-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E/Aym6uhIf2DpHduktiPxLSBY6ajM/ooB6t1IyoJ33BNDi3w/j/nUk1vqC+LL1b9 oj+GvKthTkJgqys7I+ujkg== 0000950116-98-000708.txt : 19980401 0000950116-98-000708.hdr.sgml : 19980401 ACCESSION NUMBER: 0000950116-98-000708 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELDERTRUST CENTRAL INDEX KEY: 0001043236 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 232932973 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-13807 FILM NUMBER: 98580400 BUSINESS ADDRESS: STREET 1: 415 MCFARLAN RD STREET 2: STE 202 CITY: KENNETT SQUARE STATE: PA ZIP: 19348 MAIL ADDRESS: STREET 1: 415 MCFARLAN RD STREET 2: STE 202 CITY: KENNETT SQUARE STATE: PA ZIP: 19348 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------- FORM 10-K [xx] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 001-13807 --------- ElderTrust ------------------------------------------------------ (Exact name of registrant as specified in its charter) Maryland 23-2932973 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 415 McFarlan Road, Suite 202 Kennett Square, PA 19348 ---------------------------- ---------- (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: (610) 925-0808 Securities registered pursuant to Section 12(b) of the Act: Title of each class: Name of each exchange on which Common shares of beneficial interest, registered: par value $.01 per share New York Stock Exchange - ------------------------------------- ------------------------------ Securities registered pursuant to Section 12(g) of the Act: (Not applicable) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No X --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X --- The aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing price of the registrant's common shares of beneficial interest as of March 20, 1998 is $121,024.293. */ The number of shares outstanding of each of the registrant's classes of common shares of beneficial interest, as of the latest practicable date is: Class: Common shares of beneficial interest, par value $.01 per share. Outstanding at March 20, 1998: 7,390,100 shares. Documents Incorporated by Reference: Parts I-III: Portions of the Company's prospectus dated January 26, 1988 contained in the Company's registration statement on Form S-11 (333-37451) relating to the Company's initial public offering. - ----------- */ Solely for the purposes of this calculation, all trustees and executive officers of the registrant and all shareholders beneficially owning more than 5% of the registrant's common shares of beneficial interest are considered to be affiliates. TABLE OF CONTENTS
Page(s) PART I Item 1. Business.................................................................... 3 Item 2. Properties.................................................................. 3 Item 3. Legal Proceedings........................................................... 3 Item 4. Submission of Matters to a Vote of Security Holders......................... 3 PART II Item 5. Market for Registrant's Common Equity and Related Stockholders Matters................................................ 4 Item 6. Selected Financial Data..................................................... 4 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations......................................... 4 Item 7A. Quantitative and Qualitative Disclosures About Market Risk........................................................... 4 Item 8. Financial Statements and Supplementary Data................................. 4 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......................................... 10 PART III Item 10. Directors and Executive Officers of the Registrant.......................... 10 Item 11. Executive Compensation...................................................... 10 Item 12. Security Ownership of Certain Beneficial Owners and Management.............................................................. 10 Item 13. Certain Relationships and Related Transactions.............................. 11 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................................................................. 11 SIGNATURES ........................................................................................ 12
2 PART I Item 1. Business. ElderTrust, a Maryland real estate investment trust (together with its subsidiaries, the "Company"), was formed on September 23, 1997 to invest in healthcare-related real estate and mortgages. At December 31, 1997, the Company had no operations. The Company completed its initial public offering ("IPO") on January 30, 1998. The net proceeds to the Company from the IPO, after deducting underwriting discount and offering expenses, totaled approximately $116.5 million. For a description of the proposed business operations of the Company, reference is made to the discussion under the captions "Risk Factors" and "Business and Properties" in the Company's prospectus dated January 26, 1998 contained in the Company's registration statement on Form S-11 (333-37451) relating to its IPO (the "Prospectus"), which discussion is incorporated herein by reference. The Company has completed all of the initial investments described in the Company's Prospectus, except for the acquisition of one skilled nursing facility, Silverlake NRC, for which a necessary consent to the transfer of the facility to the Company was not received. Additionally, an initial draw of $900,000 under the construction loan for the Mallard Landing development project has not yet been made. The Company has in place a secured credit facility of up to $140 million from an affiliate of Deutsche Morgan Grenfell (the "Credit Facility"). The term of the facility is 364 days, subject to extension options. The Company currently has borrowings under the Credit Facility totaling approximately $34.1 million and additional borrowing authority of approximately $18.5 million based on the properties and other assets that currently comprise the borrowing base. Item 2. Properties. The information set forth under the caption "Business and Properties Initial Properties" in the Company's Prospectus is incorporated herein by reference. As noted above, the Silverlake NRC skilled nursing facility was not acquired because a consent necessary to the transfer of the facility to the Company was not received. Item 3. Legal Proceedings. The information set forth under the caption "Business and Properties -- Legal Proceedings" in the Company's Prospectus is incorporated herein by reference. Item 4. Submission of Matters to a Vote of Security Holders. Not applicable. 3 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. The Company's common shares of beneficial interest, par value $.01 per share (the "Common Shares") began trading on the New York Stock Exchange on January 27, 1998. As of March 20, 1998, the Company had approximately 25 holders of its outstanding Common Shares. On September 23, 1997, the Company was capitalized with the issuance to the Company's chief financial officer of 100 Common Shares for an aggregate purchase price of $100. The issuance of such Common Shares was effected in reliance upon an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"). On July 30, 1997, ElderTrust Operating Limited Partnership (the "Operating Partnership") was capitalized with the issuance of a general partnership interest to ElderTrust Realty Group, Inc. in exchange for a capital contribution in the amount of $200 and with the issuance of a limited partnership interest to ET Partnership in exchange for a capital contribution of $200,000. The issuance of such limited partnership interests in the Operating Partnership was effected in reliance upon an exemption from registration under Section 4(2) of the Securities Act, and Regulation D promulgated thereunder. On September 10, 1997, the Operating Partnership issued additional limited partnership interests to Messrs. Romanov and McCreary in exchange for capital contributions in the aggregate amount of $200. The issuance of such limited partnership interests in the Operating Partnership was effected in reliance upon an exemption from registration under Section 4(2) of the Securities Act, and Regulation D promulgated thereunder. Item 6. Selected Financial Data. At December 31, 1997, the Company had total assets of $100 representing the consideration the Company received for the issuance of 100 Common Shares to the Company's chief financial officer in its formation on September 23, 1997. See "Financial Statements and Supplementary Data." Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. The information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Prospectus is incorporated herein by reference. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Not applicable. Item 8. Financial Statements and Supplementary Data. The financial statement included in this Annual Report on Form 10-K is set forth below. 4 Independent Auditors' Report The Board of Trustees and Shareholder ElderTrust: We have audited the accompanying balance sheet of ElderTrust as of December 31, 1997. This balance sheet is the responsibility of the Company's management. Our responsibility is to express an opinion on this balance sheet based upon our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit of the balance sheet provides a reasonable basis for our opinion. In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of ElderTrust as of December 31, 1997, in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP Washington, DC January 30, 1998 5 ELDERTRUST Balance Sheet December 31, 1