maintain such other casualty insurance as
reasonably required by Agent, including, without limitation, ordinance or law coverage, in amounts and in form and with carrier(s) approved by Agent as of the Closing Date which carrier(s), amounts
and form shall not be changed without the prior written consent of Agent which consent shall not be unreasonably withheld or delayed. Borrowers shall keep each Project insured against loss by flood if
such Project is located in an area identified by the Federal Emergency Management Agency as an area having special flood hazards and in which flood insurance has been made available under the National
Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 (and any successor acts thereto) in an amount at least equal to the amount
approved by Agent as of the Closing Date. The proceeds of insurance paid on account of any damage or destruction to any Project shall be paid to Agent to be applied as provided in Section 3.2. 

        (b)   Liability.
Borrowers shall maintain (a) commercial general liability insurance with respect to the Projects; (b) worker's compensation insurance and
employer's liability insurance covering employees at the Projects employed by Borrowers or Master Tenants (to the extent required, and in the amounts required by applicable laws); (c) business
interruption insurance, including use and occupancy, rental income loss and extra expense, against all periods covered by Borrowers' property insurance; (f) builder's risk insurance, as
applicable, and (g) Terrorism insurance (subject to the last sentence of this Section 3.1(b)). All of the above shall be maintained at all times during the term of the Loan with
coverages, in the amounts and forms and with limits and carrier(s) approved by Agent as of the Closing Date which carrier(s), amounts, limits and form shall not be changed or reduced without the prior
written consent of Agent, which shall not be unreasonably withheld or delayed. Lender and Borrowers agree that with respect to the amounts of any general and professional liability insurance to be
maintained by Borrowers hereunder, Master Tenants' coverage under such insurance policy or policies shall be deemed sufficient to satisfy the requirements of this Section 3.1(b) so long as
(i) policy limits of not less than $1,000,000 per occurrence and $3,000,000 aggregate per Project, with a self-insured retention no greater than $350,000 per occurrence, are
maintained, unless other limits or retentions are first approved in writing by Agent, which approval shall not be unreasonably withheld or denied, and (ii) Master Tenants either
(A) accrue in their financial statements reserves adequate to fund estimated losses payable by Master Tenants on account of any self-insured retentions, deductibles and other
liabilities not covered by such policy or policies, and/or (B) to the extent reserves are not accrued therefor, purchase coverage from an insurer or insurers (which shall meet the criteria set
forth in Section 3.1(d) below) covering the self insured retentions and/or any deductibles under the policies required hereby. Notwithstanding anything to the contrary contained herein, from
and after the date hereof, insurance coverage for terrorism, terrorist acts or similar perils (collectively, "Terrorism") may be required by Agent if such coverage is (1) customarily obtained
by owners of property similar to the Projects in use, character and geographic location (the Tucson, Phoenix, Walla Walla, Los Angeles or Santa Rosa metropolitan areas, as applicable), and
(2) readily available at a cost which, in Agent's opinion, exercised reasonably, is commercially reasonable. 

11

 

        (c)   Other
Insurance. Borrowers shall maintain such other insurance with respect to the Projects as reasonably required by Agent. 

        (d)   Form
and Quality. All insurance policies shall be endorsed in form and substance acceptable to Agent to name Agent as an additional insured, loss payee or mortgagee
thereunder, as its interest may appear, with loss payable to Agent, without contribution, under a standard New York (or local equivalent) mortgagee clause. All such insurance policies and endorsements
shall be fully paid for and contain such provisions and expiration dates and be in such form and issued by such insurance companies licensed to do business in the State where each Project is located,
with a rating of "A-IX" or better as established by Best's Rating Guide (or an equivalent rating approved in writing by Agent); provided that insurance policies for surplus insurance may
be issued by unrated insurance companies reasonably approved by Agent. Each policy shall provide that such policy may not be cancelled or materially changed except upon thirty (30) days' prior
written notice of intention of non-renewal, cancellation or material change to Agent and that no act or thing done by Borrowers shall invalidate any policy as against Agent. Borrowers
shall assign the policies or proofs of insurance to Agent, in such manner and form that Agent and its successors and assigns shall at all times have and hold the same as security for the payment of
the Loan. Borrowers shall deliver copies of all original policies certified to Agent by the insurance company or authorized agent as being true copies, together with the endorsements required
hereunder. The proceeds of insurance policies coming into the possession of Agent shall not be deemed trust funds, and Agent shall be entitled to apply such proceeds as herein provided. Borrowers
shall not maintain any separate or additional property insurance which is contributing in the event of loss unless it is properly endorsed and otherwise satisfactory to Agent in all respects. 

        (e)   Adjustments.
Borrowers shall give immediate written notice of any loss to the insurance carrier and to Agent. Borrowers hereby irrevocably authorize and empower Agent,
as attorney-in-fact for Borrowers coupled with an interest, to make proof of loss, to adjust and compromise any claim under insurance policies, to appear in and prosecute any
action arising from such insurance policies, to collect and receive insurance proceeds, and to deduct therefrom Agent's expenses incurred. in the collection of such proceeds. Nothing contained in this
Section 3.1, however, shall require Agent to incur any expense or take any action hereunder. 

        (f)    Agent's
Right to Purchase Insurance. In the event Borrowers fail to provide Agent with evidence of the insurance coverage required by this Agreement, Agent may purchase
insurance at Borrowers' expense to protect Agent's interests in the Projects. This insurance may, but need not, protect Borrowers' interests. The coverage purchased by Agent may not pay any claim made
by any Borrower or any claim that is made against any Borrower in connection with the Projects. Borrowers may later cancel any insurance purchased by Agent, but only after providing Agent with
evidence that Borrowers have obtained insurance as required by this Agreement. If Agent purchases insurance for the Projects, Borrowers will be responsible for the costs of that insurance, including
interest and other charges imposed by Agent in connection with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance. The costs of the insurance
may be added to the Loan. The costs of the insurance may be more than the cost of insurance Borrowers are able to obtain on their own. 

12

 

        Section 3.2    Use
and Application of Insurance Proceeds 

        Agent
shall apply insurance proceeds to costs of restoring a Project or Projects or the Loan as follows: 

        (a)   if
a loss is less than or equal to twenty five percent (25%), of the Allocated Loan Amount shown on Schedule 3.2(a) with respect to the Project or Projects
affected by such loss, Agent shall apply the insurance proceeds to restoration provided that: (i) no Event of Default exists, and (ii) Borrowers promptly commence and diligently pursues
restoration of the Projects; 

        (b)   if
the loss exceeds twenty-five percent (25%) of the Allocated Loan amount with respect to the Project or Projects affected by the loss, but is not more than
thirty percent (30%) of the replacement value of the affected improvements (for projects containing multiple phases or stand alone structures, such calculation to be based on the damaged phase or
structure, not the Project or Projects as a whole), Agent shall apply the insurance proceeds to restoration provided that at all times during such restoration: (i) no Event of Default exists;
(ii) Agent determines that there are sufficient funds available to restore and repair the Projects to a condition approved by Agent; (iii) Agent determines that the Net Operating Income
of the Projects during restoration plus the collectible proceeds of business interruption insurance will be sufficient to pay Debt Service; (iv) Agent determines that restoration and repair of
the affected Project or Projects to a condition approved by Agent will be completed within six months after the elate of loss or casualty and in any event ninety (90) days prior to the Maturity
Date; and (v) Borrowers promptly commence and are diligently pursuing restoration of the affected Project or Projects; or 

        (c)   if
the conditions set forth above are not satisfied or the loss exceeds the maximum amount specified in Subsections (b) above, in Agent's sole discretion, Agent
may apply any insurance proceeds it may receive to the payment of the Loan or allow all or a portion of such proceeds to be used for the restoration of the affected Project or Projects. 

        Insurance
proceeds applied to restoration will be disbursed on receipt of satisfactory plans and specifications, contracts and subcontracts, schedules, budgets, lien waivers and
architects' certificates, and otherwise in accordance with prudent commercial construction lending practices for construction loan advances, including, as applicable, the advance conditions under
Part D of Schedule 2.1 with respect to disbursement of insurance proceeds. 

13

 

        Section 3.3    Condemnation
Awards. 

        Borrowers
shall immediately notify Agent of the institution of any proceeding for the condemnation or other taking of any Project or any portion thereof. Agent may participate in any
such proceeding and Borrowers will deliver to Agent all instruments necessary or required by Agent to permit such participation. Without Agent's prior consent, Borrowers (a) shall not agree to
any compensation or award, and (b) shall not take any action or fail to take any action which would cause the compensation to be determined. All awards and compensation for the taking or
purchase in lieu of condemnation of the Projects or any part thereof are hereby assigned to and shall be paid to Agent. Borrowers authorize Agent to collect and receive such awards and compensation,
to give proper receipts and acquittances therefor, and in Agent's sole discretion, (a) to apply the same (after deduction of Lender's reasonable costs and expenses, if any in collecting the
same) toward the payment of the Loan in such order and manner as Agent may elect, notwithstanding that the Loan may not then be due and payable, or (b) to make the same available to Borrowers
for the restoration or repair of the Projects. If the net proceeds of the condemnation award are made available to Borrower for restoration or repair, such proceeds shall be disbursed upon
satisfaction of and in accordance with the terms and conditions set forth in Section 3.2. Borrowers, upon request by Agent, shall execute all instruments requested to confirm the assignment of
the awards and compensation to Agent, free and clear of all liens, charges or encumbrances. 

        Section 3.4    Insurance
Impounds. 

        Borrowers
shall deposit with Agent, monthly, a sum of money (the "Insurance Impound") equal to one-twelfth (1/12th) of the annual charges for insurance premiums
relating to the insurance coverages required by this Agreement. At or before the initial advance of the Loan, Borrowers shall deposit with Agent a sum of money which together with the monthly
installments will be sufficient to make each of such payments thirty (30) days prior to the date any delinquency or penalty becomes due with respect to such payments and maintain a reserve
equal to approximately 1/6 of the annual charges in Agent's sole but reasonable estimation. Deposits shall be made on the basis of Agent's estimate from time to time of the charges for
the current year. All funds so deposited shall be held by Agent. These sums may be commingled with the general funds of Agent, and shall not be deemed to be held in trust for the benefit of Borrowers.
So long as no Event of Default exists hereunder, Agent shall credit for Borrowers' account interest on such funds held by Agent from time to time at the money market account rate announced from time
to time by the Northern Trust Company or any other national banking association selected by Agent in its sole discretion (the "Money Market Rate"). All interest paid on such funds shall be deemed to
be a part of the Insurance impound and shall be applied in accordance with this Section 3.4. Borrowers hereby grant to Agent for the benefit of Lender and Agent a security interest in all funds
so deposited with Agent for the purpose of securing the Loan. While an Event of Default exists, the funds deposited may be applied in payment of the charges for which such funds have been deposited,
or to the payment of the Loan or any other charges affecting the security of Agent, as Agent may elect, but no such application shall be deemed to have
been made by operation of law or otherwise until actually made by Agent. Borrowers shall furnish Agent with bills for the charges for which such deposits are required at least thirty (30) days
prior to the date on which the charges first become payable. If at any time the amount on deposit with Agent, together with amounts to be deposited by Borrowers before such charges are payable is
insufficient to pay such charges and maintain a reserve equal to approximately 1/6 of the annual charges in Agent's sole but reasonable estimation, Borrowers shall deposit any
deficiency with Agent immediately upon demand. Agent shall pay such charges when the amount on deposit with Agent is sufficient to pay such charges and maintain such reserve and Agent has received a
bill for such charges. Notwithstanding the foregoing to the contrary, so long as no Event of Default is continuing, this Section 3.4 shall not apply. 

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        Section 3.5    Real
Estate Tax Impounds. 

        Borrowers
shall deposit with Agent, monthly, a sum of money (the "Tax Impound") equal to one-twelfth (1/12th) of the annual charges for real estate taxes, assessments,
franchise taxes and changes, impositions and other charges and obligations relating to the Projects (collectively, the "Taxes"). At or before the initial advance of the Loan, Borrowers shall deposit
with Agent a sum of money which together with the monthly installments will be sufficient to make each of such payments thirty (30) days prior to the date any delinquency or penalty becomes due
with respect to such payments and maintain a reserve equal to approximately 1/6 of the annual taxes, assessments and charges in Agent's sole but reasonable estimation. Deposits shall be
made on the basis of Agent's estimate from time to time of the charges for the current year (after giving effect to any reassessment or, at Agent's election, on the basis of the charges for the prior
year, with adjustments when the charges are fixed for the then current year). All funds so deposited shall be held by Agent. These sums may be commingled with Agent's general funds and shall not be
deemed to be held in trust for the benefit of Borrowers. So long as no Event of Default exists hereunder, Agent shall credit for Borrowers' account interest on such funds held by Agent from time to
time at the Money Market Rate. All interest paid on such funds shall be deemed to be a part of the Tax Impound and shall be applied in accordance with this Section 3.5. Borrowers hereby grant
to Agent for the benefit of Lender and Agent a security interest in all funds so deposited with Agent for the purpose of securing the Loan. While an Event of Default exists, the funds deposited may be
applied in payment of the charges for which such funds have been deposited, or to the payment of the Loan or any other charges affecting the security of Agent, as Agent may elect, but no such
application shall be deemed to have been made by operation of law or otherwise until actually made by Agent. Borrowers shall furnish Agent with bills for the charges for which such deposits are
required at least thirty (30) days prior to the date on which the charges first become payable. If at any time the amount on deposit with Agent, together with amounts to be deposited by
Borrowers before such charges are payable, is insufficient to pay such charges and maintain a reserve equal to approximately 1/6 of the annual taxes, assessments and charges in Agent's
sole but reasonable estimation, Borrowers shall deposit any deficiency with Agent immediately upon demand. Agent shall pay such charges when the amount on deposit with Agent is sufficient to pay such
charges and maintain such reserve and Agent has received a bill for such charges. The obligation of Borrowers to pay the Taxes, as set forth in the Security Documents, is not affected or modified by
the provision of this paragraph. 

15

 

        Section 3.6    Replacement
Reserves. 

        (a)   Deposits.
At the time of and in addition to the monthly installment of interest and, principal due under the Note and this Loan Agreement, Borrowers shall pay to Agent
an amount equal to the product of Thirty Dollars ($30) multiplied by the number of skilled nursing beds and assisted living units in the Projects (the "Replacement Deposit"). Provided no Event of
Default hereunder or under any of the other Loan Documents has occurred and is continuing, Agent shall credit for Borrowers' account interest on the sum of the Replacement Deposit held by Agent from
time to time, which interest shall accrue monthly at the Money Market Rate. The undisbursed amount of the Replacement Deposit and any interest earned thereon is hereinafter referred to as the
"Replacement Reserve". Borrowers hereby grant to Agent for the benefit of Lender and Agent a security interest in the Replacement Reserve for the purpose of securing the Loan. On the Maturity Date,
the monies then remaining on deposit with Agent shall, at Agent's option, be applied against the Indebtedness or if no Potential Default is continuing, returned to Borrowers. The Replacement Reserve
may be commingled with the general funds of the Agent, and these sums shall not be deemed to be held in trust for the benefit of Borrowers. 

        (b)   Disbursements.
So long as no Event of Default hereunder or under any of the other Loan Documents has occurred and is continuing, Borrowers may request, from time to
time, Agent to disburse funds from the Replacement Reserve (which request will include a reasonably detailed description of the capital expenditures at the Projects which Borrowers intend to pay for
with such funds), which request shall not be unreasonably denied by Agent. If requested by Agent, each disbursement request will be accompanied by copies of invoices, lien waivers and other evidence
reasonably required by Agent. 

        If
an Event of Default occurs, Agent shall have the right to apply all or any portion of the Replacement Reserve to the obligations evidenced by the Loan Documents in such order as Agent
in its sole discretion determines. 

16

  

 
 

ARTICLE IV
  LEASING MATTERS    
    

        Section 4.1
Representations and Warranties on Leases. 

Borrowers
represent and warrant to Agent with respect to Leases of the Projects that: (a) the rent roll separately delivered to Agent at or prior to Closing is true and correct as of the date
hereof, and the Leases are valid and in and full force and effect; (b) the Leases (including amendments) are in writing, and there are no oral agreements with respect thereto; (c) the
copies of the Master Leases delivered to Agent are true and complete; (d) no Borrower has any knowledge of any notice of termination or default with respect to any Master Lease or any other
non-residential Lease; (e) no Borrower has assigned or pledged any of the Leases, the rents or any interests therein, except to Agent; (f) no tenant or other party has an
option to purchase all or any portion of the Projects; (g) no Master Tenant has the right to terminate its Lease prior to expiration of the stated term of such Master Lease (unless due to
casualty or condemnation of the Project); and (i) no tenant has prepaid more than one month's rent in advance (except for bona fide security deposits not in excess of an amount equal to two
month's rent). 

        Section 4.2
Approval Rights. 

        (a)   Borrowers
shall not and shall not permit any Master Tenant to, without Agent's prior written consent, enter into or amend (in any material respect) any Lease or other
rental or occupancy agreement or concession agreement with respect to a Project except as expressly permitted hereunder. 

        (b)   Borrowers
shall have the right to enter into or to permit any Master Tenant to, amend and/or modify non-residential Leases without Agent's consent provided
(i) the economic terms of the Lease conform to those of the market, (ii) the form of the nonresidential Lease is that of the standard lease form approved by Agent, with no material
modifications, (iii) the initial term is not longer than five (5) years, and (iv) the leased premises are not greater than 15% of the square footage of the applicable Project. 

        (c)   Borrower
and any Master Tenant shall have the right to enter into or amend any residential Lease which has a term of no more than one (1) year and all such
residential Leases shall be at market rates on the form previously approved by Agent without any material modifications. 

        Section 4.3
Covenants. 

Borrowers
shall or shall cause Master Tenants to: (a) perform the obligations which any Borrower or Master Tenant is required to perform under the Leases; (b) enforce the material
obligations to be performed by the tenants under the Leases; (c) promptly furnish to Agent any notice of default or termination received by any Borrower or Master Tenant from any
non-residential tenant, and any notice of default or termination given by any Borrower or Master tenant to any non-residential tenant; (d) not collect, without Agent's
prior written consent, any rents for more than one month in advance of the time when the same shall become due, except for bona fide security deposits not in excess of an amount equal to two months
rent; (e) not enter, without Agent's prior written consent, into any ground lease or master lease (other than the Master Leases) of any part of the Projects; (f) not further assign or
encumber any Lease; (g) not, except with Agent's prior written consent, cancel or accept surrender or termination of any non-residential Lease; and (h) not, except with
Agent's prior written consent, modify or amend any non-residential Lease, and any action in violation of clauses (e), (f), (g), and (h) of this Section 4.3 shall be void at
the election of Agent. Borrowers will not suffer or permit any breach or default to occur in any of any Borrower's or Master Tenant's obligations under any of the Leases nor suffer or permit the same
to terminate by reason of any failure of any Borrower to meet any requirement of any Lease. 

17

 

        Section 4.4
Tenant Estoppels. 

At
Agent's request, Borrowers shall obtain and furnish to Agent, written estoppels in form and substance satisfactory to Agent, executed by each Master Tenant and by each tenant under other
non-residential Leases in the Projects and confirming the term, rent, and other provisions and matters relating to the Leases. 

        Section 4.5
Security Deposits 

        (a)   Existence
of Security Deposits. None of any Borrower nor any Master Tenant has collected or is in receipt of any security deposit from any tenant of any Project, except
as described on the rent rolls previously provided to Agent at or prior to closing. Borrowers and/or Master Tenants, as applicable shall hold, in trust, all tenant security deposits in a segregated
account, and, to the extent required by applicable law, shall not commingle any such funds with any other funds of Borrowers or Master Tenants, as applicable. 

        (b)   Lien
on Security Deposits. Borrowers or Master Tenants shall at all times have on deposit with Agent, as cash collateral for the Loan and all amounts payable under the
Loan Documents, an amount of cash equal to the aggregate amount of security deposits which are or may become refundable to tenants of the Projects from time to time. Agent agrees to allow Borrowers or
Master Tenants, if applicable, to use such funds solely to repay such amounts to tenants of the Projects, as and when the same are due; provided Agent may, but shall not be obligated to, pay such
amounts directly to the tenants upon Agent's receipt of evidence reasonably satisfactory to Agent that such amounts are due; and provided further, upon payment in full of the Loan and all other
amounts due Agent under the Loan Documents, Agent shall pay any remaining amounts on deposit with Agent pursuant to this Section 4.5(b) to Borrower or Master Tenants, if applicable. Agent shall
not be obligated to pay Borrowers or any Master Tenant, if applicable, interest on any amounts on deposit with Agent pursuant to this Section 4.5(b). 

18

 
 
 

ARTICLE V
  REPRESENTATIONS AND WARRANTIES    
    

Borrowers
represents and warrants to Agent that: 

        Section 5.1
Organization and Power. 

Each
Borrower and each Guarantor (other than a natural person) is duly organized, validly existing and in good standing under the laws of the state of its formation or existence, and is in compliance
with legal requirements applicable to doing business in the state of its formation. Each Borrower and each Guarantor (other than a natural person and to the extent required by law) is in good standing
under the laws of and is in compliance with legal requirements applicable to doing business in the state where
each Project is located. No Borrower is a "foreign person" within the meaning of § 1445(f)(3) of the Internal Revenue Code. 

        Section 5.2
Members. 

Guarantor.
Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with its principal place of business at 27101 Puerta Real, Suite
450, Mission Viejo, California 92691. Guarantor is the sole managing member of each Borrower and owns one hundred percent (100%) of the membership interests in each Borrower free and clear of all
liens, claims, and encumbrances. Guarantor has full right, power and authority to execute the Loan Documents on its own behalf and on behalf of each Borrower. 

        Section 5.3
Borrowers' Operating Agreement. 

A
true and complete copy of the operating agreement creating each Borrower and any and all amendments thereto (collectively, the "Operating Agreement") have been furnished to Agent. The Operating
Agreement constitutes the entire agreement among the members of each Borrower and is binding upon and enforceable against each of the members in accordance with its terms. There are no other
agreements, oral or written, among any of the members relating to any Borrower. No breach exists under the Operating Agreement and no condition exists which, with the giving of notice or the passage
of time would constitute a breach under the Operating Agreement. 

        Section 5.4
Corporate Documents. 

A
true and complete copy of the articles of incorporation and by-laws of Guarantor and all other documents creating and governing Guarantor (collectively, the "Incorporation Documents")
have been furnished to Agent. There are no other agreements, oral or written, among any of the shareholders of Guarantor relating to Guarantor. The Incorporation Documents were duly executed and
delivered, are in full force and effect, and binding upon and enforceable in accordance with their terms. The Incorporation Documents constitute the entire understanding among the shareholders of
Guarantor. No breach exists under the Incorporation Documents and no act has occurred and no condition exists which, with the giving of notice or the passage of time would constitute a breach under
the Incorporation Documents. 

19

 

        Section 5.5
Validity of Loan Documents. 

The
execution, delivery and performance by Borrowers and each Guarantor of the Loan Documents: (a) are duly authorized and do not require the consent or approval of any other party or
governmental authority which has not been obtained; and (b) will not violate any law or result in the imposition of any lien, charge or encumbrance upon the assets of any such party, except as
contemplated by the Loan Documents. The Loan Documents constitute the legal, valid and binding obligations of Borrowers and each Guarantor, enforceable in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, or similar laws generally affecting the enforcement of creditors' rights. 

        Section 5.6
Liabilities; Litigation. 

        (a)   The
financial statements delivered by Borrowers, each Guarantor and, Master Tenants are true and correct with no significant change since the date of preparation. Except
as disclosed in such financial statements, there are no liabilities (fixed or contingent) affecting any Project, any Borrower, Guarantor or any Master Tenant. Except as disclosed in such financial
statements or on Schedule 5.6, there is no litigation, administrative proceeding, investigation or other legal action (including any proceeding under any state or federal bankruptcy or
insolvency law) pending or, to the knowledge of any Borrower, threatened, against any Project, any Borrower, Guarantor or any Master Tenant which if adversely determined could have a material adverse
effect on such party, any Project or the Loan. 

        (b)   Neither
any Borrower nor Guarantor nor any Master Tenant is contemplating either the filing of a petition by it under state or federal bankruptcy or insolvency laws or
the liquidation of all or a major portion of its assets or property, and neither any Borrower nor Guarantor nor any Master Tenant has knowledge of any Person contemplating the filing of any such
petition against it. 

        Section 5.7
Taxes and Assessments. 

There
are no unpaid or outstanding real estate or other taxes or, assessments on or against the Projects or any part thereof, except general real estate taxes not due or payable. Copies of the current
general real estate tax bills, with respect to the Projects have been delivered to Agent. Each Project is comprised of one or more parcels, each of which constitutes a separate tax lot and none of
which constitutes a portion of any other tax lot. There are no pending or, to Borrowers' best knowledge, proposed, special or other assessments for public improvements or otherwise affecting any
Project, nor are there any contemplated improvements to any Project that may result in such special or other assessments. 

20

 

        Section 5.8
Other Agreements; Defaults. 

Neither
any Borrower nor Guarantor nor any Master Tenant is a party to any agreement or instrument or subject to any court order, injunction, permit, or restriction, which might adversely affect any
Project or the business, operations, or condition (financial or otherwise) of any Borrower or Guarantor or any Master Tenant. Neither any Borrower nor Guarantor nor any Master Tenant is in violation
of any agreement which violation would have an adverse effect on any Project, any Borrower, Guarantor or any Master Tenant or any Borrower's or Guarantor's or any Master Tenant business, properties,
or assets, operations or condition, financial or otherwise. 

        Section 5.9
Compliance with Law. 

Each
Borrower, Guarantor and each Master Tenant has all requisite licenses, permits, franchises, qualifications, certificates of occupancy or other governmental authorizations to own, lease, and
operate the Projects and carry on its business, and each Project is in compliance, in all material respects, with all applicable legal requirements and is free of structural defects, and all building
systems contained therein are in good working order, subject to ordinary wear and tear. No Project constitutes, in whole or in part, a legally non-conforming use under applicable legal
requirements. 

        Section 5.10
Condemnation. 

To
Borrower's knowledge, as of the date hereof, no condemnation is pending nor has any condemnation been threatened with respect to all or any portion of the Project. 

        Section 5.11
Access. 

Each
Project has adequate rights of access to public ways and is served by adequate water, sewer, sanitary sewer and storm drain facilities. All public utilities necessary or convenient to the full
use and enjoyment of each Project are located in the public right-of-way abutting the applicable Project, and all such utilities are connected so as to serve such Project
without passing over other property, except to the extent such other property is subject to a perpetual easement for such utility benefiting such Protect. All roads necessary for the full utilization
of each Project for its current purpose have been completed and dedicated to public use and accepted by all governmental authorities. 

        Section 5.12
Flood Hazard. 

No
Project is situated in an area designated as having special flood hazards as defined by the Flood Disaster Protection Act of 1973, as amended, or as a wetlands by any governmental entity having
jurisdiction over any Project. 

        Section 5.13
Property. 

A
fee in each Project is, or contemporaneously with the initial funding of the Loan will be, owned by the respective Borrower free and clear of all liens, claims, encumbrances, covenants, conditions
and restrictions, security interests and claims of others, except only such exceptions to title as have been approved by Agent. To the best of Borrowers' knowledge, the Projects are in compliance with
all zoning requirements, building codes, subdivision improvement agreements, declarations, ground leases, and all covenants, conditions and restrictions of record. Except as set forth in the
exceptions to title approved by Agent, the zoning and subdivision approval of the Projects and the right and ability to, use or operate the Projects are not in any way dependent on or related to any
real estate other than the Properties where the same are to be made. Except as previously disclosed to Agent in writing, to the best of Borrowers' knowledge, as of the date hereof, (i) there
are no, nor are there any alleged or asserted, violations of law, regulations, ordinances, codes, permits, licenses, declarations, ground leases, covenants, conditions, or restrictions of record, or
other agreements relating to the Projects, or any part thereof, (ii) the Projects are in good condition and repair with no deferred maintenance and are free from damage caused by fire or other
casualty, (iii) there is no latent or patent structural or other significant defect or deficiency in the Projects, (iv) design and as-built conditions of the Projects are
such that no drainage or surface or other water will drain across or rest upon either the Project or land of others except in areas designated for such purpose and for which a benefiting or burdening
easement has been established, and (v) none of the Improvements on the Projects create an encroachment over, across or upon any of the Projects' boundary lines, rights of way or easements, and
no buildings or other improvements on adjoining land create such an encroachment. 

21

 

        Section 5.14
Location of Borrowers. 

Each
Borrower's principal place of business and chief executive offices are located at the address stated in Section 10.1. 

        Section 5.15
Margin Stock. 

No
part of proceeds of the Loan will be used for purchasing or acquiring any "margin stock" within the meaning of Regulations T, U or X of the Board of Governors of the Federal Reserve System. 

        Section 5.16
Tax Filings. 

Each
Borrower and each Guarantor have filed (or have obtained effective extensions for filing) all federal, state and local tax returns required to be filed and have paid or made adequate provision
for the payment of all federal, state and local taxes, charges and assessments payable by each Borrower and each Guarantor, respectively. 

        Section 5.17
Solvency. 

After
giving effect to the Loan, the fair saleable value of each Borrower's assets exceeds and will, immediately following the making of the Loan, exceed any Borrower's total liabilities, including,
without limitation, subordinated, unliquidated, disputed and contingent liabilities. The fair saleable value of each Borrower's assets is and will, immediately following the making of the Loan, be
greater than such Borrower's probable liabilities, including the maximum amount of its contingent liabilities on its Debts as such Debts become absolute and matured, no Borrower's assets constitute
and, immediately following the making of the Loan will not constitute, unreasonably small capital to carry out its business as conducted or as proposed to be conducted. No Borrower intends to, nor
believes that it will, incur Debts and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such Debts as they mature (taking into account the timing and
amounts of cash to be received by such Borrower and the amounts to be payable on or in respect of obligations of such Borrower). 

22

 

        Section 5.18
Full and Accurate Disclosure. 

No
statement of fact made by or on behalf of any Borrower or Guarantor or any Master Tenant in this Agreement or in any of the other Loan Documents contains any untrue statement of a material fact or
omits to state any material fact necessary to make statements contained herein or therein not misleading. There is no fact presently known to any Borrower which has not been disclosed to Agent which
adversely affects, nor as far as any Borrower can foresee, might adversely affect, any Project or the business, operations or condition (financial or otherwise) of any Borrower or Guarantor. 

        Section 5.19
Single Purpose Entity. 

Each
Borrower is and has at all times since its formation been a Single Purpose Entity. 

        Section 5.20
No Broker. 

No
brokerage commission or finder's fee is owing to any broker or finder arising out of any actions or activity of any Borrower in connection with the Loan. 

        Section 5.21
Reserved 

        Section 5.22
Labor Disputes. 

To
the best of each Borrower's knowledge, there are no strikes, boycotts, or labor disputes which could reasonably be anticipated to have a material adverse effect on the operation of any Project. 

        Section 5.23
Employees. 

Employees.
No Borrower has any employees. 

        Section 5.24
ERISA (Borrower). 

        (a)   No
Borrower is an "employee benefit plan" as defined in Section 3(3) of ERISA, or a "governmental plan" within the meaning of Section 3(32) of ERISA;
(b) Borrowers are not subject to state statutes regulating investments and fiduciary obligations with respect to governmental plans; (c) the assets of the Borrowers do not constitute
"plan assets" of one or more plans within the meaning of 29 C.F.R. Section 2510.3-101; and (d) one or more of the following circumstances is true: (i) Equity interests
in Borrowers are publicly offered securities, within the meaning of 29 C.F.R. Section 2510.3-101(b)(2) or are securities issued by an investment company registered under the
Investment Company Act of 1940; (ii) Less than twenty-five percent (25%) of the value of any class of equity interests in Borrower are held by "benefit plan investors" within the
meaning of 29 C.F.R. Section 2510.3-101(f)(2); or (iii) Borrowers each qualify as an "operating company", a "venture capital operating company", or a "real estate operating
company" within the meaning of 29 C.F.R. Section 2510.3-101(c), (d) or (e). Borrowers shall deliver to Agent such certifications and/or other evidence periodically requested
by Agent, in its reasonable discretion, to verify these representations and warranties. Failure to deliver these certifications or evidence, breach of these representations and warranties, or
consummation of any transaction which would cause the Loan Documents or any exercise of Agent's or Lender's rights under the Loan Documents to (1) constitute a non-exempt prohibited
transaction under ERISA or (2) violate ERISA or any state statute regulating governmental plans (collectively, a "Violation"), which failure continues for thirty (30) days after written
notice, shall be an Event of Default. Notwithstanding anything in the Loan Documents to the contrary, no sale, assignment, or transfer of any direct or indirect right, title, or interest in Borrowers
or the Projects (including creation of a junior lien, encumbrance or leasehold interest) shall be permitted which would negate Borrowers' representations in this section or cause a Violation. At least
Fifteen (15) days before consummation of any of the foregoing, Borrowers shall obtain from the proposed transferee or lienholder (1) a certification to Agent that the representations and
warranties of this subparagraph will be true after consummation and (2) an agreement to comply with this section. 

23

 

        Section 5.25
Intellectual Property. 

Except
as set forth on Exhibit B, Borrowers have no interest in any trademarks, copyrights, patents or other intellectual property with respect to the Projects. 

        Section 5.26
Anti-Terrorism and Anti-Money Laundering Compliance. 

        (a)   Compliance
with, Anti-Terrorism Laws. Borrowers represent, warrant to Agent that they are not, and, after making due inquiry, that no Person who owns a
controlling interest in or otherwise controls Borrowers is, (i) listed on the Specially Designated Nationals and Blocked Persons List (the "SDN List") maintained by the Office of Foreign Assets
Control ("OFAC"), Department of the Treasury, and/or on any other similar list ("Other Lists" and, collectively with the SDN List, the "Lists") maintained by the OFAC pursuant to any authorizing
statute, Executive Order or regulation (collectively, "OFAC Laws and Regulations"); or (ii) a Person (a "Designated Person") either (A) included within the term "designated national" as
defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515, or (B) designated under Sections 1(a), l(b), l(c) or 1(d) of Executive Order No. 13224, 66 Fed. Reg. 49079
(published September 25, 2001) or similarly designated under any related enabling legislation or any other similar Executive Orders (collectively, the "Executive Orders"). The OFAC Laws and
Regulations and the Executive Orders are collectively referred to in this Amendment as the "Anti-Terrorism Laws". Borrowers represent and warrant that they require, and have taken
reasonable measures to ensure compliance with, the requirement, that no Person who owns any other direct interest in Borrowers is or shall be listed on any of the Lists or is or shall be a Designated
Person. This Section 5.25 shall not apply to any Person to the extent that such Person's interest in the Borrowers is through a U.S. Publicly-Traded Entity. As used in this Agreement, "U.S.
Publicly-Traded Entity" means a Person (other than an individual) whose securities are listed on a national securities exchange, or quoted on an automated quotation system, in the United States, or a
wholly-owned subsidiary of such a Person. 

24

 

        (b)   Funds
Invested in Borrowers. Borrowers represent and warrant that they have taken reasonable measures appropriate to the circumstances (and in any event as required by
law), with respect to each holder of a direct or indirect interest in any Borrower, to assure that funds invested by such holders in Borrowers are derived from legal sources ("Anti-Money
Laundering Measures"). The Anti-Money Laundering Measures have been undertaken in accordance with the Bank Secrecy Act, 31 U.S.C. §§ 5311 et seq. ("BSA"), and all
applicable laws, regulations and government guidance on BSA compliance and on the prevention and detection of money laundering violations under 18 U.S.C. §§ 1956 and 1957
(collectively with the BSA, "Anti-Money Laundering Laws"). 

        (c)   No
Violation of Anti-Money Laundering Laws. Borrowers represent and warrant to Agent, to its actual knowledge after making due inquiry, that neither
Borrowers nor any holder of a direct or indirect interest in any Borrower (i) is under investigation by any governmental authority for, or has been charged with, or convicted of, money
laundering under 18 U.S.C. §§ 1956 and 1957, drug trafficking, terrorist-related activities or other money laundering predicate crimes, or any violation of the BSA,
(ii) has been assessed civil penalties under any Anti-Money Laundering Laws, or (iii) has had any of its funds seized or forfeited in an action under any
Anti-Money Laundering Laws. 

        (d)   Borrower
Compliance with Anti-Money Laundering Laws. Borrowers represent, warrant to Agent that they have taken reasonable measures appropriate to the
circumstances (in any event as required by law), to ensure that Borrowers are in compliance with all current and future Anti-Money Laundering Laws and laws, regulations and government
guidance for the prevention of terrorism, terrorist financing and drug trafficking. 

        Section 5.27
Master Lease. 

A
true, correct and complete copy of each Master Lease, together with all amendments thereto, has been delivered to Agent; and each Master Lease, and all amendments thereto is in full force and effect
as of the Closing Date. 

        Section 5.28
Property Management. 

Each
Project is managed by the applicable Master Tenant, and there is no agreement in place between any Borrowers or any Master Tenant with a third party for the provision of management services at
any Project. 

25

 
 
 

ARTICLE VI
  FINANCIAL REPORTING NOTICES    
    

        Section 6.1 Financial Statements. 

Borrowers
shall furnish to Agent and shall cause the Loan Parties to furnish to Agent such financial statements and other financial Information as Agent may from time to time request. All such
financial statements shall show all material contingent liabilities and shall accurately and fairly present the results of operations and the financial condition of Borrowers at the dates and for the
period indicated and shall be sufficient to permit Agent to calculate and/or verify Borrowers' calculation of Net Operating Income. Without limitation of the foregoing, Borrowers shall furnish to
Agent and shall cause Loan Parties and Master Tenants to furnish to Agent the following statements: 

        (a)   Monthly
Reports. 

        (i)    Borrowers
shall deliver or cause to be delivered to Agent on or prior to the twenty-fifth (25th) day of each fiscal month used by Master Tenants and/or Borrowers in
preparing financial reports (each, a "fiscal month") the following reports in respect of the Projects: 

        (A)  Statements
of the operations of the Projects (including a current occupancy report by financial class and operating statement) as of the last day of the immediately
preceding fiscal month; 

        (B)  For
the preceding fiscal month and fiscal year-to-date (i) a cash summary detailing all cash activity and reconciling beginning and end
cash balances, and (ii) for Borrowers and Master Tenants, aged accounts receivable and accounts payable; 

        (C)  Statements
of Net Operating Income. 

        (ii)   Upon
request by Agent, Borrowers shall deliver or cause to be delivered to Agent the following (together with the foregoing, such reports are hereinafter collectively
referred to as the "Monthly Reports"): 

        (A)  A
true, correct and complete copy of the check register showing all paid invoices, indicating date paid, amount paid and check number; and 

        (B)  Evidence
of the timely payment of all taxes and insurance premiums not paid from the Insurance Impound or Tax Impound. 

        (iii)  The
Monthly Reports shall (a) be certified by the chief financial representative of Borrowers as true, correct and complete, (b) be derived from the
books and records maintained by Borrowers and/or /Master Tenants at the Projects or the Borrowers' principal office in Mission Viejo, California, and (c) be accompanied with copies of
supporting documentation to the extent that Agent shall request. 

26

 

        (iv)  Each
financial statement, report or other information required to be delivered or caused to be delivered by Borrowers and/or Master Tenants to Agent under this
Agreement and required hereunder to be certified by the chief financial representative of Borrowers shall also certify that: (a) all of the covenants set forth in Article VII are fully
performed and (b) the representations and warranties set forth in the this Loan Agreement, the Security Documents and in the other Loan Documents are and remain true, correct and complete
except as disclosed in writing in the certificate. Each financial statement, report or other information required to be delivered by Borrowers to Agent under this Agreement shall show all material
contingent liabilities, shall be prepared in accordance with sound accounting practices and shall accurately and fairly present the results of operations and the financial condition of the person(s)
referred to therein as of the dates and for the period indicated. 

        (b)   Annual
Statements. Within ninety (90) days after the end of each fiscal year, Borrowers shall deliver or cause to be delivered to Agent a balance sheet and
financial statements of each Borrower, Guarantor and Master Tenant, which shall show, if Agent requests, each Guarantor's other real estate holdings, including income and expenses, debt service
requirements and occupancy and Borrowers, certified as true and correct in all respects, and prepared in accordance with sound accounting practices and fairly presenting the financial condition(s) of
the person(s) referred to therein as of the date(s) indicated. 

        Section 6.2
Audits. 

If
Borrowers fail to furnish or cause to be furnished promptly any report required by Section 6.1, or if Agent reasonably deems such reports to be unacceptable or unreliable, Agent may elect
(in addition to exercising any other right and remedy) to conduct an audit of all books and records of Borrowers, and Loan Parties and Master Tenants which in any way pertain to the projects and to
prepare such reports. Such audit shall be made and such reports shall be prepared by an independent firm of certified public accountants to be selected by Agent or another auditor of Agent's choice
(which may be an affiliate of Agent). Borrowers shall pay all reasonable expenses of the audit and other services, which expenses shall be immediately due and payable with interest thereon at the
Default Rate. 

        Section 6.3
Books and Records/Audits. 

Borrowers
shall keep and maintain or cause to be kept and maintained at all times at the Projects or at the Borrower's principal office in Mission Viejo, California, or such other place as Agent may
approve in writing, complete and accurate books of accounts and records adequate to reflect the results of the operation, of the Projects and to provide the financial statements required to be
provided to Agent pursuant to Section 6.1 above and copies of all written contracts, correspondence, reports of Agent's independent consultant, if any, and other documents affecting the
Projects. Agent and its designated agents shall have the right to inspect and copy any of the foregoing. Additionally, Agent may audit and determine, in Agent's sole and absolute discretion, the
accuracy of Borrowers' records and computations. The costs and expenses of the audit shall be paid by Borrowers if the audit discloses a monetary variance in any financial information or computation
equal to or greater than the greater of: (i) five percent (5%); or (ii) Five Thousand and No/100 Dollars ($5,000.00) more than any computation submitted by Borrowers. 

27

 

        Section 6.4
Notice of Litigation or Default. 

Borrowers
shall promptly provide Agent with: 

        (a)   written
notice of any litigation, arbitration, or other proceeding or governmental investigation (including any survey results or inspection reports from any
Governmental Authority) pending or, to any Borrower's or Guarantor's knowledge, threatened against or relating to any Borrower, Guarantor, Project or Master Tenant (but with respect to matters
affecting only Guarantor, only such matters which could reasonably be expected to have a material adverse effect on the financial condition of such Person and with respect to matters affecting only
Master Tenant, only such matters which pertain to a Project or which could reasonably be expected to have a material adverse effect on Master Tenant's financial condition), or any Project; provided,
that with respect to any such litigation, arbitration or other proceeding relating solely to a monetary claim of less than $10,000, Borrowers shall not be required to provide notice (written or
otherwise) of such claim in accordance with the terms of this Section 6.4. 

        (b)   a
copy of all notices of default and violations of laws, regulations, codes, ordinances and the like received by any Borrower, Guarantor or Master Tenant relating to
(i) Guarantor, if potentially material to the business operations of such Guarantor or (ii) any Borrower, the Collateral or the Projects; and 

        (c)   a
copy of all notices sent to or received from any Master Tenant under any Master Lease. 

        Section 6.5
Bank Accounts. 

Borrower
shall, and shall cause the Master Tenants to, provide Agent with the following information with respect to each of the accounts from which payments will be made to Agent pursuant to the Loan
Documents: (i) bank name; (ii) bank's ABA number; (iii) bank account number; and (iv) the name in which the bank account is held. 

 
 

ARTICLE VII
  COVENANTS    
    

Each
Borrower covenants and agrees with Agent as follows: 

        Section 7.1
Inspection. 

Subject
to the rights of tenants under the Leases, Agent and its authorized agents may enter upon and inspect the Projects at all reasonable times upon notice given orally or in writing to Borrowers. 

28

 

        Section 7.2
Due on Sale and Encumbrance, Transfers of Interests. 

        (a)   Except
as permitted hereby, without the prior written consent of Agent, no Borrower nor any other Person having a direct or indirect ownership or beneficial interest in
any Borrower shall 

        (i)    create,
or permit the creation of, any new direct or indirect ownership interest in any Borrower, or 

        (ii)   transfer,
or permit the transfer of (A) all or any part of the Projects, or any interest therein (other than Leases permitted hereunder), or (B) any
direct or indirect ownership interest in any Borrower (including any interest in the profits, losses or cash distributions in any way relating to the Projects, any Borrower or Guarantor), or 

        (iii)  encumber,
alienate, grant a Lien or grant any other interest in any Project or any part thereof (other than Leases, easements or other restrictions permitted
hereunder) or take or fail to take any other action which would result in a Lien against the Projects or the interest of any Borrower in any Project or any ownership interest in any Borrower, whether
voluntarily or involuntarily except Liens in favor of Agent for the benefit of Lender and Agent, or 

        (iv)  enter
into any easement or other agreement granting rights in or restricting the use or development of any Project (provided that Agent's consent thereto shall not be
unreasonably withheld or delayed), or 

        (v)   permit
a Change in Control (as defined below) of the Guarantor. 

        (b)   Notwithstanding
the foregoing or any other provision of this Agreement or the Loan Documents to the contrary, nothing contained herein or in any of the Loan Documents
shall prevent the transfer of an ownership interest in Guarantor as a result of or in connection with any of the following: 

        (i)    Private
Placements. Any sale, conveyance, transfer or new issuance of equity or other interests in Guarantor to a third Person (as defined below), which third Person
must be reasonably acceptable to Agent, in a bona fide arm's-length transaction as part of the current and ongoing capitalization of Guarantor, which does not result in a Change in Control, so long as
(a) Guarantor provides written notice of any such transaction to Agent (which notice shall include the name of the purchaser and the percentage of ownership purchased), (b) the proceeds
of such transaction are used only for proper corporate purposes, and (c) the then-current officers and a majority of the then-current directors remain as officers and
directors of Guarantor or Guarantor immediately following such transaction. 

29

 

        (ii)   Public
Offering. Any Change in Control occurring in connection with a public offering of Guarantor's stock which (a) constitutes a bona fide public distribution
of such stock pursuant to a firm commitment underwriting or a plan of distribution registered under the Securities Act of 1933 and (b) results in such stock being listed for trading on the
American Stock Exchange or the New York Stock Exchange, authorized for quotation on the NASDAQ National Market, or listed or authorized for quotation on another national or regional stock exchange
immediately upon the completion of such public offering. In addition, so long as such stock of Guarantor is listed for trading on any such exchange or authorized for quotation on such market, the
transfer or exchange of such stock over such exchange or market shall not be deemed a Change in Control hereunder unless the same (whether in one transaction or in any step or series of transactions)
results, directly or indirectly, in a Change of Control of Guarantor as a result of a tender or similar offer to acquire a substantial majority of the issued and outstanding securities of Guarantor. 

        (iii)  As
used in this Section 7.2, "Change in Control" shall mean a change (voluntary or involuntary, by operation of law or otherwise) in the Person or Persons which
directly or indirectly control Guarantor as of the date hereof, as described in subparagraphs (A) through (D) below: 

        (A)  any
Person is or becomes the Beneficial Owner, directly or indirectly, of securities (or other equity interests) of Guarantor representing thirty-five
percent (35%) or more of the combined voting power of the then outstanding securities (or equity interests) of Guarantor (but not in the case of any such Person who, as of the date of this Agreement,
holds such thirty-five percent (35%) interest); or 

        (B)  the
stockholders (or holders of equity interests) of Guarantor approve a merger or consolidation of Guarantor with any other corporation (or other entity), other than as
part of a corporate restructuring which does not result in a material (i.e., thirty-five percent (35%) or more) change in the ultimate stockholders (or holders of equity interests) of
Guarantor; or 

        (C)  the
stockholders (or holders of voting equity interests) of Guarantor approve a plan of complete liquidation of Guarantor or an agreement for the sale or disposition by
Guarantor of all or substantially all of the assets of Guarantor; or 

        (D)  the
creation or issuance of new stock (or other voting equity interests), other than stock or stock option grants to employees, officers and directors of Guarantor, in
one or a series of transactions by which an aggregate of more than fifty percent (50%) of the stock (or other voting equity interests) of Guarantor shall be vested in a party or parties who are not
stockholders (or holders of voting equity interests) of Guarantor as of the date of this Agreement. 

        (iv)  For
purposes of this Section 7.2, the term "Person" shall have the meaning ascribed thereto in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). 

30

 

        (v)   For
purposes of this Section 7.2, the term "Beneficial Owner" shall have the meaning ascribed thereto in Rule 13d-3 of the Exchange Act. 

        Section 7.3
Taxes; Charges. 

Borrowers
shall pay before any fine, penalty, interest or cost may be added thereto, and shall not enter into any agreement to defer, any Taxes that may become a Lien upon any Project or become
payable during the term of the Loan, and will promptly furnish Agent with evidence of such payment; however, Borrowers' compliance with Section 3.5 of this Agreement relating to impounds for
taxes and assessments shall, with respect to payment of such taxes and assessments, be deemed compliance with this Section 7.3. Borrowers shall not suffer or permit the joint assessment of any
Project with any other real property constituting a separate tax lot or with any other real or personal property. Borrowers shall pay when due all Taxes, claims and demands of mechanics, materialmen,
laborers and others which, if unpaid, might result in a Lien on any Project (collectively, the "Charges"); however, Borrowers may contest, in good faith by appropriate proceedings, the amount or
validity of any such Charges or Liens so long as (a) Borrowers have given prior written notice to Agent of the intent to so contest or object to any such Charges or Liens, (b) such
contest stays the enforcement or collection of the Charges or any Lien created, (c) Borrowers provide Agent with a bond or other security satisfactory to Agent (including an endorsement to
Agent's Title Policies insuring against such claim, demand or lien) assuring the discharge of Borrowers' obligations for such claims, demands or lien, including interest and penalties, and
(d) Borrowers are diligently contesting the same by appropriate legal proceedings in good faith and at their own expense and concludes such contest prior to the tenth (10th) day preceding the
earlier to occur of the Maturity Date or the date on which a Project is scheduled to be sold for non-payment. 

        Section 7.4
Control; Management. 

Except
as permitted in Section 7.2, there shall be no change in the day-to-day control and management of any Borrower, Guarantor or any Master Tenant without the written
consent of Agent. Borrowers and/or Master Tenants shall hold and maintain all necessary licenses, certifications and permits required by law. 

        Section 7.5
Operation; Maintenance; Inspection. 

Each
Borrower shall observe and comply with (or cause observance and compliance with) all legal requirements applicable to the ownership, use and operation of the Projects. Borrowers shall maintain
(or cause to be maintained) the Projects in good condition and promptly repair any damage or casualty. 

        Section 7.6
Taxes on Security, 

Borrowers
shall pay all taxes, charges, filing, registration and recording fees, excises and levies payable with respect to the Note or the Liens created or secured by the Loan Documents, other than
income, franchise and doing business taxes imposed on Agent or Lender. If there shall be enacted any law
(1) deducting the Loan from the value of any Project for the purpose of taxation, (2) affecting any Lien on the Projects, or (3) changing existing laws of taxation of mortgages,
deeds of trust, security deeds, or debts secured by real property, or changing the manner of collecting any such taxes, Borrowers Shall promptly pay to Agent, on demand, all taxes, costs and charges
for which Agent or Lender is or may be liable as a result thereof; however, if such payment would be prohibited by law or would render the Loan usurious, then instead of collecting such payment,
Lender may declare all amounts owing under the Loan Documents to be immediately due and payable. 

31

 

        Section 7.7
Single Purpose Entity; Legal Existence, Name, Etc. 

Each
Borrower and each Master Tenant shall preserve and keep in full force and effect its existence as a Single Purpose Entity, entity status, franchises, rights and privileges under the laws of the
state of its formation, and all qualifications, licenses and permits applicable to the ownership, use and operation of the Projects. Neither any Borrower nor any Master Tenant shall wind up,
liquidate, dissolve, reorganize, merge, or consolidate with or into, or convey, sell, assign, transfer, lease, or otherwise dispose of all or substantially all of its assets, or acquire all or
substantially all of the assets of the business of any Person, or permit any subsidiary or Affiliate of Borrowers to do so. No Borrower will amend or terminate or permit the amendment or termination
of any Borrower's membership agreement without the prior written consent of Agent, which consent shall not be unreasonably withheld or delayed. Each Borrower and each Master Tenant shall conduct
business only in its own name and no Borrower shall change its name, identity, or organizational structure, the location of its chief executive office or principal place of business or its state of
organization unless Borrowers (a) shall have obtained the prior written consent of Agent to such change, which consent shall not be unreasonably withheld or delayed, and (b) shall have
taken all actions necessary or requested by Agent to file or amend any financing statement or continuations statement to assure perfection and continuation of perfection of security interests under
the Loan Document. Each Borrower (and each Master Tenant shall maintain its separateness as an entity, including maintaining separate books, records, and accounts and observing corporate and
partnership formalities independent of any other entity, shall pay its obligations with its own funds and shall not commingle funds or assets with those of any other Borrower or entity. 

        Section 7.8
Affiliate Transactions. 

Without
the prior written consent of Agent, no Borrower shall engage in any transaction affecting any Project with an Affiliate of Borrowers. 

        Section 7.9
Limitation on Other Debt. 

Neither
any Borrower nor Guarantor shall, without the prior written consent of Agent, which consent shall not be unreasonably withheld or delayed, incur any Debt, except for trade payables in the
ordinary course of business. 

32

  

        Section 7.10 Further Assurances. 

        Borrowers
shall promptly (a) cure any defects in the execution and delivery of the Loan Documents, and (b) execute and deliver, or cause to be executed and delivered, all
such other documents, agreements and instruments as Agent may reasonably request to further evidence and more fully describe the collateral for the Loan, to correct any omissions in the Loan
Documents, to perfect, protect or preserve any liens created under any of the Loan Documents, or to make any recordings, file any notices, or obtain any consents, as may be necessary or appropriate in
connection therewith. 

        Section 7.11
Estoppel Certificates. 

        Borrowers,
within ten (10) days after request, shall furnish to Agent a written statement, duly acknowledged, setting forth the amount due on the Loan, the terms of payment of the
Loan, the date to which interest has been paid, whether any offsets or defenses exist against the Loan and, if any are alleged to exist, the nature thereof in detail, and such other matters as Agent
reasonably may request. 

        Section 7.12
Notice of Certain Events. 

        Borrowers
shall promptly notify Agent of (a) any Potential Default or Event of Default, together with a detailed statement of the steps being taken to cure such Potential Default
or Event of Default; (b) any notice of default received by any Borrower or any Master Tenant under other obligations relating to any Project or otherwise material to any Borrower's business,
including any notices of violations of any laws, regulations, codes or ordinances; (c) any threatened or pending legal, judicial or regulatory proceedings, including any dispute between any
Borrower or any Master Tenant and any governmental authority, affecting any Borrower or any Project; (d) a copy of each notice of default or termination given or made to any Master Tenant by
any Borrower or received by any Borrower from any Master Tenant; and (e) a copy of each notice of default or termination under any license or permit necessary for the operation of the Projects
in the manner required by this Agreement; and in the case of clauses (b), (d) or (e), promptly provide Agent with copies of such notices referred to therein. 

        Section 7.13
Indemnification. 

        Borrowers
shall indemnify, defend and hold Agent and Lenders harmless from and against any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions,
judgments, suits, costs or disbursements of any kind or nature whatsoever, including the reasonable fees and actual expenses of Agent's and Lender's counsel, in connection with (a) any
inspection, review or testing of or with respect to any Project, (b) any investigative, administrative, mediation, arbitration, or judicial proceeding, whether or not Agent or a Lender is
designated a party thereto, commenced or threatened at any time (including after the repayment of the Loan) in any way related to the execution, delivery or performance of any Loan Document or to any
Project, (c) any proceeding instituted by any Person claiming a Lien, and (d) any brokerage commissions or finder's fees claimed by any broker or other party in connection with the Loan,
any Project, or any of the transactions contemplated in the Loan Documents, including those arising from the joint, concurrent, or comparative negligence of Agent or Lender, except to the extent any
of the foregoing is caused by an indemnitee's gross negligence or willful misconduct. 

33

 

        Section 7.14
Use of Proceeds, Revenues. 

        All
proceeds of the Loan shall be used for proper business purposes related to the operation of the Borrowers' business and no portion of the proceeds of the Loan shall be distributed to
the direct or indirect owners of Borrowers outside the ordinary course of business. No portion of the proceeds of the Loan shall be used by Borrowers in any manner that might cause the borrowing or
the application of such proceeds to violate Regulation U, Regulation T or Regulation X or any other regulation of the Board of Governors of the Federal Reserve System or to
violate the Securities Act of 1933 or the Securities Exchange Act of 1934. Except as otherwise specifically provided in the Loan Documents, Operating Revenues, and other Project proceeds received by
Borrowers shall be applied to the Indebtedness then due and payable, operating expenses or other Project capital improvements, repairs or replacements before distribution by Borrowers to any member of
any Borrower. 

        Section 7.15
Bank Accounts: Notices to Tenants and Residents. 

        Borrowers
shall deliver to Agent, in form acceptable to Agent, an undated letter of direction to Master Tenant pursuant to which each such Master Tenant is irrevocably directed to make
all payments directly to Agent or an Approved Bank Account. Upon the occurrence of an Event of Default, Agent shall have the right to date and deliver such letters of direction. 

        Section 7.16
Reserved. 

        Section 7.17
Reserved. 

        Section 7.18
Compliance with Laws and Contractual Obligations. 

        (a)   Borrowers
will (to the extent applicable to Borrowers) comply with and (to the extent applicable to Master Tenants) will cause Master Tenants to comply with
(i) the requirements of all applicable laws, rules, regulations and order of any governmental authority (including, without limitation, laws, rules, regulations and orders relating to all
building, zoning, density, land use, covenants, conditions and restrictions, subdivision requirements, taxes, employer and employee contributions, securities, employee retirement and welfare benefits,
environmental protection matters, employee health and safety, quality and safety standards, accreditation standards and requirements of the applicable state department of health or other applicable
state regulatory agency (each a "State Regulator"), quality and adequacy of medical care, distribution of pharmaceuticals, rate setting, equipment, personnel, operating policies, additions to
facilities and services and fee splitting) as are now in effect and which may be imposed upon any Borrower, Master Tenant or the maintenance, use or operation of the Projects or the provision of
services to the occupants of the Projects and (ii) the obligations, covenants and conditions contained in all other material contractual obligations of any Borrower; and as it relates to any
Project, Master Tenant; and 

34

 

        (b)   Borrowers
will maintain or obtain and will cause Master Tenants to maintain or obtain, all licenses, qualifications and permits now held or hereafter required to be held
by any Borrower Master Tenant for which the loss, suspension, revocation or failure to obtain or renew, could reasonably be expected to have a material adverse effect upon the financial condition of
any Borrower or the ability to operate the Projects in compliance with the requirements of the Loan Documents and as it has been operated prior to the date hereof. 

        Section 7.19
Notice of Money Laundering. 

        If
a tenant under any Lease is charged with crimes involving money laundering or predicate crimes to money laundering, and such charges are not dismissed without further investigation
within thirty (30) days, then Borrowers shall give notice of such charges to Agent's and upon Agent's request, Borrowers shall exclude from the debt service rents from said tenant or resident. 

        Section 7.20
Anti-Terrorism and Anti-Money Laundering Compliance 

        (a)   Compliance
with Anti-Terrorism Laws. Borrowers covenant to Agent and Lender that they shall not be, and, after making due inquiry, that no Person who owns a
controlling interest in or otherwise controls Borrowers shall be; (i) listed on the Lists; or (ii) a Designated Person. Borrowers also shall require, and shall take reasonable measures
to ensure compliance with the requirement, that no Person who owns any other direct interest in Borrowers shall be listed on any of the Lists or is or shall be a Designated Person. This
Section 7.20 shall not apply to any Person to the extent that such Person's interest in the Borrowers is through a U.S. Publicly-Traded Entity. 

        (b)   Compliance
by Interest Holders. Borrowers shall require each Person that proposes to become a partner, member or shareholder in Borrowers after the date hereof and that
is not a U.S. Publicly-Traded Entity to sign, and to deliver to Borrowers (and Borrowers shall deliver to Agent), (i) an Interest Holder Certification and Agreement, substantially in the form
attached as Exhibit C ("Interest Holder Agreement"') and (ii) if requested by Agent, Borrowers shall deliver to Agent a schedule of the name, legal domicile address and (for entities)
place of organization of each holder of a direct or indirect legal or beneficial interest in Borrowers. 

        (c)   Anti-Terrorism
Policies. To the extent required by law, Borrowers agree to adopt and maintain adequate policies, procedures and controls to ensure that it is
in compliance with all Anti-Terrorism Laws and related government guidance (such policies, procedures and controls are collectively referred to in this Agreement as "Borrower
Anti-Terrorism Policies"). Borrowers further agree to make the Borrower Anti-Terrorism Policies, and the respective policies, procedures and controls for Persons who are or are
to become partners, members or shareholders in Borrowers (such policies, procedures and controls are collectively referred to as "Investor Anti-Terrorism Policies"), together with the
information collected thereby concerning Borrowers and such partners, members or shareholders (but not information about indirect members that do not have the power to direct the management or
policies of Borrowers, whether through the ownership of voting stock, agreement or otherwise), available to Agent for review and inspection by Agent from time to time during normal business hours and
upon reasonable prior notice, and Borrowers agree to deliver copies of the same to Agent from time to time upon request. Agent and Lender will keep the Borrower Anti-Terrorism Policies and
the Investor Anti-Terrorism Policies, and the information collected thereby, confidential subject to customary exceptions for legal process, auditors, regulators, or as otherwise
reasonably required by Agent and Lender for enforcement of its rights and/or in connection with reasonable business us in the management, administration and disposition of its assets and investments.
Borrowers consent to the disclosure to U.S. regulators and law enforcement authorities by Agent or Lender or any of their affiliates or agents of such information about Borrowers and the owners of
direct and indirect interests in Borrowers that Agent or Lender reasonably deems necessary or appropriate to comply with applicable Anti-Terrorism Laws and Anti-Money
Laundering Laws. 

35

 

        (d)   Funds
Invested in Borrowers. Borrowers covenant that they will take Anti-Money Laundering Measures in accordance with Anti-Money Laundering Laws
with respect to each holder of a direct or indirect interest in any Borrower. 

        (e)   Borrower
Compliance with Anti-Money Laundering Laws. Borrowers covenant to Agent and Lender that they shall take reasonable measures appropriate to the
circumstances (in any event as required by law), to ensure that Borrowers are in compliance with all current and future Anti-Money Laundering Laws and laws, regulations and government
guidance for the prevention of terrorism, terrorist financing and drug trafficking. 

        (f)    Notification
of Agent; Quarantine Steps. Borrowers shall immediately notify Agent if Borrowers obtain actual knowledge that any holder of a direct or indirect interest
in any Borrower, or any director, manager or officer of any of such holder, (i) has been listed on any of the Lists, (ii) has become a Designated Person, (iii) is under
investigation by any governmental authority for, or has been charged with or convicted of, money laundering drug trafficking, terrorist-related activities or other money laundering predicate crimes,
or any violation of the BSA, (iv) has been assessed civil penalties under any Anti-Money Laundering Laws, or (v) has had funds seized or forfeited in an action under any
Anti-Money Laundering Laws. 

        Section 7.21
Employees. 

        No
Borrower shall have any employees while any portion of the Loan is outstanding. 

        Section 7.22
Post-Closing Obligations. 

        (a)   Amendment
to Master Leases. Within thirty (30) days after the date hereof, Borrowers shall have entered into amendments with each of the Master Tenants, in form
and substance reasonably acceptable to Agent, pursuant to which the Master Leases are amended to provide for monthly rent payments in an amount equal to 110% of the payments due on the Loan for the
applicable month. 

        (b)   Required
Repairs. Within ninety (90) days (or such shorter time period as is specified on Exhibit F) after the date hereof, Borrower shall provide Agent
with reasonably satisfactory evidence that the repairs listed on Exhibit F attached hereto have been completed. Notwithstanding the foregoing,(i) Borrowers shall not be required to
complete any of the repairs for the Park Manor Project except for the railings, water heater and ADA compliance items listed as the seventh, eighth and ninth items on Exhibit F for the Park
Manor Project (the "Deferred Repairs") until the earlier of (A) ninety (90) days following the denial (and the expiration or waiver of all appeal rights, if any) of the currently pending
application for a CON to expand the Park Manor Project (the "Expansion CON"), (B) the date of completion of the expansion and related alterations made in connection with the Expansion CON, or
(C) one (1) year after the date of hereof; provided, however, if within one (l) year after the date hereof, Borrowers notify Agent that the Expansion CON has been approved and
Borrower intends to commence construction of the expansion and related alterations but that such construction is not anticipated to be complete within such one (1) year period, Agent's consent
shall not be unreasonably withheld to an extension of the one (1) year period, with such extension to coincide with the timeline for completion of the expansion and related alterations under
the Expansion CON; and (ii) Borrowers shall not be required to complete the ADA compliance items listed as the second item on Exhibit F for the Desert Terrace Project until Borrowers
renovate the applicable areas of the Desert Terrace Project and provided that such ADA compliance items must be completed at the time of such renovation. Nothing herein shall be deemed a consent by
Agent of any alteration being done to the Park Manor Project or the Desert Terrace Project or an approval of the Expansion CON nor shall anything herein constitute a waiver of any restrictions,
conditions or obligation imposed in the Loan Documents with respect to any alterations to Improvements or any changes to any CON or other Governmental Approvals or Licenses for any of the Projects.
Borrowers shall provide Agent with notice of the status of approval of the Expansion CON six (6) months after the date hereof. 

        (c)   Good
Standing Certificates. Within thirty (30) days after the date hereof, Borrowers shall deliver to Agent (i) certificates of good standing, or the
equivalent, issued by the Secretary of State of California for Upland Community Care, Inc., Camarillo Community Care, Inc., Cedar Avenue Holdings and Granada Investments LLC, and
(ii) good standing certificates, or the equivalent, issued by the Secretary of State of Washington for Manor Park Healthcare LLC and Plaza Health Holdings LLC. 

        (d)   UCC
Terminations. Within thirty (30) days after the date hereof, Borrowers shall deliver to Agent evidence that the Uniform Commercial Code financing statements
described on Exhibit G attached hereto have been terminated. 

36

 

        Section 7.23
Representations and Warranties. 

        Except
for those representations and warranties which are expressly made only as of the date hereof, Borrowers will cause all representations and warranties to remain true and correct
all times during the term of this Agreement and while any portion of the Loan remains outstanding. 

        Section 7.24
Cooperation. 

        Borrowers
acknowledge that Lender and its, successors and assigns may (a) sell, transfer or assign this Agreement, the Note and the other Loan Documents to one or more investors
as a whole loan, in a rated or unrated public offering or private placement, (b) participate the Loan to one or more investors in a rated or unrated public offering or private placement,
(c) deposit the Loan Documents with a trust, which trust may sell certificates to investors evidencing an ownership interest in the trust assets in a rated or unrated public offering or private
placement, or (d) otherwise sell the Loan or interest therein to investors in a rated or unrated public offering or private placement (the transactions referred to in clauses (a) through
(d) are hereinafter referred to as "Secondary Market Transactions"). Borrowers shall cooperate in good faith with Agent and Lender in effecting any such Secondary Market Transaction and shall
cooperate in good faith to implement all requirements reasonably imposed by the participants involved in any Secondary Market Transaction (including without limitation, an institutional purchaser,
participant or investor) including, without limitation, all structural or other changes to the Loan, modifications to any documents evidencing or securing the Loan, delivery of opinions of counsel
reasonably acceptable to such other purchasers, participants or investors may reasonably require; provided, however, that Borrowers shall not be required to modify any documents evidencing or securing
the Loan which would (i) modify the interest rate payable under the Note, (ii) modify the stated maturity of the Note; (iii) modify the amortization of principal of the Note,
(iv) modify or conflict with any other material terms or covenants of the Loan, (v) conflict with any Master Lease or (vi) increase the Borrowers' liability or obligations under
the Loan Documents. Borrowers shall provide such information and documents relating to Borrowers, Loan Parties, the Projects and the Master Tenants. Borrowers acknowledge that certain information
regarding the Loan and the Loan Parties and the Projects may be included in a private placement memorandum, prospectus or other disclosure documents. 

        Section 7.25
Master Leases. 

        Borrowers
shall not, without Agent's prior written consent, which consent shall not be unreasonably withheld or delayed, amend or terminate any Master Lease. 

        Section 7.26
Property Management Agreements. 

        Without
Agent's prior written consent, Borrowers shall not, nor shall Borrowers permit any Master Tenant to, enter into, amend or terminate any agreement for the provision of management
services for any Project. 

37

 
 
 

ARTICLE VIII
  HEALTH CARE MATTERS    
    

        Section 8.1 Healthcare Laws. 

        (a)   Without
limiting the generality of any other provision of this Agreement, each Borrower and each Master Tenants and their employees and contractors (other than
contracted agencies) in the exercise of their duties on behalf of any Borrower or Master Tenants (with respect to its operation of the Projects) shall be and remain in substantial compliance with all
applicable Laws relating to patient healthcare and/or patient healthcare information, including without limitation the Health Insurance Portability and Accountability Act of 1996, as amended, and the
rules and regulations promulgated thereunder ("HIPAA") (collectively, "Healthcare Laws"). Each Borrower and Master Tenant has maintained and shall continue to maintain in all material respects all
records required to be maintained by any Governmental Authority or otherwise under the Healthcare Laws and, to the best of Borrowers' knowledge, there are no presently existing circumstances which
would result or likely would result in material penalties for violations of the Healthcare Laws. Each Borrower and each Master Tenant has and will maintain all Governmental Approvals necessary under
applicable Laws to own and/or operate the Projects, as applicable (including such Governmental Approvals as are required under such the Healthcare Laws). 

        (b)   If
(i) any Borrower or Master Tenant is a "covered entity" within the meaning of HIPAA or (ii) any Borrower or Master Tenant (with respect to its operation
of the Projects) is subject to the "Administrative Simplification" provisions of HIPAA, then such Person(s) (x) have undertaken or will promptly undertake all necessary surveys, audits,
inventories, reviews, analyses and/or assessments (including any necessary risk assessments) of all areas of its business and operations required by HIPAA and/or that could be adversely affected by
the failure of such Person(s) to be HIPAA Compliant (as defined below); (y) has developed or will promptly develop a detailed plan and time line for becoming HIPAA Compliant (a "HIPAA
Compliance Plan"); and (z) has implemented or will implement those provisions of such HIPAA Compliance Plan in all material respects necessary to ensure that such Person(s) are or become HIPAA
Compliant. For purposes hereof, "HIPAA Compliant" shall mean that each Borrower and each Master Tenant, as applicable (A) are or will be in substantial 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") if and to the extent such Borrowers and/or Master Tenants are subjected to such
provisions, rules or regulations, and (B) are not and will take all steps necessary to avoid becoming, as of any date following any such HIPAA Compliance Date, the subject of any civil or
criminal penalty, process, claim, action or proceeding, or any administrative or other regulatory review, survey, process or proceeding (other than routine surveys or reviews conducted by any
government health plan or other accreditation entity) that could result in any of the foregoing or that could reasonably be expected to materially adversely affect any Borrower's or Master Tenant's
business, operations, assets, properties or condition (financial or otherwise), in connection with any actual or potential violation by any Borrower or Master Tenant of the then effective provisions
of HIPAA. 

38

 

        (c)   If
required under applicable Law, each Borrower and each Master Tenant has and shall maintain in full force and effect a valid certificate of need ("CON") or similar
certificate, license, or approval issued by the State Regulator for the requisite number of beds and units in the Projects (as shown on Exhibits A-1 through A-6 attached
hereto), and a provider agreement or other required documentation of approved provider status for each provider payment or reimbursement program listed in Exhibit D hereto, if applicable. All
required Government Approvals necessary for operation of the Projects are listed on Exhibit E hereto (collectively with the CON, if applicable, the "Licenses"). Borrowers and Master Tenant
shall operate the Projects in a manner such that the Licenses shall remain in full force and effect. True and complete copies of the Licenses have been delivered to Agent. 

        Section 8.2
Representations, Warranties and Covenants Regarding Healthcare Matters. 

        Each
Borrower represents, warrants covenants and agrees with Agent and Lenders that: 

        (a)   Master
Tenants are using and operating the Projects as skilled nursing facilities and/or assisted living facilities, having the number of beds/units as set forth in
Exhibits A-1 through A-6 attached hereto (as modified from time to time with Agent's consent). 

        (b)   All
Licenses necessary or desirable for using and operating the Projects for the uses described in Section 8.2(a) above are held by Master Tenants in the name of
the applicable Borrower or Master Tenant as required under applicable law, and are in full force and effect, including, if applicable, the CON. 

        (c)   The
Licenses: 

        (i)    Are
not now and will not be pledged as collateral security for any loan or indebtedness, other than the Loan; and 

        (ii)   Shall
be timely renewed as required from time to time in order to continue each Project's Licensure uninterrupted and in full force and effect throughout the term of
the Loan, and are held free from, and Borrowers shall cause Master Tenants to ensure that they remain free from, restrictions or known conflicts which would materially impair the use or operation of
the Projects for the uses described in Section 8.2(a) above, and Borrowers shall cause Master Tenants to ensure that the Licenses shall not become provisional, probationary or restricted in any
way. 

        (d)   No
Borrower or /Master Tenant shall do (or voluntarily suffer to be done) any of the following: 

        (i)    Rescind,
withdraw, revoke, amend, modify, supplement, or otherwise alter the nature, tenor or scope of the Licenses for the Projects without Agent's consent; 

39

 

        (ii)   Amend
or otherwise change any Project's authorized units/beds capacity and/or the number of units/beds approved by the State Regulator without Agent's prior written
consent, which consent shall not be unreasonably withheld or delayed; 

        (iii)  Replace
or transfer all or any part of any Project's licensed units or beds to another site or location; or 

        (iv)  Voluntarily
transfer or encourage the transfer of any resident of any Project to any other facility, unless such transfer is at the request of the resident or is for
reasons relating to the health, required level of medical care or safety of the resident to be transferred. 

        (e)   If
and when any Borrower or Master Tenant participates in any Medicare or Medicaid or other Third-Party Payor Programs with respect to any Project, the Project will
remain in substantial compliance with all requirements for participation in Medicare and Medicaid, including the Medicare and Medicaid Patient Protection Act of 1987, as it may be amended, and such
other third party payor programs. Each Project is and will remain in conformance in all material respects with all insurance, reimbursement and cost reporting requirements, and, if applicable, have a
current provider agreement that is in full force and effect under Medicare and Medicaid. 

        (f)    There
is no threatened, exiting or pending, and during the term of the Loan there shall be no, existing or pending revocation, suspension, termination, probation,
restriction, limitation, or nonrenewal affecting any Borrower, Master Tenant or Project or any participation or provider agreement with any governmental third-party payor, including Medicare or
Medicaid ("Government Payor Program"), and there is no threatened or pending revocation, suspension, termination, probation, restriction, limitation or nonrenewal affecting any Borrower, Master Tenant
or Project under any participation or provider agreement with Blue Cross and/or Blue-Shield, and any other private commercial insurance managed care and employee assistance program
("Commercial Payor Programs" and together with Government Payor Programs, the "Third-Party Payor Programs") to which any Borrower or Master Tenant may presently be subject with respect to any Project,
or at any time hereafter is subject. No Borrower or Master Tenant, other than in the normal course of business, shall change the terms of any of the Government Payor Programs now or hereinafter in
effect or their normal billing payment or reimbursement policies and procedures with respect thereto (including the amount and timing of finance charges, fees and write-offs). All
Medicaid, Medicare and private insurance cost reports and financial reports submitted by any Borrower or Master Tenant, if any, are and will be materially accurate and complete and have not been and
will not be misleading in any material respects. Borrowers shall cause Master Tenants to remain at all times certified to participate in and be reimbursed for services under, the Government Payor
Programs, without probation, restriction or suspension. 

40

 

        (g)   None
of any Borrower, any Project or any Master Tenant is the subject of any proceeding by any Governmental Authority, and no notice of any violation which has not been
previously resolved to the satisfaction of the applicable Governmental Authority has been issued by a Governmental Authority that would, directly or indirectly, or with the passage of time (each a
"Material Violation"): 

        (i)    Have
a material adverse impact on Borrowers' or Master Tenant's ability to accept and/or retain patients or residents or operate the Projects for their current use or
result in the imposition of a fine, a sanction, a lower rate certification or a lower reimbursement rate for services rendered to eligible patients or residents; 

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

        (iii)  If
applicable, affect any Borrower's or Master Tenant's continued participation in the Medicaid or Medicare programs or any other of the Third-Party Payor Programs, or
any successor programs thereto, at then current rate certifications. 

        (h)   No
Borrower, Project (since the applicable Borrower's acquisition of such Project) or Master Tenant has received a survey deficiency of an "F-Tag" or with a
scope or severity of "G" or a higher level, nor has any Borrower, Project or Master Tenant been subject to a penalty action for which a remedy other than a civil monetary penalty has been imposed (any
such deficiency or penalty being referred to as a "Material Deficiency"), which, in either case, has not been resolved to the satisfaction of the applicable Governmental Authority. 

        (i)    No
Borrower, Project or Master Tenant shall receive or be subject to a Material Violation or Material Deficiency (i) for which a plan of correction or other good
faith allegation of compliance is not filed with the applicable Governmental Authority within ten (10) days after a Borrower's or Master Tenants' receipt of a CMS 2567 statement of
deficiencies, a Notice of Citation or any other written notice of violation from a Governmental Authority having inspection and enforcement powers with respect to a Material Violation or Material
Deficiency at a Project, alleging such Material Violation or Material Deficiency, and (ii) which is not remedied to the satisfaction of the inspecting agency within the time periods prescribed
by the regulations governing the cure of such Material Violations or Material Deficiency or any different time period allotted for cure by such agency; provided that, other than for purposes of
determining whether a Project may be released pursuant to Section 2.11 hereof, no Borrower, Project or Master Tenant shall be deemed to be in default of this Section 8.2(i) or in
Potential Default of this Agreement while it pursues any informal dispute resolution, informal or formal appeal or such other rights or remedies as may be available to contest any such deficiency or
citation, so long as Borrower or Master Tenant timely files and prosecutes to resolution its IDR requests, notice of contest or appeal or such other notifications, filing or payments as may be
necessary to preserve its rights to prevent the execution of any penalty involving the revocation, suspension, termination, probation, restriction, limitation or nonrenewal of any operating license or
any participation or provider agreement with a Government Payor Program. In the event of a Material Violation or Material Deficiency constituting an "immediate jeopardy" deficiency at a Project, the
Borrower for that Project shall cause its Master Tenant to file such plans of correction and allegations of compliance, and to take such other and further actions and as may be necessary, to negate
the jeopardy finding as quickly as reasonably possible, but in any event within ten (10) days after receipt of notice of the jeopardy finding. Thereafter, the Borrower shall cause its Master
Tenant to remedy the deficiency(ies) or violation(s) supporting the jeopardy finding in accordance with the requirements and time periods set forth in subsection (ii) of the immediately
preceding sentence. 

41

 

        (j)    To
the best of Borrowers' knowledge, there are no current, pending or outstanding Medicaid, Medicare or Third-Party Payor Programs reimbursement audits or appeals
pending at the Projects for program years prior to 2002. 

        (k)   To
the best of Borrower's knowledge, there are no current or pending Medicaid or Medicare or Third-Party Payor Programs recoupment efforts at the Projects. All cost
reports filed or to be filed for program years from and after 2002 are reasonably accurate, are not anticipated to be the subject of material recoupment efforts, and, to the best of Borrowers'
knowledge, if a material recoupment were alleged to be due by any Government Payor Program for any of the Projects, the amount of any such recoupment would not likely have a seriously deleterious
impact on such Project or impair its right to participate in the Government Payor Programs in the future. Except for the programs administered by the Centers for Medicare and Medicaid Services, the
Arizona Health Care Cost Containment System, the Veteran's Administration/Office of Veteran's Affairs and the Bureau of Indian Affairs, to the best of Borrowers' knowledge, no Borrower or Master
Tenant is a participant in any federal program whereby any Governmental Authority may have the right to recover funds by reason of the advance of federal funds, including those authorized under the
Hill-Burton Act (42 U.S.C. 291, et seq.), as it may be amended. 

	(1)
	There
are no and there will remain no patient or resident care agreements with patients or residents which deviate in any material adverse respect from the form agreements which have
been delivered to and approved by Agent pursuant to Section 4.2 of this Loan Agreement. 

        (m)  In
the event any Master Lease is terminated or in the event of foreclosure or other acquisition of the Projects by Agent or its designee or any purchaser at a
foreclosure sale or by acceptance of a deed in lieu of foreclosure, Borrowers, Agent, any subsequent manager or tenant or any subsequent purchaser need not obtain a CON prior to applying for and
receiving Medicare or Medicaid payments. 

        (n)   All
patient or resident financial records at each Project, including patient or resident trust fund accounts, are true and correct in all material respects, and will
remain true and correct in all material respects; Borrowers shall cause Master Tenants to ensure that all patient or resident medical records at each Project prepared by Master Tenants are true and
correct in all material respects. 

42

 

        Section 8.3
Cooperation. 

        From
time to time, upon the request of Agent, regardless of whether or not an Event of Default hereunder or under the other Loan Documents is then continuing, Borrowers shall, and shall
cause Master Tenants to complete, execute and deliver to Agent any applications, notices, documentation, and other information necessary or desirable, in Agent's judgment, to permit Agent or its
designee (including a receiver) to obtain, maintain or renew any one or more of the Licenses for the Projects (or to become the owner of the existing Licenses for the Projects) and to the extent
permitted, by
applicable Laws to obtain any other provider agreements or Governmental Approvals then necessary or desirable for the operation of the Projects by Agent or its designee for their current use
(including, without limitation, any applications for change of ownership of the existing Licenses or change of control of the owner of the existing Licenses). To the extent permitted by applicable
Laws, (i) Agent is hereby authorized (without the consent of Borrowers or Master Tenants) to submit any such applications, notices, documentation or other information which Borrowers caused to
be delivered to Agent in accordance with the above provisions to the applicable Governmental Authorities, or to take such other steps as Agent may deem advisable to obtain, maintain or renew any
License or other Governmental Approvals in connection with the operation of the Projects for their current use, and Borrowers agree to cooperate and to cause Master Tenants to cooperate with Agent in
connection with the same and (ii) Borrowers, upon demand by Agent, shall take any action and cause Master Tenants to take any action necessary or desirable, in Agent's sole judgment, to permit
Agent or its designee (including a receiver) to use, operate and maintain the Projects for their current use. If Borrowers fail to comply with the provisions of this Section 8.3 for any reason
whatsoever, Borrowers hereby irrevocably appoint Agent and its designee as Borrowers' attorney-in-fact, with full power of substitution, to take any action and execute any
documents and instruments necessary or desirable in Agent's sole judgment to permit Agent or its designee to undertake Borrowers' obligations under this Section 8.3, including obtaining any
Licenses or Governmental Approvals then required for the operation of the Projects by Agent or its designee for their current use. The foregoing power of attorney is coupled with an interest and is
irrevocable and Agent may exercise its rights thereunder in addition to any other remedies which Agent may have against Borrowers or Guarantors as a result of a Borrower's breach of the obligations
contained in this Section 8.3. 

 
 

ARTICLE IX
  EVENTS OF DEFAULT    
    

        Each of the following shall' constitute an Event of Default: 

43

 

        Section 9.1
Payments. 

        Failure
of Borrowers to pay within five (5) days after the date when due any of the payment obligations of Borrowers due under the Loan Documents, or Borrowers' failure to pay the
Loan at the Maturity Date, whether by acceleration or otherwise. 

        Section 9.2
Certain Covenants. 

        Borrowers'
failure to (a) maintain insurance as required under Section 3.1 of this Agreement; (b) maintain its status as a Single Purpose Entity as required by
Section 7.7; (c) permit inspections as required by Section 7.1 and (d) strictly comply with the provisions of Section 8.1(c) (licenses and other matters),
Section 8.2(b) and (c) (licenses), Section 8.2(i) (Material Violation and Material Deficiency), Section 7.21 (employees) and Section 7.25 (Master Leases). 

        Section 9.3
Sale, Encumbrance, Etc. 

        The
sale, transfer, conveyance, pledge, mortgage or assignment of any part or all of any Project, or any interest therein, or of any interest in Guarantor or Master Tenant, in violation
of Section 7.2 of this Agreement. 

        Section 9.4
Covenants. 

        Borrowers'
failure to perform or observe any of the agreements and covenants contained in this Agreement or in any of the other Loan Documents, and the continuance of such failure for
ten (10) days after notice by Agent to Borrowers; however, subject to any shorter period for curing any failure by Borrowers as specified in any of the other Loan Documents, Borrowers shall
have an additional sixty (60) days to cure such failure if (a) such failure does not involve the failure to make payments on a monetary obligation; (b) such failure cannot
reasonably be cured within sixty (60) days; (c) Borrowers commenced to cure such failure promptly after written notice thereof and are diligently undertaking to cure such default, and
(d) Borrowers have provided Agent with security reasonably satisfactory to Agent against any interruption of payment or impairment of collateral as a result of such continuing failure; provided
that the notice and cure provisions of this Section 9.4 do not apply to the Events of Default described in any other section of this Article VIII. 

        Section 9.5
Representations and Warranties. 

        Any
representation or warranty made in any Loan Document proves to be untrue in any material respect when, made or deemed made. 

        Section 9.6
Other Encumbrances. 

        Any
default under any document or instrument, other than the Loan Documents, evidencing or creating a Lien on any Project or any part thereof. 

44

 

        Section 9.7
Involuntary Bankruptcy or Other Proceeding. 

        Commencement
of an involuntary case or other proceeding against Borrowers, Guarantor or any Master Tenant (each, a "Bankruptcy Party") which seeks liquidation, reorganization or other
relief with respect to it or its debts or other liabilities under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeks the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any of its property, and such involuntary case or other proceeding shall remain undismissed or unstayed for a period of sixty (60) days;
or an order for relief against a Bankruptcy Party shall be entered in any such case under the Federal Bankruptcy Code. 

        Section 9.8
Voluntary Petitions, etc. 

        Commencement
by a Bankruptcy Party of a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its Debts or other liabilities
under any bankruptcy, insolvency or other similar law or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official for it or any of its property, or consent by a
Bankruptcy Party to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or the making by a Bankruptcy
Party of a general assignment for the benefit of creditors, or the failure by a Bankruptcy Party, or the admission by a Bankruptcy Party in writing of its inability to pay its debts generally as they
become due, or any action by a Bankruptcy Party to authorize or effect any of the foregoing. 

        Section 9.9
Default Under the Accounts Receivable Loan Documents. 

        The
occurrence of a default and the expiration of any cure period applicable thereto under any of the Accounts Receivable Loan Documents. 

        Section 9.10
False Reports. 

        Any
statement, report or certificate made or delivered to Agent by Borrowers, Guarantor or any Master Tenant is not materially true and complete when made or delivered. 

        Section 9.11
Reserved. 

        Section 9.12
Money Laundering. 

        (a)   Guarantor
is listed on the Lists or (i) is convicted or (ii) pleads nolo contendere to charges involving money laundering or predicate crimes to money
laundering. 

        (b)   Any
Borrower or Guarantor is charged with crimes involving money laundering or predicate crimes to money laundering, and such Borrower does not, within thirty
(30) days, obtaining the dismissal of such charges without further investigation. 

        (c)   If
a tenant under any Lease is listed on the Lists or (i) is convicted, or (ii) pleads nolo contendere to charges involving money laundering or predicate
crimes to money laundering, and proceeds from the rents of such tenant are used to pay debt service and Borrowers fail to give Agent such representations and verifications as Agent shall reasonably
request that such rents are not being used to pay debt service. 

45

 

        Section 9.13
Loan Documents. 

        The
occurrence of a default under any of the other Loan Documents, which continues uncured beyond any applicable notice and grace periods provided under such Loan Document, or the
occurrence of an "Event of Default" as defined in any other Loan Document. 

        Section 9.14
Reserved. 

        Section 9.15
Master Leases. 

        The
occurrence of a default under any Master Lease which continues uncured beyond any applicable notice and grace period provided under such Master Lease. 

        Section 9.16
Operations. 

        (a)   Commencing
with the calendar quarter beginning on October 1, 2006 and continuing each calendar quarter thereafter, the average occupancy of the Projects for any
calendar quarter is less than ninety percent (90%) of the occupancy of the Projects on the date of the initial funding of the Loan; 

        (b)   Commencing
with the calendar quarter beginning on October 1, 2006 and continuing each calendar quarter thereafter, the Debt Service Coverage Ratio (as determined
at the end of any calendar quarter) for the Projects for any calendar quarter is less than 1:80:1:00; or 

        (c)   Commencing
with the calendar quarter beginning on October 1, 2006 and continuing each calendar quarter thereafter, the Project Yield (as determined at the end of
any calendar quarter) for the Projects for any calendar quarter is less than fifteen and one-half percent (15.5%). 

 
 

ARTICLE X
  REMEDIES    
    

        Section 10.1 Remedies—Insolvency Events. 

        Upon
the occurrence of any Event of Default described in Section 9.7 or 9.8, the obligations of Lender to advance amounts hereunder shall immediately terminate, and all amounts
due under the Loan Documents immediately shall become due and payable, all without written notice and without presentment, demand, protest, notice of protest or dishonor, notice of intent to
accelerate the maturity thereof, notice of acceleration of the maturity thereof, or any other notice of default of any kind, all of which are hereby expressly waived by Borrowers; however, if the
Bankruptcy Party under Section 9.7 or 9.8 is other than a Borrower, then all amounts due under the Loan Documents shall become immediately due and payable at Lender's election, in Agent's sole
discretion. 

46

 

        Section 10.2
Remedies—Other Events. 

        Except
as set forth in Section 10.1 above, while any Event of Default exists, Agent may (a) by written notice to Borrowers, declare the entire Loan to be immediately due
and payable without presentment, demand, protest, notice of protest or dishonor, notice of intent to accelerate the maturity thereof, notice of acceleration of the maturity thereof, or other notice of
default of any kind, all of which are hereby expressly waived by Borrowers, (b) terminate the obligation, if any, of Lender to advance amounts hereunder, and (c) exercise all rights and
remedies therefore under the Loan Documents and at law or in equity. 

        Section 10.3
Agent's Right to Perform the Obligations. 

        If
Borrowers shall fail, refuse or neglect to make any payment or perform any act required by the Loan Documents, then while any Event of Default exists, and without notice to or demand
upon Borrowers and without waiving or releasing any other right, remedy or recourse Agent or Lender may have because of such Event of Default, Agent may (but shall not be obligated to) make such
payment or perform such act for the account of and at the expense of Borrowers, and shall have the right to enter upon the Projects for such purpose and to take all such action thereon and with
respect to the Projects as it may deem necessary or appropriate. If Agent shall elect to pay any sum due with reference to the Projects, Agent may do so in reliance on any bill, statement or
assessment procured from the appropriate governmental authority or other issuer thereof without inquiring into the accuracy or validity thereof. Similarly, in making any payments to protect the
security intended to be created by the Loan Documents, Agent shall not be bound to inquire into the validity of any apparent or threatened adverse title, lien, encumbrance, claim or charge before
making an advance for the purpose of preventing or removing the same. Additionally, if any Hazardous Materials (as defined in the Environmental Indemnity) affect or threaten to affect any Project,
Agent may (but shall not be obligated to) give such notices and take such actions as it deems necessary or advisable in order to abate the discharge of any Hazardous Materials or remove the Hazardous
Materials. In exercising any rights under the Loan Documents or taking any actions provided for therein, Agent may act through its employees, agents or independent contractors as authorized by Agent.
Borrowers shall indemnify Agent and Lender for all losses, expenses, damages, claims and causes of action, including reasonable attorneys' fees, incurred or accruing by reason of any acts performed by
Agent or Lender pursuant to the provisions of this Section 10.3, including those arising from the joint, concurrent, or comparative negligence of Agent or Lender, except as a result of Agent or
Lender's gross negligence or willful misconduct. All sums paid by Agent or Lender pursuant to this Section 10.3, and all other sums expended by Agent or Lender to which they shall be entitled
to be indemnified, together with interest thereon at the Default Rate from the date of such payment or expenditure until paid, shall constitute additions to the Loan, shall be secured by the Loan
Documents and shall be paid by Borrowers to Agent upon demand. 

47

  

 
 

ARTICLE XI
  MISCELLANEOUS    
    

        Section 11.1
Notices. 

        Any
notice required or permitted to be given under this Agreement shall be in writing and either shall be mailed by certified mail, postage prepaid, return receipt requested, or sent by
overnight air courier service, or personally delivered to a representative of the receiving parry, or sent by telecopy (provided an identical notice is also sent simultaneously by mail, overnight
courier, or personal delivery as otherwise provided in this Section 11.1). All such communications shall be mailed, sent or delivered, addressed to the party for whom it is intended at its
address set forth below. 

	If to Borrowers:	 	c/o Ensign Facility Services, Inc.

27101 Puerta Real, Suite 450

Mission Viejo, California 92691
	 	 	Attention:	 	General Counsel
	 	 	Facsimile:	 	(949) 487-9400
	
 If to Agent:	
 	

General Electric Capital Corporation

Loan No. 07-0004261

2 Bethesda Metro Center, Suite 600
	 	 	Attention:	 	Manager, Portfolio Management Group
	 	 	Facsimile:	 	(301) 347-3150
	
 With a copy to:	
 	

General Electric Capital Corporation

Loan No. 07-0004261

500 West Monroe Street

Chicago, Illinois 60661
	 	 	Attention:	 	Senior Vice President, Real Estate
	 	 	Facsimile:	 	(312) 441-6755
	
 And a copy to:	
 	

General Electric Capital Corporation

Loan No. 07-0004261

5804 Trailridge Drive

Austin, Texas 78731
	 	 	Attention:	 	Diana Pennington

Senior Executive Vice President,

Chief Counsel, Real Estate
	 	 	Facsimile:	 	(866) 221-0433

        Notices
shall be deemed given when actually delivered, (2) on the first Business Day after deposit with an overnight air courier service for delivery on the next Business Day, or
(3) on the third Business Day after deposit in the United States mail, postage prepaid, in each case to the address of the intended addressee (except as otherwise provided in the Security
Document), and any communication so delivered in person shall be deemed to be given when received for by, or actually received by Agent or Borrowers, as the case may be. If given by telecopy, a notice
shall be deemed given and received when the telecopy is transmitted to the party's telecopy number specified above, and confirmation of complete receipt is received by the transmitting party during
normal business hours or on the next Business Day if not confirmed during normal business hours, and an identical notice is also sent simultaneously by mail, overnight courier, or personal delivery as
otherwise provided in this Section 11.1. Either party may designate a change of address by written notice to the other by giving at least ten (10) days prior written notice of such
change of address. 

48

 

        Section 11.2
Amendments and Waivers. 

        No
amendment or waiver of any provision of the Loan Documents shall be effective unless in writing and signed by the party against whom enforcement is sought. 

        Section 11.3
Limitation on Interest. 

        It
is the intention of the parties hereto to conform strictly to applicable usury laws. Accordingly, all agreements between Borrowers, Agent and Lender with respect to the Loan are
hereby expressly limited so that in no event, whether by reason of acceleration of maturity or otherwise, shall the amount paid or agreed to be paid to Lender or charged by Lender for the use,
forbearance or detention of the money to be lent hereunder or otherwise, exceed the maximum amount allowed by law. If the Loan would be usurious under applicable law, then, notwithstanding anything to
the contrary in the Loan Documents: (a) the aggregate of all consideration which constitutes interest under applicable law that is contracted for, taken, reserved, charged or received under the
Loan Documents shall under no circumstances exceed the maximum amount of interest allowed by applicable law, and any excess shall be credited on the Note the holder thereof (or, if the Note has been
paid in full, refunded to Borrowers); and (b) if maturity is accelerated by reason of an election by Agent or Lender, or in the event of any prepayment, then any consideration which constitutes
interest may never include more than the maximum amount allowed by applicable law. In such case, excess interest, if any, provided for in the Loan Documents or otherwise, to the extent permitted by
applicable law, shall be amortized, prorated, allocated and spread from the date of advance until payment in full so that the actual rate of interest is uniform through the term hereof. If such
amortization, proration, allocation and spreading is not permitted under applicable law, then such excess interest shall be cancelled automatically as of the date of such acceleration or prepayment
and, if theretofore paid, shall be credited on the Note (or, if the Note has been paid in full, refunded to Borrowers). The terms and provisions of this Section 11.3 shall control and supersede
every other provision of the Loan
Documents. The Loan Documents are contracts made under and shall be construed in accordance with and governed by the laws of the State of Illinois, except that (1) if at any time the laws of
the United States of America permit Lender to contract for, take, reserve, charge or receive a higher rate of interest than is allowed by the laws of the State of Illinois (whether such federal laws
directly so provide or refer to the law of any state), then such federal laws shall to such extent govern as to the rate of interest which Lender may contract for, take, reserve, charge or receive
under the Loan Documents and (2) to the extent otherwise specified in any of the Loan Documents. 

49

 

        Section 11.4
Invalid Provisions. 

        If
any provision of any Loan Document is held to be illegal, invalid or unenforceable, such provision shall be fully severable; the Loan Documents shall be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a part thereof; the remaining provisions thereof shall remain in full effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance therefrom; and in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as a part of such Loan Document a provision as
similar in terms to such illegal, invalid or unenforceable provision as may be possible to be legal, valid and enforceable. 

        Section 11.5
Reimbursement of Expenses: Portfolio Administration Fee. 

        Borrowers
shall pay all expenses incurred by Agent and Lenders in connection with the Loan, including, without limitation, (i) out-off pocket costs and expenses of
Agent and Lender in connection with (a) the negotiation, preparation, execution and delivery of the Loan Documents and the documents and instruments referred to therein; (b) due
diligence with respect to the Collateral and the creation, perfection or protection of Agent's liens in the Collateral (including, without limitation, fees and expenses for title and lien searches,
premiums for title insurance and endorsements thereto, amended or replacement Security Documents, Uniform Commercial Code financing statements or other collateral security instruments, title insurance
premiums and filing and recording fees, third party due diligence expenses for the Projects plus travel expenses, accounting firm fees, costs of the appraisals and Site Assessments (and the
environmental consultant), the engineering reports, audit costs and costs and fees incurred in connection with arranging, setting up, servicing any pledged accounts or similar collateral);
(c) the negotiation, preparation, execution and delivery of any amendment, waiver, restructuring, workout or consent relating to any of the Loan Documents, (d) the settlement of or
dispute regarding condemnation and casualty awards and (e) the preservation of rights under and enforcement of the Loan Documents and the documents and instruments referred to therein,
including any communications or discussions relating to any action that any Borrower shall from time to time request Agent to take, as well as any restructuring or rescheduling of the Loan,
(ii) the fees, expenses and other charges of counsel to Agent and the Lender in connection with all of the foregoing, (iii) all fees and expenses of any servicer appointed by Agent to
service and administer the Loan and its counsel, and (iv) Agent's or Lender's reasonable travel and other
out-of-pocket expenses in connection with site visits to the Projects. Borrowers shall, upon request, promptly reimburse Agent and Lender for all amounts expended, advanced or
incurred by Agent and Lender to collect the Note, or to enforce the rights of Agent and Lender under this Agreement or any other Loan Document, or to defend or assert the rights and claims of Agent
and Lender under the Loan Documents or with respect to the Projects (by litigation or other proceedings), which amounts will include all court costs, attorneys' fees and expenses, fees of auditors and
accountants, and investigation expenses as may be incurred by Agent and Lender in connection with any such matters (whether or not litigation is instituted), together with interest at the Default Rate
on each such amount from the date of disbursement until the date of reimbursement to Agent, all of which shall constitute part of the Loan and shall be secured by the Loan Documents. 

50

 

        Section 11.6
Approvals; Third Parties; Conditions. 

        All
approval rights retained or exercised by Agent with respect to leases, contracts, plans, studies and other matters are solely to facilitate Lender's credit underwriting, and shall
not be deemed or construed as a determination that Agent or Lender has passed on the adequacy thereof for any other purpose and may not be relied upon by Borrowers or any other Person. This Agreement
is for the sole and exclusive use of Agent, Lender and Borrowers and may not be enforced, nor relied upon, by any Person other than Agent, Lender and Borrowers. All conditions of the obligations of
Agent or Lender hereunder, including the obligation to make advances, are imposed solely and exclusively for the benefit of Agent and Lender, and their respective successors and assigns, and no other
Person shall have standing to require satisfaction of such conditions or be entitled to assume that Lender will refuse to make advances in the absence of strict compliance with any or all of such
conditions, and no other Person shall, under any circumstances, be deemed to be a beneficiary of such conditions, any and all of which may be freely waived in whole or in part by Agent or Lender, as
applicable, at any time in Agent's or Lender's sole discretion. 

        Section 11.7
Lender Not in Control; No Partnership. 

        None
of the covenants or other provisions contained in this Agreement shall, or shall be deemed to, give Agent or Lender the right or power to exercise control over the affairs or
management of Borrowers, the power of Agent and Lender being limited to the rights to exercise the remedies referred to in the Loan Documents. The relationship between Borrowers, on the one hand, and
Agent and Lender, on the other hand, is, and at all times shall remain, solely that of debtor and creditor. No covenant or provision of the Loan Documents is intended, nor shall it be deemed or
construed, to create a partnership, joint venture, agency or common interest in profits or income between Agent and Lender, on the one hand, and Borrowers, on the other hand, or to create an equity in
the Projects in Lender or Agent. Neither Agent nor Lender either undertakes or assumes any responsibility or duty to Borrowers or to any other person with respect to the Projects or the Loan, except
as expressly provided in the Loan Documents; and notwithstanding any other provision of the Loan Documents (a) Neither
Agent nor Lender is nor shall be construed as, a partner, joint venturer, alter ego, manager, controlling person or other business associate or participant of any kind of Borrowers or its
stockholders, members, or partners and neither Agent nor Lender intends to ever assume such status; (b) Neither Agent nor Lender shall in any event be liable for any Debts, expenses or losses
incurred or sustained by Borrowers; and (c) neither Agent nor Lender shall be deemed responsible for or a participant in any acts, omissions or decisions of Borrowers or their stockholders,
members, or partners. Agent, and Lender, on the one hand, and Borrowers, on the other hand, disclaim any intention to create any partnership, joint venture, agency or, common interest in profits or
income between Agent and Lender, on the one hand, and Borrowers, on the other hand, or to create an equity in the Projects in Agent or Lender, or any sharing of liabilities, losses, costs or expenses. 

        Section 11.8
Time of the Essence. 

        Time
is of the essence with respect to this Agreement. 

51

 

        Section 11.9
Successors and Assigns. 

        This
Agreement shall be binding upon and inure to the benefit of Agent, Lender and Borrowers and the respective successors and assigns of Agent, Lender and Borrowers, provided that
neither any Borrower nor any other Guarantor shall, without the prior written consent of Agent, assign any rights, duties or obligations hereunder. 

        Section 11.10
Renewal, Extension or Rearrangement. 

        All
provisions of the Loan Documents shall apply with equal effect to each and all promissory notes and amendments thereof hereinafter executed which in whole or in part represent a
renewal, extension, increase or rearrangement of the Loan. For portfolio management purposes, Agent and Lender may elect to divide the Loan into two or more separate loans evidenced by separate
promissory notes so long as the payment and other obligations of Borrowers are not effectively increased or otherwise modified. Borrowers agree to cooperate with Agent and to execute such documents as
Agent reasonably may request to effect such division of the Loan. 

        Section 11.11
Waivers; Forbearance. 

        No
advance of Loan proceeds hereunder shall constitute a waiver of any of the conditions of Lender's obligation to make advances nor, in the event Borrower is unable to satisfy any such
condition, shall any such advance have the effect of precluding Lender or Agent from thereafter requiring such condition to be satisfied prior to any fixture advance to which such condition otherwise
applies. No course of dealing on the part of Agent or Lender, or their respective officers, employees, consultants or agents, nor any failure or delay by Agent or Lender with respect to exercising any
right, power or privilege of Agent or Lender under any of the Loan Documents, shall operate as a waiver thereof. Any forbearance by Agent or Lender in exercising any right or remedy under any of the
Loan Documents, or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any right or remedy. Agent's acceptance of payment of any sum secured by any of the Loan
Documents after the due date of such payment shall not be a waiver of Agent's or Lender's right to either require prompt payment when due of all other sums so secured or to declare a Potential Default
for failure to make prompt payment. The procurement of insurance or the payment of taxes or other liens or charges by Agent or Lender shall not be a waiver of Agent's or Lender's right to accelerate
the maturity of the Loan, nor shall Agent's or Lender's receipt of any awards, proceeds, or damages under this Agreement or the Security Document operate to cure or waive Borrowers' or any Guarantor's
Potential Default in payment of sums secured by any of the Loan Documents. 

        Section 11.12
Cumulative Rights. 

        Rights
and remedies of Agent and Lender under the Loan Documents shall be cumulative, and the exercise or partial exercise of any such right or remedy shall not preclude the exercise of
any other right or remedy. 

52

 

        Section 11.13
Singular and Plural. 

        Words
used in this Agreement and the other Loan Documents in the singular, where the context so permits, shall be deemed to include the plural and vice versa. The definitions of words in
the singular in this Agreement and the other Loan Documents shall apply to such words when used in the plural where the context so permits and vice versa. 

        Section 11.14
Phrases. 

        When
used in this Agreement and the other Loan Documents, the phrase "including" shall mean "including, but not limited to," the phrase "satisfactory to Agent" or "satisfactory to
Lender" shall
mean "in form and substance satisfactory to Agent in all respects" or "in form and substance satisfactory to Lender in all respects" (as applicable), (unless otherwise modified) the phrase "with
Agent's consent", "with Agent's approval", "with Lender's consent" or "with Lender's approval" shall mean such consent or approval at Agent's or Lender's discretion (as applicable), and the phrase
"acceptable to Agent" or "acceptable to Lender" shall mean "acceptable to Agent at Agent's sole discretion" or "acceptable to Lender at Lender's sole discretion" (as applicable). 

        Section 11.15
Exhibits and Schedules. 

        The
exhibits and schedules attached to this Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes stated herein. 

        Section 11.16
Titles of Articles, Sections and Subsections. 

        All
titles or headings to articles, sections, subsections or other divisions of this Agreement and the other Loan Documents or the exhibits hereto and thereto are only for the
convenience of the parties and shall not be construed to have any effect or meaning with respect to the other content of such articles, sections, subsections or other divisions, such other content
being controlling as to the agreement between the parties hereto. 

        Section 11.17
Promotional Material. 

        Borrowers
authorize Agent and Lender to issue press releases, advertisements and other promotional materials in connection with Lender's own promotional and marketing activities, and
describing the Loan in general terms or in detail and Lender's and Agents participation in the Loan. All references to Lender or Agent contained in any press release, advertisement or promotional
material issued by any Borrower or Affiliate of Borrowers shall be approved in writing by Agent in advance of issuance. 

        Section 11.18
Survival. 

        All
of the representations, warranties, covenants, and indemnities hereunder, and under the indemnification provisions of the other Loan Documents shall survive the repayment in full of
the Loan and the release of the liens evidencing or securing the Loan, and shall survive the transfer (by sale, foreclosure, conveyance in lieu of foreclosure or otherwise) of any or all right, title
and interest in and to the Projects to any party, whether or not an Affiliate of Borrowers. 

53

 

        Section 11.19
WAIVER. OF JURY TRIAL. 

        BORROWERS,
AGENT AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS AGREEMENT AND ANY OF
THE OTHER LOAN DOCUMENTS AND THE BUSINESS RELATIONSHIP THAT IS BEING ESTABLISHED. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY BORROWERS, AGENT AND LENDER, AND BORROWERS ACKNOWLEDGE
THAT NONE OF LENDER, AGENT OR ANY PERSON ACTING ON BEHALF OF LENDER OR AGENT HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY
MODIFY OR NULLIFY ITS EFFECT. BORROWERS, AGENT AND LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH OF THEM HAS ALREADY RELIED ON THIS
WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. BORROWERS, AGENT AND LENDER FURTHER
ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL. WITHOUT LIMITING THE APPLICABILITY OF THE PROVISIONS OF SECTION 8.13 ABOVE, IF ANY ACTION OR PROCEEDING IS FILED IN A COURT OF THE STATE OF CALIFORNIA BY OR AGAINST ANY
PARTY HERETO IN CONNECTION WITH ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY, THE PARTIES HERETO HEREBY AGREE THAT
(A) THE COURT SHALL, AND IS HEREBY DIRECTED TO, MAKE A GENERAL REFERENCE PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638 ("SECTION 638") TO A REFEREE OR REFEREES TO HEAR AND
DETERMINE ALL OF THE ISSUES IN SUCH ACTION OR PROCEEDING (WHETHER OF FACT OR OF LAW) AND TO REPORT A STATEMENT OF DECISION, PROVIDED THAT AT THE OPTION OF LENDER, ANY SUCH ISSUES PERTAINING TO A
"PROVISIONAL REMEDY" AS DEFINED IN CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 1281.8 SHALL BE HEARD AND DETERMINED BY THE COURT, AND (B) BORROWERS AND GUARANTOR SHALL BE SOLELY RESPONSIBLE TO
PAY ALL FEES AND EXPENSES OF ANY REFEREE APPOINTED IN SUCH ACTION OR PROCEEDING. THE PARTIES HERETO INTEND THAT THIS PARAGRAPH CREATE A REFERENCE AGREEMENT WITHIN THE MEANING OF SECTION 638. 

54

 

        Section 11.20
Waiver of punitive or Consequential Damages. 

        Neither
Agent, Lender nor any Borrower shall be responsible or liable to the other or to any other Person for any punitive, exemplary or consequential damages which may be alleged as a
result of the Loan or the transaction contemplated hereby, including any breach or other Potential Default by any party hereto. 

        Section 11.21
Governing Law. 

        The
laws of the State of Illinois and of the United States of America shall govern the rights and duties of the parties hereto and the validity, construction, enforcement and
interpretation of the Loan Documents, except to the extent otherwise specified in any of the Loan Documents. 

        Section 11.22
Entire Agreement. 

        This
Agreement and the other Loan Documents embody the entire agreement and understanding between Agent, Lender and Borrowers and supersede all prior agreements and understandings
between such parties relating to the subject matter hereof and thereof. Accordingly, the Loan Documents may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of
the parties. There are no unwritten oral agreements among the parties. If any conflict or inconsistency exists between the Commitment and this Agreement or any of the other Loan Documents, the terms
of this Agreement and the other Loan Documents shall control. 

        Section 11.23
Counterparts. 

        This
Agreement may be executed in multiple counterparts, each of which shall constitute an original, but all of which shall constitute one document. 

        Section 11.24
Venue. 

        EACH
BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT OR
LENDER'S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH BORROWER EXPRESSLY SUBMITS AND CONSENTS
TO THE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON
BORROWERS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWERS, AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER
THE SAME HAS BEEN POSTED. 

55

 

        Section 11.25
Sale of Loan, Participation, 

        Lender
or Agent, at any time and without the consent of Borrowers or Guarantor may grant participation in or sell, transfer, assign and convey all or any portion of its right, title and
interest in and to the Loan, this Agreement and the other Loan Documents, any guaranties given in connection with the Loan and any collateral given to secure the Loan. Agent and Lender shall have the
right (but shall be under no obligation) to make available to any party for the purpose of granting participations in or suing, transferring, assigning or conveying all or any part of the Loan
(including any governmental agency or authority and any prospective bidder at any foreclosure sale of any Project) any and all information which Agent or Lender may have with respect to the Projects
and Borrowers, whether provided by Borrowers, Guarantor or any third party or obtained as a result of any environmental assessments. Each Borrower and each Guarantor agrees that Agent and Lender shall
have no liability whatsoever as a result of delivering any such information to any third party, and Borrowers and the other Loan Parties, on behalf of themselves and their successors and assigns,
hereby release and discharge Agent and Lender from any and all liability, claims, damages, or causes of action, arising, out of, connected with or incidental to the delivery of any such information to
any third party. 

        Section 11.26
Limitation on Liability of Agent's and Lender's Officers, Employees, etc. 

        Any
obligation or liability whatsoever of Agent or Lender which may arise at any time under this Agreement or any other Loan Document shall be satisfied, if at all, out of the Agent's or
Lender's assets only. No such obligation or liability shall be personally binding upon, nor shall resort for the enforcement thereof be had to, the property of any of Agent's or Lender's shareholders,
directors, officers, employees or agents, regardless of whether such obligation or liability is in the nature of contract, tort or otherwise. 

        Section 11.27
Effectiveness of Facsimile Documents and Signatures, 

        The
Loan Documents may be transmitted and/or signed by facsimile. The effectiveness of any such documents and signatures shall, subject to applicable law, have the same force and effect
as manually signed originals and shall be binding on all parties to the Loan Documents. Agent may also require that any such documents and signatures be confirmed by a manually signed original
thereof; provided, however, that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature. 

        Section 11.28
Joint and Several Liability. 

        The
Indebtedness and all other obligations of Borrowers hereunder and under the Loan Documents (collectively, the "Obligations") shall be joint and several obligations and liabilities of
each Borrower and of each, Borrowers heirs, personal representatives, successors and assigns. 

56

 

        Section 11.29
Agency 

        Both
GECC and the other Lenders agree that GECC shall act as agent for each Lender in all dealings with Borrowers, Guarantor and Master Tenants under or in connection with this Loan
Agreement and each of the other Loan Documents, including without limitation, granting any consents or waivers, taking any enforcements actions, sending or receiving notices, dealing with collateral,
granting releases, accepting payments or otherwise. Borrowers, Guarantor, Master Tenants and all Loan Parties may rely without question upon any document signed by GECC as agent for each Lender
hereunder or under any other Loan Documents. References to "Lender" in this Agreement and in the other Loan Documents shall refer to each of GECC and the other financial institutions who are or
hereafter become parties to this Agreement as Lenders, individually, or to all of GECC and the other financial institutions who are or hereafter become parties to this Agreement, collectively, as the
context may require; provided any and all grants of security interests to a Lender under this Agreement or any other Loan Document shall be deemed to be a grant to GECC as agent for each Lender. 

        Section 11.30
California Waivers. 

        EXCEPT
AS OTHERWISE EXPRESSLY PERMITTED IN THE NOTE, THE LOAN AGREEMENT OR THE OTHER LOAN DOCUMENTS, EACH BORROWER HEREBY EXPRESSLY (A) WAIVES ANY RIGHTS IT MAY HAVE UNDER LAW,
PURSUANT TO CALIFORNIA CIVIL CODE SECTION 2954.10 OR OTHERWISE, TO PREPAY THE NOTE, IN WHOLE OR IN PART, WITHOUT PENALTY, UPON ACCELERATION OF THE MATURITY DATE, AND (B) AGREES THAT IF, FOR ANY
REASON, A PREPAYMENT OF ALL OR ANY
PORTION OF THE PRINCIPAL AMOUNT OF THE NOTE IS MADE INCLUDING, WITHOUT LIMITATION, UPON OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE BY AGENT OR LENDER ON ACCOUNT OF ANY DEFAULT BY ANY BORROWER,
INCLUDING, WITHOUT LIMITATION, ANY TRANSFER, DISPOSITION, OR FURTHER ENCUMBRANCE PROHIBITED OR RESTRICTED BY THE LOAN AGREEMENT, THEN EACH BORROWER SHALL BE OBLIGATED TO PAY CONCURRENTLY WITH SUCH
PREPAYMENT THE PREPAYMENT PREMIUM AND THE MAKE WHOLE BREAKAGE AMOUNT, IF ANY. BY INITIALING THIS PROVISION IN THE SPACE PROVIDED BELOW, EACH BORROWER HEREBY DECLARES THAT (1) EACH OF THE
FACTUAL MATTERS SET FORTH IN THIS PARAGRAPH IS TRUE AND CORRECT, (2) LENDER'S AGREEMENT TO MAKE THE LOAN EVIDENCED BY THIS NOTE AT THE INTEREST RATE AND FOR THE TERM SET FORTH IN THE LOAN
AGREEMENT CONSTITUTES ADEQUATE CONSIDERATION FOR THIS WAIVER AND AGREEMENT, AND HAS BEEN GIVEN INDIVIDUAL WEIGHT BY EACH BORROWER, AGENT AND LENDER, (3) EACH BORROWER IS A SOPHISTICATED AND
KNOWLEDGEABLE REAL ESTATE INVESTOR WITH COMPETENT AND INDEPENDENT LEGAL COUNSEL, AND (4) EACH BORROWER FULLY UNDERSTANDS THE EFFECT OF THIS WAIVER AND AGREEMENT. 

57

 
INITIALS OF GREGORY K. STAPLEY ON BEHALF OF EACH BORROWER: 

        Section 11.31
Additional Waivers. 

        Each
Borrower hereby waives, to the maximum extent permitted by California Civil Code Section 2856 and/or other applicable law, all suretyship rights and defenses which might
otherwise be available to such Borrower under or pursuant to California Civil Code Sections 2787 through 2855 inclusive. 

        (a)   Each
Borrower hereby waives all rights and defenses that such Borrower may have because the Borrowers' debt is secured by real property. This means, among other things: 

        (A)  Agent
may collect from any Borrower without first foreclosing on any real or personal property collateral pledged by the other Borrowers; 

        (B)  If
Agent forecloses on any real property collateral pledged by the Borrowers: 

        (1)   The
amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the
sale price. 

        (2)   Agent
may collect from such Borrower even if Agent, by foreclosing on the real property collateral, has destroyed any right such Borrower may have to collect, from other
Borrowers. 

        This
is an unconditional and irrevocable waiver of any rights and defenses Borrowers may have because the Borrowers' debt is secured by real property. These rights and defenses include,
but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of Civil Procedure. 

        (b)   Each
Borrower hereby waives all rights and defenses arising out of an election of remedies by Agent or Lender, even though that election of remedies, such as nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed Borrowers' rights of subrogation and reimbursement against Borrowers by the operation of Section 580d of the
California Code of Civil Procedure or otherwise, 

        Without
limiting the generality of the foregoing, each Borrower hereby expressly: (a) waives any and all benefits which might otherwise be available to it under California Civil
Code Sections 2809, 2810, 2819, 2839, 2845 through 2847, 2849, 2850, 2899 and 3433, and California Code of Civil Procedure Sections 580a, 580b, 580d and 726, or any similar statutes of other states;
(b) acknowledges that Section 2856 of the California Civil Code authorizes and validates waivers of a borrower's or guarantor's rights of subrogation and reimbursement and certain other
rights and defenses available to such Borrower under California law; and (c) waives all rights of subrogation, reimbursement, indemnification and contribution and all other rights and defenses
that are or may become available by reason of Sections 2787 to 2855, inclusive, of the California Civil Code. 

58

 

        Section 11.32
Arizona Waiver. 

        Without
limiting the generality of the foregoing or any other provision hereof, each Borrower further expressly waives, to the extent permitted by law, (i) the benefits of any
statutory or other provision limiting the liability of a surety, including without limitation, any and all rights and defenses which might otherwise be available to Borrowers under Arizona Revised
Statutes Section 121641 et seq. and Rule 17(f) of the Arizona Rules of Civil Procedure; and (b) the benefits of any statutory provision limiting the right of Agent or Lender to
recover a deficiency judgment, or to otherwise proceed against any person or entity obligated for payment of the Indebtedness, after any foreclosure or trustee's sale
of any security for the Indebtedness, including without limitation the benefits to Borrowers of Arizona Revised Statutes Sections 33-814 and 12-1566. 

[Signatures
appear on the following page.] 

59

   
EXECUTED as of the date first written above. 

	 	LENDER:
	
 	

GECC:

GENERAL ELECTRIC CAPITAL

CORPORATION, a Delaware corporation
	
 	

By:	

/s/ Jim McMahon

	 	Name: Jim McMahon

Its: Duly Authorized Signatory
	
 	

BORROWERS:
	
 	

SKY HOLDINGS AZ LLC, a Nevada limited liability company
	
 	

By:	

The Ensign Group, Inc., a Delaware

corporation, its sole member
	
 	

 	

By:	

 
	 	 	 	

	 	 	Name: Gregory K. Stapley

Its: Vice President
	
 	

TERRACE HOLDINGS AZ LLC, a Nevada limited

liability company
	
 	

By:	

The Ensign Group, Inc., a Delaware

corporation, its sole member
	
 	

 	

By:	

 
	 	 	 	

	 	 	Name: Gregory K. Stapley

Its: Vice President
	
 	

 	

 	

 

Signature
Page to Third Amended and Restated Loan Agreement 

60

 

EXECUTED
as of the date first written above. 

	 	LENDER:
	
 	

GECC:
	
 	

GENERAL ELECTRIC CAPITAL

CORPORATION, a Delaware corporation
	
 	

        GENERAL ELECTRIC CAPITAL

        CORPORATION, a Delaware corporation
	
 	

By:	

	 	Name:	

	 	Title:	

	
 	

BORROWERS:
	
 	

SKY HOLDINGS AZ LLC, a Nevada limited

liability company
	
 	

By:	

The Ensign Group, Inc., a Delaware

corporation, its sole member
	
 	

 	

By:	

/s/ Gregory K. Stapley
	 	 	 	

	 	 	Name: Gregory K. Stapley

Its: Vice President
	
 	

TERRACE HOLDINGS AZ LLC, a Nevada limited

liability company
	
 	

By:	

The Ensign Group, Inc., a Delaware

corporation, its sole member
	
 	

 	

By:	

/s/ Gregory K. Stapley
	 	 	 	

	 	 	Name: Gregory K. Stapley

Its: Vice President
	
 	

 	

 	

 

Signature
Page to Third Amended and Restated Loan Agreement 

61

 

EXECUTED
as of the date first written above. 

	
 	

ENSIGN HIGHLAND LLC, a Nevada limited

liability company
	
 	

By:	

The Ensign Group, Inc., a Delaware

corporation, its sole member
	
 	

 	

By:	

/s/ Gregory K. Stapley
	 	 	 	

	 	 	Name: Gregory K. Stapley

Its: Vice President
	
 	

VALLEY HEALTH HOLDINGS LLC, a Nevada

limited liability company
	
 	

By:	

The Ensign Group, Inc., a Delaware

corporation, its sole member
	
 	

 	

By:	

/s/ Gregory K. Stapley
	 	 	 	

	 	 	Name: Gregory K. Stapley

Its: Vice President
	
 	

PLAZA HEALTH HOLDINGS LLC, a Nevada limited liability company
	
 	

By:	

The Ensign Group, Inc., a Delaware

corporation, its sole member
	
 	

 	

By:	

/s/ Gregory K. Stapley
	 	 	 	

	 	 	Name: Gregory K. Stapley

Its: Vice President
	
 	

RILLITO HOLDINGS LLC, a Nevada limited

liability company
	
 	

By:	

The Ensign Group, Inc., a Delaware

corporation, its sole member
	
 	

 	

By:	

/s/ Gregory K. Stapley
	 	 	 	

	 	 	Name: Gregory K. Stapley

Its: Vice President

Signature
Page to Third Amended and Restated Loan Agreement 

62

 

EXECUTED
as of the date first written above. 

	
 	

MOUNTAINVIEW COMMUNITY CARE LLC, a

Nevada limited liability company
	
 	

By:	

The Ensign Group, Inc., a Delaware

corporation, its sole member
	
 	

 	

By:	

/s/ Gregory K. Stapley
	 	 	 	

	 	 	Name: Gregory K. Stapley

Its: Vice President
	
 	

MEADOWBROOK HEALTH ASSOCIATES LLC a Nevada limited liability company
	
 	

By:	

The Ensign Group, Inc., a Delaware

corporation, its sole member
	
 	

 	

By:	

/s/ Gregory K. Stapley
	 	 	 	

	 	 	Name: Gregory K. Stapley

Its: Vice President
	
 	

CEDAR AVENUE HOLDINGS LLC, a Nevada L.L.C.
	
 	

By:	

The Ensign Group, Inc., a Delaware

corporation, its sole member
	
 	

 	

By:	

/s/ Gregory K. Stapley
	 	 	 	

	 	 	Name: Gregory K. Stapley

Its: Vice President
	
 	

GRANADA INVESTMENTS LLC,

a Nevada L.L.C.
	
 	

By:	

The Ensign Group, Inc., a Delaware

corporation, its sole member
	
 	

 	

By:	

/s/ Gregory K. Stapley
	 	 	 	

	 	 	Name: Gregory K. Stapley

Its: Vice President

Signature
Page to Third Amended and Restated Loan Agreement 

63

 

EXECUTED
as of the date first written above. 

	
 	

AGENT:
	
 	

GENERAL ELECTRIC CAPITAL

CORPORATION, a Delaware corporation
	
 	

By:	

/s/ Jim McMahon

	 	Name: Jim McMahon

Its: Duly Authorized Signatory

Signature
Page to Third Amended and Restated Loan Agreement 

64

  

 
 

EXHIBIT A-1
  
    The Desert Sky Health and Rehabilitation Center Project    

	

Borrower:	
 	

Sky Holdings AZ LLC
	

Name of Facility:	
 	

Desert Sky Heals and Rehabilitation Center and Desert Sky Assisted Living
	

Address of Land:	
 	

5125 North 58th Avenue, Glendale, Arizona
	

Master Tenant:	
 	

Glendale Healthcare Associates LLC
	

Number of Licensed Beds/Units:	
 	

189 SNF beds; 103 ALF Units
	

Number of Parking Spaces:	
 	

118
	

Legal Description of Land:	
 	

Attached

65

 
 
 

EXHIBIT A-2
  
    The Desert Terrace Nursing Center Project    

	

Borrower:	
 	

Terrace Holdings AZ LLC
	

Name of Facility:	
 	

Desert Terrace Nursing Center
	

Address of Land:	
 	

2509 North 201 Street, Phoenix, Arizona
	

Master Tenant:	
 	

24th Street Healthcare Associates LLC
	

Number of Licensed Beds/Units:	
 	

108 beds
	

Number of Parking Spaces:	
 	

51
	

Legal Description of Land:	
 	

Attached

66

 
 
 

EXHIBIT A-3
  
    The Highland Manor Health and Rehabilitation Center Project    

	

Borrower:	
 	

Ensign Highland LLC
	

Name of Facility:	
 	

Highland Manor Health and Rehabilitation Center
	

Address of Land:	
 	

4635 North 14th Street, Phoenix, Arizona
	

Master Tenant:	
 	

Highland Healthcare LLC
	

Number of Licensed Beds/Units:	
 	

107 beds
	

Number of Parking Spaces:	
 	

32
	

Legal Description of Land:	
 	

Attached

67

 
 
 

EXHIBIT A-4
  
    The NMMRC Project    

	

Borrower:	
 	

Valley Health Holdings LLC
	

Name of Facility:	
 	

North Mountain Medical and Rehabilitation Center
	

Address of Land:	
 	

9155 N. 3rd Street, Phoenix, Arizona
	

Master Tenant:	
 	

Radiant Hills Health Associates LLC
	

Number of Licensed Beds/Units:	
 	

155
	

Number of Parking Spaces:	
 	

101
	

Legal Description of Land:	
 	

Attached

68

 
 
 

EXHIBIT A-5
  
    The Park Manor Project    

	

Borrower:	
 	

Plaza Health Holdings LLC
	

Name of Facility:	
 	

Park Manor Rehabilitation Center
	

Address of Land:	
 	

1710 Plaza Way, Walla Walla, Washington
	

Master Tenant:	
 	

Manor Park Healthcare LLC
	

Number of Licensed Beds/Units:	
 	

79
	

Number of Parking Spaces:	
 	

 
	

Legal Description of Land:	
 	

Attached

69

 
 
 

EXHIBIT A-6
  
    The Catalina Project    

	

Borrower:	
 	

Rillito Holdings LLC
	

Name of Facility:	
 	

Catalina Care and Rehabilitation Center
	

Address of Land:	
 	

2611 N. Warren Avenue, Tucson, Arizona
	

Master Tenant:	
 	

Presidio Health Associates LLC
	

Number of Licensed Beds/Units:	
 	

102
	

Number of Parking Spaces:	
 	

 
	

Legal Description of Land:	
 	

 

        Lots
2, 3, 4 and 7 in Block 6 of Amended Samos Subdivision, according to the plat of record in the office of the County Recorder of Pima County, Arizona in Book 5 of Maps and
Plats at Page 41, being more particularly described as follows: 

        Commencing
at the Northwest corner of said Lot 7, said point being the "Point of Beginning"; thence N 89° 57' 00" E, along the North boundary line
of said Lots 7 and 2, a distance of 381.21 feet to the Northeast corner of said Lot 2; 

        Thence
S 00° 43' 44" W, along the East boundary line of said Lots 2, 3 and 4, a distance of 409.64 feet to the Southeast corner of said Lot 4; 

        Thence
S 89° 25' 45" W, along the South boundary line of said Lot 4, a distance of 172.03 feet to the Southwest corner of Lot 4; 

        Thence
N 00° 43' 44" E, along the West boundary, lines of said Lots 4 and 3, a distance of 261.19 feet to the Northwest corner of said Lot 3; 

        Thence
S 89° 57' 00" W, along the South boundary line of said Lot 7, a distance of 214.49 feet to the Southwest corner of said Lot 7; 

        Thence
N 02° 42' 19" E, along the West boundary line of said Lot 7, a distance of 150.17 feet to the "Point of Beginning." 

70

 
 
 

EXHIBIT A-7
  
    The Park View Gardens Project    

	

Borrower:	
 	

Mountainview Communitycare LLC
	

Name of Facility:	
 	

Park View Gardens at Montgomery
	

Address of Land:	
 	

3751 Montgomery Drive, Santa Rosa, California
	

Master Tenant:	
 	

Ensign Montgomery LLC
	

Number of Licensed Beds/Units:	
 	

116
	

Number of Parking Spaces:	
 	

 
	

Legal Description of Land:	
 	

Attached

71

 
 
 

EXHIBIT A-8
  
    The Sabino Project    

	

Borrower:	
 	

Meadowbrook Health Associates LLC
	

Name of Facility:	
 	

Sabino Canyon Rehabilitation and Care Center
	

Address of Land:	
 	

5830 E. Pima, Tucson, Arizona
	

Master Tenant:	
 	

Ensign Sabino LLC
	

Number of Licensed Beds/Units:	
 	

112
	

Number of Parking Spaces:	
 	

 
	

Legal Description of Land:	
 	

Attached

72

 
 
 

EXHIBIT A-9
  
    The Upland Project    

	Borrower:	 	Cedar Avenue Holdings LLC
	

Name of Facility:	
 	

Upland Rehabilitation and Care Center
	

Address of Land:	
 	

1221 East Arrow Highway, Upland, California
	

Master Tenant:	
 	

Upland Community Care, Inc.
	

Number of Licensed Beds/Units:	
 	

206
	

Number of Panting Spaces:	
 	

 
	

Legal Description of Land:	
 	

Attached

73

 
 
 

EXHIBIT A-10
  
    The Camarillo Project    

	Borrower:	 	Granada Investments LLC
	

Name of Facility:	
 	

Camarillo Healthcare Center
	

Address of Land:	
 	

205 Granada Street, Camarillo, California
	

Master Tenant:	
 	

Camarillo Community Care, Inc.
	

Number of Licensed Beds/Units:	
 	

114
	

Number of Parking Spaces:	
 	

 
	

Legal Description of Land:	
 	

Attached

74

  

 
 

EXHIBIT B
  Intellectual Property    

None. 

75

  

 
 

EXHIBIT C
  
    Interest Holder Certificate and Agreement    

Date:                                       
                                  
 

	To:	 	General Electric Capital Corporation, as Agent

500 West Monroe Street

Suite 1500

Chicago, Illinois 60661

        Re:
Loan Agreement dated as of                        ,
20      among                        ("Borrowers"), and General Electric Capital Corporation, a
Delaware corporation, as Agent and, in
its individual capacity as a Lender, "GECC", and the other financial institutions who are or become parties to said Loan Agreement as lenders (collectively with GECC, the "Lender"), (as it may be
amended from time to time, the "Loan Agreement") 

        To
induce Agent and Lender to enter into the Loan Agreement with Borrowers, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
the undersigned represents, warrants, covenants and agrees for the benefit of Agent and Lender as follows: 

        1.     The
undersigned members (collectively, "Owners" and in their individual capacity, "Owner") represent and warrant to Agent and Lender that the Owners own, in the
aggregate, 100% of the direct ownership interests in Borrowers, and that neither Borrowers nor any Owner is or shall be and, after due inquiry, that no Person who owns a controlling interest in or
otherwise controls Borrowers or any Owner, is or shall be, (a) listed on the Specially Designated Nationals and Blocked Persons List (the "SDN List") maintained by the Office of Foreign Assets
Control ("OFAC"), Department of the Treasury, and/or on any other similar publicly-available United States government list ("Other Lists" and, collectively with the SDN List, the "Lists") maintained
by the OFAC pursuant to any authorizing statute, Executive Order or regulation (collectively, "OFAC Laws and Regulations"); or (b) a Person (a "Designated Person") either (i) included
within the term "designated national" as defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515, or (ii) designated under Sections 1(a), 1(b), 1(c) or 1(d) of Executive
Order No. 13224, 66 Fed. Reg. 49,079 (published September 25, 2001), or similarly designated under any related enabling legislation or any other similar Executive Orders (collectively,
the "Executive Orders"). The OFAC Laws and Regulations and the Executive Orders are collectively referred to in this Agreement as the "Anti Terrorism Laws". Each Owner and Borrowers shall required,
and shall take reasonable measures to ensure compliance with such requirement, that no Person who owns any other direct interest in any Owner or Borrowers is or shall be listed on any of the Lists or
is or shall be a Designated Person. This Section I shall not apply to any Person to the extent that such Person's interest in the Borrowers is through a U.S. Publicly-Traded Entity. As used in
this Agreement "U.S. Publicly-Traded Entity" means a Person (other than an individual) whose securities are listed on a national securities exchange, or quoted on an automated quotation system, in the
United States, or a wholly-owned subsidiary of such a Person. From time to time upon the written request of Agent, each Owner shall deliver to Borrowers a schedule of the name, legal domicile address
and (for entities) place of organization of each holder of a controlling ownership interest in such Owner. 

76

 

        2.     Each
Owner represents and warrants that all evidence of identity provided by it to Borrowers is genuine and that all related information is accurate and that it has
acquired, or is acquiring, and shall hold, its interest in Borrowers for its own account, risk and beneficial interest and without the obligation or intention to sell, distribute, assign or transfer
all or a portion of such interest to any other Person. 

        3.     Each
Owner represents and warrants that it has taken, and agrees that it shall continue to take, reasonable measures appropriate to the circumstances (and in any event as
required by law), with respect to each holder of a controlling ownership interest in such Owner and Borrowers, to assure that funds invested by such holders in Borrowers are derived from legal sources
(the "Anti Money Laundering Measures"). The Anti Money Laundering Measures have been and shall be undertaken in accordance with the Bank Secrecy Act, 31 U.S.C. §§ 5311 et seq.
("BSA"), to the extent applicable and all applicable laws, regulations and government guidance on BSA compliance and on the prevention and detection of money laundering violations under 18 U.S.C.
§§ 1956 and 1957 (collectively, "Anti Money Laundering Laws"). 

        4.     Each
Owner represents and warrants, to its knowledge after making due inquiry, that neither it nor any holder of a controlling ownership interest in any Owner or in
Borrowers (a) is under investigation by any governmental authority for, or has been charged with, or convicted of, money laundering under l8 U.S.C. §§ 1956 and 1957,
drug trafficking, terrorist related activities, other money, laundering predicate crimes or any violation of the BSA, (b) has been assessed civil penalties under Anti Money Laundering Laws, or
(c) has had its funds seized or forfeited in an action under any Anti Money Laundering Laws. 

        5.     Each
Owner shall immediately notify Agent if such Owner obtains actual knowledge that Borrowers, any Owner, or any holder of a direct or indirect interest in Borrowers or
any Owner, or any director, manager or officer of any of them, (a) has been listed on any of the Lists, (b) has become a Designated Person, (c) is under investigation by any
governmental authority for, or has been charged with or convicted of, money laundering, drug trafficking, terrorist related activities, other money laundering predicate crimes, or any violation of the
BSA, (d) has been assessed civil penalties under any Anti Money Laundering Laws, or (e) has had funds seized or forfeited in an action under any Anti Money Laundering Laws. 

        6.     Each
Owner acknowledges and agrees that if any of the representations or warranties of the undersigned set forth herein are false, misleading or incorrect in any material
respect as of the date made, Agent, in addition to all of its other rights and remedies, may declare that an Event of Default exists under the Loan Agreement. Each Owner agrees to notify Borrowers and
Agent promptly of any change in facts or circumstances that causes any of the representations or warranties contained herein to the untrue. 

77

 

        7.     Each
Owner represents and warrants that it has taken, and agrees that it shall continue to take, reasonable measures, appropriate to the circumstances (and in any event
as required by law), to ensure that it and Borrowers are and shall be in compliance with all current and future applicable Anti-Money Laundering Laws, and other applicable laws,
regulations and government guidance for the prevention of terrorism, terrorist financing and drug trafficking. 

        8.     In
addition to the representations, warranties and covenants regarding full compliance with Anti-Terrorism Laws and Anti-Money Laundering Laws,
each Owner represents and warranties that it is, and agrees that it shall remain, in compliance in all material respects with all other laws and requirements applicable to it, its business and its
assets, the violation of which would have a material adverse effect on its ability to perform its obligations under the Borrowers' operating agreement or on the Borrowers' ability to perform its
obligations under the Loan Agreement. 

        9.     Each
Owner shall cause to be made, all payments owed by Borrowers to Agent by check or wire transfer drawn on an account owned by Borrowers, or by an Owner or another
Person approved in writing in advance by Agent, and maintained at a banking institution organized under the laws of the United States or one of its constituent States, or at a federally regulated U.S.
branch or agency of a foreign bank, or at a federally regulated securities broker dealer. 

        10.   If
the applicable Anti-Money Laundering Measures do not provide, in Agent's reasonable determination, adequate means to assure that Persons that are listed
on any of the Lists, or that are Designated Persons, or whose funds are not derived from legal sources, are excluded from becoming or being direct or indirect investors in any Owner or Borrowers,
Agent shall notify Borrowers of its determination in accordance with the notice provisions in the Loan Agreement. If such inadequate Anti-Money Laundering Measures are not modified in a
commercially reasonable manner to Agent's reasonable satisfaction within thirty (30) days following notice to Borrowers of Agent's determination, each of the undersigned acknowledges that
Agent, in addition to all of its other rights and remedies, may declare that an Event of Default exists. 

        11.   No
transfer of any direct interest in Borrowers or of any controlling ownership interest in Owner shall be effective unless and until the transferor has provided a
written certification to Borrowers that, after making due inquiry, (a) the transferee or any Person who owns a controlling interest in, or otherwise controls, the transferee is not listed on
any of the Lists and is not a Designated Person, and the transferee has taken reasonable measures to assure that no holder of any other controlling ownership interest in the transferee is so listed or
is so designated; provided, however, that none of the foregoing shall apply to any Person which is, or to the extent that such interest is through, a U.S. Publicly-Traded Entity, and (b) the
funds for investment in Owner or Borrowers are derived from legal sources. 

78

 

        12.   Each
Owner acknowledges and agrees that if at any time Borrowers or Agent reasonably believes that such Owner has breached its representations and warranties or its
agreements set forth herein, Borrowers have the right or may be obligated to block such Owner's investment in Borrowers, to prohibit additional investments, to segregate the assets constituting such
Owner's the investment in accordance with applicable Anti-Terrorism Laws, to decline any redemption request or to redeem the Investor's investment. Each Owner further acknowledges that it
will have no claim against Borrowers, Lender or Agent or any of their respective affiliates or agents for any form of damages as a result of any of the foregoing actions. 

        13.   Each
Owner shall require each Person that proposes to become a holder of any direct interest in Borrowers or of any controlling ownership interest in Owner to sign an
agreement substantially in the form of this Agreement and to deliver the same to Borrowers. 

        14.   Capitalized
terms used in this Agreement and not defined in this Agreement shall have the meanings assigned to them in the Loan Agreement. Any notice sent to Agent under
this Agreement shall be sent in accordance with the notice provisions set forth in the Loan Agreement. 

        15.   The
undersigned acknowledges that (a) Lender is relying on this Agreement and its rights hereunder in entering into the Loan Agreement and in advancing proceeds
of the Loan, and (b) any terms hereof applying to more than one of the undersigned are made on a joint and several basis hereunder. This Agreement may be executed in counterparts. 

79

 

        IN
WITNESS WHEREOF, each of the undersigned have executed and delivered this Agreement as of the date set forth above. 

OWNER:

80

  

 
 

EXHIBIT D
  Provider Payment/Reimbursement Programs    

81

  

 
 

EXHIBIT E
  Governmental Approvals    

	1.
	Arizona
Department of Health Services; Nursing Care Institution License No. NCI-345 with respect to the Desert Sky Healthcare and Rehabilitation Center Project.

	2.
	Arizona
Department of Health Services, Nursing Care Institution License No. NCI-237 with respect to the Desert Terrace Nursing Center Project.

	3.
	Arizona
Department of Health Services, Nursing Care Institution License No. NCI-159 with respect to the Highland Manor Health and Rehabilitation Center Project.

	4.
	Arizona
Department of Health Services, Nursing Care Institution License No. NCI-2647 with respect to the NMMRC Project.

	5.
	Nursing
Home License No. 1342 issued by the Washington Department of Social and Health Services with respect to the Park Manor Project.

	6.
	Arizona
Department of Health Services. Nursing Care Institution License No. NCI-2634 with respect to the Catalina Project.

	7.
	State
of California Department of Health Services License No. 010000062 with respect to the Park View Gardens Project.

	8.
	Arizona
Department of Health Services, Nursing Care Institution License No. NCI-279 with respect to the Sabino Project.

	9.
	State
of California Department of Health Services License No. 240000215 with respect to the Upland Project.

	10.
	State
of California Department of Health Services License No. 050000087 with respect to the Camarillo Project. 

82

  

 
 

EXHIBIT F
  Required Repairs    

Desert
Sky (Glendale, AZ) 

	Item Description
 
	 	Quantity
	 	Cost
	 	I-Total$
	 	Comments

	ADA Compliance Items	 	1	 	$	600.00	 	$	600	 	See Section III G.2 of the report for detailed explanation
	 	 	
	 	
	 	
	 	 
	Total Immediate Repairs	 	 	 	 	 	 	$	600	 	 
	 	 	 	 	 	 	 	
	 	 

Desert
Terrace (Phoenix, AZ) 

	Item Description
 
	 	Quantity
	 	Cost
	 	I-Total$
	 	Comments

	Irrigation system	 	1	 	$	1,000.00	 	$	1,000	 	See Section III A of the report for detailed explanation
	

ADA Compliance Items	
 	

1	
 	
$	

24,990.00	
 	
$	

24,990	
 	

See Section III G.2 of the report for detailed explanation
	 	 	
	 	
	 	
	 	 
	Total Immediate Repairs	 	 	 	 	 	 	$	25,990	 	 
	 	 	 	 	 	 	 	
	 	 

Catalina
(Tucson, AZ) 

	Item Description
 
	 	Quantity
	 	Cost
	 	I-Total$
	 	Comments

	ADA Compliance Items	 	1	 	$	900	 	$	900	 	See Section III G.2 of the report for detailed explanation
	 	 	
	 	
	 	
	 	 
	Total Immediate Repairs	 	 	 	 	 	 	$	900	 	 
	 	 	 	 	 	 	 	
	 	 

Highland
Manor (Phoenix, AZ) 

	Item Description
 
	 	Quantity
	 	Cost
	 	I-Total$
	 	Comments

	ADA Compliance Items	 	1	 	$	4,940	 	$	4,940	 	See Section III G.2 of the report for detailed explanation
	 	 	
	 	
	 	
	 	 
	Total Immediate Repairs	 	 	 	 	 	 	$	4,940	 	 
	 	 	 	 	 	 	 	
	 	 

North
Mountain (Phoenix, AZ) 

	Item Description
 
	 	Quantity
	 	Cost
	 	I-Total$
	 	Comments

	Asphalt pavement, initial seal coat	 	31,500	 	$	3,150.00	 	$	3,150	 	Seal, stripe.
	

ADA Compliance Items	
 	

1	
 	
$	

1,410.00	
 	
$	

1,410	
 	

See Section III G.2 of the report for detailed explanation
	 	 	
	 	
	 	
	 	 
	Total Immediate Repairs	 	 	 	 	 	 	$	4,560	 	 
	 	 	 	 	 	 	 	
	 	 

83

 

Park
Manor (Walla Walla, WA) 

	Item Description
 
	 	Quantity
	 	Cost
	 	I-Total$
	 	Comments

	Fencing, repair an paint	 	2,500	 	$	1,250	 	$	1,250	 	See Section III A of the report for detailed explanation
	

Asphalt repair (cut & patch, full-depth)	
 	

1,715	
 	
$	

4,288	
 	
$	

4,288	
 	

See Section III A of the report for detailed explanation
	

Asphalt overlay	
 	

17,150	
 	
$	

10,719	
 	
$	

10,719	
 	

See Section III A of the report for detailed explanation
	

Roof covering, built-up system	
 	

1	
 	
$	

1,000	
 	
$	

1,000	
 	

Drain installation
	

Replace patio roofs	
 	

4	
 	
$	

4,900	
 	
$	

4,900	
 	

See Section III B of the report for detailed explanation
	

Soffit repairs	
 	

200	
 	
$	

1,000	
 	
$	

1,000	
 	

See Section III B of the report for detailed explanation
	

Metal railings, Repair	
 	

1	
 	
$	

1,000	
 	
$	

1,000	
 	

Repair or replace loose railings
	

DHW heaters, <150 gal.	
 	

1	
 	
$	

1,000	
 	
$	

1,000	
 	

See Section III D of the report for detailed explanation
	

ADA Compliance Items	
 	

1	
 	
$	

300	
 	
$	

300	
 	

See Section III G.2 of the report for detailed explanation
	 	 	
	 	
	 	
	 	 
	Total Immediate Repairs	 	 	 	 	 	 	$	25,456	 	 
	 	 	 	 	 	 	 	
	 	 

Desert
Terrace Sprinkler Heads 

        In
the Property Condition Report prepared by EMG, it is recommended that Borrowers contact their fire sprinkler contractor to initiate an audit to replace all recalled sprinkler heads,
such audit and replacement must be completed within 30 days after the date of this Agreement. 

Park
View Gardens Sprinklers 

        In
the Property Condition Report prepared by EMG, it is recommended that Borrowers contact their fire sprinkler contractor to initiate an audit to replace all recalled sprinkler heads,
such audit and replacement must be completed within 30 days after the date of this Agreement. 

84

  

	Property Name:	 	Upland Rehab and Care Center	 	Beds:	 	203
	Location:	 	Upland, California	 	Building Quantity:	 	1
	Project Number:	 	80913.-6R-001.042	 	Reserve Term:	 	12 years
	 	 	 	 	Property Age:	 	42 years
	 	 	 	 	 	 	 

	Sec
 
	 	Component or System
	 	Comments
	 	Quantity
	 	Unit
	 	Cost
	 	I-Totals

	III A	 	Retaining walls, unit masonry/concrete	 	Repair	 	50	 	LF	 	$	50.00	 	$	2,500
	

III A	
 	

Asphalt repair (cut & patch, full-depth)	
 	

Repair damaged paving	
 	

3,500	
 	

EA	
 	
 	

2.50	
 	
$	

8,750
	

III B	
 	

Concrete patios	
 	

Replace	
 	

1,000	
 	

SF	
 	
$	

5.00	
 	
$	

5,000
	

III G	
 	

ADA Compliance Items	
 	

See Section III G.2 of the report for detailed explanation	
 	

1	
 	

EA	
 	
$	

14,115.00	
 	
$	

14,115
	 	 	 	 	 	 	Total Immediate Repairs	 	$	30,365
	 	 	 	 	 	 	Cost Per Bed	 	$	150
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

85

 

	Property Name:	 	Camarillo Healthcare Center	 	Beds:	 	114
	Location:	 	Camarillo, California	 	Building Quantity:	 	1
	Project Number:	 	80913.06R-002.042	 	Reserve Term:	 	12 years
	 	 	 	 	Property Age:	 	35 years
	 	 	 	 	 	 	 

	Sec
 
	 	Component or System
	 	Comments
	 	Quantity
	 	Unit
	 	Cost
	 	I-Totals

	III D	 	Rooftop package unit per ton	 	Replace 4 down units	 	16	 	TON	 	$	1,200.00	 	$	19,200
	

III D	
 	

Emergency generator	
 	

Replace	
 	

1	
 	

EA	
 	
$	

7,500.00	
 	
$	

7,500
	

III E	
 	

Fire inspection Violations	
 	

Minor Fire Inspection Violations need to be addressed	
 	

1	
 	

LS	
 	
$	

500.00	
 	
$	

500
	

III G	
 	

ADA Compliance Items	
 	

See Section III G.2 of the report for detailed explanation	
 	

1	
 	

EA	
 	
$	

8,270.00	
 	
$	

8,270
	 	 	 	 	 	 	Total Immediate Repairs	 	$	35,470
	 	 	 	 	 	 	Cost Per Bed	 	$	311

86

 

Park
View Gardens (Santa Rosa, CA) 

	Item Description
 
	 	Quantity
	 	Unit
	 	Cost
	 	I-Total$
	 	Comments

	Asphalt Repair (service drive)	 	1,920	 	SF	 	$	5.00	 	$	1,000	 	New grading, drainage and asphaltic concrete
	Attic insulation and ventilation	 	1	 	LS	 	$	20,000.00	 	$	20,000	 	Improve current attic ventilation and insulation
	ADA Compliance Items	 	1	 	LS	 	$	3,650.00	 	$	3,650	 	 
	Asphalt pavement (initial seal coat)	 	20,500	 	SF	 	 	.10	 	 	2,050	 	 
	 	 	 	 	 	 	 	 	 	
	 	 
	Total Immediate Repairs	 	 	 	 	 	 	 	 	$	35,500	 	 
	 	 	 	 	 	 	 	 	 	
	 	 

Sabino
Canyon (Tucson, AZ) 

	Item Description
 
	 	Quantity
	 	Unit
	 	Cost
	 	I-Total$
	 	Comments

	Commercial Kitchen: refrigerator	 	1	 	LS	 	$	1,000.00	 	$	1,000	 	Repair door seal
	Laundry room ceiling	 	1	 	EA	 	$	1,500.00	 	$	1,500	 	Repair ceiling drainage
	Strobe lights (for existing alarms)	 	5	 	EA	 	$	250.00	 	$	1,250	 	 
	ADA Compliance Items	 	1	 	LS	 	$	690.00	 	$	690	 	See Section G.2 of the PCA report for details
	 	 	 	 	 	 	 	 	 	
	 	 
	Total Immediate Repairs	 	 	 	 	 	 	 	 	$	5,500	 	 
	 	 	 	 	 	 	 	 	 	
	 	 

        Complete
repairs 90 Days Post-Closing 

87

  

 
 

EXHIBIT G
  UCC Financing Statements to be Terminated    

	Filing Jurisdiction
 
	 	Filing Number
	 	Filing Date
	 	Secured Party
	 	Debtor

	Nevada Secretary of State	 	2003021513-0	 	8/11/03	 	Reliastar Life Insurance Company	 	Rillito Holdings LLC
	Pima County, Arizona	 	20030951143	 	5/16/03	 	Reliastar Life Insurance Company	 	Rillito Holdings LLC

88

  

 
 

SCHEDULE 2.1
  
    Advance Conditions    

        Part A—Conditions
to Initial Advance 

        Part B—General
Conditions 

        Part C—Capital
Improvements Advances 

        Part D—Application
of Insurance Proceeds 

 
 

PART A
  
    CONDITIONS TO INITIAL ADVANCE    

        The
initial advance of the Loan shall be subject to the terms of the Term Sheet, as clarified or modified by this Agreement and Agent's receipt, review, approval and/or confirmation of
the following items set forth in Part A of this Schedule 2.1, at Borrowers' cost and expense, each in form and content satisfactory to Agent in its sole discretion: 

	1.
	Loan
Documents. The following Loan Documents:

	(a)
	the
Loan Agreement executed by Borrowers

	(b)
	the
Note

	(c)
	the
Security Documents executed by Borrowers

	(d)
	such
Uniform Commercial Code financing statements as Agent may require

	(e)
	a
Third Amended and Restated Environmental Indemnity Agreement executed by Borrowers and a Third Amended and Restated Environmental Indemnity Agreement executed by Guarantor
(collectively, the "Environmental Indemnity")

	(f)
	a
Third Amended and Restated Guaranty of Payment and Performance executed by Guarantor (the "Guaranty")

	(g)
	a
Subordination and Attornment Agreements executed by each Master Tenant (the "Subordination Agreements"), and

	(h)
	the
Business Associate Agreement executed by Master Tenants.

	2.
	Loan
Origination Fee. The loan origination fee of $171,000, which fee shall be non-refundable, stall be deemed fully earned upon receipt. 

89

 
	3.
	Title
Insurance Policies. An ALTA (or equivalent) mortgagee policy or policies of title insurance in the maximum amount of the Loan, with reinsurance and endorsements as Agent may
require, containing no exceptions to title (printed or otherwise) which are unacceptable to Agent, and insuring that the Security Documents are a first-priority Lien on the Projects and related
collateral (the "Title Policies").

	4.
	Organizational
and Authority Documents. Certified copies of all documents evidencing the formation, organization, valid existence, good standing, and due authorization of and for each
Borrower and each Guarantor for the execution, delivery, and performance of the Loan Documents by each Borrower and each Guarantor, as applicable.

	5.
	Legal
Opinions. Legal opinions issued by counsel for Borrower and each Guarantor, opining as to the due organization, valid existence and good standing of Borrowers and each Guarantor,
and the due authorization, execution, delivery, enforceability and validity of the Loan Documents with respect to, Borrowers and each Guarantor; that the Loan, as reflected in the Loan Documents is
not usurious; to the extent that Agent is not otherwise satisfied, that each Project and its use is in full compliance with all legal requirements; that the Loan Documents do not create or constitute
a partnership, a joint venture or a trust or fiduciary relationship between Borrowers and Agent; and as to such other matters as Agent and Agent's counsel reasonably may specify.

	6.
	Searches.
Current Uniform Commercial Code, tax, judgment lien and litigation searches for Borrowers, Loan Parties, Master Tenants Borrowers' partners and members, and the immediately
preceding owner of the Projects.

	7.
	Insurance.
Evidence of insurance as required by this Agreement, and conforming in all respects to the requirements of Agent.

	8.
	Survey.
Three (3) originals of a current "as-built" survey of each Project, dated or updated to a date not earlier than forty-five (45) days prior
to the Closing Date, prepared by a registered land surveyor in accordance with the American Land Title Association/ American Congress on Surveying and Mapping Standards and containing Agent's approved
form of certification in favor of Agent and the title insurer. The surveyor shall certify that no portion of any Project is in a flood hazard area as identified by the Secretary of Housing and Urban
Development (or, if any portion of any Project is in such a flood hazard area, then the survey shall certify to the hazard designation of the affected portion of the property,) and shall conform to
Agent's current survey requirements. The surveys shall be sufficient for the title insurer to remove the general survey exception. 

90

 
	9.
	Property
Condition Report. A current engineering report or architect's certificate with respect to each Project, covering, among other matters, inspection of heating and cooling
systems, roof and structural details and showing no failure of compliance with building plans and specifications, applicable legal requirements (including requirements of the Americans with
Disabilities Act) and fire, safety and health standards. As requested by Agent, such report shall also include an assessment of the Project's tolerance for earthquake and seismic activity.

	10.
	Environmental
Reports. A current Site Assessment for each Project.

	11.
	Leases.
All leases of, subleases of, and occupancy agreements affecting the Projects or any part thereof now existing or hereafter executed (including the Master Leases and all
patient and resident care agreements and service agreements which include an occupancy agreement) and all amendments, modifications or supplements thereto ("Leases") shall be in form and substance,
with tenants and for uses acceptable to Agent. On the Closing Date: (a) the Master Leases shall be, in full force and effect; (b) Borrowers shall have submitted revised and updated
financials and census data to Agent; and (c) Agent shall have received subordination agreements in form and substance acceptable to Agent the Master Tenants.

	12.
	Master
Leases. A copy of each Master Lease, certified by Borrowers as being true, correct and complete.

	13.
	Tax
and Insurance Impounds. Borrowers' deposit with Agent of the amount required by Agent to impound for taxes and assessments. insurance premiums and to fund any other required
escrows or reserves.

	14.
	Compliance
With Laws. Evidence that each Project and the operation thereof comply with all legal requirements, including that all requisite certificates of occupancy, building
permits, and other licenses, certificates, approvals or consents required of any governmental authority have been issued without variance or condition and that there is no litigation, action,
citation, injunctive proceedings, or like matter pending or threatened with respect to the validity of such matters. If title insurance with respect to any Project described in item 3 above does not
include a Zoning 3.1 (with parking) endorsement because such an endorsement is not available in the State where the Project is located, then Borrowers shall furnish to Agent a zoning letter from the
applicable municipal agency with respect to such Project. Borrowers shall, upon request of Agent, furnish Agent with utility letters from applicable service providers. 

91

 
	15.
	No
Casualty or Condemnation. No condemnation or adverse zoning or usage change proceeding shall have occurred or shall have been threatened against any Project; no Project shall have
suffered any significant damage by fire or other casualty which has not been repaired; no law, regulation, ordinance, moratorium, injunctive proceeding, restriction, litigation, action, citation or
similar proceeding or matter shall have been enacted, adopted, or threatened by any governmental authority, which would have, in Agent's judgment, a material adverse effect on Borrowers, Guarantor or
any Project.

	16.
	Audit
Requirements. The annualized Net Operating Income of the Projects equals or exceeds $7,650,000.

	17.
	Broker's
Fees. All fees and commissions payable to real estate brokers, mortgage brokers, or any other brokers or agents in connection with the Loan or the acquisition of the Projects
have been paid, such evidence to be accompanied by any waivers or indemnifications deemed necessary by Agent.

	18.
	Costs
and Expenses. Payment of Agent's costs and expenses in underwriting, documenting, and closing the transaction, including fees and expenses of Agent's inspecting engineers,
consultants and counsel.

	19.
	Representations
and Warranties. The representations and warranties contained in this Loan Agreement and in all other Loan Documents are true and correct.

	20.
	No
Defaults. No Potential Default or Event of Default shall have occurred or exist.

	21.
	Appraisal.
Agent shall obtain an appraisal report for each Project, in form and content acceptable to Agent, prepared by an independent MAI appraiser in accordance with the Financial
Institutions Reform, Recovery and Enforcement Act ("FIRREA") and the regulations promulgated pursuant to such act.

	22.
	Agent
shall have received such other items as Agent may reasonably require. 

92

 
 
 

PART B
  
    GENERAL CONDITIONS    

        Each
advance of the Loan following the initial advance shall be subject to Agent's receipt, review, approval and/or confirmation of the following, each in form and content satisfactory
to Agent in its sole discretion: 

	1.
	There
shall exist no Potential Default under any of the Loan Documents (currently and after giving effect to the requested advance).

	2.
	The
representations and warranties contained in this Loan Agreement and in all other Loan Documents are true and correct in all material respects.

	3.
	Such
advance shall be secured by the Loan Documents.

	4.
	Borrowers
shall have paid Agent's costs and expenses in connection with such advance (including title charges, and costs and expenses of Agent's inspecting engineer and attorneys).

	5.
	No
change shall have occurred in the financial condition of any Borrower or Guarantor, or in the Net Operating Income of the Projects, or in the financial condition of any Master
Tenant, which would have, in Agent's judgment, a material adverse effect on the Loan, any Project, or any Borrower's or Guarantor's ability to perform its obligations under the Loan Documents.

	6.
	No
condemnation or adverse, as determined by Agent, zoning or usage change proceeding shall have occurred or shall have been threatened against any Project; no Project shall have
suffered any damage by fire or other casualty which has not been repaired or is not being restored in accordance with this Agreement; no law, regulation, ordinance, moratorium, injunctive proceeding,
restriction, litigation, action, citation or similar proceeding or matter shall have been enacted, adopted, or threatened by any governmental authority, which would have, in Agent's judgment, a
material adverse effect on any Project or any Borrower's or Guarantor's ability to perform its obligations under the Loan Documents.

	7.
	Borrowers
shall immediately deposit all proceeds of the Loan advanced by Agent in a separate and exclusive account to be used solely for the purposes specified in this Agreement and in
Borrowers' advance request and, upon Agent's request, shall promptly furnish Agent with evidence thereof. 

 
 

PART C
  
    RESERVED    

93

 
 
 

PART D
  
    APPLICATION OF INSURANCE PROCEEDS    

        Insurance
proceeds applied to restoration will be advanced in accordance with Section 3.2 and on the following terms and conditions: 

	1.
	Each
request for such an advance shall specify the amount requested, shall be on forms satisfactory to Agent, and shall be accompanied by appropriate invoices, bills paid affidavits,
lien waivers, title updates, endorsements to the title insurance, and other documents as may be required by Agent. Such advances may be made, at Agent's election, either: (a) in reimbursement
for expenses paid by Borrowers, or (b) for payment of expenses incurred and invoiced but not yet paid by Borrowers, or (c) with respect to non-residential tenant
restorations, by funding allowances for tenant improvements undertaken to be constructed by non-residential tenants and completed in accordance with Leases. Agent, at its option and
without further direction from Borrowers, may disburse any restorations advance to the Person to whom payment is due or through an escrow satisfactory to Agent. Borrowers hereby irrevocably directs
and authorizes Agent to so advance the insurance proceeds. Agent may, at Borrowers' expense, conduct an audit, inspection, or review of the Projects to confirm the amount of the requested restoration
advance.

	2.
	Borrowers
shall have submitted and Agent shall have approved (a) the restorations to be completed, (b) the plans and specifications for such restorations, which plans and
specifications may not be changed without Agent's prior written consent, which consent shall not be unreasonably withheld or delayed, and (c) if requested by Agent, each contract or subcontract
for an amount in excess of Twenty-Five Thousand Dollars ($25,000) for the performance of labor or the furnishing of materials for such restorations.

	3.
	Borrowers
shall have submitted and Agent shall have approved the time schedule for completing the restorations. After Agent's approval of a detailed budget, such budget may not be
changed without Agent's prior written consent, which consent shall not be unreasonably withheld or delayed. If the estimated cost of such restorations exceeds the unadvanced portion of the amount
allocated for such restorations in the approved budget, then Borrowers shall provide such security as Agent may require to assure the lien-free completion of restorations before the
scheduled completion date.

	4.
	All
restorations constructed by Borrowers prior to the date an restorations advance is requested shall be completed to the satisfaction of Agent and Agent's engineer and in accordance
with the plans and budget for such restorations, as approved by Agent, and all legal requirements.

	5.
	Borrowers
shall not use any portion of any restorations advance for payment of any other cost except as specifically set forth in a request for advance approved by Agent in writing. 

94

 
	6.
	Each
restorations advance, except for a final restorations advance, shall be in the amount of actual costs incurred less ten percent (10%) of such costs as retainage to be advanced as
part of a final restorations advance.

	7.
	Agent
shall not under any circumstances be obligated to make any restorations advance after twelve (12) months after the casualty or six (6) months prior to the Maturity
Date.

	8.
	No
funds will be advanced for materials stored at the Projects unless Borrowers furnish Agent satisfactory evidence that such materials are properly stored and secured at the Projects.

	9.
	Borrowers
shall have delivered evidence satisfactory to Agent, in its sole discretion, that the amount remaining to be disbursed for such restorations is sufficient to complete the
restorations or, if insufficient, Borrowers shall have deposited with Agent funds necessary to complete the restorations (Borrowers' deposit to be disbursed before any balance of the additional
advance). 

95

  

 
 

SCHEDULE 2.2
  
    Treasury Rate    

        "Treasury
Rate" shall mean the yield to maturity of the most recently issued U.S. Treasury security having a term which is closest to the remaining term of the Loan at the time the
applicable advance is made, as quoted in the Wall Street Journal on the date such advance is made (being the closing yield to maturity on the Business Day immediately prior to that date). If the date
such advance is made is not a day on which the Wall Street Journal is published, then the quote shall be obtained from the Walt Street Journal published immediately preceding the date such advance is
made (provided that the yield to maturity is always the closing yield to maturity for the Business Day immediately preceding the date of the advance). If the Wall Street Journal (a) quotes more
than one such U.S. Treasury security with such a term; the highest of such quotes shall apply, or (b) fails or ceases to publish such quotes, such U.S. Treasury security yield to maturity shall
be determined from such substitute financial reporting service or source as Agent in its reasonable discretion shall determine. 

96

 
 
 

SCHEDULE 2.3(b)
  
    Principal Payments    

	 
	 	Date
	 	Principal
	 	 

	 	 	1/1/2007	 	39,444.05	 	 
	 	 	2/1/2007	 	56,618.64	 	 
	 	 	3/1/2007	 	90,566.12	 	 
	 	 	4/1/2007	 	57,536.97	 	 
	 	 	5/1/2007	 	69,064.10	 	 
	 	 	6/1/2007	 	58,326.62	 	 
	 	 	7/1/2007	 	69,833.04	 	 
	 	 	8/1/2007	 	59,126.00	 	 
	 	 	9/1/2007	 	59,494.71	 	 
	 	 	10/1/2007	 	70,970.52	 	 
	 	 	11/1/2007	 	60,308.49	 	 
	 	 	12/1/2007	 	71,762.96	 	 
	 	 	1/1/2008	 	61,132.29	 	 
	 	 	2/1/2008	 	61,513.54	 	 
	 	 	3/1/2008	 	83,975.67	 	 
	 	 	4/1/2008	 	62,421.21	 	 
	 	 	5/1/2008	 	73,820.30	 	 
	 	 	6/1/2008	 	63,271.06	 	 
	 	 	7/1/2008	 	71,647.87	 	 
	 	 	8/1/2008	 	64,131.39	 	 
	 	 	9/1/2008	 	64,531.36	 	 
	 	 	10/1/2008	 	75,875.13	 	 
	 	 	11/1/2008	 	65,407.22	 	 
	 	 	12/1/2008	 	76,728.03	 	 
	 	 	1/1/2000	 	66,293.88	 	 
	 	 	2/1/2009	 	66,707.36	 	 
	 	 	3/1/2009	 	99,735.42	 	 
	 	 	4/1/2009	 	67,745.96	 	 
	 	 	5/1/2009	 	79,005.46	 	 
	 	 	6/1/2009	 	68,661.45	 	 
	 	 	7/1/2009	 	79,896.96	 	 

97

 

	 
	 	Date
	 	Principal
	 	 

	 	 	8/1/2009	 	69,588.23	 	 
	 	 	9/1/2009	 	70,022.28	 	 
	 	 	10/1/2009	 	81,222.12	 	 
	 	 	11/1/2009	 	70,965.84	 	 
	 	 	12/1/2009	 	82,140.93	 	 
	 	 	1/1/2010	 	71,921.02	 	 
	 	 	2/1/2010	 	72,369.65	 	 
	 	 	3/1/2010	 	103,881.69	 	 
	 	 	4/1/2010	 	73,475.76	 	 
	 	 	5/1/2010	 	84,585.07	 	 
	 	 	6/1/2010	 	74,461.89	 	 
	 	 	7/1/2010	 	85,545.35	 	 
	 	 	8/1/2010	 	75,460.18	 	 
	 	 	9/1/2010	 	75,930.92	 	 
	 	 	10/1/2010	 	86,975.86	 	 
	 	 	11/1/2010	 	76,947.32	 	 
	 	 	12/1/2010	 	87,965.62	 	 
	 	 	1/1/2011	 	77,976.25	 	 
	 	 	2/1/2011	 	78,462.70	 	 
	 	 	3/1/2011	 	110,419.47	 	 
	 	 	4/1/2011	 	79,641.47	 	 
	 	 	5/1/2011	 	90,589.15	 	 
	 	 	6/1/2011	 	80,703.62	 	 
	 	 	7/1/2011	 	91,623.46	 	 
	 	 	8/1/2011	 	81,778.87	 	 
	 	 	9/1/2011	 	82,289.07	 	 
	 	 	10/1/2011	 	93,167.36	 	 
	 	 	11/1/2011	 	83,383.87	 	 
	 	 	12/1/2011	 	94,233.46	 	 
	 	 	1/1/2012	 	84,492.17	 	 
	 	 	2/1/2012	 	85,019.32	 	 
	 	 	3/1/2012	 	106,102.31	 	 
	 	 	4/1/2012	 	86,212.03	 	 
	 	 	5/1/2012	 	96,987.49	 	 
	 	 	6/1/2012	 	87,355.20	 	 
	 	 	7/1/2012	 	98,100.69	 	 
	 	 	8/1/2012	 	88,512.47	 	 
	 	 	9/1/2012	 	89,064.74	 	 
	 	 	10/1/2012	 	99,765.42	 	 
	 	 	11/1/2012	 	90,243.09	 	 
	 	 	12/1/2012	 	100,912.88	 	 
	 	 	1/1/2013	 	91,435.97	 	 
	 	 	2/1/2013	 	92,006.51	 	 
	 	 	3/1/2013	 	122,729.01	 	 
	 	 	4/1/2013	 	93,346.79	 	 
	 	 	5/1/2013	 	103,935.23	 	 
	 	 	6/1/2013	 	94,577.94	 	 
	 	 	7/1/2013	 	105,134.11	 	 
	 	 	8/1/2013	 	95,824.28	 	 
	 	 	9/1/2013	 	96,422.24	 	 
	 	 	10/1/2013	 	106,930.06	 	 

98

 

	 
	 	Date
	 	Principal
	 	 

	 	 	11/1/2013	 	97,691.32	 	 
	 	 	12/1/2013	 	108,165.88	 	 
	 	 	1/1/2014	 	98,976.05	 	 
	 	 	2/1/2014	 	99,593.70	 	 
	 	 	3/1/2014	 	129,624.77	 	 
	 	 	4/1/2014	 	101,024.47	 	 
	 	 	5/1/2014	 	111,411.67	 	 
	 	 	6/1/2014	 	102,350.32	 	 
	 	 	7/1/2014	 	112,702.76	 	 
	 	 	8/1/2014	 	103,692.51	 	 
	 	 	9/1/2014	 	104,339.63	 	 
	 	 	10/1/2014	 	114,639.94	 	 
	 	 	11/1/2014	 	105,706.36	 	 
	 	 	12/1/2014	 	115,970.84	 	 
	 	 	1/1/2015	 	107,089.95	 	 
	 	 	2/1/2015	 	107,758.30	 	 
	 	 	3/1/2015	 	137,045.33	 	 
	 	 	4/1/2015	 	109,286.46	 	 
	 	 	5/1/2015	 	119,457.10	 	 
	 	 	6/1/2015	 	110,714.21	 	 
	 	 	7/1/2015	 	120,847.43	 	 
	 	 	8/1/2015	 	112,159.56	 	 
	 	 	9/1/2015	 	112,859.59	 	 
	 	 	10/1/2015	 	122,936.58	 	 
	 	 	11/1/2015	 	114,331.41	 	 
	 	 	12/1/2015	 	124,369.82	 	 
	 	 	1/1/2016	 	115,821.38	 	 
	 	 	2/1/2016	 	116,544.30	 	 
	 	 	3/1/2016	 	135,777.69	 	 
	 	 	4/1/2016	 	118,119.42	 	 
	 	 	5/1/2016	 	128,058.55	 	 
	 	 	6/1/2016	 	119,656.11	 	 

99

 
 
 

SCHEDULE 2.5(a)
  
    Make-Whole Brokerage Amount    

        As
used herein, "Make Whole Breakage Amount" means, as calculated by Agent, the greater of (i) one percent (1%) of the amount being prepaid and (ii) the excess, if any, of
(A) the sum of the net present values of each scheduled interest and principal payment of the Loan, including the payment of the balance of the Loan (together with accrued interest thereon) on
the then scheduled Maturity Date, discounted to the date of the prepayment at an interest rate equal to the Replacement Treasury Yield plus fifty (50) basis points, over (B) the amount
of principal being prepaid. 

        As
used herein the term "Replacement Treasury Yield" shall mean the rate of interest equal to the yield to maturity of the most recently issued U.S. Treasury security as quoted in the
Wall Street Journal on the prepayment date. If the remaining term is less than one year, the Replacement Treasury Yield will equal the yield for 1-Year Treasury's. If the remaining term is
1-Year, 2-Year, etc., then the Replacement Treasury Yield will equal the yield for the Treasury's with a maturity equaling the remaining term. If the remaining term is longer
than one year but does not equal one of the maturities being quoted, then the Replacement Treasury Yield will equal the yield for Treasury's with a maturity closest to but not exceeding the remaining
term. If the Wall Street Journal (i) quotes more than one such rate, the highest of such quotes shall apply, or (ii) ceases to publish such quotes, the U.S. Treasury security shall be
determined from such financial reporting service or source as Agent shall determine. 

100

 
 
 

SCHEDULE 2.9
  
    Sources and Uses    

	SOURCES
 
	 	USES

	Loan:	 	 	 	 	Refinance of Existing Loan:	 	$	39,596,111.67
	—Initial Advance	 	$	55,692,111.67	 	Earnout Advance	 	$	9,000,000
	—Earnout Advance	 	$	9,000,000	 	Upland and Camarillo Funding*	 	$	15,735,000
	 	 	 	 	 	Closing Costs	 	$	200,000
	 	 	 	 	 	Commitment Fee	 	$	161,000
	Total:	 	$	64,692,111.67	 	Total:	 	$	64,692,111.67

*Closing
Cost and Commitment Fee are deducted from Upland and Camarillo (initial) Funding Amount of $16,100,000. 

101

 
 
 

SCHEDULE 3.2(a)
  
    Allocated Loan Amount    

	Project
 
	 	Allocated Loan

Amount*

	The Desert Sky Health and Rehabilitation Center Project	 	$	8,379,640.51
	The Desert Terrance Nursing Center Project	 	$	4,014,758.13
	The Highland Manor Health and Rehabilitation Center Project	 	$	3,305,910.07
	The NMMRC Project	 	$	6,347,077.07
	The Catalina Project	 	$	4,007,387.09
	The Park Manor Project	 	$	3,271,511.90
	The Park View Gardens Project	 	$	7,271,527.96
	The Sabino Project	 	$	3,197,187.28
	The Upland Project	 	$	8,779,000
	The Camarillo Project	 	$	7,321,000

*The
Allocated Loan Amount for each project shall be increased pro rata with each disbursement of the Earnout Advance. 

102

 
 
 

SCHEDULE 5.6
  
    Litigation    

        None. 

103

  

 
 

SCHEDULE I
  
    Certain Definitions    

        As
used herein, the following terms have the meanings indicated: 

        "Accounts
Receivable Loan" means the revolving loan made by GECC to Master Tenants which loan is being amended and restated as of the date thereof. 

        "Accounts
Receivable Loan Documents" means that certain Amended and Restated Loan and Security Agreement among GECC and Master Tenants dated as of March 25, 2004 and all
documents, instruments and certificates now or hereafter executed by any Master Tenant or their Affiliates, including Guarantor, as such documents, instruments and certificates may be amended from
time to time. 

        "Affiliate"
means (a) any corporation in which any Borrower or any partner, shareholder, director, officer, member; or manager of any Borrower or Guarantor directly or indirectly
owns or controls more than ten percent (10%) of the beneficial interest, (b) any general or limited partnership, joint venture, limited liability company or limited liability partnership in
which any Borrower or any partner, shareholder, director, officer, member, or manager of any Borrower is a partner, joint venturer or member, (c) any trust as to which any Borrower or any
partner, shareholder, director, officer, member or manager of any Borrower is a trustee or beneficiary, (d) any entity of any type which is directly or indirectly owned or controlled by any
Borrower or any partner, shareholder, director, officer, member or manager of any Borrower or by Guarantor, (e) any partner, shareholder, director, officer, member, manager or employee of any
Borrower or Guarantor, (f) any Person related by birth, adoption or marriage to any partner, shareholder, director, officer, member, manager, or employee of any Borrower or Guarantor,
(g) Guarantor, (h) any Person which owns or controls, directly or indirectly, more than ten percent (10%) of the beneficial interests of any Borrower or Guarantor or (i) any
entity of which more than ten percent (10%) of the beneficial interests are owned or controlled, directly or indirectly, by an Affiliate as defined in clauses (a) through (h). 

        "Agent"
has the meaning assigned to such term in the introductory paragraph of this Agreement. 

        "Agreement"
means this Loan Agreement, as amended from time to time. 

        "Allocated
Loan Amount" shall be the amount set forth for each Project on Schedule 3.2(a). 

        "Anti-Money
Laundering Laws" has the meaning assigned to such term in Sections 5.26(b). 

        "Anti-Money
Laundering Measures" has the meaning assigned to such term in Section 5.26(b). 

104

 

        "Anti-Terrorism
Laws" has the meaning assigned to such term in Section 5.26(a). 

        "Approved
Bank Account" shall mean an account maintained at a bank reasonably approved by Agent, as to which account, Borrowers, said bank and Agent shall have entered into an agreement
in form and substance reasonably acceptable to Agent to ensure Agent that Agent has "control" of such account as such term is defined in the Uniform Commercial Code as in effect in the applicable
state and as to a Borrower's right, title and interest in such amounts in such account Agent has a perfected first security interest (all costs and expenses of negotiating, documenting and maintaining
such bank account, agreement and perfected security interest shall be paid for by Borrowers). 

        "Assignment
Agreement" has the meaning assigned to such term in Section 2.5(b). 

        "Bankruptcy
Party" has the meaning assigned to such term in Section 8.7. 

        "Base
Rate" has the meaning assigned to such term in Schedule 2.2. 

        "Borrower"
and "Borrowers" have the meaning assigned to such terms in the introductory paragraph of this Agreement. 

        "Borrower
Anti-Terrorism Policies" has the meaning assigned to such term in Section 7.20(c). 

        "Borrowers'
Equity" has the meaning assigned to such term in Part A of Schedule 2.1. 

        "Business
Associate Agreement" has the meaning assigned to such term in Part A of Schedule 2.1. 

        "Business
Day" means a day other than a Saturday, a Sunday, or a legal holiday on which national banks located in the State of New York or Chicago are not open for general banking
business. 

        "BSA"
has the meaning assigned to such term in Section 5.26(b). 

        "Closing
Date" shall be the date on which the Loan is closed and the Initial Advance is funded. 

        "Collateral"
has the meaning assigned to such term in Section 2.4. 

        "Collateral
Assignments" has the meaning assigned to such term in Part A of Schedule 2.1. 

105

 

        "Commencement
Date" has the meaning assigned to such term in Section 7.17. 

        "CON"
has the meaning assigned to such term in Section 8.1(c). 

        "Control"
or "controls": When used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the
ownership of voting securities or other beneficial interests, by contractor or otherwise; and the terms "Controlling" and "Controlled" have the meaning correlative to the foregoing. 

        "Debt"
means, for any Person, without duplication, the aggregate of: (a) all indebtedness of such Person for borrowed money, for amounts drawn under a letter of credit, or for the
deferred purchase price of property for which such Person or its assets is liable, (b) all unfunded amounts under a loan Agreement, letter of credit, or other credit facility for which such
Person would be liable, if, such amounts were advanced under, the credit facility, (c) all amounts required to be paid by such Person as a guaranteed payment to partners or a preferred or
special dividend, including any mandatory redemption of shares or interests, (d) all indebtedness guaranteed by such Person, directly or indirectly, (e) all obligations under leases that
constitute capital leases for which such Person is liable, and (f) all obligations of such Person under interest rate swaps, caps, floors, collars and other interest hedge agreements, in each
case whether such Person is liable contingently or otherwise, as obligor, guarantor or otherwise; or in respect of which obligations such Person otherwise assures a creditor against loss. 

        "Debt
Service" means the aggregate interest, principal, and other payments due under the Loan, and on any other outstanding permitted Debt relating to the Projects (if any) for the
period of time for which calculated. 

        "Debt
Service Coverage Ratio" means the ratio of (i) Net Operating Income (calculated in accordance with Schedule II attached hereto) from the Projects for a particular
period, to (ii) payments of interest due o f the Loan (which shall be assumed to be at the greater of actual interest or seven percent (7%) per year) for the same period plus amortization due
during the same period: 

        "Default
Rate" means the lesser of (a) the maximum rate of interest allowed by applicable law, and (b) five percent (5%) per annum in excess of the Interest Rate. 

        "Defeasance"
has the meaning assigned to such term in Section 2.5(b). 

        "Defeasance
Deposit" has the meaning assigned to such term in Section 2.5(b). 

        "Designated
Person" has the meaning assigned to such term in Section 5.26(a). 

106

 

        "Earnout
Advance" has the meaning assigned to such term in Section 2.1(c). 

        "Earnout
Interest Rate" has the meaning assigned to such term in Section 2.2. 

        "Earnout
Request" has the meaning assigned to such term in Section 2.1(c). 

        "Environmental
Indemnity" has the meaning assigned to such term in Schedule 2. l, Part A. 

        "Event
of Default" has the meaning assigned to such term in Article IX. 

        "Executive
Order" has the meaning assigned to such term in Section 5.26(a). 

        "Existing
Loan" has the meaning assigned to such term in Recital A. 

        "Extension
Notice" has the meaning assigned to such term in Section 2.4. 

        "Expenses"
has the meaning assigned to such term in Schedule II. 

        "Federal
Bankruptcy Code" shall mean Chapter 11, of Title II of the United States Code (11 U.S.C. § 101, et seq.), as amended. 

        "FIRREA"
has the meaning assigned to such term in Part A of Schedule 2.1. 

        "Fourth
Funding Interest Rate" has the meaning assigned to such term in Section 2.2. 

        "GECC"
has the meaning assigned to such term in the introductory paragraph of this Agreement. 

        "Governmental
Approvals" means, collectively, all consents, licenses and permits and all other authorizations or approvals required from any Governmental Authority to operate the
Projects. 

        "Governmental
Authority" means any federal, state, county or municipal government or political subdivision thereof, any governmental or quasi-governmental agency, authority, board,
bureau, commission, department, instrumentality or public body (including, without limitation, the State Regulator), or any court, administrative tribunal, or public body, including but not limited to
all such authorities relating to the quality and adequacy of medical care, distribution of pharmaceuticals, rate setting, equipment, personnel, operating policies, additions to facilities and services
and fee splitting. 

        "Guarantor"
means The Ensign Group, Inc., the sole and managing member of each Borrower. 

107

 

        "Hazardous
Materials" has the definition given to such term in the Environmental Indemnity. 

        "HIPAA"
has the meaning assigned to such term in Section 8.1(a). 

        "HIPAA
Compliance Plan" has the meaning assigned to such term in Section 8.1(a). 

        "HIPAA
Compliance Date" has the meaning assigned to such term in Section 8.1(a). 

        "Healthcare
Laws" has the meaning assigned to such term in Section 8.1(a). 

        "Indebtedness"
means all payment obligations of Borrower or Guarantor to Agent and Lender under the Loan or any of the Loan Documents. 

        "Initial
Funding Interest Rate" has the meaning assigned to such term in Section 2.2. 

        "Insurance
Impound" has the meaning assigned to such term in Section 3.4. 

        "Interest
Rate" has the meaning assigned to such term in Article II. 

        "Investor
Anti-Terrorism Policies" has the meaning assigned to such term in Section 7.20(c). 

        "Laws"
means, collectively, all federal, state and local laws, statutes, codes, ordinances, orders, rules and regulations and guidances and judicial opinions or presidential authority in
the applicable jurisdiction, including but not limited to quality and safety standards, accreditation standards and requirements of the State Regulator, each as it may be amended from time to time. 

        "Leases"
has the meaning assigned to such term in Part A o£ Schedule 2.1. 

        "Licenses"
has the meaning assigned to such term in Section 8.1(a). 

        "Lien"
means any interest, or claim thereof, in the Projects securing an obligation owed to, or a claim by, any Person other than the owner of the Projects, whether such interest is
based on common law, statute or contract, including the lien or security interest arising from a deed of trust, mortgage, assignment, encumbrance, pledge, security agreement, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes. The term "Lien" shall include reservations, exceptions, encroachments, easements, rights of way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances affecting the Projects. 

        "Lists"
has the meaning assigned to such term in Section 5.26(a). 

108

 

        "Loan"
means the loan to be made by Lender to Borrower under this Agreement and all other amounts payable under the Loan Documents. 

        "Loan
Documents" means: (a) this Agreement, (b) the Note, (c) the Guaranty, (d) any letter of credit provided to Agent in connection with the Loan,
(e) the Security Documents, (f) the Environmental Indemnity Agreement, (g) Uniform Commercial Code financing statements, (h) the Subordination Agreements, (i) all
other documents evidencing, securing, governing or otherwise pertaining to the Loan, and all amendments, modifications, renewals, substitutions and replacements of any of the foregoing. 

        "Loan
Parties" means Guarantor and Master Tenants. 

        "Loan
Year" means the period beginning on the Closing Date and ending on the last day of the month during which the first anniversary of the Funding Date occurs for the First Loan Year
and, for each Loan Year thereafter, each one year period beginning on the anniversary of the date following the last day of the First Loan Year until the Maturity Date. 

        "Master
Leases" mean those certain leases between each Borrower as landlord and each Master Tenant, as tenant. 

        "Master
Tenants" means Radiant Hills Health Associates LLC, Glendale Healthcare Associates LLC, 24th Street Healthcare Associates LLC, Highland Healthcare LLC, Manor Park
Healthcare LLC, Presidio Health Associates LLC, Ensign Sabino LLC, and Ensign Montgomery LLC, each a Nevada limited liability company, and Upland Community Care, Inc. and Camarillo Community
Care, Inc., each a Nevada corporation. 

        "Material
Adverse Change" or "material adverse change" means, in Agent's reasonable discretion, the business prospects, operations or financial condition of a Person or property has
changed in a manner which could impair the value of Agent's and Lender's security for the Loan, prevent timely repayment of the Loan or otherwise prevent the applicable Person, Guarantor or any
Borrower from timely performing any of its material obligations under the Loan Documents. 

        "Maturity
Date" means the earlier of (a) June 29, 2016, or (b) any earlier date on which the entire Loan is required to be paid in full, whether at maturity, by
acceleration or otherwise, under this Agreement or any of the other Loan Documents, or any later date to which the same may be extended in accordance with the terms of the Loan Agreement. 

        "Money
Market Rate" has the meaning assigned to such term in Section 3.4. 

        "Monthly
Reports" has the meaning assigned to such term in Section 6.1(a). 

        "Net
Operating Income" means, as reasonably determined by Agent, earnings from the Projects before interest, taxes, amortization, depreciation, rent and management fees determined in
accordance with generally accepted accounting principles consistently applied for the trailing twelve (12) month period adjusted for (i) a management fee of five percent (5%) of
operating revenue, (ii) a replacement reserve of $300/bed, (iii) maximum occupancy of 95% and (iv) excess bad debt expenses, if any, up to a maximum amount of $75,000. 

109

 

        "Note"
has the meaning assigned to such term in Recital A. 

        "Obligations"
has the meaning assigned to such term in Section 11.28. 

        "OFAC"
has the meaning assigned to such term in Section 5.26(a). 

        "OFAC
Laws and Regulations" has the meaning assigned to such term in Section 5.26(a). 

        "Other
Lists" has the meaning assigned to such term in Section 5.26(a). 

        "Payment
Date" has the meaning assigned to such term in Section 2.5(b). 

        "Person"
means any individual, corporation, partnership, joint venture, association, joint stock company, trust, trustee, estate, limited liability company, limited partnership, limited
liability, partnership, limited partnership, unincorporated organization, real estate investment trust, government or any agency or political subdivision thereof, or any other form of entity. 

        "Potential
Default" means the occurrence of any event or condition which, with the giving of notice, the passage of time, or both, would constitute an Event of Default. 

        "Prepayment
Premium" has the meaning assigned to such term in Section 2.7. 

        Project"
and "Projects" have the meanings assigned to such terms in Recital B. 

        "Project
Yield" means the ratio, expressed as a percentage, of (a) annualized Net Operating Income from the Projects, as determined by Agent for a particular period, to
(b) the outstanding principal balance of the Loan. 

        "Property"
and "Properties" have the meanings assigned to such terms in Recital B. 

        "Release
Date" has the meaning assigned to such term in Section 2.5(b). 

        "Repayment
Date" means the date upon which the entire principal balance of the Loan and all interest thereon and other sums due pursuant to the Loan Documents, including, without
limitation, the Exit Fee, in any, have been paid in full. 

        "Replacement
Deposit" has the meaning assigned to such term in Section 3.6. 

110

 

        "Replacement
Reserve" has the meaning assigned to such term in Section 3.6. 

        "Scheduled
Defeasance Date" has the meaning assigned to such term in Section 2.5(b). 

        "Second
Funding Interest Rate" has the meaning assigned to such term in Section 2.2. 

        "Security
Agreement" has the meaning assigned to such term in Section 2.5(b). 

        "Security
Deposits" means any security deposit from any tenant or occupant of any Project collected or held by any Borrower or Master Tenant. 

        "Security
Documents" means those certain first priority Deeds of Trust, Security Agreements and Fixture Filing, (or documents of similar title) executed by Borrowers for the benefit of
Agent, encumbering the Projects. 

        "Successor
Borrower" has the meaning assigned to such term in Section 2.5(b). 

        "Single
Purpose Entity" means a Person (other than an individual, a government, or any agency or political subdivision thereof), which exists solely for the purpose of owning and
operating a Project, conducts business only in its own name, does not engage in any business or have any assets unrelated to such Project, does not have any Debt other than as permitted by this
Agreement, has its own separate books, records, and accounts (with no commingling of assets), holds itself out as being a Person separate and apart from any other Person, and observes corporate,
partnership or limited liability company, as the case may be, formalities independent of any other Person, and which otherwise constitutes a single purpose entity as determined by Agent. Without
limiting the foregoing, a Single Purpose Entity (i) does not hold, directly or indirectly, any ownership interest (legal or equitable) in any real or personal property other than the interest
which it owns in its respective Project and (ii) is not a shareholder or partner or member of any other entity. 

        "Site
Assessment" means the Phase I Report for each Property prepared by Golder Associates dated March, 2004. [Revise] 

        "SND
List" has the meaning assigned to such term in Section 5.26(a). 

        "State
Regulator" has the meaning assigned to such term in Section 7.18(a). 

        "Subordination
Agreements" has the meaning assigned to such term in Schedule 2.1 Part A. 

        "Taxes"
has the meaning assigned to such term in Section 3.5. 

111

 

        "Tax
Impound" has the meaning assigned to such term in Section 3.5. 

        "Tenant"
means any tenant or occupant of a Project under a Lease. 

        "Term
Sheet" means that certain letter from GECC to The Ensign Group, Inc. dated October 20, 2006. 

        "Third
Funding Interest Rate" has the meaning assigned to such term in Section 2.2. 

        "Third
Party Payor Programs" has the meaning assigned to such term in Section 8.2(f). 

        "Title
Policies" has the meaning assigned to such term in Schedule 2.1 Part A. 

        "U.S.
Obligations" has the meaning assigned to such term in Section 2.5(b). 

        "U.S.
Publicly-Traded Entity" has the meaning assigned to such term in Section 5.26(a). 

        "Violation"
has the meaning assigned to such term in Section 5.24. 

        "Yield
Maintenance Amount" has the meaning assigned to such term in Section 2.5(b). 

112

QuickLinks

TABLE OF CONTENTS

LIST OF EXHIBITS AND SCHEDULES TO LOAN AGREEMENT

THIRD AMENDED AND RESTATED LOAN AGREEMENT

RECITALS

ARTICLE I INCORPORATION OF RECITALS EXHIBITS AND SCHEDULES

ARTICLE II LOAN TERMS

ARTICLE III INSURANCE, CONDEMNATION, AND IMPOUNDS,

ARTICLE IV LEASING MATTERS

ARTICLE V REPRESENTATIONS AND WARRANTIES

ARTICLE VI FINANCIAL REPORTING NOTICES

ARTICLE VII COVENANTS

ARTICLE VIII HEALTH CARE MATTERS

ARTICLE IX EVENTS OF DEFAULT

ARTICLE X REMEDIES

ARTICLE XI MISCELLANEOUS

EXHIBIT A-1 The Desert Sky Health and Rehabilitation Center Project

EXHIBIT A-2 The Desert Terrace Nursing Center Project

EXHIBIT A-3 The Highland Manor Health and Rehabilitation Center Project

EXHIBIT A-4 The NMMRC Project

EXHIBIT A-5 The Park Manor Project

EXHIBIT A-6 The Catalina Project

EXHIBIT A-7 The Park View Gardens Project

EXHIBIT A-8 The Sabino Project

EXHIBIT A-9 The Upland Project

EXHIBIT A-10 The Camarillo Project

EXHIBIT B Intellectual Property

EXHIBIT C Interest Holder Certificate and Agreement

EXHIBIT D Provider Payment/Reimbursement Programs

EXHIBIT E Governmental Approvals

EXHIBIT F Required Repairs

EXHIBIT G UCC Financing Statements to be Terminated

SCHEDULE 2.1 Advance Conditions

PART A CONDITIONS TO INITIAL ADVANCE

PART B GENERAL CONDITIONS

PART C RESERVED

PART D APPLICATION OF INSURANCE PROCEEDS

SCHEDULE 2.2 Treasury Rate

SCHEDULE 2.3(b) Principal Payments

SCHEDULE 2.5(a) Make-Whole Brokerage Amount

SCHEDULE 2.9 Sources and Uses

SCHEDULE 3.2(a) Allocated Loan Amount

SCHEDULE 5.6 Litigation

SCHEDULE I Certain DefinitionsQuickLinks
 -- Click here to rapidly navigate through this document
Exhibit 10.19  

	$20,000,000.00 REVOLVING CREDIT LOAN
	

	AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

by and among

THE ENSIGN GROUP, INC.

and each of its subsidiaries listed on Exhibit A attached hereto

and

GENERAL ELECTRIC CAPITAL CORPORATION

Amended and Restated as of March 25, 2004

Amending and Restating that certain Loan and Security Agreement

originally dated as of September 13, 1999

  

 
 

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT    
    

        THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this "Agreement") is made as of March 25, 2004, by and between THE ENSIGN GROUP, INC., a
Delaware corporation ("Ensign"), and each of Ensign's subsidiaries as listed on Exhibit A attached hereto and made a part hereof (collectively, with Ensign, "Borrower"), and GENERAL ELECTRIC
CAPITAL CORPORATION, a Delaware corporation, as assignee from GE HFS Holdings, Inc., f/k/a Heller Healthcare Finance, Inc. (together with its successors and assigns, "Lender"). 

 
 

RECITALS    
    

        A.    Pursuant
to that certain Loan and Security Agreement dated September 13, 1999 by and among certain entities comprising Borrower and Lender (as amended, restated,
modified or supplemented from time to time, the "Original Loan Agreement"), the parties have established certain financing arrangements that allow Borrower to borrow funds from Lender in accordance
with the terms and conditions set forth therein (the "Existing Loan"). 

        B.    Borrower
now wishes to amend and restate the Original Loan Agreement, all as set forth in this Agreement. Neither this Agreement nor any of the other Loan Documents is
intended to, nor shall they, constitute or give rise to a novation of the Existing Loan. 

        NOW,
THEREFORE, in consideration of the promises and covenants contained in this Agreement, and for other consideration, the receipt and sufficiency of which are acknowledged, the
parties agree that the Original Loan Agreement is amended and restated in its entirety as follows: 

 
 

ARTICLE I
  DEFINITIONS    
    

        As used in this Agreement, unless otherwise specified, all references to "Sections" shall be deemed to refer to Sections of this Agreement, and the following
terms shall have the meanings set forth below: 

        Section 1.1.
Account. "Account" means any right to payment for goods sold or leased or services rendered, whether or not evidenced by an instrument or chattel paper, and whether
or not earned by performance, including, without limitation, the right to payment of management fees. 

        Section 1.2.
Account Debtor. "Account Debtor" means any Person obligated on any Account of Borrower, including, without limitation, any Insurer and any Medicaid/Medicare Account
Debtor. 

        Section 1.3.
Affiliate. "Affiliate" means, with respect to a specified Person, any Person directly or indirectly controlling, controlled by, or under common control with the
specified Person, including, without limitation, their stockholders and any Affiliates thereof. A Person shall be deemed to control a corporation or other entity if the Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and business of the corporation or other entity, whether through the ownership of voting securities, by contract, or otherwise. 

        Section 1.4.
Affiliated Loan Documents. "Affiliated Loan Documents" means any and all documents evidencing, securing and/or governing any financing provided by Lender or Lender's
Affiliates to Borrower or any Affiliate of Borrower, as the same may be amended, restated, increased, extended, renewed, modified or supplemented from time to time. Affiliated Loan Documents shall
include, without limitation, the Real Estate Loan Documents. 

        Section 1.5.
Agreement. "Agreement" means the Original Loan Agreement, as amended and restated by this Amended and Restated Loan and Security Agreement, as it may be further
amended, restated, modified or supplemented from time to time. 

1

 

        Section 1.6.
Base Rate. "Base Rate" means a rate of interest equal to one percent (1.0%) above the Prime Rate of Interest. 

        Section 1.7.
Borrowed Money. "Borrowed Money" means any obligation to repay money, any indebtedness evidenced by notes, bonds, debentures or similar obligations, any obligation
under a conditional sale or other title retention agreement and the net aggregate rentals under any lease which under GAAP would be capitalized on the books of Borrower or which is the substantial
equivalent of the financing of the property so leased. 

        Section 1.8,
Borrower. "Borrower" has the meaning set forth in the Preamble. 

        Section 1.9.
Borrowing Base. "Borrowing Base" has the meaning set forth in Section 2.1(d). 

        Section 1.10.
Business Day. "Business Day" means any day on which financial institutions are open for business in the State of Maryland, excluding Saturdays and Sundays. 

        Section 1.11.
Closing Date. "Closing Date" means the Closing Date of the Loan under the Original Loan Agreement, which was September 13, 1999. 

        Section 1.12.
Collateral. "Collateral" has the meaning set forth in Section 3.1. 

        Section 1.13.
Commitment Fee. "Commitment Fee" has the meaning set forth in Section 2.4(a). 

        Section 1.14.
Concentration Account. "Concentration Account" has the meaning set forth in Section 2.3. 

        Section 1.15.
Controlled Group. "Controlled Group" means all businesses that would be treated as a single employer under Section 4001(b) of ERISA. 

        Section 1.16.
Cost Report Settlement Account. "Cost Report Settlement Account" means an Account owed to Borrower by a Medicaid/Medicare Account Debtor pursuant to any cost report,
either interim, filed or audited, as the context may require. 

        Section 1.17.
Default Rate. "Default Rate" means a rate per annum equal to three percent (3%) above the then applicable Base Rate. 

        Section 1.18.
ERISA. "ERISA" has the meaning set forth in Section 4.12. 

        Section 1.19.
Event of Default. "Event of Default" and "Events of Default" have the meanings set forth in Section 8.1. 

        Section 1.20.
GAAP. "GAAP" means generally accepted accounting principles applied in a consistent manner. 

        Section 1.21.
Governmental Authority. "Governmental Authority" means and includes any federal, state, District of Columbia, county, municipal, or other government and any
department, commission, board, bureau, agency or instrumentality thereof, whether domestic or foreign. 

        Section 1.22.
Hazardous Material. "Hazardous Material" means any substances defined or designated as hazardous or toxic waste, hazardous or toxic material, hazardous or toxic
substance, or similar term, by any environmental statute, rule or regulation or any Governmental Authority applicable to Borrower or its business, operations or assets. 

        Section 1.23.
Highest Lawful Rate. "Highest Lawful Rate" means the maximum lawful rate of interest referred to in Section 2.7 that may accrue pursuant to this Agreement. 

        Section 1.24.
Insurer. "Insurer" means a Person that insures a Patient against certain of the costs incurred in the receipt by such Patient of Medical Services, or that has an
agreement with Borrower to compensate Borrower for providing services to a Patient. 

2

 

        Section 1.25.
Lender. "Lender" has the meaning set forth in the Preamble. 

        Section 1.26.
Loan. "Loan" has the meaning set forth in Section 2.1(a). 

        Section 1.27.
Loan Documents. "Loan Documents" means and includes this Agreement, the Note, the Certificate of Validity, and each and every other document now or hereafter
delivered in connection with this Agreement, as any of them may be amended, modified, or supplemented from time to time. 

        Section 1.28.
Loan Management Fee. "Loan Management Fee" has the meaning set forth in Section 2.4(c). 

        Section 1.29.
Lockbox. "Lockbox" has the meaning set forth in Section 2.3. 

        Section 1.30.
Lockbox Account. "Lockbox Account" means an account maintained by Borrower at the Lockbox Bank into which all collections of Accounts are paid directly. 

        Section 1.31.
Lockbox Bank. "Lockbox Bank" has the meaning set forth in Section 2.3. 

        Section 1.32.
Material Adverse Effect. "Material Adverse Effect" shall mean any event or condition which, alone or when taken with other events or conditions occurring or existing
concurrently with such event or condition (a) has or is reasonably expected to have a material adverse effect on the business, operations, condition (financial or otherwise), assets,
liabilities, prospects, or properties of Borrower; (b) has or is reasonably expected to have any material adverse effect on the validity or enforceability of this Agreement or any Loan
Document; (c) materially impairs or is reasonably expected to materially impair the ability of Borrower to pay and perform the Obligations; (d) materially impairs or is reasonably
expected to materially impair the ability of Lender to enforce its rights and remedies under this Agreement or any of the Loan Documents; or (e) has or is reasonably expected to have any
material adverse effect on the Collateral, the liens of Lender in the Collateral or the priority of such liens. 

        Section 1.33.
Maximum Loan Amount. "Maximum Loan Amount" has the meaning set forth in Section 2.1(a). 

        Section 1.34.
Medicaid/Medicare Account Debtor. "Medicaid/Medicare Account Debtor" means any Account Debtor which is (a) the United States of America acting under the
Medicaid/Medicare program established pursuant to the Social Security Act, (b) any state or the District of Columbia acting pursuant to a health plan adopted pursuant to Title XIX of the Social
Security Act, or (c) any agent, carrier, administrator or intermediary for any of the foregoing. 

        Section 1.35.
Medical Services. "Medical Services" means medical and health care services provided to a Patient, including, without limitation, medical and health care services
provided to a Patient and performed by Borrower which are covered by a policy of insurance issued by an Insurer, and includes
physician services, nurse and therapist services, dental services, hospital services, skilled nursing facility services, comprehensive outpatient rehabilitation services, home health care services,
residential and outpatient behavioral healthcare services, and medicine or health care equipment provided by Borrower to a Patient for a necessary or specifically requested valid and proper medical or
health purpose. 

        Section 136.
Note. "Note" has the meaning set forth in Section 2.1(c). 

        Section 1.37.
Obligations. "Obligations" has the meaning set forth in Section 3.1. 

        Section 1.38.
Patient. "Patient" means any Person receiving Medical Services from Borrower and all Persons legally liable to pay Borrower for such Medical Services other than
Insurers. 

        Section 1.39.
Permitted Liens. "Permitted Liens" means: (a) deposits or pledges to secure obligations under workmen's compensation, social security or similar laws, or
under unemployment 

3

 

insurance;
(b) deposits or pledges to secure bids, tenders, contracts (other than contracts for the payment of money), leases, statutory obligations, surety and appeal bonds and other
obligations of like nature arising in the ordinary course of business; (c) mechanic's, workmen's, materialmen's or other like liens arising in the ordinary course of business with respect to
obligations which are not due, or which are being contested in good faith by appropriate proceedings which suspend the collection thereof and in respect of which adequate reserves have been made
(provided that such proceedings do not, in Lender's sole discretion, involve any substantial risk of the sale, loss or forfeiture of such property or assets or any interest therein); (d) liens
and encumbrances in favor of Lender; (e) liens set forth on Schedule 1.39 and (f) liens created as permitted 7.1 (in such amounts permitted thereunder). 

        Section 1.40.
Person. "Person" means an individual, partnership, corporation, trust, joint venture, joint stock company, limited liability company, association, unincorporated
organization, Governmental Authority, or any other entity. 

        Section 1.41.
Plan. "Plan" has the meaning set forth in Section 4.12. 

        Section 1.42.
Premises. "Premises" has the meaning set forth in Section 4.14. 

        Section 1.43.
Prime Rate of Interest. "Prime Rate of Interest" means that rate of interest designated as such by Citibank, N.A., or any successor thereto, as the same may from
time to time fluctuate. 

        Section 1.44.
Prohibited Transaction. "Prohibited Transaction" means a "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975(c)(1) of
the Internal Revenue Code that is not exempt under Section 407 or Section 408 of ERISA or Section 4975(c)(2) or (d) of the Internal Revenue code or under a class exemption
granted by the U.S. Department of Labor. 

        Section 1.45.
Qualified Account. "Qualified Account" means an Account of Borrower generated in the ordinary course of Borrower's business from the sale of goods or rendition of
Medical Services which Lender, in its sole credit judgment, deems to be a Qualified Account. Without limiting the generality of the foregoing, no Account shall be a Qualified Account if:
(a) the Account or any portion of the Account is payable by an individual beneficiary, recipient or subscriber individually and not directly to Borrower by a Medicaid/Medicare Account Debtor or
commercial medical insurance carrier acceptable to Lender in its sole discretion; (b) the Account remains unpaid more than ninety (90) days past the claim or invoice date (but in no
event more than one hundred five (105) days after the applicable Medical Services have been rendered); (c) the Account is subject to any defense, set-off, counterclaim,
deduction, discount, credit, chargeback, freight claim, allowance, or adjustment of any kind; (d) any part of any goods the sale of which has given rise to the Account has been returned,
rejected, lost, or damaged; (e) if the Account arises from the sale of goods by Borrower, the sale was not an absolute sale, or the sale was made on consignment or on approval or on a
sale-or-return basis, or the sale was made subject to any other repurchase or return agreement, or the goods have not been shipped to the Account Debtor or its designee;
(f) if the Account arises from the performance of Medical Services, the Medical Services have not been actually been performed or the Medical Services were undertaken in violation of any law;
(g) the Account is subject to a lien other than a Permitted Lien; (h) Borrower knows or should have known of the bankruptcy, receivership, reorganization, or insolvency of the Account
Debtor; (i) the Account is evidenced by chattel paper or an instrument of any kind, or has been reduced to judgment; (j) the Account is an Account of an Account Debtor having its
principal place of business or executive office outside the United States; (k) the Account Debtor is an Affiliate or Subsidiary of Borrower; (1) more than ten percent (10%) of the
aggregate balance of all Accounts owing from the Account Debtor obligated on the Account are outstanding more than one hundred twenty (120) days past their invoice date; (in) fifty percent
(50%) or more of the aggregate unpaid Accounts from any single Account Debtor are not deemed Qualified Accounts under this Agreement; (n) the total unpaid Accounts of the Account Debtor, except
for a Medicaid/Medicare Account Debtor, exceed twenty percent (20%) of the net amount of all Qualified Accounts 

4

 

(including
Medicaid/Medicare Account Debtors); (o) any covenant, representation or warranty contained in the Loan Documents with respect to such Account has been breached; or (p) the
Account fails to meet such other specifications and requirements which may from time to time be established by Lender. 

        Section 1.46.
Reportable Event. "Reportable Event" means a "reportable event" as defined in Section 4043(c) of ERISA for which the notice requirements of
Section 4043(a) of ERISA are not waived. 

        Section 1.47.
Real Estate Borrower. "Real Estate Borrower" means, collectively, Sky Holdings AZ LLC, Terrace Holdings AZ LLC and Ensign Highland LLC, as mortgage borrowers under
the Real Estate Loan Documents. 

        Section 1.48.
Real Estate. Loan Documents. "Real Estate Loan Documents" shall mean that certain Loan Agreement of even date herewith among Sky Holdings AZ LLC, Terrace Holdings AZ
LLC and Ensign Highland LLC, as mortgage borrowers, and Lender, as lender, and all instruments and documents executed in connection with such loan made pursuant thereto, as such documents and
instruments may be amended from time to time. 

        Section 1.49.
Revolving Credit Loan. "Revolving Credit Loan" has the meaning set forth in Section 2.1(b). 

        Section 1.50.
Term. "Term" has the meaning set forth in Section 2.8. 

 
 

ARTICLE II
  LOAN    
    

        Section 2.1. Terms. 

        (a)   The
maximum aggregate principal amount of credit extended by Lender to Borrower under this Agreement (the "Loan") that will be outstanding at any time is Twenty Million
and No/100 Dollars ($20,000,000.00) (the "Maximum Loan Amount"), including outstanding advances of the Revolving Credit Loan and the face amount of outstanding Letters of Credit. 

        (b)   The
Loan shall be in the nature of a revolving line of credit, and shall include sums advanced and other credit extended by Lender to or for the benefit of Borrower from
time to time under this Article II (each a "Revolving Credit Loan") up to the Maximum Loan Amount depending upon the availability in the Borrowing Base (less applicable reserves established
hereunder), the requests of Borrower pursuant to the terms and conditions of Section 2.2, and on such other basis as Lender may reasonably determine. The outstanding principal balance of the
Loan may fluctuate from time to time, to be reduced by repayments made by Borrower (which may be made without penalty or premium), and to be increased by future Revolving Credit Loans, advances and
other extensions of credit to or for the benefit of Borrower, including draws on any letter of Credit under Section 2.1(f) below, and shall be due and payable in full upon the expiration of the
Term. For purposes of this Agreement, any determination as to whether there is availability within the Borrowing Base for advances or extensions of credit shall be made by Lender in its sole
discretion and is final and binding upon Borrower. In no event shall the aggregate face amount of outstanding Letters of Credit established for Borrower hereunder plus the outstanding advances of the
Revolving Credit Loan exceed the Borrowing Base or the Maximum Loan Amount. 

        (c)   Upon
the execution of this Agreement, Borrower shall execute and deliver to Lender an Amended and Restated Revolving Credit Note evidencing Borrower's unconditional
obligation to repay Lender for Revolving Credit Loans, advances, and other extensions of credit made under the Loan, in the form substantially the same as those promissory notes delivered by Borrower
previously (as amended, modified, restated or replaced from time to time, the "Note"), dated the date of this 

5

 

Agreement,
payable to the order of Lender in accordance with the terms thereof. The Note shall bear interest on the outstanding principal balance of the Note from the date of the Note until repaid,
with interest payable monthly in arrears on the first Business Day of each month, at a rate per annum (on the basis of the actual number of days elapsed over a year of 360 days) equal to the
Base Rate; provided, however, that after the occurrence and during the continuance of an Event of Default, such rate shall be equal to the Default Rate. Each Revolving Credit Loan, advance and other
extension of credit shall be deemed evidenced by the Note, which is deemed incorporated into and made a part of this Agreement by this reference. 

        (d)   Subject
to the terms and conditions of this Agreement, advances under the Loan shall be made against a borrowing base equal to eighty-five percent (85%) of
Qualified Accounts due and owing from any Medicaid/Medicare, Insurer or other Account Debtor (the "Borrowing Base"). The Borrowing Base shall be determined by Lender (including the eligibility of
Accounts) based on the most recent Borrowing Base certificate delivered to Lender in accordance with this Agreement and such other information as may be available to Lender. Lender, in its good faith
credit judgment, may further adjust the Borrowing Base by applying percentages (known as "Liquidity Factors") to Qualified Accounts by payor class based upon Borrower's actual recent collection
history for each such payor class (i.e., Medicare, Medicaid, commercial insurance, etc.) in a manner consistent with Lender's underwriting practices and procedures and its prior practices with respect
to this Loan, and Lender may adjust such Liquidity Factors throughout the Term; provided, however, that Lender agrees to increase the liquidity factors applied in the calculation of the Borrowing Base
to 100% provided the following are satisfied: (i) no Event of Default which has been duly noticed by Lender to Borrower (if notice is required) has occurred and is continuing,
(ii) Lender's field audits have not revealed any reason for such liquidity factors to be reduced, as determined by Lender in its reasonable discretion, and (iii) no events or
circumstances have occurred to cause Lender to reasonably believe that such liquidity factors should be reduced. 

        (e)   As
of the date of this Agreement, Lender shall establish a reserve against the Borrowing Base (the "Accounts Receivable Reserve') in an amount equal to Two Million Five
Hundred Thousand and No/100 Dollars ($2,500,000.00) in connection with and as additional security for the amounts owing under the Real Estate Loan Documents; provided, however, that Lender hereby
agrees to release such reserve at such time (i) during the period beginning on the sixth (6th) month anniversary of the date of this Agreement and ending on the eighteenth
(18th) month anniversary of the date of this Agreement, if the following conditions have been satisfied: (A) no Event of Default or event which, with the giving of notice of the
lapse of time, or both, could become an Event of Default shall have occurred and be continuing under any of the Loan Documents or any of the Affiliated Loan Documents, (B) the Real Estate
Borrower has achieved an annualized Net Operating Income (as defined in the Real Estate Loan Documents) of at least Two Million Five Hundred Fifty Thousand and No/ 100 Dollars ($2,550,000.00) for at
least two (2) consecutive calendar quarters, and (C) the Real Estate Borrower then has a Debt Service Coverage Ratio (as defined in the Real Estate Loan Documents) of at least 1.50 or
(ii) the loans evidenced by the Real Estate Loan Documents have been paid if full. If the Project Yield (as defined in the Real Estate Loan Documents) does not equal or exceed eighteen percent
(18%), as required under the Real Estate Loan Documents, provided that Borrower has availability in the Borrowing Base, Borrower may elect, by written notice to Lender, to increase the Accounts
Receivable Reserve by the Paydown Amount (as defined in the Real Estate Loan Documents). If so increased, then if the Project Yield thereafter equals or exceeds eighteen percent (18%) for two
(2) consecutive calendar quarters, the Accounts Receivable Reserve shall be reduced by the aggregate Paydown Amount. If the borrowers under the Real Estate Loan Documents seek to have a
property released from the Real Estate Loan Documents pursuant to the terms thereof, provided that Borrower has availability in the Borrowing Base, Borrower may elect by written notice to Lender, to
increase the Accounts Receivable Reserve by the Accounts Receivable Reserve Amount (as defined in the Real Estate Loan Documents) applicable to the property to be released. Upon the release of a 

6

 

property
from the Real Estate Loan Documents pursuant to the terms thereof, the Accounts Receivable Reserve shall be reduced by the lesser of (1) an amount equal to Two Million Five Hundred
Thousand and No/ 100 Dollars ($2,500,000.00) multiplied by the applicable property's Allocated Loan Amount divided Twelve Million Four Hundred Thousand and No/100 Dollars ($12,400,000.00) or
(2) the amount which will result in the Project Yield being reduced to twenty percent (20%). 

        (f)    Lender
shall issue Letters of Credit (as defined on Exhibit B upon the request of, and on behalf of, Borrower, subject to the terms and conditions of
Exhibit B attached hereto and subject to the following: 

        (i)    Either
(A) Lender establishes a reserve against the Borrowing Base in the aggregate face amount of all Letters of Credit issued on behalf of Borrower, or
(B) Borrower pledges and/or delivers additional collateral to Lender in a form satisfactory to Lender and in an amount sufficient to collateralize Borrower's obligations to Lender in connection
with such Letters of Credit, as determined by Lender in its sole discretion, provided, however, that the aggregate amount of such Letters of Credit, together with all of Borrower's other outstanding
Obligations hereunder, shall not exceed the Borrowing Base or the Maximum Loan Amount; 

        (ii)   No
Event of Default which has been duly noticed by Lender to Borrower (if notice is required) has occurred and is continuing, and the Loan Agreement has not been
terminated; 

        (iii)  Borrower
executes and delivers to Lender such other notes, instruments, letter of credit agreements, security agreements, letter of credit applications and other
documents as Lender may generally require in connection with the issuance of Letters of Credit, and as Lender may require in connection with the specific request; 

        (iv)  any
amounts drawn on any Letter of Credit shall immediately be deemed to be a Revolving Credit Loan; and 

        (v)   Borrower
pays to Lender a letter of credit fee equal to two percent (2%) of the initial face amount of the Letter of Credit on the issuance date thereof, and on each
anniversary date of such date of issuance for as long as the Letter of Credit remains outstanding. 

        Section 2.2.
Loan Administration. Borrowings under the Loan shall be as follows: 

        (a)   A
request for a Revolving Credit Loan shall be made, or shall be deemed to be made, in the following manner: (i) Borrower may give Lender notice of its intention
to borrow, in which notice Borrower shall specify the amount of the proposed borrowing and the proposed borrowing date, not later than 2:00 p.m. Eastern time on the Business Day before the
proposed borrowing date, provided, however, that no such request may be made at a time when there exists an Event of Default; and (ii) the becoming due of any amount required to be paid under
this Agreement, whether as interest or for any other Obligation, shall be deemed irrevocably to be a request for a Revolving Credit Loan on the day following the due date in the amount required to pay
such interest or other Obligation if such was not paid by Borrower on the due date. 

        (b)   Borrower
hereby irrevocably authorizes Lender to disburse the proceeds of each Revolving Credit Loan requested, or deemed to be requested, as follows: (i) the
proceeds of each Revolving Credit Loan requested under subsection 2.2(a)(i) shall be disbursed by Lender by wire transfer to such bank account as may be agreed upon by Borrower and Lender from
time to time or elsewhere if pursuant to written direction from Borrower; and (ii) the proceeds of each Revolving Credit Loan deemed to be requested under subsection 2.2(a)(ii) shall be
disbursed by Lender by way of direct payment of the relevant interest or other Obligation. 

        (c)   All
Revolving Credit Loans, advances and other extensions of credit to or for the benefit of Borrower shall constitute one general Obligation of Borrower, and shall be
secured by Lender's lien upon all of the Collateral. 

7

 

        (d)   Lender
shall enter all Revolving Credit Loans as debits to a loan account in the name of Borrower and shall also record in said loan account all payments made by
Borrower on any Obligations and all proceeds of Collateral which are indefeasibly paid to Lender, and may record therein, in accordance with customary accounting practice, other debits and credits,
including interest and all charges and expenses properly chargeable to Borrower. All collections into the Concentration Account pursuant to Section 2.3 shall be applied first to fees, costs and
expenses due and owing under the Loan Documents, then to interest due and owing under the Loan Documents, and then to principal outstanding with respect to Revolving Credit Loans. 

        (e)   Lender
will account to Borrower monthly with a statement of Revolving Credit Loans, charges and payments made pursuant to this Agreement, and such accounting rendered by
Lender shall be deemed final, binding and conclusive upon Borrower, absent manifest error, unless Lender is notified by Borrower in writing to the contrary within thirty (30) days of the date
each accounting is mailed to Borrower. Such notice shall be deemed an objection to those items specifically objected to in the notice. 

        Section 2.3.
Collections, Disbursements, Borrowing Availability, and Lockbox Account. Borrower shall maintain a lockbox account (the "Lockbox") with Wells Fargo Bank, N.A. (the
"Lockbox Bank"), subject to the provisions of this Agreement, and shall execute with the Lockbox Bank a Lockbox Agreement in a form acceptable to lender in its commercially reasonable discretion (it
being the understanding of the parties that the existing Four Party Lockbox Agreement among the parties with Lockbox Bank is acceptable to Lender), and such other agreements related to the Lockbox
Agreement as Lender may require. Borrower shall ensure that all collections of Accounts are paid directly from Account Debtors into the Lockbox, and that all funds paid into the Lockbox are
immediately transferred into a depository account maintained by Lender at Bank One, N.A., or such other financial institution as determined by Lender in its sole discretion and communicated to
Borrower (the "Concentration Account"). Lender shall apply, on a daily basis, all funds transferred into the Concentration Account pursuant to this Section 2.3 to reduce the outstanding
indebtedness under the Loan (in accordance with Section 2.2(d)), and all future Revolving Credit Loans, advances and other extensions of credit to be made by Lender under the conditions set
forth in this Article II. To the extent that any collections of Accounts or proceeds of other Collateral are not sent directly to the Lockbox but are received by Borrower, such collections
shall be held in trust for the benefit of Lender and immediately remitted, in the form received, to the Lockbox Bank for transfer to the Concentration Account immediately upon receipt by Borrower.
Borrower acknowledges and agrees that its compliance with the terms of this Section 2.3 is essential, and that upon its failure to comply with any such terms Lender shall be entitled to assess
a noncompliance fee which shall operate to increase the Base Rate by two percent (2%) per annum during any period of non-compliance. Lender shall be entitled to assess such fee whether or
not an Event of Default is declared or otherwise occurs. All funds transferred from the Concentration Account for application to Borrower's indebtedness to
Lender shall be applied as of the date of receipt to reduce the Loan balance, but for purposes of calculating interest such funds shall be subject to a three (3) Business Day holding or
clearance period. If as the result of collections of Accounts pursuant to the terms and conditions of this Section 2.3 a credit balance exists with respect to the Concentration Account, such
credit balance shall not accrue interest in favor of Borrower, but shall be available to Borrower at any time or times for so long as no Event of Default exists. 

        Section 2.4.
Fees. 

        (a)   By
executing this Agreement, Borrower agrees unconditionally to pay to Lender a commitment fee equal to one percent (1.0%) of the Maximum Loan Amount (the "Commitment
Fee"). Lender acknowledges that the Commitment Fee has previously been paid. 

8

 

        (b)   For
so long as the Loan is available to Borrower, Borrower unconditionally shall pay to Lender a monthly loan management fee (the "Loan Management Fee") equal to
eight-hundredths of one percent (0.08%) of the average amount of the outstanding principal balance of the Revolving Credit Loans during the preceding month. The Loan Management Fee shall be payable
monthly in arrears on the first day of each successive calendar month. 

        (c)   Borrower
shall pay to Lender all out-of-pocket audit and appraisal fees in connection with audits and appraisals of Borrower's books and records
and such other matters as Lender shall deem appropriate, which shall be due and payable on the first Business Day of the month following the date of issuance by Lender of a request for payment thereof
to Borrower. 

        (d)   Borrower
shall pay to Lender, on demand, any and all fees, costs or expenses which Lender or any participant pays to a bank or other similar institution (including,
without limitation, any fees paid by Lender to any participant) arising out of or in connection with (i) the forwarding to Borrower or any other Person on behalf of Borrower, by Lender, of
proceeds of Revolving Credit Loans made by Lender to Borrower pursuant to this Agreement, and (ii) the depositing for collection, by Lender or any participant, of any check or item of payment
received or delivered to Lender or any participant on account of Obligations. 

        Section 2.5.
Payments. Principal payable on account of Revolving Credit Loans shall be payable by Borrower to Lender immediately upon the earliest of (a) the receipt by
Borrower or Lender of any payments on or proceeds from any of the Collateral, to the extent of such proceeds, (b) the occurrence of an Event of Default if the Loan and the maturity of the
payment of the Obligations are accelerated, or (c) the termination of this Agreement pursuant to Section 2.8 of this Agreement; provided, however,
that if the aggregate of outstanding advances hereunder and face amount of outstanding Letters of Credit issued by Lender are in excess of the Borrowing Base (less any applicable reserves established
hereunder against the Borrowing Base) at any time, Borrower shall, immediately upon demand, repay such overadvance. Interest accrued on the Revolving Credit Loans shall be due on the earliest of
(i) the first Business Day of each month (for the immediately preceding month), computed on the last calendar day of the preceding month, (ii) the occurrence of an Event of Default if
the Loan and the maturity of the payment of the Obligations are accelerated, or (iii) the termination of this Agreement pursuant to Section 2.8. Except to the extent otherwise set forth
in this Agreement, all payments of principal and of interest on the Loan, all other charges and any other obligations of Borrower under this Agreement, shall be made to Lender to the Concentration
Account, in immediately available funds. 

        Section 2.6.
Use of Proceeds. The proceeds of Lender's advances under the Loan shall be used solely for working capital and for other costs of Borrower arising in the ordinary
course of Borrower's business. 

        Section 2.7.
Interest Rate Limitation. The parties intend to conform strictly to the applicable usury laws in effect from time to time during the term of the Loan. Accordingly, if
any transaction contemplated by this Agreement would be usurious under such laws, then notwithstanding any other provision of this Agreement: (a) the aggregate of all interest that is
contracted for, charged, or received under this Agreement or under any other Loan Document shall not exceed the maximum amount of interest allowed by applicable law (the "Highest Lawful Rate"), and
any excess shall be promptly credited to Borrower by Lender (or, to the extent that such consideration shall have been paid, such excess shall be promptly refunded to Borrower by Lender);
(b) neither Borrower nor any other Person now or hereafter liable under this Agreement shall be obligated to pay the amount of such interest to the extent that it is in excess of the Highest
Lawful Rate; and (c) the effective rate of interest shall be reduced to the Highest Lawful Rate. All sums paid, or agreed to be paid, to Lender for the use, forbearance, and detention of the
debt of Borrower to Lender shall, to the extent permitted by applicable law, be allocated throughout the full term of the Note until payment is made in full so that the actual rate of interest does
not exceed the Highest Lawful Rate in effect at any particular time 

9

 

during
the full term thereof. If at any time the rate of interest under the Note exceeds the Highest Lawful Rate, the rate of interest to accrue pursuant to this Agreement shall be limited,
notwithstanding anything to the contrary in this Agreement, to the Highest Lawful Rate, but any subsequent reductions in the Base Rate shall not reduce the interest to accrue pursuant to this
Agreement below the Highest Lawful Rate until the total amount of interest accrued equals the amount of interest that would have accrued if a varying rate per annum equal to the interest rate under
the Note had at all times been in effect. If the total amount of interest paid or accrued pursuant to this Agreement under the foregoing provisions is less than the total amount of interest that would
have accrued if a varying rate per annum equal to the interest rate under the Note had been in effect, then Borrower agrees to pay to Lender an amount equal to the difference between (i) the
lesser of (A) the amount of interest that would have accrued if the Highest Lawful Rate had at all times been in effect, or (B) the amount of interest that would have accrued if a
varying rate per annum equal to the interest rate under the Note had at all times been in effect, and (ii) the amount of interest accrued in accordance with the other provisions of this
Agreement. 

        Section 2.8.
Term. 

        (a)   Subject
to Lender's right to cease making Revolving Credit Loans to Borrower upon or after any Event of Default, this Agreement shall be in effect until March
    , 2007, unless terminated as provided in this Section 2.8 (the "Term"); provided, however, that notwithstanding anything set forth in this Agreement to the contrary (including,
without limitation, Section 6.23), in no event shall Borrower be entitled to terminate this Agreement prior to the repayment in full of all amounts owed to Lender pursuant to the Real Estate
Loan Documents. 

        (b)   Notwithstanding
anything in this Agreement to the contrary, Lender may terminate this Agreement without notice upon or after the occurrence of an Event of Default. 

        (c)   Subject
to the restriction set forth in Section 2.8(a) and the provisions regarding prepayment of the loan described in the Real Estate Loan Documents, upon at
least thirty (30) days prior written notice to Lender (the "Termination Notice Period"), Borrower may terminate this Agreement prior to the expiration of the Term. 

        (d)   All
of the Obligations shall be immediately due and payable upon the termination date stated in any notice of termination of this Agreement (the "Termination Date");
provided, however, that, notwithstanding anything in Section 2.8(c) to the contrary, the Termination Date shall be effective no earlier than the first Business Day of the month following the
expiration of the Termination Notice Period. All undertakings, agreements, covenants, warranties, and representations of Borrower contained in the Loan Documents shall survive any such termination and
Lender shall retain its liens in the Collateral and all of its rights and remedies under the Loan Documents notwithstanding such termination until Borrower has paid the Obligations to Lender, in full,
in immediately available funds. 

        (e)   Notwithstanding
any provision of this Agreement which makes reference to the continuance of an Event of Default, nothing in this Agreement shall be construed to permit
Borrower to cure an Event of Default following the lapse of the applicable cure period, and Borrower shall have no such right in any instance unless specifically granted in writing by Lender. 

 
 

ARTICLE III
  COLLATERAL    
    

        Section 3.1. Generally. As security for the payment of all liabilities of Borrower and its Affiliates to Lender, including, without limitation:
(a) indebtedness evidenced under the Note, repayment of Revolving Credit Loans, advances and other extensions of credit, all fees and charges owing by Borrower, and all other liabilities and
obligations of every kind or nature whatsoever of Borrower to Lender, whether now existing or hereafter incurred, joint or several, matured or unmatured, direct or 

10

 

indirect,
primary or secondary, related or unrelated, due or to become due, including, without limitation, any extensions, modifications, substitutions, increases and renewals thereof, (b) the
payment of all amounts advanced by Lender to preserve, protect, defend, and enforce its rights under this Agreement and in the following property in accordance with the terms of this Agreement,
(c) the payment of all expenses incurred by Lender in connection therewith, and (d) the payment and performance by Borrower and/or their respective Affiliates of their respective
obligations under the Affiliated Loan Documents (collectively, the "Obligations"), and as further security for the payment and performance of Borrower under the Affiliated Loan Documents, Borrower
hereby assigns and grants to Lender a continuing first priority lien on and security interest in, upon, and to the following property (the "Collateral"): 

        (i)    All
of Borrower's now-owned and hereafter acquired or arising Accounts, accounts receivable and rights to payment of every kind and description, and all of
Borrower's contract rights, chattel paper, documents and instruments with respect thereto, and all of Borrower's rights, remedies, security and liens, in, to and in respect of the Accounts, including,
without limitation, rights of stoppage in transit, replevin, repossession and reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, guaranties or other contracts of
suretyship with respect to the Accounts, deposits or other security for the obligation of any Account Debtor, and credit and other insurance; 

        (ii)   All
moneys, securities and other property and the proceeds thereof, now or hereafter held or received by, in transit to, in possession of, or under the control of
Lender or a bailee or Affiliate of Lender, from or for Borrower, whether for safekeeping, pledge, custody, transmission, collection or otherwise, and all of Borrower's deposits (general or special),
balances, sums and credits with Lender at any time existing; 

        (iii)  All
of Borrower's right, title and interest in, to and in respect of all goods relating to, or which by sale have resulted in, Accounts, including, without limitation,
all goods described in invoices or other documents or instruments with respect to, or otherwise representing or evidencing, any Account, and all returned, reclaimed or repossessed goods; 

        (iv)  All
of Borrower's now owned or hereafter acquired deposit accounts into which Accounts are deposited, including the Lockbox Account; 

        (v)   All
of Borrower's now owned and hereafter acquired or arising general intangibles and other property of every kind and description with respect to, evidencing or
relating to its Accounts, accounts receivable and other nights to payment, including, without limitation, all existing and future customer lists, choses in action, claims, books, records, ledger
cards, contracts, licenses, formulae, tax and other types of refunds, returned and unearned insurance premiums, rights and claims under insurance policies, and computer programs, information,
software, records, and data, as the same relates to the Accounts; 

        (vi)  All
of Borrower's other general intangibles (including, without limitation, any proceeds from insurance policies after payment of prior interests), patents, unpatented
inventions, trade secrets, copyrights, contract rights, goodwill, literary rights, rights to performance, rights under licenses, choses-in-action, claims, information contained
in computer media (such as data bases, source and object codes, and information therein), things in action, trademarks and trademarks applied for (together with the goodwill associated therewith) and
derivatives thereof, trade names, including the right to make, use, and vend goods utilizing any of the foregoing, and permits, licenses, certifications, authorizations and approvals, and the rights
of Borrower thereunder, issued by any governmental, regulatory, or private authority, agency, or entity whether now owned or hereafter acquired, together with all cash and non-cash
proceeds and products thereof; 

        (vii) All
of Borrower's now owned or hereafter acquired inventory of every description which is held by Borrower for sale or lease or is furnished by Borrower under any
contract of service or is held 

11

 

by
Borrower as raw materials, work in process or materials used or consumed in a business, wherever located, and as the same may now and hereafter from time to time be constituted, together with all
cash and non-cash proceeds and products thereof; 

        (viii) All
of Borrower's now owned or hereafter acquired machinery, equipment, computer equipment, tools, tooling, furniture, fixtures, goods, supplies, materials, work in
process, whether now owned or hereafter acquired, together with all additions, parts, fittings, accessories, special tools, attachments, and accessions now and hereafter affixed thereto and/or used in
connection therewith, all replacements thereof and substitutions therefor, and all cash and non-cash proceeds and products thereof; and 

        (ix)  The
proceeds (including, without limitation, insurance proceeds) of all of the foregoing. 

        Section 3.2.
Lien Documents. Borrower shall execute and deliver to Lender, or have executed and delivered (all in form and substance satisfactory to Lender in its sole discretion)
any agreements, documents, instruments, and writings deemed necessary by Lender or as Lender may otherwise request from time to time in its sole discretion to evidence, perfect, or protect Lender's
Lien and security interest in the Collateral required under this Agreement. Borrower hereby authorizes Lender to file one or more financing statements and amendments thereto and continuation
statements therefor covering the Collateral and naming Borrower as debtor and Lender as secured party. Borrower acknowledges that it is not authorized to file any financing statement or amendment or
any termination statement with respect to any financing statement filed against Borrower by Lender and Borrower agrees that it will not do so without the prior written consent of Lender, subject to
Borrower's rights under Section 9-509(d)(2) of the Uniform Commercial Code. 

        Section 3.3.
Collateral Administration, 

        (a)   All
Collateral (except deposit accounts) will at all times be kept by Borrowers at their respective principal office(s) as set forth on Schedule 4.15(a) or at the
principal office of Ensign Facility Services, Inc. as set forth on Schedule 4.15(a) and shall not be moved from such locations without the prior written consent of Lender, which consent
shall not be unreasonably withheld. 

        (b)   Borrower
shall keep accurate and complete records of its Accounts and all payments and collections thereon and shall submit to Lender on such periodic basis as Lender
shall request a sales and collections report for the preceding period, in form satisfactory to Lender. In addition, if Accounts in an aggregate face amount in excess of $50,000.00 become ineligible
because they fall within one of the specified categories of ineligibility set forth in the definition of Qualified Accounts or otherwise (excepting those Accounts which become ineligible merely by
reason of their age, for which no such notification is required). Borrower shall notify Lender of such occurrence on the first Business Day following such occurrence and the Borrowing Base shall
thereupon be adjusted to reflect such occurrence. If requested by Lender after the occurrence and during the continuation of an Event of Default, Borrower shall execute and deliver to Lender weekly
formal written assignments of all of its Accounts, which shall include all Accounts that have been created since the date of the last assignment, together with copies of claims, invoices or other
information related thereto. 

        (c)   Whether
or not an Event of Default has occurred, any of Lender's officers, employees or agents shall have the right, at any time or times hereafter, in the name of
Lender or any designee of Lender or Borrower, to verify the validity, amount or any other matter relating to any Accounts by mail, telephone, telegraph or otherwise. Borrower shall cooperate fully
with Lender in an effort to facilitate and promptly conclude such verification process. 

        (d)   To
expedite collection, Borrower shall endeavor in the first instance to make collection of its Accounts for Lender. Lender retains the right at all times after the
occurrence and during the continuance of an Event of Default, subject to applicable law regarding Medicaid/Medicare Account Debtors, to notify Account Debtors that Accounts have been assigned to
Lender and to collect 

12

 

Accounts
directly in its own name and to charge the collection costs and expenses, including attorneys' fees, to Borrower. 

        Section 3.4.
Other Actions. Borrower shall cause all Medicare and Medicaid Accounts to be deposited directly to the Lockbox. In addition to the foregoing, upon notice from Lender
to Borrower of the existence of an Event of Default under this Agreement and directing Borrower to do so, Borrower (a) shall provide prompt written notice to each private indemnity, managed
care or other Insurer who either is currently an Account Debtor or becomes an Account Debtor at any time following the date of this Agreement that Lender has been granted a first priority lien and
security interest in, upon and to all Accounts applicable to such Insurer and directs each Account Debtor to make payments into the Lockbox so long as an Event of Default is outstanding, and hereby
authorizes Lender, upon Borrower's failure to send such notices within ten (10) days after the date of this Agreement (or ten (10) days after the Insurer becomes an Account Debtor), to
send any and all similar notices to such Insurers, and (b) shall do anything further that may be lawfully required by Lender to secure Lender and effectuate the intentions and objects of this
Agreement, including, without limitation, the execution and delivery of Lockbox agreements, continuation statements, amendments to financing statements, and any other documents required under this
Agreement. At Lender's request, Borrower shall also immediately deliver to Lender all items for which Lender must receive possession to obtain a perfected security interest. Borrower shall, on
Lender's demand, deliver to Lender all notes, certificates, and documents of title, chattel paper, warehouse receipts, instruments, and any other similar instruments constituting Collateral. 

        Section 3.5.
Searches. Throughout the Term of the Loan, Lender shall be entitled to perform the searches described in clauses (a), (b) and (c) below against Borrower
(the results of which shall be consistent with Borrower's representations and warranties under this Agreement and otherwise acceptable to Lender), all at Borrower's expense: 

        (a)   UCC
searches with the Secretary of State and local filing offices of each jurisdiction where Borrower maintains its executive offices, a place of business, or assets and
the jurisdiction in which Borrower is organized; 

        (b)   judgment,
federal and state tax lien, and corporate and partnership tax lien searches, in each jurisdiction searched under clause (a) above; and 

        (c)   searches
of applicable corporate, limited liability company, partnership and related records to confirm the continued existence, organization and good standing of
Borrower and any Guarantor, and the exact legal name under which Borrower and any Guarantor is organized. 

        Section 3.6.
Power of Attorney. Each of the officers of Lender is hereby irrevocably made, constituted and appointed the true and lawful attorney for Borrower (without requiring
any of them to act as such) with full power of substitution to do the following: (a) endorse the name of Borrower upon any and all checks, drafts, money orders, and other instruments for the
payment of money that are payable to Borrower and constitute collections on Borrower's Accounts; (b) execute in the name of Borrower any financing statements, schedules, assignments,
instruments, documents, and statements that Borrower is obligated to give Lender under this Agreement; and (c) do such other and further acts and deeds in the name of Borrower that Lender may
deem necessary or desirable to enforce any Account or other Collateral or perfect Lender's security interest or lien in any Collateral. In addition, if Borrower breaches its obligation to direct
payments of the proceeds of the Collateral to the Lockbox Account, Lender, as the irrevocably made, constituted and appointed true and lawful attorney for Borrower pursuant to this paragraph, may, by
the signature or other act of any of Lender's officers (without requiring any of them to do so), direct any federal, state or private payor or fiscal intermediary to pay proceeds of the Collateral to
Borrower by directing payment to the Lockbox Account. 

13

 

 
 

ARTICLE IV
  REPRESENTATIONS AND WARRANTIES    
    

        Borrower represents and warrants to Lender, and shall be deemed to represent and warrant on each day on which any Obligations shall be outstanding under this
Agreement, that: 

        Section 4.1.
Subsidiaries. Except as set forth in Schedule 4.1, Borrower has no subsidiaries. 

        Section 4.2.
Organization and Good Standing. Ensign, and each of its subsidiaries which is a corporation, is a corporation duly organized, validly existing, and in good standing
under the laws of its state of formation. Each of Ensign's subsidiaries which is a limited liability company is duly formed, validly existing and in good standing under the laws of its state of
formation. Ensign and each of its subsidiaries is in good standing as a foreign corporation in each jurisdiction in which the character of the properties owned or leased by it therein or the nature of
its business makes such qualification necessary, has the corporate (or other) power and authority to own its assets and transact the business in which it is engaged, and has obtained all certificates,
licenses and qualifications required under all laws, regulations, ordinances, or orders of public authorities necessary for the ownership and operation of all of its properties and transaction of all
of its business. 

        Section 4.3.
Authority. Borrower has full corporate power and authority to enter into, execute, and deliver this Agreement and to perform its obligations under this Agreement, to
borrow the Loan, to execute and deliver the Note, and to incur and perform the obligations provided for in the Loan Documents, all of which have been duly authorized by all necessary corporate action.
No consent or approval of shareholders of, or lenders to, Borrower and no consent, approval, filing or registration with any Governmental Authority is required as a condition to the validity of the
Loan Documents or the performance by Borrower of its obligations under the Loan Documents. 

        Section 4.4.
Binding Agreement. This Agreement and all other Loan Documents constitute, and the Note, when issued and delivered pursuant to this Agreement for value received, will
constitute, the valid and legally binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms. 

        Section 4.5.
Litigation. Except as disclosed in Schedule 4.5, there are no actions, suits, proceedings or investigations pending or threatened against Borrower before any
court or arbitrator or before or by any Governmental Authority which, in any one case or in the aggregate, if determined adversely to the interests of Borrower, could have a Material Adverse Effect.
Borrower is not in default with respect to any order of any court, arbitrator, or Governmental Authority applicable to Borrower or its properties. 

        Section 4.6.
No Conflicts. The execution and delivery by Borrower of this Agreement and the other Loan Documents do not, and the performance of its obligations under the Loan
Documents will not, violate, conflict with, constitute a default under, or result in the creation of a lien or encumbrance upon the property of Borrower (other than for the benefit of Lender) under:
(a) any provision of Borrower's certificate of incorporation or bylaws, (b) any provision of any law, rule, or regulation applicable to Borrower, or (c) any of the following:
(i) any indenture or other agreement or instrument to which Borrower is a party or by which Borrower or its property is bound; or (ii) any judgment, order or decree of any court,
arbitration tribunal, or Governmental Authority having jurisdiction over Borrower which is applicable to Borrower. 

        Section 4.7.
Financial Condition. The unaudited consolidated financial statements of Borrower as of December 31, 2003, certified by the chief financial officer of Borrower,
which have been delivered to Lender, fairly present the financial condition of Borrower and the results of its operations and changes in financial condition as of the dates and for the periods
referred to, and have been prepared in accordance with GAAP. There are no material unrealized or anticipated liabilities, direct or indirect, fixed or contingent, of Borrower as of the dates of such
financial statements which are not reflected in such financial statements or in the notes to such financial statements. There has been no adverse 

14

 

change
in the business, properties, condition (financial or otherwise) or operations (current or prospective) of Borrower since December 31, 2003. Borrower's fiscal year ends on
December 31. The federal tax identification number of Ensign is 33-0861263. The federal tax identification numbers of Borrowers are set forth on Schedule 4.15(a). 

        Section 4.8.
No Default. Borrower is not in default under or with respect to any obligation in any respect which could be adverse to its business, operations, property or
financial condition, or which could adversely affect the ability of Borrower to perform its obligations under the Loan Documents. No Event of Default or event which, with the giving of notice or lapse
of time, or both, could become an Event of Default, has occurred and is continuing. 

        Section 4.9.
Title to Properties. Borrower has good and marketable title to its properties and assets, including the Collateral and the properties and assets reflected in the
financial statements described in Section 4.7, subject to no lien, mortgage, pledge, encumbrance or charge of any kind, other than Permitted Liens. Borrower has not agreed or consented to cause
any of its properties or assets whether owned now or hereafter acquired to be subject in the future (upon the happening of a contingency or otherwise) to any lien, mortgage, pledge, encumbrance or
charge of any kind other than Permitted Liens. 

        Section 4.10.
Taxes. Borrower has filed, or has obtained extensions for the filing of, all federal, state and other tax returns which are required to be filed, and has paid all
taxes shown as due on those returns and all assessments, fees and other amounts due as of the date of this Agreement. All tax liabilities of Borrower were, as of June 30, 1999 and are now,
adequately provided for on Borrower's books. No tax liability has been asserted by the Internal Revenue Service or other taxing authority against Borrower for taxes in excess of those already paid. 

        Section 4.11.
Securities and Banking Laws and Regulations. 

        (a)   The
use of the proceeds of the Loan and Borrower's issuance of the Note will not directly or indirectly violate or result in a violation of the Securities Act of 1933 or
the Securities Exchange Act of 1934, as amended, or any regulations issued pursuant thereto, including, without limitation, Regulations U, T or X of the Board of Governors of the Federal Reserve
System. Borrower is not engaged in the business of extending credit for the purpose of the purchasing or carrying "margin stock" within the meaning of those regulations. No part of the proceeds of the
Loan under this Agreement will be used to purchase or carry any margin stock or to extend credit to others for such purpose. 

        (b)   Borrower
is not an investment company within the meaning of the Investment Company Act of 1940, as amended, nor is it, directly or indirectly, controlled by or acting on
behalf of any Person which is an investment company within the meaning of that Act. 

        Section 4.12.
ERISA. No employee benefit plan (a "Plan") subject to the Employee Retirement Income Security Act of 1974 ("ERISA") and regulations issued pursuant to ERISA that is
maintained by Borrower or under which Borrower could have any material liability under ERISA (a) has failed to meet minimum funding standards established in Section 302 of ERISA,
(b) has failed to substantially comply with all applicable requirements of ERISA and of the Internal Revenue Code, including all applicable rulings and regulations thereunder, or (c) has
engaged in or been involved in a prohibited transaction (as defined in ERISA) under ERISA or under the Internal Revenue Code. Neither Borrower nor any member of a Controlled Group that includes
Borrower has not assumed, or received notice of a claim asserted against Borrower or another member of the Controlled Group for, withdrawal liability (as defined in the Multi-Employer Pension Plan
Amendments Act of 1980, as amended) with respect to any multi-employer pension plan. Borrower has timely made when due all contributions with respect to any multi-employer pension plan in which it
participates and no event has occurred triggering a material claim against Borrower for withdrawal liability with respect to any multi-employer pension plan in which Borrower participates. 

15

 

        Section 4.13.
Compliance with Law. Except as described in Schedule 4.13, Borrower is not in violation of any statute, rule or regulation of any Governmental Authority
(including, without limitation, any statute, rule or regulation relating to employment practices or to environmental, occupational and health standards and controls). Borrower has obtained all
licenses, permits, franchises, and other governmental authorizations necessary for the ownership of its properties and the conduct of its business. Borrower is current with all reports and documents
required to be filed with any state or federal securities commission or similar Governmental Authority and is in full compliance with all applicable rules and regulations of such commissions. 

        Section 4.14.
Environmental Matters. To the best of Borrower's knowledge, no use, exposure, release, generation, manufacture, storage, treatment, transportation or disposal of
Hazardous Material has occurred or is occurring on or from any real property on which the Collateral is located or which is owned, leased or otherwise occupied by Borrower (the "Premises"), or off the
Premises as a result of any action of Borrower, except as described in Schedule 4.14. All Hazardous Material used, treated, stored, transported to or from, generated or handled on the Premises,
or off the Premises by Borrower, has been disposed of on or off the Premises by or on behalf of Borrower in a lawful manner. To the best of Borrower's knowledge, there are no underground storage tanks
present on or under the Premises owned or leased by Borrower. No other environmental, public health or safety hazards exist with respect to the Premises. 

        Section 4.15.
Places of Business. As of the date hereof, the only places of business of Borrower, and the places where it keeps and intends to keep the Collateral and records
concerning the Collateral, are at the addresses set forth in Schedule 4.15(a). Schedule 4.15(a) also lists the owner of record of each such property. 

        Section 4.16.
Intellectual Property. Borrower exclusively owns or possesses all the patents, patent applications, trademarks, trademark applications, service marks, trade names,
copyrights, franchises, licenses, and rights with respect to the foregoing necessary for the current and planned future conduct of its business, without any conflict with the rights of others. A list
of all such intellectual property (indicating the nature of Borrower's interest), as well as all outstanding franchises and licenses given by or held by Borrower, is attached as Schedule 4.16.
Borrower is not in default of any obligation or undertaking with respect to such intellectual property or rights. Borrower is not infringing on any patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, franchises, licenses, any rights with respect to the foregoing, or any other intellectual property rights of others and the Borrower is not aware
of any infringement by others of any such rights owned by Borrower. 

        Section 4.17.
Stock Ownership. The identity of the stockholders of record of all classes of the outstanding stock of Borrower, together with the respective ownership percentages
held by such stockholders, are as set forth on Schedule 4.17. 

        Section 4.18.
Material Facts. Neither this Agreement nor any other Loan Document nor any other agreement, document, certificate, or statement furnished to Lender by or on behalf
of Borrower in connection with the transactions contemplated by this Agreement contains any untrue statement of material fact or omits to state a material fact necessary to make the statements
contained in this Agreement or other Loan Document not misleading. There is no fact known to Borrower that currently or in the future may have a Material Adverse Effect. 

        Section 4.19.
Investments, Guarantees, and Certain Contracts. Borrower does not own or hold any equity or long-term debt investments in, have any outstanding advances
to, have any outstanding guarantees for the obligations of, or have any outstanding borrowings from, any Person, except as described on Schedule 4.19. Borrower is not a party to any contract or
agreement, or subject to any corporate restriction, which adversely affects its business. 

16

 

        Section 4.20.
Business Interruptions. Within five (5) years before the date of this Agreement, neither the business, property or assets, or operations of Borrower has been
materially adversely affected in any way by any casualty, strike, lockout, combination of workers, or order of the United States of America or other Governmental Authority, directed against Borrower,
except as set forth on Schedule 4.20. There are no pending or threatened labor disputes, strikes, lockouts, or similar occurrences or grievances against Borrower or its business except as set
forth on Schedule 4.20. 

        Section 4.21.
Names. Within five (5) years before the date of this Agreement, Borrower has not conducted business under or used any other name (whether corporate,
partnership or assumed) other than as shown on Schedule 4.15(a)/4.16. Each Borrower has a different trade name or names, and each
Borrower is the sole owner of all of its names listed on that Schedule and any and all business done and invoices issued in such names are Borrower's sales, business, and invoices. Each trade name of
a Borrower represents a division, operating location or trading style of that Borrower and not a separate Person or independent Affiliate. 

        Section 4.22.
Joint Ventures. Borrower is not engaged in any joint venture or partnership with any other Person, except as set forth on Schedule 4.22. 

        Section 4.23.
Accounts. Lender may rely, in determining which Accounts are Qualified Accounts, on all statements and representations made by Borrower with respect to any Account
or Accounts. Unless otherwise indicated in writing to Lender, with respect to each Qualified Account, Borrower represents that: 

        (a)   The
Account is genuine and in all respects what it purports to be, and is not evidenced by a judgment; 

        (b)   The
Account arises out of a completed, bona fide sale and delivery of goods or rendition of Medical Services by Borrower in the ordinary course of its business and in
accordance with the terms and conditions of all purchase orders, contracts, certification, participation, certificate of need, or other documents relating thereto and forming a part of the contract
between Borrower and the Account Debtor; 

        (c)   The
Account is for a liquidated amount maturing as stated in a duplicate claim or invoice covering such sale or rendition of Medical Services, a copy of which has been
furnished or is available to Lender; 

        (d)   The
Account, and Lender's security interest in such Account, is not, and will not (by voluntary act or omission by Borrower), be in the future, subject to any offset,
lien, deduction, defense, dispute, counterclaim or any other adverse condition, and each such Account is absolutely owing to Borrower and is not contingent in any respect or for any reason; 

        (e)   There
are no facts, events or occurrences which in any way impair the validity or enforceability of any Accounts or tend to reduce the amount payable thereunder from the
face amount of the claim or invoice and statements delivered to Lender with respect thereto; 

17

  

        (f)    To the best of Borrower's knowledge, (i) the Account Debtor under the Account had the capacity to contract at the time any contract or other document giving rise
to the Account was executed and (ii) such Account Debtor is solvent; 

        (g)   To
the best of Borrower's knowledge, there are no proceedings or actions which are threatened or pending against any Account Debtor under the Account which might result
in any material adverse change in such Account Debtor's financial condition or the collectibility of such Account; 

        (h)   The
Account has been billed and forwarded to the Account Debtor for payment in accordance with applicable laws and compliance and conformance with any and requisite
procedures, requirements and regulations governing payment by such Account Debtor with respect to such Account, and such Account if due from a Medicaid/Medicare Account Debtor is properly payable
directly to Borrower; and 

        (i)    Borrower
has obtained and currently has all certificates of need, Medicaid and Medicare provider numbers, licenses, permits and authorizations that are necessary in the
generation of such Accounts. 

        Section 4.24.
Solvency. Both before and after giving effect to the transactions contemplated by the terms and provisions of this Agreement, Borrower (taken as a whole)
(a) owns property whose fair saleable value is greater than the amount required to pay all of Borrower's Indebtedness (including contingent debts), (b) was and is able to pay all of its
Indebtedness as such Indebtedness matures, and (c) had and has capital sufficient to carry on its business and transactions and all business and transactions in which it about to engage. For
purposes of this Agreement, the term "Indebtedness" means, without duplication (i) all items which in accordance with GAAP would be included in determining total liabilities as shown on the
liability side of a balance sheet of such Borrower as of the date on which Indebtedness is to be determined, (ii) all obligations of any other person or entity which such Borrower has
guaranteed, and (iii) the Obligations. 

 
 

ARTICLE V
  CLOSING AND CONDITIONS OF LENDING    
    

        Section 5.1. Conditions Precedent to Agreement. The obligation of Lender to enter into and perform this Agreement and to make Revolving Credit Loans is
subject to the following conditions precedent: 

        (a)   Lender
shall have received two (2) originals of this Agreement, an updated the Certificate of Validity, and all other Loan Documents required to be executed and
delivered by Lender in connection with the amendment and restatement of the Original Loan Agreement (other than the Note, as to which Lender shall receive only one (1) original), executed by
Borrower and any other required Persons, as applicable. 

        (b)   Lender
shall have received all searches and good standing certificates required by Lender, if any. 

        (c)   Borrower
shall have complied and shall then be in compliance with all the terms, covenants and conditions of the Loan Documents. 

        (d)   There
shall have occurred and be continuing no Event of Default and no event which, with the giving of notice or the lapse of time, or both, could constitute such an
Event of Default. 

        (e)   The
representations and warranties contained in Article IV shall be true and correct. 

        (f)    Lender
shall have received copies of all resolutions of Borrower's board of directors and other action taken by Borrower to authorize the execution, delivery and
performance of the Loan Documents 

18

 

and
the borrowing of the Loan under the Loan Documents, as well as the names and signatures of the officers of Borrower authorized to execute documents on its behalf in connection with the Loan, all
as also certified as of the date of this Agreement by Borrower's chief financial officer, or equivalent, and such other papers as Lender may require. 

        (g)   Lender
shall have received copies, certified as true, correct and complete by a corporate officer of Borrower, of the certificate of incorporation of Borrower, with any
amendments to any of the foregoing, and all other documents necessary for performance of the obligations of Borrower under this Agreement and the other Loan Documents. 

        (h)   Reserved.

        (i)    Lender
shall have received such financial statements, reports, certifications, and other operational information required to be delivered under this Agreement,
including, without limitation, an initial borrowing base certificate calculating the Borrowing Base. 

        (j)    Lender
shall have received the Commitment Fee. 

        (k)   The
Lockbox, Lockbox Account and the Concentration Account shall have been established. 

        (l)    Lender
shall have received an estoppel certificate in form and substance satisfactory to Lender in its commercially reasonable discretion from Borrower's landlord or
sublandlord, as the case may be, with respect to each of the facilities identified on Schedule 4.15. 

        Section 5.2.
Conditions Precedent to Advances. Notwithstanding any other provision of this Agreement, no Loan proceeds, Revolving Credit Loans, advances or other extensions of
credit under the Loan shall be disbursed under this Agreement unless the following conditions have been satisfied or waived immediately before such disbursement: 

        (a)   The
representations and warranties on the part of Borrower contained in Article IV of this Agreement shall be true and correct in all respects at and as of the
date of disbursement or advance, as though made on and as of such date (except to the extent that such representations and warranties expressly relate solely to an earlier date and except that the
references in Section 4.7 to financial statements shall be deemed to be a reference to the then most recent annual and interim financial statements of Borrower furnished to Lender pursuant to
Section 6.1). 

        (b)   No
Event of Default or event which, with the giving of notice of the lapse of time, or both, could become an Event of Default shall have occurred and be continuing or
would result from the making of the disbursement or advance. 

        (c)   No
adverse change in the condition (financial or otherwise), properties, business, or operations of Borrower shall have occurred and be continuing with respect to
Borrower since the date of this Agreement. 

        Section 5.3.
Closing. Each of the parties hereby confirm, acknowledge and agree that the Loan was closed and made available as of September 13, 1999 (the "Closing Date") at
Lender's offices in Chevy Chase, Maryland. 

        Section 5.4.
Waiver of Rights. By completing the closing under this Agreement, or by making advances under the Loan, Lender does not waive a breach of any representation or
warranty of Borrower under this Agreement or under any other Loan Document, and all of Lender's claims and rights resulting from any breach or misrepresentation by Borrower are specifically reserved
by Lender. 

19

 

 
 

ARTICLE VI
  AFFIRMATIVE COVENANTS    
    

        Borrower covenants and agrees that for so long as Borrower may borrow under this Agreement and until payment in full of the Note and performance of all other
obligations of Borrower under the Loan Documents: 

        Section 6.1.
Financial Statements and Collateral Reports. Borrower will furnish to Lender (a) a sales and collections report and accounts receivable aging schedule on a
form acceptable to Lender within twenty-five (25) days after the end of each calendar month, which shall include, without limitation, a report of sales, credits issued, and
collections received; (b) payables aging schedules within twenty-five (25) days after the end of each calendar month; (c) to the extent prepared by Borrower or
reasonably requested by Lender, internally prepared monthly financial statements for Borrower, certified by the chief financial officer of Borrower, within forty-five (45) days of
the end of each calendar month, accompanied by management analysis and actual vs. budget variance reports for each nursing home generating Accounts; (d) to the extent prepared by Borrower,
annual projections, profit and loss statements, balance sheets, and cash flow reports (prepared on a monthly basis) for the succeeding fiscal year within thirty (30) days before the end of each
of Borrower's fiscal years; (e) internally prepared annual financial statements for Borrower within sixty (60) days after the end of each of Borrower's fiscal years; (1) annual
audited financial statements for Borrower prepared by Deloitte & Touche, or another firm of independent public accountants satisfactory to Lender, within one hundred fifty (150) days
after the end of each of Borrower's fiscal years; (g) promptly upon receipt thereof, copies of any reports submitted to Borrower by the independent accountants in connection with any interim
audit of the books of Borrower and copies of each management control letter provided to Borrower by independent accountants; (h) as soon as available, copies of all financial
statements and notices provided by Borrower to all of its stockholders; and (i) such additional information, reports or statements as Lender may from time to time request. Annual financial
statements shall set forth in comparative form figures for the corresponding periods in the prior fiscal year. All financial statements shall include a balance sheet and statement of earnings and
shall be prepared in accordance with GAAP. 

        Section 6.2.
Payments Under this Agreement. Borrower will make all payments of principal, interest, fees, and all other payments required under this Agreement and under the Loan,
and under any other agreements with Lender to which Borrower is a party, as and when due. 

        Section 6.3.
Existence, Good Standing and Compliance with Laws. Borrower will do or cause to be done all things necessary (a) to obtain and keep in full force and effect
all corporate existence, rights, licenses, privileges, and franchises of Borrower necessary to the ownership of its property or the conduct of its business, and comply with all applicable current and
future laws, ordinances, rules, regulations, orders and decrees of any Governmental Authority having or claiming jurisdiction over Borrower; and (b) to maintain and protect the properties used
or useful in the conduct of the operations of Borrower, in a prudent manner, including, without limitation, the maintenance at all times of such insurance upon its insurable property and operations as
required by law or by Section 6.7. 

        Section 6.4.
Legality. The making of the Loan and each disbursement or advance under the Loan shall not be subject to any penalty or special tax, shall not be prohibited by any
governmental order or regulation applicable to Borrower, and shall not violate any rule or regulation of any Governmental Authority, and necessary consents, approvals and authorizations of any
Governmental Authority to or of any such disbursement or advance shall have been obtained. 

        Section 6.5.
Lender's Satisfaction. All instruments and legal documents and proceedings in connection with the transactions contemplated by this Agreement shall be reasonably
satisfactory in form and substance to Lender and its counsel, and Lender shall have received all documents, including 

20

 

records
of corporate proceedings and opinions of counsel, which Lender may have requested in connection therewith. 

        Section 6.6.
Taxes and Charges. Borrower will timely file all tax reports and pay and discharge all taxes, assessments and governmental charges or levies imposed upon Borrower, or
its income or profits or upon its properties or any part thereof, before the same shall be in default and before the date on which penalties attach thereto, as well as all lawful claims for labor,
material, supplies or otherwise which, if unpaid, might become a lien or charge upon the properties or any part thereof of Borrower; provided, however, that Borrower shall not be required to pay and
discharge or cause to be paid and discharged any such tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good faith and by appropriate proceedings
by Borrower, and Borrower shall have
set aside on their books adequate reserve therefor; and provided further, that such deferment of payment is permissible only so long as Borrower's title to, and its right to use, the Collateral is not
adversely affected thereby and Lender's lien and priority on the Collateral are not adversely affected, altered or impaired thereby. 

        Section 6.7.
Insurance. Borrower will carry adequate public liability and professional liability insurance with responsible companies reasonably satisfactory to Lender in such
amounts and against such risks as is customarily maintained by similar businesses and by owners of similar property in the same general area. Lender and Borrower agree that the liability insurance
coverages and terms approved by Lender in connection with the Real Estate Loan Documents shall be satisfactory to Lender to the extent that such coverages and terms apply to the facilities subject to
this Agreement. 

        Section 6.8.
General Information. Borrower will furnish to Lender such information as Lender may, from time to time, reasonably request with respect to the business or financial
affairs of Borrower, and permit any officer, employee or agent of Lender to visit and inspect any of the properties, to examine the minute books, books of account and other records, including
management letters prepared by Borrower's auditors, of Borrower, and make copies thereof or extracts therefrom, and to discuss its and their business affairs, finances and accounts with, and be
advised as to the same by, the accountants and officers of Borrower, all at such times and as often as Lender may reasonably require. 

        Section 6.9.
Maintenance of Property. Borrower will maintain, keep and preserve all of its properties in good repair, working order and condition and from time to time make all
necessary repairs, renewals, replacements, betterments and improvements thereto, so that the business carried on in connection therewith may be properly conducted at all times. 

        Section 6.10.
Notification of Events of Default and Adverse Developments. Borrower promptly will notify Lender upon the occurrence of: (a) any Event of Default;
(b) any event which, with the giving of notice or lapse of time, or both, could constitute an Event of Default; (c) any event, development or circumstance whereby the financial
statements previously furnished to Lender fail in any material respect to present fairly, in accordance with GAAP, the financial condition and operational results of Borrower; (d) any judicial,
administrative or arbitration proceeding pending against Borrower, and any judicial or administrative proceeding known by Borrower to be threatened against it which, if adversely decided, could have a
Material Adverse Effect; (e) any default claimed by any other creditor for Borrowed Money of Borrower other than Lender; and (f) any other development in the business or affairs of
Borrower which may be materially adverse; in each case describing the nature of the event or development. In the case of notification under clauses (a) and (b), Borrower should set forth the
action Borrower proposes to take with respect to such event. 

        Section 6.11.
Employee Benefit Plans. Borrower will (a) comply with the funding requirements of ERISA with respect to the Plans for its employees, or will promptly satisfy
any accumulated funding deficiency that arises under Section 302 of ERISA; (b) furnish Lender, promptly after filing the same, with copies of all reports or other statements filed with
the United States Department of Labor, the Pension Benefit Guaranty Corporation, or the Internal Revenue Service with respect to all Plans, or 

21

 

which
Borrower, or any member of a Controlled Group, may receive from such Governmental Authority with respect to any such Plans, and (c) promptly advise Lender of the occurrence of any
Reportable Event or Prohibited Transaction with respect to any such Plan and the action which Borrower proposes to take with respect thereto. Borrower will make all contributions when due with respect
to any multi-employer pension plan in which it participates and will promptly advise Lender: (i) upon its receipt of notice of the assertion against Borrower of a claim for withdrawal
liability; (ii) upon the occurrence of any event which could trigger the assertion of a claim for withdrawal liability against Borrower; and (iii) upon the occurrence of any event which
would place Borrower in a Controlled Group as a result of which any member (including Borrower) thereof may be subject to a claim for withdrawal liability, whether liquidated or contingent. 

        Section 6.12.
Financing Statements. Borrower shall provide to Lender evidence satisfactory to Lender as to the due recording of termination statements, releases of collateral, and
Forms UCC-3, and shall cause to be recorded financing statements on Form UCC-1, duly executed by Borrower and Lender, in all places necessary to release all existing security
interests and other liens in the Collateral (other than as permitted by this Agreement) and to perfect and protect Lender's first priority lien and security interest in the Collateral, as Lender may
request. 

        Section 6.13.
Financial Records. Borrower shall keep current and accurate books of records and accounts in which full and correct entries will be made of all of its business
transactions, and will reflect in its financial statements adequate accruals and appropriations to reserves, all in accordance with GAAP. 

        Section 6.14.
Collection of Accounts. Borrower shall continue to collect its Accounts in the ordinary course of business. 

        Section 6.15.
Places of Business. Borrower shall give thirty (30) days' prior written notice to Lender of any change in the location of any of its places of business, of
the places where its records concerning its Accounts are kept, of the places where the Collateral is kept, or of the establishment of any new, or the discontinuance of any existing, places of
business. 

        Section 6.16.
Business Conducted. Borrower shall continue in the business currently conducted by it using its best efforts to maintain its customers and goodwill. Borrower shall
not engage, directly or indirectly, in any line of business substantially different from the business conducted by it immediately
before the Closing Date, or engage in business or lines of business which are not reasonably related thereto. 

        Section 6.17.
Litigation and Other Proceedings. Borrower shall give prompt notice to Lender of any litigation, arbitration, or other proceeding before any Governmental Authority
against or affecting Borrower where the matter, if decided adversely to Borrower, could have a Material Adverse Effect. 

        Section 6.18.
Bank Accounts. Borrower shall assign to Lender all of its depository and disbursement accounts into which collections of Accounts are deposited. 

        Section 6.19.
Submission of Collateral Documents. Borrower will, on demand of Lender, make available to Lender copies of shipping and delivery receipts evidencing the shipment of
goods that gave rise to an Account, medical records, insurance verification forms, assignment of benefits, in-take forms or other proof of the satisfactory performance of services that
gave rise to an Account, a copy of the claim or invoice for each Account and copies of any written contract or order from which the Account arose. Borrower shall promptly notify Lender if an Account
becomes evidenced or secured by an instrument or chattel paper and upon request of Lender, will promptly deliver any such instrument or chattel paper to Lender. 

        Section 6.20.
Licensure; Medicaid/Medicare Cost Reports. Borrower will maintain all certificates of need, provider numbers and licenses necessary to conduct its business as
currently conducted, and take 

22

 

any
steps required to comply with any such new or additional requirements that may be imposed on providers of medical products and Medical Services. If required, all Medicaid/Medicare cost reports
will be properly filed. 

        Section 6.21.
Officer's Certificates. Together with the monthly financial statements delivered pursuant to clause (c) of Section 6.1, and together with the audited
annual financial statements delivered pursuant to clause (f) of that Section, Borrower shall deliver to Lender a certificate of its chief financial officer, in the form attached hereto as
Schedule 6.21 and: 

        (a)   Setting
forth the information (including detailed calculations) required to establish whether Borrower is in compliance with the requirements of Articles VI and VII as
of the end of the period covered by the financial statements then being furnished; and 

        (b)   Stating
that the signer has reviewed the relevant terms of this Agreement, and has made (or caused to be made under his supervision) a review of the transactions and
conditions of Borrower from the beginning of the accounting period covered by the income statements being delivered to the date of the certificate, and that such review has not disclosed the existence
during such period of any condition or event which constitutes an Event of Default or which is then, or with the passage of time or giving of notice or both, could become an Event of Default, and if
any such condition or event existed during such period or now exists, specifying the nature and period of existence thereof and what action Borrower has taken or proposes to take with respect thereto. 

        Section 6.22.
Visits and Inspections. Borrower agrees to permit representatives of Lender, from time to time, as often as may be reasonably requested, but only during normal
business hours, to visit and inspect the properties of Borrower, and to inspect, audit and make extracts from its books and records, and discuss with its officers, its employees and its independent
accountants, Borrower's business, assets, liabilities, financial condition, business prospects and results of operations. 

        Section 6.23.
Right of First Refusal. 

        (a)   Borrower
hereby agrees that if at any time it or any of its now existing or hereafter created affiliates (for the purposes of this Section 6.23, any or all of
which shall constitute "Borrower") receives from a third party a commitment, or Borrower makes a proposal substantially acceptable to or accepted by a Person (all of the foregoing being referred to as
an "Offer"), which Offer provides for permanent financing, long-term financing, short-term financing, cash flow financing, working capital financing, accounts receivable
financing, real estate financing, inventory or equipment financing, financing secured in whole or in part by assets (tangible or intangible) or personal property of Borrower, or sale/leaseback
financing (the "Financing"), Borrower shall forward the Offer to Lender. 

        (b)   Lender
shall have fifteen (15) days after receipt of the Offer (the "Option Period') to agree to provide financing substantially equal to or better than the
Financing in the place of such Person upon the terms and conditions set forth in the Offer and to notify Borrower in writing of Lender's acceptance of the Offer (the "Acceptance Notice"). If Borrower
has not received an Acceptance Notice within the Option Period, Borrower shall be free to consummate the Financing with the Person. 

        (c)   If
the Financing is not consummated under similar terms with such Person during the ninety (90) day period following the expiration of the Option Period, or if
any material term of the Financing is changed, Borrower may not consummate the Financing without again complying with this Section 6.23. 

        (d)   For
purposes of this Section 6.23, the term "Lender" shall mean and include any of General Electric Capital Corporation, GE Healthcare Financial
Services, Inc., or any parent, subsidiary or affiliate of any of such entities. 

        (e)   If
Borrower pays in full the outstanding balance of the Loan from the proceeds of a Financing, and if Borrower has complied with this Section 6.23 with respect to
such Financing, then the 

23

 

Lender's
rights under this Section 6.23 shall terminate upon such receipt of such payment in full. If Borrower pays in full the outstanding balance of the Loan without using, directly or
indirectly, the proceeds of a Financing, then the Lender's rights under this Section 6.23 shall survive with respect to Offers made or received for a period of one year from the date of such
payment in full, and shall terminate upon the expiration of such one-year period. 

        (f)    Nothing
in this Section 6.23 shall entitle Borrower, nor shall Borrower be entitled, to repay the Loan in full unless and until the loan evidenced by the Real
Estate Loan Documents has been repaid in full. 

 
 

ARTICLE VII
  NEGATIVE COVENANTS    
    

        Borrower covenants and agrees that so long as Borrower may borrow under this Agreement and until payment in full of the Note and performance of all other
obligations of Borrower under the Loan Documents: 

        Section 7.1.
Borrowing. Borrower will not create, incur, assume or suffer to exist any liability for Borrowed Money except: (a) indebtedness to Lender;
(b) indebtedness of Borrower secured by mortgages, encumbrances or liens expressly permitted by Section 7.3; (c) accounts payable to trade creditors and current operating expenses
(other than for borrowed money) which are not aged more than one hundred twenty (120) days from the billing date (except that those accounts payable described in Schedule 7.1 may be aged
up to the number of days set forth on Schedule 7.1 with respect thereto), in each case incurred in the ordinary course of business and paid within such time period, unless the same are being
contested in good faith and by appropriate and lawful proceedings, and Borrower shall have set aside such reserves, if any, with respect thereto as are required by GAAP and deemed adequate by Borrower
and its independent accountants; and (d) borrowings (including without limitation capital leases) incurred in the ordinary course of its business, for furniture, fixtures, equipment, software
and similar items and assets, and not exceeding $10,000,000 in the aggregate outstanding at any one time; provide, however, no such permitted borrowings shall be secured by a lien on any Accounts.
Upon notice from Lender to Borrower of the existence of an Event of Default under this Agreement, Borrower will not make prepayments on any existing or future indebtedness for Borrowed Money to any
Person (other than Lender, to the extent permitted by this Agreement or any subsequent agreement between Borrower and Lender). 

        Section 7.2.
Joint Ventures. Borrower will not invest directly or indirectly in any joint venture for any purpose without the prior written notice to, and the prior written
consent of, Lender, which consent shall not be unreasonably withheld. 

        Section 7.3.
Liens and Encumbrances. Borrower will not create, incur, assume or suffer to exist any mortgage, pledge, lien or other encumbrance of any kind (including the charge
upon property purchased under a conditional sale or other title retention agreement) upon, or any security interest in, any of its Collateral, whether now owned or hereafter acquired, other than
Permitted Liens. 

        Section 7.4.
Restriction on Fundamental Changes; No Change in Operation or Control. Except as permitted under this Section 7.4, Borrower will not: (a) enter into any
transaction of merger or consolidation; (b) liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution); or (c) except as permitted under this Agreement
or otherwise approved by Lender (which approval will not be unreasonably withheld or delayed) convey, sell, lease, sublease, transfer or otherwise dispose of, in one transaction or a series of
transactions, any of its assets, or the capital stock of any subsidiary of Borrower, whether now owned or hereafter acquired. Notwithstanding the foregoing or any other provision of this Agreement or
the Loan Documents to the contrary, nothing contained herein or in 

24

 

any
of the Loan Documents shall prevent the transfer of an ownership interest in Ensign as a result of or in connection with any of the following: 

        (i)    Private
Placements. Any sale, conveyance, transfer or new issuance of equity or other interests in Ensign to a third Person (as defined below), which third Person must
be reasonably acceptable to Lender, in a bona fide arm's-length transaction as part of the current and ongoing capitalization of Ensign, which does not result in a Change in Control, so long as
(a) Ensign provides written notice of any such transaction to Lender (which notice shall include the name of the purchaser and the percentage of ownership purchased), (b) the proceeds of
such transaction are used only for proper corporate purposes, and (c) the then-current officers and a majority of the then-current directors remain as officers and
directors of Ensign immediately following such transaction. 

        (ii)   Public
Offering. Any sale, conveyance, transfer or new issuance of equity or other interests in Ensign to a third Person occurring in connection with a public offering
of Ensign's stock which (a) constitutes a bona fide public distribution of such stock pursuant to a firm commitment underwriting or a plan of distribution registered under the Securities Act of
1933 and (b) results in such stock being listed for trading on the American Stock Exchange or the New York Stock Exchange, authorized for quotation on the NASDAQ National Market, or listed or
authorized for quotation on another national or regional stock exchange immediately upon the completion of such public offering. In addition, so long as such stock of Ensign is listed for trading on
any such exchange or authorized for quotation on such market, the transfer or exchange of such stock over such exchange or market shall not be prohibited hereunder unless the same (whether in one
transaction or in any step or series of transactions) results, directly or indirectly, in a Change of Control of Ensign as a result of a tender or similar offer to acquire a substantial majority of
the issued and outstanding securities of Ensign. 

        (iii)  As
used in this Section 7.2, "Change in Control" shall mean a change (voluntary or involuntary, by operation of law or otherwise) in the Person or Persons which
directly or indirectly control Ensign as of the date hereof, as described in subparagraphs (A) through (D) below: 

        (A)  any
Person is or becomes the Beneficial Owner, directly or indirectly, of securities (or other equity interests) of Ensign representing thirty-five percent
(35%) or more of the combined voting power of the then-outstanding securities (or equity interests) of Ensign (but not in the case of any such Person who, as of the date of this Agreement,
holds such thirty-five percent (35%) interest); or 

        (B)  the
stockholders (or holders of equity interests) of Ensign approve a merger or consolidation of Ensign with any other corporation (or other entity), other than as part
of a corporate restructuring which does not result in a material (i.e., thirty-five percent (35%) or more) change in the ultimate stockholders (or holders of equity interests) of Ensign;
or 

        (C)  the
stockholders (or holders of voting equity interests) of Ensign approve a plan of complete liquidation of Ensign or an agreement for the sale or disposition by Ensign
of all or substantially all of the assets of Ensign; or 

        (D)  the
creation or issuance of new stock (or other voting equity interests), other than stock or stock option grants to employees, officers and directors of Ensign, in one
or a series of transactions by which an aggregate of more than fifty percent (50%) of the stock (or other voting equity interests) of Ensign shall be vested in a party or parties who are not
stockholders (or holders of voting equity interests) of Ensign as of the date of this Agreement. 

        (iv)  For
purposes of this Section 7.4, the term "Person" shall have the meaning ascribed thereto in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). 

        (v)   For
purposes of this Section 7.4, the term "Beneficial Owner" shall have the meaning ascribed thereto in Rule 13d-3 of the Exchange Act. 

25

 

        Consistent
with the foregoing, until the Obligations are repaid in full, none of the entities comprising Borrower shall transfer, assign, convey or grant to any other Person the right to
operate or control any of the nursing homes listed on Schedule 4.15, whether by lease, sublease, management agreement, joint venture agreement or otherwise. 

        Section 7.5.
Sale and Leaseback. Borrower will not, directly or indirectly, enter into any arrangement whereby Borrower sells or transfers all or any part of its assets and
thereupon and within one year thereafter rents or leases the assets so sold or transferred without prior written notice to and the prior written consent of Lender, which consent shall not be
unreasonably withheld. 

        Section 7.6.
Dividends, Distributions and Management Fees. Upon notice from Lender to Borrower of the existence of an Event of Default under this Agreement, Borrower will not
declare or pay any dividends or other distributions with respect to, purchase, redeem or otherwise acquire for value any of its outstanding stock now or hereafter outstanding, or return any capital of
its stockholders, nor shall Borrower pay management fees or fees of a similar nature to any Person, except that Borrower may make intercompany transfers to Ensign Facility Services, Inc. to pay
reasonable expenses incurred by Ensign Facility Services, Inc. in providing administrative and operating support services to Borrowers. 

        Section 7.7.
Loans. Borrower will not make loans or advances to any Person, other than (a) trade credit extended in the ordinary course of its business, (b) advances
for business travel and similar temporary advances made in the ordinary course of business to officers, stockholders, directors, and employees and (c) loans or other extensions of credit to
officers, stockholders, directors or employees, not exceeding $1,000,000 in the aggregate, to (i) promote legitimate corporate purposes (including, but not limited to, long-term
relocation assistance) and (ii) fund the exercise of stock option or other purchases of shares in Ensign 

        Section 7.8.
Contingent Liabilities. Borrower will not 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 or collection or similar transactions in the ordinary course of business. 

        Section 7.9.
Subsidiaries. Borrower will not form any subsidiary, or make any investment in or any loan in the nature of an investment to, any other Person without Lender's prior
written consent, which
consent shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, Borrower shall have the right to form and fund such operating, holding and other subsidiaries as Borrower may deem
necessary or appropriate to expand and carry out its business. 

        Section 7.10.
Compliance with ERISA. Borrower will not permit with respect to any Plan covered by Title IV of ERISA any Prohibited Transaction or any Reportable Event. 

        Section 7.11.
Certificates of Need. Borrower will not amend, alter or suspend or terminate or make provisional in any material way, any certificate of need or provider number
without the prior written consent of Lender, which consent shall not be unreasonably withheld. 

        Section 7.12.
Transactions with Affiliates. Borrower will not enter into any transaction, including, without limitation, the purchase, sale, or exchange of property, or the
loaning or giving of funds to any Affiliate or subsidiary, except as permitted in Section 7.9 or in the ordinary course of business and pursuant to the reasonable requirements of Borrower's
business and upon terms substantially the same and no less favorable to Borrower as it would obtain in a comparable arm's length transaction with any Person not an Affiliate or subsidiary, and so long
as the transaction is not otherwise prohibited under this Agreement. For purposes of the foregoing, Lender consents to the transactions described on Schedule 7.12. 

26

 

        Section 7.13.
Use of Lender's Name. Borrower will not use Lender's name (or the name of any of Lender's affiliates) in connection with any of its business operations. Borrower may
disclose to third parties that Borrower has a borrowing relationship with Lender. Nothing contained in this Agreement is intended to permit or authorize Borrower to make any contract on behalf of
Lender. 

        Section 7.14.
Change in Capital Structure. Except (i) as permitted under Section 7.4 and (ii) in connection with the operation and administration of Ensign's
2001 Stock Option, Deferred Stock and Restricted Stock Plan, there shall occur no material change in the ownership of Borrower's capital stock or in Borrower's capital structure. 

        Section 7.15.
Contracts and Agreements. Borrower will not become or be a party to any contract or agreement which would breach this Agreement, or breach any other instrument,
agreement, or document to which Borrower is a party or by which it is or may be bound. 

        Section 7.16.
Margin Stock. Borrower will not carry or purchase any "margin security" within the meaning of Regulations U, T or X of the Board of Governors of the Federal Reserve
System. 

        Section 7.17.
Truth of Statements and Certificates. Borrower will not furnish to Lender any certificate or other document that contains any untrue statement of a material fact or
that omits to state a material fact necessary to make it not misleading in light of the circumstances under which it was furnished. 

        Section 7.18.
Census. With respect to any twelve (12) month period during the Term, Borrower will not allow the average patient census for all of the nursing homes listed
on Schedule 4.15(b), when taken as a whole for such 12-month period, to fall below the average patient census shown on Schedule 4.15(b) in an amount that has a materially
adverse effect on Borrower's business or operations. 

 
 

ARTICLE VIII
  EVENTS OF DEFAULT    
    

        Section 8.1. Events of Default. Each of the following (individually, an "Event of Default" and collectively, the "Events of Default") shall constitute an
event of default under this Agreement: 

        (a)   A
default in the payment of any installment of principal of, or interest upon, the Note when due and payable, whether at maturity or otherwise, or any breach of
Section 2.3, which default or breach, as applicable, shall have continued unremedied for a period of five (5) days after written notice of the default or breach from Lender to Borrower; 

        (b)   A
default in the payment of any other charges, fees, or other monetary obligations owing to Lender arising out of or incurred in connection with this Agreement when such
payment is due and payable, which default shall have continued unremedied for a period of five (5) days after written notice of the default from Lender to Borrower; 

        (c)   A
default in the due observance or performance by Borrower of any other term, covenant or agreement contained in any of the Loan Documents, which default shall have
continued unremedied for a period of ten (10) days after written notice of the default from Lender to Borrower; 

        (d)   Any
representation or warranty made by Borrower in this Agreement or in any of the other Loan Documents, any financial statement, or any statement or representation made
in any other certificate, report or opinion delivered in connection with this Agreement or the other Loan Documents proves to have been incorrect or misleading in any material respect when made, which
default shall have continued unremedied for a period of ten (10) days after written notice of the default from Lender to Borrower, provided that if the nature of the default is such that it
cannot reasonably be cured within such ten (10) day period, then, so long as Borrower has commenced its cure 

27

 

within
such ten (10) day period and continues to diligently prosecute such cure, Borrower shall have such additional time, not to exceed sixty (60) days, as is necessary to complete such
cure; 

        (e)   Any
material obligation of Borrower (other than its Obligations under this Agreement) for the payment of Borrowed Money is not paid when due or within any applicable
grace period, or such obligation becomes or is declared to be due and payable before the expressed maturity of the obligation; 

        (f)    Borrower
makes an assignment for the benefit of creditors, offers a composition or extension to creditors, or makes or sends notice of an intended bulk sale of any
business or assets now or hereafter conducted by Borrower; 

        (g)   (i) Borrower
files a petition in bankruptcy, (ii) Borrower is adjudicated insolvent or bankrupt, petitions or applies to any tribunal for any receiver of
or any trustee for itself or any substantial part of its property, (iii) Borrower commences any proceeding relating to itself under any reorganization, arrangement, readjustment or debt,
dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect, (iv) any such proceeding is commenced against Borrower and such proceeding remains undismissed
for a period of sixty (60) days, (v) Borrower by any act indicates its consent to, approval of, or acquiescence in, any such proceeding or the appointment of any receiver of or any
trustee for a Borrower or any substantial part of its property, or suffers any such receivership or trusteeship to continue undischarged for a period of sixty (60) days; 

        (h)   One
or more final judgments against Borrower or attachments against its property not fully and unconditionally covered by insurance shall be rendered by a court of
record and shall remain unpaid, unstayed on appeal, undischarged, unbonded and undismissed for a period of ten (10) days; 

        (i)    A
Reportable Event which might constitute grounds for termination of any Plan covered by Title IV of ERISA or for the appointment by the appropriate United States
District Court of a trustee to administer any such Plan or for the entry of a lien or encumbrance to secure any deficiency, has occurred and is continuing thirty (30) days after its occurrence,
or any such Plan is terminated, or a trustee is appointed by an appropriate United States District Court to administer any such Plan, or the Pension Benefit Guaranty Corporation institutes proceedings
to terminate any such Plan or to appoint a trustee to administer any such Plan, or a lien or encumbrance is entered to secure any deficiency or claim; 

        (j)    Except
as permitted by Section 7.4, any outstanding stock of Borrower is sold or otherwise transferred by the Person owning such stock on the date of this
Agreement; 

        (k)   There
shall occur any uninsured damage to or loss, theft or destruction of any portion of the Collateral that could materially adversely affect the Collateral; 

        (l)    An
Event of Default (as defined in any of the Affiliated Loan Documents) shall have occurred under any of the Affiliated Loan Documents; 

        (m)  Borrower
breaches or violates the terms of, or a default or an event which could, whether with notice or the passage of time, or both, constitute a default, occurs under
any other existing or future agreement (related or unrelated) between Borrower and Lender, and Borrower fails to timely cure such breach, violation or default following notice (if required) and any
grace or permitted cure period (if applicable); 

        (n)   Upon
the issuance of any execution or distraint process against Borrower or any of its property or assets; 

        (o)   Borrower
ceases any material portion of its business operations as currently conducted without first obtaining Lender's consent, which shall not be unreasonably withheld
or delayed; 

28

 

        (p)   Any
indication or evidence is received by Lender that Borrower may have directly or indirectly been engaged in any type of activity which, in Lender's discretion, may
result in the forfeiture of any property of Borrower to any Governmental Authority, which default shall have continued unremedied for a period of ten (10) days after written notice from Lender; 

        (q)   Borrower
or any Affiliate of Borrower, shall challenge or contest, in any action, suit or proceeding, the validity or enforceability of this Agreement, or any of the
other Loan Documents, the legality or the enforceability of any of the Obligations or the perfection or priority of any Lien granted to Lender; 

        (r)   Borrower
shall be criminally indicted or convicted under any law that could lead to a forfeiture of any Collateral; or 

        (s)   There
shall occur a material adverse change in the financial condition or business prospects of Borrower, or if Lender in good faith deems itself insecure as a result of
acts or events bearing upon the financial condition of Borrower or the repayment of the Note, which default shall have continued unremedied for a period of ten (10) days after written notice
from Lender. 

        Section 8.2.
Acceleration. Upon the occurrence of any of the foregoing Events of Default, the Note shall become and be immediately due and payable upon declaration to that effect
delivered by Lender to Borrower; provided, however, that, upon the happening of any event specified in Section 8.1(g), the Note shall be immediately due and payable without declaration or other
notice to Borrower. 

        Section 8.3.
Remedies. 

        (a)   Upon
the occurrence of and during the continuance of an Event of Default under this Agreement or the other Loan Documents, Lender, in addition to all other rights,
options, and remedies granted to Lender under this Agreement, or under the Affiliated Loan Documents, or at law or in equity, may take any of the following steps (which list is given by way of example
and is not intended to be an exhaustive list of all such rights and remedies): 

        (i)    Terminate
the Loan, whereupon all outstanding Obligations shall be immediately due and payable; 

        (ii)   Exercise
all other rights granted to it under this Agreement and all rights under the UCC in effect in the applicable jurisdiction(s) and under any other applicable
law; and 

        (iii)  Exercise
all rights and remedies under all Loan Documents now or hereafter in effect, including, without limitation: 

        (A)  The
right to take possession of, send notices regarding, and collect directly the Collateral, with or without judicial process; 

        (B)  The
right to (by its own means or with judicial assistance) enter any of Borrower's premises and take possession of the Collateral, or render it unusable, or dispose of
the Collateral on such premises in compliance with subsection (C) below, without any liability for rent, storage, utilities, or other sums, and Borrower shall not resist or interfere with such
action; 

        (C)  The
right to require Borrower at Borrower's expense to assemble all or any part of the Collateral and make it available to Lender at any place designated by Lender; and 

        (D)  The
right to reduce the Maximum Loan Amount or to use the Collateral and/or funds in the Concentration Account in amounts up to the Maximum Loan Amount for any reason. 

        (b)   Borrower
agrees that a notice received by it at least five (5) days before the time of any intended public sale, or the time after which any private sale or other
disposition of the Collateral is to be made, shall be deemed to be reasonable notice of such sale or other disposition. If permitted by 

29

 

applicable
law, any perishable Collateral which threatens to speedily decline in value or which is sold on a recognized market may be sold immediately by Lender without prior notice to Borrower. At
any sale or disposition of Collateral, Lender may (to the extent permitted by applicable law) purchase all or any part of the Collateral, free from any right of redemption by Borrower, which right is
hereby waived and released. Borrower covenants and agrees not to interfere with or impose any obstacle to Lender's exercise of its rights and remedies with respect to the Collateral. 

        Section 8.4.
Nature of Remedies. Lender shall have the right to proceed against all or any portion of the Collateral to satisfy in any order (a) the liabilities and
Obligations of Borrower, Guarantor and their respective Affiliates or any Affiliate of Lender under this Agreement or any other loan documents evidencing financings provided to Borrower, or
(b) the liabilities and obligations of Borrower, Guarantor and their respective Affiliates to Lender under the Affiliated Loan Documents. All rights and remedies granted Lender under this
Agreement and under any agreement referred to in this Agreement, or otherwise available at law or in equity, shall be deemed concurrent and cumulative, and not alternative remedies, and Lender may
proceed with any number of remedies at the same time until the Loans, and all other existing and future liabilities and obligations of Borrower to Lender, are satisfied in full. The exercise of any
one right or remedy shall not be deemed a waiver or release of any other right or remedy, and Lender, upon the occurrence of an Event of Default, may proceed against Borrower, and/or the Collateral,
at any time, under any agreement, with any available remedy and in any order. 

 
 

ARTICLE IX
  MISCELLANEOUS    
    

        Section 9.1. Expenses and Taxes. 

        (a)   Borrower
agrees to pay a reasonable documentation preparation fee, together with actual audit and appraisal fees and all other out-of-pocket
charges and expenses incurred by Lender in connection with the negotiation, preparation, legal review and execution of each of the Loan Documents, including, without limitation, UCC and judgment lien
searches and UCC filings and fees for post-closing UCC and judgment lien searches. In addition, Borrower shall pay all such fees associated with any amendments to the Loan Documents
following the Closing Date. 

        (b)   Borrower
also agrees to pay all charges and expenses incurred by Lender (including the fees and expenses of Lender's in-house and outside counsel) in
connection with the enforcement, protection, preservation, administration or monitoring of any right or claim of Lender, any of the Collateral, and the collection of any amounts due under the Loan
Documents. If Lender uses in-house legal counsel and/or auditors for any of these purposes, Borrower further agrees that its Obligations under the Loan Documents include reasonable charges
for such legal work commensurate with the fees that would otherwise be charged by outside legal counsel or audit firm (as the case may be) selected by Lender for the work performed. Notwithstanding
the foregoing, and provided no Event of Default has occurred, has been duly noticed by Lender to Borrower (if notice is required) and is continuing, Lender shall agree to limit fees charged for its
auditors and legal counsel in the circumstances described below as follows: 

        (i)    In
connection with audits conducted with respect to Collateral and Facilities subject to this Agreement as of the date hereof, Lender shall limit audit fees to
$20,000.00 in the aggregate per year, plus expenses. For each Facility added on or after the date hereof, this annual audit fee limitation shall be increased by $250, with the amount of audit fees
payable for the year in which the facility is added to be prorated based on the number of quarterly audits remaining in the year to be performed after the Facility's addition; 

        (ii)   in
connection with audits conducted with respect to the addition of proposed new Borrowers, new Facilities and new Collateral to this Agreement, Lender shall limit
audit fees to $2,500.00 per each 

30

 

new
Facility provided Borrower delivers all relevant books, records and other information required by Lender in its sole discretion to perform a desk review of such new Facility; and 

        (iii)  in
connection with legal services conducted with respect to the preparation of additional Loan Documents required for the addition of proposed new Borrowers, new
Facilities and new Collateral to this Agreement, Lender shall limit legal fees charged to Borrower to $2,500.00 per each new Facility provided: (A) Borrower delivers to Lender all relevant
books, records, corporate organizational documents, lease agreements, purchase agreements and other information required by Lender in its sole discretion to prepare the appropriate loan documentation,
UCC financing statements, estoppel certificates and other agreements and documents required to effectuate such amendment, (B) Lender has no need for the services of outside counsel,
(C) the Facility to be added is not the subject of any bankruptcy or insolvency proceeding; provided however that for any Facility to be added which is the subject of any bankruptcy or
insolvency proceeding, the legal fees charged to add such Facility shall not exceed $3,500.00 per Facility, (D) in Lender's reasonable opinion, no additional legal services are required for the
addition of the proposed new Facility beyond the preparation and negotiation of an amendment to the Note and Loan Agreement substantially in the form of the amendments previously entered into between
Borrower and Lender, the preparation and filing of UCC financing statements, the review of corporate documentation of the proposed new Borrower, and the preparation of intercreditor agreements and of
estoppel certificates, and (E) in Lender's reasonable opinion the proposed transaction is not complex or complicated. Lender agrees to use its best efforts to contain its legal costs for
transactions that do not fit the criteria described in this subparagraph (3). 

        (c)   Borrower
shall pay all taxes (other than taxes based upon or measured by Lender's income or revenues or any personal property tax), if any, in connection with the
issuance of the Note and the recording of the security documents therefor. The obligations of Borrower under this clause (c) shall survive the payment of Borrower's indebtedness under this
Agreement and the termination of this Agreement. 

        Section 9.2.
Entire Agreement; Amendments. This Agreement and the other Loan Documents constitute the full and entire understanding and agreement among the parties with regard to
their subject matter and supersede all prior written or oral agreements, understandings, representations and warranties made with respect thereto. No amendment, supplement or modification of this
Agreement nor any waiver of any provision thereof shall be made except in writing executed by the party against whom enforcement is sought. 

31

   
        Section 9.3. No Waiver; Cumulative Rights. No waiver by any party to this Agreement of any one or more defaults by the other party in the performance of any of the provisions of
this Agreement shall operate or be construed as a waiver of any future default or defaults, whether of a like or different nature. No failure or delay on the part of any party in exercising any right,
power or remedy under this Agreement shall operate as a waiver of such right, power or remedy nor shall any single or partial exercise of any such right, power or remedy preclude any other or further
exercise of such right, power or remedy or the exercise of any other right, power or remedy. The remedies provided for in this Agreement are cumulative and are not exclusive of any remedies that may
be available to any party to this Agreement at law, in equity or otherwise. 

        Section 9.4.
Notices. Any notice or other communication required or permitted under this Agreement shall be in writing and personally delivered, mailed by registered or certified
mail (return receipt requested and postage prepaid), sent by facsimile (with a confirming copy sent by regular mail), or sent by prepaid overnight courier service, and addressed to the relevant party
at its address set forth below, or at such other address as such party may, by written notice, designate as its address for purposes of notice under this Agreement: 

	(a)
	If
to Lender, at: 

General
Electric Capital Corporation

c/o GE Healthcare Financial Services

2 Bethesda Metro Center, Suite 600

Bethesda, Maryland 20814

Attention: General Counsel

Phone: (301) 961-1640

Facsimile: (301) 664-9866 

	(b)
	If
to Borrower, at: 

The
Ensign Group, Inc.

27101 Puerta Real, Suite 450

Mission Viejo, CA 92691

Attention: General Counsel

Phone: (949) 487-9500

Facsimile: (949) 540-3002 

	

	With
a copy to: 

The
Ensign Group, Inc.

27101 Puerta Real, Suite 450

Mission Viejo, CA 92691

Attention: Chief Financial Officer

Phone: (949) 487-9500

Facsimile: (949) 487-9400 

        If
mailed, notice shall be deemed to be given five (5) days after being sent, and if sent by personal delivery, telecopier or prepaid courier, notice shall be deemed to be given
when delivered. 

        Section 9.5.
Severability. If any term, covenant or condition of this Agreement, or the application of such term, covenant or condition to any party or circumstance shall be found
by a court of competent jurisdiction to be, to any extent, invalid or unenforceable, the remainder of this Agreement and the application of such term, covenant, or condition to parties or
circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, covenant or condition shall be valid and enforced to the fullest extent
permitted by law. Upon determination that any such term is invalid, illegal or unenforceable, Lender may, but is not obligated to, advance funds to Borrower under this Agreement until the parties to
this Agreement amend this Agreement so as to effect the original intent of the parties as closely as possible in a valid and enforceable manner. 

32

 

        Section 9.6.
Successors and Assigns. This Agreement, the Note, and the other Loan Documents shall be binding upon and inure to the benefit of Borrower and Lender and their
respective successors and assigns. Notwithstanding the foregoing, Borrower may not assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of
Lender, which may be withheld in its sole discretion. Lender may sell, assign, transfer, or participate any or all of its rights or obligations under this Agreement without notice to or consent of
Borrower. 

        Section 9.7.
Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute but
one instrument. 

        Section 9.8.
Interpretation. No provision of this Agreement or any other Loan Document shall be interpreted or construed against any party because that party or its legal
representative drafted that provision. The titles of the paragraphs of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. Any pronoun used
in this Agreement shall be deemed to include singular and plural and masculine, feminine and neuter gender as the case may be. The words "herein," "hereof," and "hereunder" shall be deemed to refer to
this entire Agreement, except as the context otherwise requires. 

        Section 9.9.
Survival of Terms. All covenants, agreements, representations and warranties made in this Agreement, any other Loan Document, and in any certificates and other
instruments delivered in connection with this Agreement shall be considered to have been relied upon by Lender and shall survive the making by Lender of the Loans contemplated by this Agreement and
the execution and delivery to Lender of the Note, and shall continue in full force and effect until all liabilities and obligations of Borrower to Lender are satisfied in full. 

        Section 9.10.
Release of Lender. Borrower releases Lender, its officers, employees, and agents, of and from any claims for loss or damage resulting from acts or conduct of any or
all of them, unless caused by Lender's recklessness, gross negligence, or willful misconduct. 

        Section 9.11.
Time. Whenever Borrower is required to make any payment or perform any act on a Saturday, Sunday, or a legal holiday under the laws of the State of Maryland (or
other jurisdiction where Borrower is required to make the payment or perform the act), the payment may be made or the act performed on the next Business Day. Time is of the essence in Borrower's
performance under this Agreement and all other Loan Documents. 

        Section 9.12.
Commissions. The transaction contemplated by this Agreement was brought about by Lender and Borrower acting as principals and without any brokers, agents, or finders
being the effective procuring cause. Borrower represents that it has not committed Lender to the payment of any brokerage fee, commission, or charge in connection with this transaction. If any such
claim is made on Lender by any broker, finder, or agent or other person, Borrower will indemnify, defend, and hold Lender harmless from and against the claim and will defend any action to recover on
that claim, at Borrower's cost and expense, including Lender's counsel fees. Borrower further agrees that until any such claim or demand is adjudicated in Lender's favor, the amount demanded will be
deemed a liability of Borrower under this Agreement, secured by the Collateral. 

        Section 9.13.
Third Parties. No rights are intended to be created under this Agreement or under any other Loan Document for the benefit of any third party donee, creditor, or
incidental beneficiary of Borrower. Nothing contained in this Agreement shall be construed as a delegation to Lender of
Borrower's duty of performance, including, without limitation, Borrower's duties under any account or contract in which Lender has a security interest. 

        Section 9.14.
Discharge of Borrower's Obligations. Lender, in its sole discretion, shall have the right at any time, and from time to time, without prior notice to Borrower if
Borrower fails to do so, to: (a) obtain insurance covering any of the Collateral as required under this Agreement; (b) pay for the performance of any of Borrower's obligations under this
Agreement; (c) discharge taxes, liens, 

33

 

security
interests, or other encumbrances at any time levied or placed on any of the Collateral in violation of this Agreement unless Borrower is in good faith with due diligence by appropriate
proceedings contesting those items; and (d) pay for the maintenance and preservation of any of the Collateral. Expenses and advances shall be added to the Loan, until reimbursed to Lender and
shall be secured by the Collateral. Any such payments and advances by Lender shall not be construed as a waiver by Lender of an Event of Default. 

        Section 9.15.
Information to Participants. Lender may divulge to any participant it may obtain in the Loan, or any portion of the Loan, all information, and furnish to such
participant copies of reports, financial statements, certificates, and documents obtained under any provision of this Agreement or any other Loan Document. 

        Section 9.16.
Indemnity. Borrower hereby agrees to indemnify and hold harmless Lender, its partners, officers, agents and employees (collectively, "Indemnitee") from and against
any liability, loss, cost, expense, claim, damage, suit, action or proceeding ever suffered or incurred by Lender (including reasonable attorneys' fees and expenses) arising from Borrower's failure to
observe, perform or discharge any of its covenants, obligations, agreements or duties under this Agreement, or from the breach of any of the representations or warranties contained in
Article IV of this Agreement. In addition, Borrower shall defend Indemnitee against and save it harmless from all claims of any Person with respect to the Collateral. Notwithstanding any
contrary provision in this Agreement, the obligation of Borrower under this Section 9.16 shall survive the payment in full of the Obligations and the termination of this Agreement. 

        SECTION
9.17. CHOICE OF LAW; CONSENT TO JURISDICTION. THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND, WITHOUT
REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS. IF ANY ACTION ARISING OUT OF THIS AGREEMENT OR THE NOTE IS COMMENCED BY LENDER IN THE STATE COURTS OF THE STATE OF MARYLAND OR IN
THE U.S. DISTRICT COURT FOR THE DISTRICT OF MARYLAND, BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH ACTION AND TO THE LAYING OF VENUE IN THE STATE OF MARYLAND. ANY PROCESS
IN ANY SUCH ACTION SHALL BE DULY SERVED IF MAILED BY REGISTERED MAIL, POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS DESCRIBED IN SECTION 9.4. 

        SECTION
9.18. WAIVER OF TRIAL BY JURY. BORROWER HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY
RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY BORROWER, AND THIS
WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS
AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES TO THIS AGREEMENT, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF BORROWER'S WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER,
BORROWER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER (INCLUDING LENDER'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO BORROWER THAT LENDER WILL NOT SEEK TO ENFORCE THIS WAIVER
OF RIGHT TO JURY TRIAL PROVISION. 

        SECTION
9.19. CONFESSION OF JUDGMENT. BORROWER AUTHORIZES ANY ATTORNEY ADMITTED TO PRACTICE BEFORE ANY COURT OF RECORD IN THE 

34

 

UNITED
STATES OR THE CLERK OF SUCH COURT TO APPEAR ON BEHALF OF BORROWER IN ANY COURT IN ONE OR MORE PROCEEDINGS, OR BEFORE ANY CLERK THEREOF OF PROTHONOTARY OR OTHER COURT OFFICIAL, AND TO CONFESS
JUDGMENT AGAINST BORROWER IN FAVOR OF LENDER IN THE FULL AMOUNT DUE ON THIS AGREEMENT (INCLUDING PRINCIPAL, ACCRUED INTEREST AND ANY AND ALL CHARGES, FEES AND COSTS) PLUS ATTORNEYS' FEES EQUAL TO
FIFTEEN PERCENT (15%) OF THE AMOUNT DUE, PLUS COURT COSTS, ALL WITHOUT PRIOR NOTICE OR OPPORTUNITY OF BORROWER FOR PRIOR HEARING. BORROWER AGREES AND CONSENTS THAT VENUE AND JURISDICTION SHALL BE
PROPER IN THE CIRCUIT COURT OF ANY COUNTY OF THE STATE OF MARYLAND OR OF BALTIMORE CITY, MARYLAND, OR IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND. BORROWER WAIVES THE BENEFIT OF
ANY AND EVERY STATUTE, ORDINANCE, OR RULE OF COURT WHICH MAY BE LAWFULLY WAIVED CONFERRING UPON BORROWER ANY RIGHT OR PRIVILEGE OF EXEMPTION, HOMESTEAD RIGHTS, STAY OF EXECUTION, OR SUPPLEMENTARY
PROCEEDINGS, OR OTHER RELIEF FROM THE ENFORCEMENT OR IMMEDIATE ENFORCEMENT OF A JUDGMENT OR RELATED PROCEEDINGS ON A JUDGMENT. THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER JUDGMENT AGAINST BORROWER
SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES THEREOF, OR BY ANY IMPERFECT EXERCISE THEREOF, AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO; SUCH AUTHORITY AND POWER MAY BE
EXERCISED ON ONE OR MORE OCCASIONS FROM TIME TO TIME, IN THE SAME OR DIFFERENT JURISDICTIONS, AS OFTEN AS LENDER SHALL DEEM NECESSARY, CONVENIENT, OR PROPER. 

        [SIGNATURES
APPEAR ON FOLLOWING PAGES] 

35

 

        IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first written above. 

	ATTEST/WITNESS:	 	LENDER:
	

 	

 	
 	

GENERAL ELECTRIC CAPITAL

CORPORATION, a Delaware corporation

By:
	
 By:	

/s/ STEPHANIE JENIFER
	
 	

By:	

/s/ JEFF ERHARDT

	
 Name:	

Stephanie Jenifer	
 	

Name:	

Jeff Erhardt
	Title:	Senior Closing Analyst	 	Title:	Authorized Signatory
	

 	

 	
 	

BORROWER:
	

 	

 	
 	

THE ENSIGN GROUP, INC.,

A Delaware corporation
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

ENSIGN HIGHLAND LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

ENSIGN WHITTIER WEST LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	 	 	 	 	 

36

 

	

ATTEST/WITNESS:	
 	

 	

 
	

 	

 	
 	

ENSIGN WHITTIER EAST LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

ENSIGN SANTA ROSA LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

ENSIGN PANORAMA LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

ENSIGN SABINO LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	 	 	 	 	 

37

 

	

ATTEST/WITNESS:	
 	

 	

 
	

 	

 	
 	

ENSIGN SAN DIMAS LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

ENSIGN MONTGOMERY LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

ENSIGN CLOVERDALE LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

ENSIGN PALM I LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	 	 	 	 	 

38

 

	

ATTEST/WITNESS:	
 	

 	

 
	

 	

 	
 	

ENSIGN SONOMA LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

ENSIGN WILLITS LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

ENSIGN PLEASANTON LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

24th STREET HEALTHCARE ASSOCIATES LLC

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	 	 	 	 	 

39

 

	

ATTEST/WITNESS:	
 	

 	

 
	

 	

 	
 	

GLENDALE HEALTHCARE ASSOCIATES LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

ATLANTIC MEMORIAL HEALTHCARE

ASSOCIATES, INC., a Nevada corporation
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

ROSE PARK HEALTHCARE ASSOCIATES INC.

a Nevada corporation
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

LEMON GROVE HEALTH ASSOCIATES LLC

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	 	 	 	 	 

40

 

	

ATTEST/WITNESS:	
 	

 	

 
	

 	

 	
 	

PRESIDIO HEALTH ASSOCIATES LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

BELL VILLA CARE ASSOCIATES LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

DOWNEY COMMUNITY CARE LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

COSTA VICTORIA HEALTHCARE LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	 	 	 	 	 

41

 

	

ATTEST/WITNESS:	
 	

 	

 
	

 	

 	
 	

WEST ESCONDIDO HEALTHCARE LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

REDBROOK HEALTHCARE ASSOCIATES LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

HB HEALTHCARE ASSOCIATES LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

NORTH MOUNTAIN HEALTHCARE LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	 	 	 	 	 

42

 

	

ATTEST/WITNESS:	
 	

 	

 
	

 	

 	
 	

PARK WAVERLY HEALTHCARE LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

SUNLAND HEALTH ASSOCIATES LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

VISTA WOOD HEALTH ASSOCIATES LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

CITY HEIGHTS HEALTH ASSOCIATES LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	 	 	 	 	 

43

 

	

ATTEST/WITNESS:	
 	

 	

 
	

 	

 	
 	

CLAREMONT FOOTHILLS HEALTH

ASSOCIATES LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

C STREET HEALTH ASSOCIATES LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President
	

 	

 	
 	

VICTORIA VENTURA HEALTH CARE LLC,

a Nevada limited liability company
	

 	

 	
 	

By:	

The Ensign Group, Inc.,

Its Sole Member
	

By:	

/s/ ALAN J. NORMAN
	
 	

By:	

/s/ CHRISTOPHER R. CHRISTENSEN

	

Name:	

Alan J. Norman	
 	

Name:	

Christopher R. Christensen
	Title:	Vice President	 	Title:	President

44

  

 
 

LIST of SCHEDULES    

	Schedule 1.39	 	—	 	Permitted Liens
	Schedule 4.1	 	—	 	Subsidiaries
	Schedule 4.5	 	—	 	Litigation
	Schedule 4.13	 	—	 	Non-Compliance with Law
	Schedule 4.14	 	—	 	Environmental Matters
	Schedule 4.15	 	—	 	Places of Business with patient census
	Schedule 4.16	 	—	 	Licenses
	Schedule 4.17	 	—	 	Stock Ownership
	Schedule 4.19	 	—	 	Borrowings and Guarantees
	Schedule 4.20	 	—	 	Business Interruptions
	Schedule 4.21	 	—	 	Trade Names
	Schedule 4.22	 	—	 	Joint Ventures
	Schedule 6.21	 	—	 	Officer's Certificate
	Schedule 7.1	 	—	 	Account Payable in Excess of 120 Days
	Schedule 7.12	 	—	 	Transactions with Affiliates

45

 
 
 

EXHIBIT A
  
    Entities Comprising Borrower    

	

1.	
 	

THE ENSIGN GROUP, INC.
	2.	 	ENSIGN HIGHLAND LLC,
	3.	 	ENSIGN WHITTIER WEST LLC
	4.	 	ENSIGN WHITTIER EAST LLC
	5.	 	ENSIGN SANTA ROSA LLC
	6.	 	ENSIGN PANORAMA LLC
	7.	 	ENSIGN SABINO LLC
	8.	 	ENSIGN SAN DIMAS LLC
	9.	 	ENSIGN MONTGOMERY LLC
	10.	 	ENSIGN PALM I LLC
	11.	 	ENSIGN SONOMA LLC
	12.	 	ENSIGN CLOVERDALE LLC
	13.	 	ENSIGN WILLITS LLC
	14.	 	ENSIGN PLEASANTON LLC
	15.	 	24th STREET HEALTHCARE ASSOCIATES LLC
	16.	 	GLENDALE HEALTHCARE ASSOCIATES LLC
	17.	 	ATLANTIC MEMORIAL HEALTHCARE ASSOCIATES, INC.
	18.	 	ROSE PARK HEALTHCARE ASSOCIATES, INC.
	19.	 	LEMON GROVE HEALTH ASSOCIATES LLC
	20.	 	PRESIDIO HEALTH ASSOCIATES LLC
	21.	 	BELL VILLA CARE ASSOCIATES LLC
	22.	 	DOWNEY COMMUNITY CARE LLC
	23.	 	COSTA VICTORIA HEALTHCARE LLC
	24.	 	WEST ESCONDIDO HEALTHCARE LLC
	25.	 	REDBROOK HEALTHCARE ASSOCIATES LLC
	26.	 	HB HEALTHCARE ASSOCIATES LLC
	27.	 	NORTH MOUNTAIN HEALTHCARE LLC
	28.	 	PARK WAVERLY HEALTHCARE LLC
	29.	 	SUNLAND HEALTH ASSOCIATES LLC
	30.	 	VISTA WOODS HEALTH ASSOCIATES LLC
	31.	 	CITY HEIGHTS HEALTH ASSOCIATES LLC
	32.	 	CLAREMONT FOOTHILLS HEALTH ASSOCIATES LLC
	33.	 	C STREET HEALTH ASSOCIATES LLC
	34.	 	VICTORIA VENTURA HEALTHCARE LLC

46

  

 
 

EXHIBIT A
  
    Updated Schedules to Loan Agreement
  (Amendment 13)    

	Sched
 
	 	Description
 
	 	Matters Covered
 

	

1.38	
 	

Permitted Liens:	
 	

(i	
)	

Landlord's liens, both statutory and contractual, contained in or created by the various leases, security agreement, pledges and related documentation covering the locations described in Schedule 4.15, but only to the extent that such liens are
contractually subordinated to Lender's liens and security interests pursuant to agreements between Lender and such landlords that are satisfactory to Lender
	 	 	 	 	 	 	 

47

 

	

 	
 	

 	
 	

(ii	
)	

(a)    The lien of the Deed of Trust and Assignment of Rents by and between Ensign Southland LLC as Trustor and Continental Wingate Associates, Inc. as Beneficiary, affecting the California Property and recorded January 30, 2001
at Document No. 01-0161647 in the office of the Los Angeles County Recorder, securing indebtedness in the original principal amount of $7,455,100, and (b) the lien of the Leasehold Deed of Trust with Assignment of Rents as Additional Security by and
between Ensign Santa Rosa LLC as Trustor and Berryman Health, Inc. as Beneficiary, affecting the leasehold for Summerfield Convalescent Hospital and recorded September 22, 2000 at Document No. 2000096596 in the office of the Sonoma County Recorder,
securing seller carryback indebtedness in the original principal amount of $252,413.44, as well as the corresponding Security Agreement dated July 1, 2000 covering the same obligations and assets and the accompanying UCC-1 filed September 11, 2000 at
Document No. 0026260342 in the office of the California Secretary of State; and (c) the lien of the Deed of Trust and Assignment of Rents by and between Sky Holdings AZ LLC as Trustor and GCI Colter, Inc. as Beneficiary, affecting the Desert Sky
Facility located at 5125 N. 58th Avenue, Glendale, Arizona, and recorded March 25, 2002 at Document No. 2002-0298119 in the office of the Maricopa County Recorder, securing indebtedness in the original principal amount of $1,649,265.31 (to
be removed concurrently with the execution of this Amendment); (d) the lien of the Deed of Trust and Assignment of Rents by and between Terrace Holdings AZ LLC as Trustor and Living Centers-Rocky Mountain, Inc. as Beneficiary, affecting the Desert
Terrace Facility located at 2509 N. 24th Street, Phoenix, Arizona, and recorded March 25, 2002 at Document No. 2002-0298116 in the office of the Maricopa County Recorder, securing indebtedness in the original principal amount of $588,790.41(to be
removed concurrently with the execution of this Amendment); and (e) the lien of the Deed of Trust and Security Agreement by and between The Mary Jane Lindsay Living Trust, Mary Jane Lindsay, Trustee and Northern Life Insurance Company, affecting the
Catalina Facility located at 2611 North Warren Avenue, Tucson, Arizona, as recorded March 31, 1995 in Pima County Recorder Docket No. 10012 at Page 870, as assumed by Presidio Health Associates LLC by Assignment, Assumption and Amendatory Agreement
recorded May 16, 2003 at Pima County Recorder Doc. No. 03-            .
	

 	
 	

 	
 	

(iii	
)	

Liens permitted to be created by Sections 6.23 and 7.1(d) of the Loan Agreement

48

 

	

4.1	
 	

Subsidiaries	
 	

Original Borrower is the sole Member of Ensign Highland LLC, Highland Healthcare LLC, Ensign Whittier East LLC, Ensign Whittier West LLC, Ensign Santa Rosa LLC, Ensign Panorama LLC, Ensign Sabino LLC, Ensign San Dimas LLC (formerly Ensign Arden LLC),
Ensign Montgomery LLC (formerly Ensign Jackson LLC), Ensign Southland LLC, Southland Management LLC, Ensign Bellflower LLC, Ensign Palm I LLC, Ensign Cloverdale LLC, Ensign Sonoma LLC, Ensign Willits LLC, Ensign Pleasanton LLC, Sky Holdings AZ LLC,
Glendale Healthcare Associates LLC, Terrace Holdings AZ LLC, 24th Street Healthcare Associates LLC, Manor Park Healthcare LLC, Moenium Holdings LLC, Brown Road Senior Housing LLC, Greenfields Assisted Living LLC, Lemon Grove Health Associates LLC,
Rillito Holdings LLC, Presidio Health Associates LLC, Bell Villa Care Associates LLC, Downey Community Care LLC, Costa Victoria Healthcare LLC, West Escondido Healthcare LLC, Redbrook Healthcare Associates LLC, HB Healthcare Associates LLC, Adipiscor
LLC, North Mountain Healthcare LLC, Park Waverly Healthcare LLC, Sunland Health Associates LLC, Permunitum LLC, Vista Woods Health Associates LLC, City Heights Health Associates LLC, Claremont Foothills Health Associates LLC, C Street Health
Associates LLC, and Victoria Ventura Healthcare LLC, and the sole shareholder of Atlantic Memorial Healthcare Associates, Inc., Rose Park Healthcare Associates, Inc., Ensign Facility Services, Inc., Salado Creek Senior Care, Inc., Wellington
Healthcare Inc., McAllen Community Healthcare, Inc. and Northern Oaks Healthcare, Inc all of which are currently active and doing business. Original Borrower is also the sole Member of Ensign Bellflower LLC, Ensign Napa LLC, Mountainview
Communitycare LLC, Walnut Grove Campuscare LLC, Ramon Healthcare Associates, Inc., East Escondido Health Associates LLC, Meadowbrook Health Associates LLC, and Valley Health Holdings LLC, all entities formed by Original Borrower to facilitate
concluded, failed, pending or future transactions.
	

4.5	
 	

Pending or Threatened Litigation:	
 	

There is currently no pending or threatened litigation which the Borrower believes would materially threaten Borrower's viability or ability to repay the Obligations; further, all claims pending or threatened against the Borrower are either covered
by insurance or, to the extent they are not, Borrower believes it has accrued adequate reserves in connection therewith.
	

4.8	
 	

Defaults:	
 	

Relating to the representations in Section 4.8 of the Loan Agreement, and without admitting any default, reference is made to Schedule 4.5 above.
	 	 	 	 	 

49

 

	

4.13	
 	

Non-compliance with Law:	
 	

To the best of the actual knowledge of the officers of Borrower, there does not currently exist any material non-compliance with applicable laws.
	

4.14	
 	

Environmental Matters:	
 	

To the best of the actual knowledge of the officers of original Borrower, there are no material adverse environmental matters associated with any of the Texas, Arizona, California or Washington properties.
	

4.15	
 	

Places of Business with patient census:	
 	

See consolidated Schedule 4.15(a)/14.16 and Schedule 4.15(b) at the end of this Exhibit A.
	

4.16	
 	

Licenses:	
 	

The entity which currently holds or possesses the right to use the operating license for each of the facilities is as shown in consolidated Schedule 4.15(a)/14.16.
	

4.17	
 	

Stock Ownership:	
 	

See separate schedule at the end of this Exhibit A.
	

4.19	
 	

Borrowings:	
 	

Other than normal trade creditors, some or all of the entities comprising the Borrower are currently indebted to the following creditors in the following manners and amounts:

	 	 	 	 	 	 	 

50

 

	 	 	 	 	a.	 	General Electric Capital Corporation; $20,000,000 Revolving Credit Facility for working capital.
	 	 	 	 	b.	 	General Electric Capital Corporation; $12,400,000 Arizona Term Loan secured by Deeds of Trust encumbering (i) Ensign Highland LLC's Highland Manor facility in Phoenix, Arizona, (ii) Sky Holdings AZ LLC's Desert Sky Health
Center & Assisted living in Glendale, Arizona, and (iii) Terrace Holdings AZ LLC's Desert Terrace Nursing & Rehabilitation Center in Phoenix, Arizona. (to be executed, delivered and recorded concurrently with the execution and delivery of the
within Amendment to the Original Loan Agreement).
	 	 	 	 	c.	 	Continental Wingate Associates, Inc.; $7,455,100 HUD-insured Loan secured by a Deed of Trust and Assignment of Rents on Ensign Southland LLC's Southland Care Center & Home facility, Norwalk,
 California.
	 	 	 	 	e.	 	Berryman Health, Inc.; $252,413.44 Carryback Promissory Note secured by Leasehold Deed of Trust and Security Agreement and Financing Statement on Sununerfield Convalescent Hospital Lease.
	 	 	 	 	f.	 	Reliastar Life Insurance Company, as successor by merger to Northern Life Insurance Company; $2,051,824.69 secured loan balance upon assumption of Deed of Trust and Security Agreement encumbering Rillito Holdings LLC's
Catalina Care Center in Tucson, Arizona.
	 	 	 	 	g.	 	Larry Santora as Successor Trustee of the Mary Jane Lindsay Living Trust darted July 26, 1993; $331,061.76 Carryback Promissory Note secured by second-position Deed of Trust on Rillito Holdings LLC's Catalina Care Center
in Tucson, Arizona.

	 	 	 	 	 

51

 

	

4.20	
 	

Labor Disputes:	
 	

A union organizing election was held at Sonoma Healthcare Center in May, 2002 at which a majority of the approximately 60 employees classified as Housekeeping, Laundry and CNAs voted to have union representation from SEIU Local 250. Due to
irregularities in the voting procedures, the results of the election were appealed to the National Labor Relations Board by the facility. The appeal is pending. Since the appeal, the SEIU has published statements critical of Sonoma Healthcare Center
and The Ensign Group, has organized two one-day pickets at the facility and has filed a §17200 suit against the facility, all in an effort to coerce the facility into waiving its appeal rights. In addition, it has caused four employees to file
multi-count unfair labor practice charges against the facility, but all charges except one that the facility settled by merely posting a notice were either dropped by the employees at the NLRB's behest or resulted in findings in the facility's favor.
Operations at the facility and throughout the company have not been materially disrupted by union issues at any time since the original organizing election.
	

4.22	
 	

Joint Venture:	
 	

None
	 	 	 	 	 

52

 

	

7.12	
 	

Transactions with Affiliates:	
 	

Formation and capitalization of, and assignment of Purchase and Sale Agreement for Highland Manor, Phoenix, Arizona, to Ensign Highland LLC, a Nevada limited liability company, of which Original Borrower is the sole Member; Lease between Ensign
Highland LLC as Landlord and Highland Healthcare LLC as Tenant for Highland Manor; formation and capitalization of Ensign Southland LLC, and the conveyance of Southland Care Center and Home thereto in connection with the HUD-insured refinancing of
that facility; Lease between Ensign Southland LLC as Landlord and Southland Management LLC as Tenant for Southland Care Center & Home; Lease between Terrace Holdings AZ LLC as Landlord and 24th Street Healthcare Associates LLC as Tenant for
Desert Terrace Nursing and Rehabilitation Center; Lease between Sky Holdings AZ LLC as Landlord and Glendale Healthcare Associates LLC as Tenant for Desert Sky Health Center & Assisted Living; Lease between Rillito Holdings LLC as Landlord and
Presidio Health Associates LLC as Tenant for Catalina Care Center; Sublease between Moenium Holdings LLC as Sublandlord and Bell Villa Care Associates LLC as Subtenant for Rose Villa Healthcare Center; Sublease between Moenium Holdings LLC as
Sublandlord and Downey Community Care LLC as Subtenant for Brookfield Healthcare Center; Sublease between Adipiscor LLC as Sublandlord and North Mountain Healthcare LLC as Subtenant for Coronado Care Center; Sublease between Adipiscor LLC as
Sublandlord and Park Waverly Healthcare LLC as Subtenant for Waverly Park Healthcare Center; Sublease between Adipiscor LLC as Sublandlord and Sunland Health Associates LLC as Subtenant for East Mesa Care Center; Sublease between Permunitum LLC as
Sublandlord and Vista Woods Health Associates LLC as Subtenant for Vista Knoll Specialized Care Center; Sublease between Permuniturn LLC as Sublandlord and City Heights Health Associates LLC as Subtenant for Arroyo Vista Healthcare Center; Sublease
between Permunitum LLC as Sublandlord and Claremont Foothills Health Associates LLC as Subtenant for Claremont Care Center
	

 	
 	

 	
 	

——Schedules 4.15(a)14.16, 4.15(6) and 4.17 follow — —

53

 

        Exhibit A—Updated
Schedules to Loan Agreement 

        March 8,
2004 

 
 

Amendment (No. 13) & Restatement to Loan and Security Agreement
  Consolidated Schedule 4.15(a)/4.16    

 
 

Places of Business with Trade Names, Licensee and Record Owner Data
  (as of March 1, 2004)
  (See separate Schedule 4.15(b) for Census Data)    

	

 	
 	

 
	The Ensign Group, Inc.

Ensign Facility Services, Inc.

27101 Puerta Real, Suite 450

Mission Viejo, CA 92691

Record Owner: Mission Ridge Associates, L.L.C.	 	Royal Court Healthcare

(fka Berryman Health Whittier West)

12385 E. Washington Blvd.

Whittier, CA 90606

Licensee: Ensign Whittier West LLC

Record Owner: Whittier West LLC
	

Southland Care Center and Home

11701 Studebaker Road

Norwalk, CA 90659

Licensee: Southland Management LLC

Record Owner: Ensign Southland LLC	
 	

Whittier Hills Healthcare Center

(fka Berrryman Health Whittier East)

10426 Bogardus Avenue

Whittier, CA 90603

Licensee: Ensign Whittier East LLC

Record Owner: Whittier East, L.L.C.
	

The Village Care Center

615 North Ware Road

McAllen, TX 78501

Licensee: McAllen Community Healthcare, Inc.

Record Owner: James F. Cotter	
 	

Summerfield Healthcare Center

1280 Summerfield Road

Santa Rosa, CA 95405

Licensee: Ensign Santa Rosa LLC

Record Owner: Summerfield Development Co.
	

Wellington Place Healthcare Center

(fka Camlu Care Center Temple)

1802 South 31st Street

Temple, TX 76504

Licensee: Wellington Healthcare, Inc.

Record Owner: James F. Cotter	
 	

Salado Creek Living & Rehab Center

(fka Camlu Care Center San Antonio)

603 Corrine

San Antonio, TX 78218

Licensee: Salado Creek Senior Care, Inc.

Record Owner: James F. Cotter
	

Panorama Gardens

9541 Van Nuys Boulevard

Panorama City, CA 91402

Licensee: Ensign Panorama LLC

Vannovi Properties, LLC	
 	

Sabino Canyon Rehab & Care Center

5830 E. Pima Street

Tucson, AZ 85712

Licensee: Ensign Sabino LLC Record

Owner: Tucson-Cal Associates, LLC
	

Northern Oaks Nursing and Rehab Center

2722 Old Anson Road

Abilene, TX 79603

Licensee: Northern Oaks Healthcare, Inc.

Record Owner: James F. Cotter	
 	

Arbor Glen Care & Living Center

(fka Glendora Care & Living Center)

1130 East Arrow Highway

Glendora, CA 91740

Licensee: Ensign San Dimas LLC

Record Owner: Health Care Investors III
	 	 	 

54

 

	

Park Manor Convalescent Center

1710 Plaza Way

Walla Walla, Washington 99362

Licensee: Manor Park Healthcare LLC

Record Owner: Health Care Property Investors, Inc.	
 	

Park View Gardens at Montgomery

3571 Montgomery Drive

Santa Rosa, CA 95405

Licensee: Ensign Montgomery LLC

Record Owner: Health Care REIT, Inc.
	

Highland Manor Health & Rehab Center

4635 N. 14th Street

Phoenix, AZ 85014

Licensee: Highland Healthcare LLC

Record Owner: Ensign Highland LLC	
 	

Premier Care & Rehabilitation Center

2990 East Ramon Road

Palm Springs, CA 92262

Licensee: Ensign Palm I LLC

Record Owner: Coachella House, Inc.
	

Northbrook Healthcare Center

(fka Willits Healthcare Center)

64 Northbrook Way

Willits, CA 95490

Licensee; Ensign Willits LLC

Record Owner: James F. Cotter	
 	

Cloverdale Healthcare Center

300 Cherry Creek Road

Cloverdale, CA 95425

Licensee: Ensign Cloverdale LLC

Record Owner: James F. Cotter
	

Sonoma Healthcare Center

1250 Broadway Sonoma, CA 95476

Licensee: Ensign Sonoma LLC

Record Owner:James F. Cotter	
 	

Ukiah Convalescent Hospital

1349 South Dora

Ukiah, CA 95482

Licensee: Berryman Health, Inc.; Ensign Pleasanton LLC (pending)

Record Owner: Ukiah SNF, LLC
	

Desert Sky Health & Assisted Living Center

5125 N. 58th Avenue

Glendale, AZ 85301

Licensee: Glendale Healthcare Associates LLC

Record Owner: Sky Holdings AZ LLC	
 	

Desert Terrace Nursing and Rehab. Center

2409 N. 24th Street

]Phoenix, AZ 85008

Licensee: 24th Street Healthcare Associates LLC

Record Owner: Terrace Holdings AZ LLC
	

Atlantic Memorial Healthcare Center

(fka Akin's Post Acute Rehab Hospital)

2750 Atlantic Avenue

Long Beach, CA 90806

Lic'e: Atlantic Memorial Healthcare Associates, Inc.

Record Owner: RMA Land, LLC	
 	

Shoreline Healthcare Center

(fka Eastwood Convalescent Hospital)

4029 East Anaheim Street

Long Beach, CA 90804

Licensee: Rose Park Healthcare Associates, Inc.

Record Owner: Akin Investments, Inc.
	

Catalina Care Center

2611 North Warren Avenue

Tucson, AZ 85719

Licensee: Presidio Health Associates LLC

Record Owner: Presidio Health Associates LLC	
 	

Lemon Grove Care & Rehab Center

8351 Broadway

Lemon Grove, CA 91945

Licensee: Lemon Grove Health Associates LLC

Record Owner: MCS PGCH LLC et al
	

Rose Villa Healthcare Center

9028 Rose Street

Bellflower, CA 90706

Licensee: Bell Villa Care Associates LLC

Record Owner: Healthcare Investors, III	
 	

Brookfield Care & Rehab Center

9300 Telegraph Rd.

Downey CA 90240

Licensee: Downey Community Care LLC

Record Owner: Healthcare Investors, III
	 	 	 

55

 

	

Victoria Healthcare Center

340 Victoria Street

Costa Mesa, CA 92627

Licensee: Costa Victoria Healthcare LLC

Record Owner: Eugene Woods, et al	
 	

Palomar Vista Healthcare Center

201 North Fig Street

Escondido, CA 92025

Licensee: West Escondido Healthcare LLC

Record Owner: Neale A. Perkins
	

Brookside Healthcare Center

105 Terracina Blvd.

Redlands, CA 92373

Licensee: Redbrook Healthcare Associates LLC

Record Owner: James F. Cotter	
 	

Sea Cliff Healthcare Center

18811 Florida Street

Huntington Beach, CA 92648

Licensee: HB Healthcare Associates LLC

Record Owner: Huntington Beach Convalescent Hospital Asset Corporation
	

Coronado Care Center

11411 N. 19th Avenue

Phoenix, AZ 85029

Licensee: North Mountain Healthcare LLC

Record Owner: Coronado Corporation	
 	

East Mesa Care Center

51 South 48th Street

Mesa, AZ 85206

Licensee: Sunland Health Associates LLC

Record Owner: LTC Partners VI, L.P.
	

Waverly Park Healthcare Center

2001 N. Park Avenue

Tucson, AZ 85719

Licensee: Park Waverly Healthcare LLC

Record Owner: Park Villa Corporation	
 	

Vista Knoll Specialized Care Center

2000 Westwood Road

Vista, CA 92083

Licensee: Vista Woods Health Associates LLC

Record Owner: OHI Asset (CA), LLC
	

Arroyo Vista Healthcare Center

3022 45th Street

San Diego, CA 92105

Licensee: City Heights Health Associates LLC

Record Owner: OHI Asset (CA), LLC	
 	

Claremont Care Center

219 East Foothill Boulevard

Pomona, CA 91768

Licensee: Claremont Foothills Health Associates LLC

Record Owner: OHI Asset (CA), LLC
	

Glenwood Care Center

1300 North C Street

Oxnard, CA 93030

Licensee: C Street Health Associates LLC

Record Owner: Oxnard Investments, L.P.	
 	

Victoria Care Center

5445 Everglades Street

Ventura, CA 93003

Licensee: Victoria Ventura Healthcare LLC

Record Owner: SHP Lexington, LLC

56

  

 
 

EXHIBIT B
  
    Letters of Credit    

        As
used herein, the following terms have the following meanings: 

        "Beneficiary
"means, collectively in the singular, the Person or Persons to whom a Letter of Credit is issued or who may have rights to submit a Draft in respect thereof. 

        "Draft"
means any draft (sight or time), receipt, acceptance, cable or other written demand for payment upon a Letter of Credit. 

        "Issuing
Party" means the Person issuing a Letter of Credit, whether it be Lender or another Person. 

        "Letter
of Credit" or "Letters of Credit" means any and all documentary or standby letters of credit issued at the request and for the account of Borrower for which Lender has incurred
Letter of Credit Obligations. 

        "Letter
of Credit Obligations" means all outstanding obligations (including all duty, freight, taxes, costs, insurance and any other charges and expenses) incurred by Lender, whether
direct or indirect, contingent or otherwise, due or not due, in connection with the issuance, negotiation, acceptance, amendment, transfer, payment and/or guarantee, by Lender or the Issuing Party, of
Letters of Credit, all as further set forth in this Exhibit B. 

        l.      The
notice to be provided to Lender requesting that Lender incur Letter of Credit Obligations shall be in the form of a Letter of Credit application in the form
customarily employed by Lender and the Issuing Party, together with a written request by Borrower and the Issuing Party that Lender approve Borrower's application. Approval by Lender in the written
form agreed upon between Lender and the Issuing Party (a) will authorize the Issuing Party to issue the requested Letter of Credit in the form requested or approved by Beneficiary and approved
by Borrower, Lender and Issuing Party, and (b) will conclusively establish the existence of the Letter of Credit Obligation as of the date of such approval. 

        2.     In
the event that Lender shall make any payment on or pursuant to any Letter of Credit Obligation, Borrower shall be unconditionally obligated to reimburse Lender
therefor, and such payment shall then be deemed to constitute a Revolving Credit Loan. For purposes of computing interest under Section 2.2, a Revolving Credit Loan made in satisfaction of a
Letter of Credit Obligation shall be deemed to have been made as of the earliest to occur of (a) the date on which the Issuing Party makes the related payment under the underlying Letter of
Credit, or (b) the date Lender makes any payment or other accommodation in respect of a Letter of Credit Obligation. Borrower's reimbursement obligations under this paragraph, and all of
Borrower's other obligations under this Exhibit B, shall be considered part of the Obligations defined in this Agreement. If an Event of Default shall occur under this Agreement, or if the
Obligations shall be declared to be immediately due and payable pursuant to any provision of this Agreement, then all contingent liabilities of Borrower with respect to Letter of Credit Obligations
shall also be deemed immediately due and payable. Borrower's Obligations to Lender with respect to any Letter of Credit or Letter of Credit Obligation shall be evidenced by Lender's records and shall
be absolute, unconditional and irrevocable. 

        4.     In
the event that any Letter of Credit Obligations, whether or not then due or payable, shall for any reason be outstanding on any Maturity Date, Borrower will either
(a) cause the underlying Letter of Credit to be returned and canceled and each corresponding Letter of Credit Obligation to be terminated, or (b) pay to Lender, in immediately available
funds, an amount equal to 105% of the maximum amount then available to be drawn under all Letters of Credit not so returned and canceled to be held by Lender as cash collateral in an account under the
exclusive dominion and control of Lender (a "Cash Collateral Account"). 

57

 

        5.     In
the event that Lender shall incur any Letter of Credit Obligations, Borrower agrees to pay the Letter of Credit Fee to Lender as compensation to Lender for incurring
such Letter of Credit Obligations. In addition to the Letter of Credit Fee, Borrower hereby agrees to pay to or reimburse Lender for, on demand, any and all commissions and charges of, and any and all
fees (including any per annum fees), costs and expenses incurred by, Lender (or of the Issuing Party to the extent Lender is obligated to reimburse the Issuing Party therefor) and the other
indemnified Parties (as defined below) in connection with the issuance, negotiation, acceptance, amendment, transfer and payment of the Letter of Credit or otherwise payable pursuant to the
application and related documentation under which the Letter of Credit is issued. The Letter of Credit Fee for each Period shall be deemed accrued and fully earned upon the commencement of each Period
(the first such Period to commence on the date of issuance of a Letter of Credit or incurrence by Lender of any Letter of Credit Obligation, and each Period thereafter to commence on each annual
anniversary thereof), shall be payable in full on the first date of each such Period, and shall be non-refundable when paid; provided, however, that upon any subsequent increase in the
Letter of Credit Fee as provided herein, the increased amount shall be and become due and payable as it accrues. Borrower hereby agrees that the Letter of Credit Fee and any and all other amounts
required to be paid or reimbursed by Borrower under this Exhibit B may be paid using the proceeds of Revolving Credit Loans made under this Agreement, and Borrower hereby authorizes Lender to
deduct the Letter of Credit Fee and any and all other such amounts from the proceeds of any Revolving Credit Loans made by Lender to Borrower hereunder. 

        6.     If
the Issuing Party honors any Draft under a Letter of Credit and Borrower fails to reimburse Lender in accordance with the terms of this Agreement, Lender may assert
its right of subrogation under applicable law, whether Lender's or Issuing Party's honoring of such Draft satisfies all or only part of the underlying obligation. Borrower shall, on reasonable notice,
cooperate with Lender and the Issuing Party in the assertion of the Borrower's rights against the Beneficiary, the Beneficiary's rights against the Borrower and any other rights that Lender or the
Issuing Party may have by subrogation or assignment. Such cooperation shall include, without limitation, the prompt return of all drafts, documents, instruments and statements in Borrower's possession
that were presented by or on behalf of the Beneficiary in connection with any Draft. 

        7.     Borrower
agrees to reimburse Lender and its directors, employees, officers, agents, Affiliates, subcontractors and servicers (collectively, the "Indemnified Parties")
upon demand for and to indemnify and hold the Indemnified Parties harmless from and against any and all claims, liabilities, losses, costs and expenses including those more specifically identified
below (collectively, "Indemnified Liabilities"), including attorneys' fees and disbursements, in any case incurred or suffered by any Indemnified Party in connection with a Letter of Credit or the
provisions of this Exhibit B. Such Indemnified Liabilities shall include, but not be limited to, all such Indemnified Liabilities incurred or suffered by the Indemnified Parties in connection
with (A) Lender's or the Issuing Party's exercise of any right or remedy granted to it under a Letter of Credit or the provisions of this Exhibit, (B) any claim and the prosecution or
defense thereof arising out of or in any way connected with a Letter of Credit or this Exhibit B, including, without limitation, as a result of any act of or omission by a Beneficiary, and
(C) any of the events or circumstances described in this Exhibit B, including any defense by Lender or the Issuing Party in an action in which Borrower obtains an injunction against
presentation or honor of any Draft. 

        8.     Borrower
will promptly examine a copy of each Letter of Credit (and any proposed amendments thereto) sent to Borrower, as well as all other instruments and documents
delivered to Borrower from time to time in connection with the Letter of Credit, and, in the event Borrower has any claim of non-compliance with the instructions or of any discrepancy or
other irregularity or any objection to any action taken or proposed to be taken by Lender or the Issuing Party with respect to any Letter of Credit, Borrower will notify Lender thereof in writing
within three (3) Business Days after its receipt of a copy of the Letter of Credit, any amendments thereto, or such instruments or 

58

 

documents
or notice of any such proposed action, and Borrower will conclusively be deemed to have waived any such claim against the Indemnified Parties, unless such notice is given as aforesaid. This
section is intended to substitute three (3) Business Days for the "not unreasonable time period" set forth in Rule 5.09 of ISP 98 (as defined below). 

        9.     The
obligations of Borrower under this Exhibit B shall be unconditional and irrevocable and shall be paid under all circumstances strictly in accordance with the
terms of this Agreement notwithstanding any fact, event or circumstance described in this Section 9. Neither Lender nor any other Indemnified Party shall be responsible for, and neither
Lender's powers and rights hereunder nor Borrower's obligations shall be affected by: 

        (i)    any
act or omission pursuant to Borrower's instructions; 

        (ii)   any
other act or omission of any Indemnified Party or the Issuing Party other than any those arising from its or their gross negligence or willful misconduct; 

        (iii)  the
validity, accuracy or genuineness of Drafts, documents or required statements, even if such Drafts, documents or statements should in fact prove to be in any or
all respects invalid, inaccurate, fraudulent or forged (and notwithstanding that Borrower shall have notified Lender or the Issuing Party thereof); 

        (iv)  failure
of any Draft to bear any reference or adequate reference to the Letter of Credit; 

        (v)   errors,
omissions, interruptions or delays in transmission of delivery of any messages however sent and whether or not in code or otherwise; 

        (vi)  any
act, default, omission, insolvency or failure in business of any other person (including any agent, subcontractor or employee) or any consequences arising from
causes beyond Lender's control; 

        (vii) any
acts or omissions of any Beneficiary of the Letter of Credit or transferee of the Letter of Credit, if transferable; 

        (viii) any
act or omission of Lender or the Issuing Party required or permitted under any (1) law or practice to which the Letter of Credit is subject (including ISP
98), (2) applicable order, ruling or decree of any court, arbitrator or governmental agency, (3) published statement or interpretation on a matter of law or practice (including ISP 98); 

        (ix)  honor
or other recognition of a presentation or demand that includes forged or fraudulent documents or that is otherwise affected by the fraudulent, bad faith, or
illegal conduct of the Beneficiary or other person (excluding Lender's employees), including payment to a person who forges the signature of a Beneficiary or the signature of an assignee of a Letter
of Credit's proceeds; 

        (x)   honor
of a presentation without regard to any nondocumentary condition(s) in the Letter of Credit, regardless of whether Rule 4.11 of ISP 98 applies; 

        (xi)  dishonor
of any presentation that does not strictly comply with the terms of the applicable Letter of Credit or that is fraudulent, forged or otherwise not entitled to
be honored; 

        (xii) the
lack of validity or enforceability of the Letter of Credit; 

        (xiii) any
amendment to waiver of or any consent or departure from all or any of the provisions of the Letter of Credit or any Loan Document; 

        (xiv) the
existence of any claim, set-off, defense or other right which Borrower, its Affiliates or any other Person may at any time have against any beneficiary
of the Letter of Credit, Lender, the Issuing Party or any other Person, whether in connection with this Agreement, any other Loan Document or any other related or unrelated agreements or transactions;
or 

59

 

        (xv) any
other act or omission to act or delay of any kind of Lender, the Issuing Party or any other Person or any other event or circumstance whatsoever that might, but for
the provisions of this paragraph, constitute a legal or equitable discharge of Borrower's obligation's under this Agreement or any other Loan Document. 

        Without
limiting the generality of the foregoing, Lender and the Issuing Party may (x) act in reliance on any oral, telephone, telegraphic, electronic, facsimile or written
request, notice, or instruction believed in good faith to be from or have been authorized by the Borrower, (y) receive, accept or pay as complying with the terms of a Letter of Credit any
Drafts or other documents, otherwise in order, which are signed by or issued to any person or entity acting as the representative of, or in the place of, the party in whose name such Letter of Credit
provides that any Drafts or other documents should be drawn or issued and (z) waive any stipulation that the bank nominated in the applicable Letter of Credit shall accept or pay the Drafts,
and Lender may then accept presentations of Drafts and documents for payment directly. It is understood and agreed by Borrower that Lender and the Issuing Parry may accept documents that appear on
their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. As between Borrower and any Indemnified Party, Borrower assumes
all risks of the acts and omissions of, or misuse of the Letter of Credit by, the Beneficiary thereof. Borrower agrees that in any action now or hereafter arising from an alleged breach, under this
Agreement or otherwise, with respect to the Letter of Credit by any
Indemnified Party, the only damages that may be sought are those which are direct and reasonably foreseeable as the probable result of any breach thereof. Borrower hereby waives any right it may have
to indirect, consequential, exemplary, special or punitive damages or lost anticipated profits (whether against Lender or any other Indemnified Party) in respect of any present or future breach by
Lender or such Indemnified Party, under the Agreement or otherwise, with respect to the Letter of Credit, even if Lender or the Issuing Party have been advised of the possibility of such damages.
Borrower must in all instances mitigate damages claimed against any Indemnified Party with respect to the Letter of Credit. If Lender or the Issuing Party honors a Draft or presentation under the
Letter of Credit for which Borrower claims it is not obligated to reimburse Lender, Borrower shall nonetheless pay to Lender the amount paid by Lender to or by the Issuing Party, without prejudice to
Borrower's claims against Lender (except to the extent waived or limited hereby) to recover fees and costs paid by Borrower with respect to the honored presentation plus any direct damages resulting
therefrom which Borrower is unable to avoid or reduce and which are permitted to be recovered under this paragraph. Borrower's prevailing in an action based on forgery or fraud of the Beneficiary or
other presenter does not relieve Borrower from its obligation to pay Lender's and the Issuing Party's costs and expenses in contesting the entry or maintenance of injunctive relief. 

        10.   Unless
Lender or the Issuing Party is enjoined by a court of competent jurisdiction, Lender and the Issuing Party may assume that any Beneficiary or other presenter acts
in good faith and that any presentation or other demand is nonfraudulent. 

        11.   Unless
the Letter of Credit specifically requires and Lender specifically agrees in writing, Lender and the Issuing Party need not check the authenticity or authority of
any purported Beneficiary signature, even if in other transactions the Beneficiary is a customer or its signature is otherwise known to Lender or the Issuing Party. 

        12.   Unless
specifically committed to do so in a writing signed by Lender, Lender and the Issuing Party need not consent to any amendment of the Letter of Credit. Lender or
the Issuing Party may, without authorization from, but upon prior notice to, Borrower, send a thirty (30) day notice of non-extension to the Beneficiary under the Letter of Credit
if it provides for automatic extension. Any notice of dishonor given by Lender or the Issuing Party within six (6) Business Days after presentation of documents to the Issuing Party shall not
be deemed to be unreasonable. This section is intended to substitute six (6) Business Days for the three (3) Business Days set forth in Rule 5.01a of ISP 98. 

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        13.   Notwithstanding
any waiver by Borrower of discrepancies in Drafts, documents or required statements, each of Lender and the Issuing Party, each acting alone, has the
right in its sole judgment, to decline to approve any discrepancies and to refuse payment on that basis under the Letter of Credit issued hereunder. 

        14.   Lender
may assign its rights and delegate its duties hereunder to any subsidiary of Lender, in each case without prior notice to Borrower; provided that such assignment
and delegation does not diminish Borrower's rights or increase Borrower's duties hereunder. 

        15.   No
Letter of Credit shall be issued hereunder providing for the acceptance of time Drafts or the incurrence of deferred payment undertakings. 

        16.   Notwithstanding
any provision herein contained to the contrary, if Borrower approves the issuance of a Letter of Credit requiring payment of a Draft on the same day on
which such Draft is presented, the Issuing Party shall be entitled to honor such Draft without review or examination by Borrower and Borrower waives all defenses to reimbursement thereof based on
irregularities that may have been revealed by Borrower's review or examination. 

        17.   Borrower
is responsible for preparing or approving the text of any Letter of Credit as issued by the Issuing Party and as received by the Beneficiary. Lender's or the
Issuing Party's recommendation or drafting of text or Lender's or the Issuing Party's use or non-use or refusal to use text submitted by Borrower shall not affect Borrower's ultimate
responsibility for the final text and its receipt by the Beneficiary. Borrower is responsible for the effect, or lack of effect under ISP 98, Rule 4.11 or applicable law, of a provision in any
Letter of Credit that requires Lender or the Issuing Party to verify facts rather than examine documents or that fails to identify the documents to which the provision applies. Borrower is responsible
for including suitable provisions in the underlying agreement that permit Borrower to review the text of the Letter of Credit as received by the Beneficiary and that describe the circumstances under
which a drawing under the Letter of Credit may be made, Letter of Credit proceeds may be applied to the underlying agreement, and part or all of those proceeds may be returned. Borrower accepts the
risk that the text of any Letter of Credit is consistent with the underlying obligation, suitable for Borrower's purposes, and received by the Beneficiary in time to permit the Beneficiary and
Borrower to review the Letter of Credit and to request any desired amendments. 

        18.   If
Lender or the Issuing Party is now or hereafter becomes subject to any reserve, special deposit or similar requirement against assets of, deposits with, or for the
account of, or credit extended by, Lender or the Issuing Party, or any other condition is imposed upon Lender or the Issuing Party which imposes a cost upon Lender or the Issuing Party, and the
result, in the determination of Lender or the Issuing Party is to increase the cost to Lender or the Issuing Party of maintaining a Letter of Credit or paying or funding the payment of any Draft
thereunder, or to reduce the amount of any sum received or receivable, directly or indirectly, by Lender hereunder or by the Issuing Party under a Letter of Credit (and such event being referred to as
a "LC Cost Increase"), Borrower will pay to Lender upon demand such amounts required to compensate Lender and Issuer for such increased cost or reduction; provided, however, if Lender receives prior
notice of a LC Cost Increase, Lender shall so notify Borrower and Borrower shall have the opportunity to replace or the Letter of Credit without liability for such LC Cost Increase if Borrower does so
prior to such LC Cost Increase becoming effective as to Lender. In making the determinations contemplated hereunder, Lender and the Issuing Party may make such estimates, assumptions, allocations and
the like which Lender or the Issuing Party in good faith determines to be appropriate, but Lender's or the Issuing Party's selection thereof, and Lender's or the Issuing Party's determinations based
thereon, shall be final and binding and conclusive upon Borrower. 

        19.   Notwithstanding
any provision to the contrary herein, Lender and the Issuing Party reserve the right to decline any instruction provided by the Borrower if, in its
discretion, Lender or the Issuing 

61

 

Patty
determines that the carrying out of such instruction contravenes Lender's or the Issuing Party's customary procedures or policy, ISP 98 or any applicable law, rule or regulation. 

        20.   The
Letters of Credit and, to the extent applicable and not otherwise inconsistent with this Agreement, this Agreement, shall be subject to the International Standby
Practices, International Chamber of Commerce Publication No. 590 ("ISP 98") and the same are incorporated herein by reference. Borrower is responsible for knowing applicable letter of credit
law and practice, including ISP 98. Solely for purposes of interpreting the ISP 98's application to this Agreement and any Letter of Credit issued hereunder, Lender and the Issuing Party shall be
deemed to be a "bank" as such term is used in ISP 98. To the extent permitted by applicable law, this Agreement shall prevail in case of a conflict with applicable law or ISP 98, and ISP 98 shall
prevail in case of a conflict with applicable law. 

62

  

 
 

SCHEDULE 6.21
  
    OFFICER'S CERTIFICATE    

        The
undersigned hereby certifies to General Electric Capital Corporation ("Lender") as follows: 

        1.     I
am the duly authorized Chief Financial Officer of The Ensign Group, Inc. ("Borrower"). Reference is made herein to that certain Amended Loan and Security
Agreement dated            between Lender and Borrower (as amended from time to time, the "Loan Agreement"). I have reviewed the relevant terms of the Loan Agreement, and have made (or have
caused to be made under my supervision) a review of the transactions and conditions of Borrower from the beginning of the accounting period covered by the income statements being delivered herewith
and through the date of this Certificate. All terms used but not defined herein shall have the meaning set forth in the Loan Agreement. 

        2.     Attached
to this Certificate are Borrower's internally prepared financial statements for the month ending on                        ,
200    , which statements fairly
present the financial condition of Borrower and the results of Borrower's operations and changes in financial condition as of the date and for the period referred to, and which have been prepared in
accordance with generally accepted accounting principles ("GAAP"). 

        3.     Also
attached to this Certificate are the following: 

        Accounts
receivable aging schedule for the month of                        , 200    ; 

        Accounts
payable aging schedule for the month of                        , 200    ; 

        Pursuant
to Section 6.1, management analysis of financial statements and actual vs. budget variance reports for each entity/facility generating Accounts; 

        Copies
of each management control letter and any other reports submitted to Borrower by independent accountants in connection with any interim audit of Borrower's books; 

        Copies
of all documents provided by Borrower to its stockholders; 

        Pursuant
to Section 6.1, annual projections, pro forma profit and loss statements, balance sheets, and cash flow reports (prepared on a monthly basis) for the succeeding fiscal
year within thirty (30) days before the end of each of Borrower's fiscal years; 

        4.     In
accordance with Section 6.6 of the Loan Agreement, all tax reports currently due have been filed, and all currently due taxes, assessments, and governmental
charges or levies have been paid and discharged. 

        5.     In
accordance with Section 6.21 of the Loan Agreement, that Borrower is in compliance with the requirements of Articles VI and VII as of the end of the period
covered by the financial statements being furnished, except as set forth on Exhibit A attached hereto. 

        6.     The
representations and warranties on the part of Borrower contained in Article IV of the Loan Agreement are true and correct in all respects as of the date
hereof, as though made on and as of this date, except as set forth on Exhibit A attached hereto. 

        7.     No
Event of Default or event that, with the giving of notice or lapse of time, or both, could become an Event of Default has occurred and is continuing, except as set
forth on Exhibit A attached hereto. 

63

 

        8.     No
event has occurred since the date of the last Officer's Certificate and is continuing that has or is likely to have a material adverse effect in the condition
(financial or otherwise), properties, business, or operations of Borrower, other than                        . 

	
 Date:                                ,
200    	

 Alan Norman

Chief Financial Officer

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QuickLinks

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

RECITALS

ARTICLE I DEFINITIONS

ARTICLE II LOAN

ARTICLE III COLLATERAL

ARTICLE IV REPRESENTATIONS AND WARRANTIES

ARTICLE V CLOSING AND CONDITIONS OF LENDING

ARTICLE VI AFFIRMATIVE COVENANTS

ARTICLE VII NEGATIVE COVENANTS

ARTICLE VIII EVENTS OF DEFAULT

ARTICLE IX MISCELLANEOUS

LIST of SCHEDULES

EXHIBIT A Entities Comprising Borrower

EXHIBIT A Updated Schedules to Loan Agreement (Amendment 13)

Amendment (No. 13) & Restatement to Loan and Security Agreement Consolidated Schedule 4.15(a)/4.16

Places of Business with Trade Names, Licensee and Record Owner Data (as of March 1, 2004) (See separate Schedule 4.15(b) for Census Data)

EXHIBIT B Letters of Credit

SCHEDULE 6.21 OFFICER'S CERTIFICATE

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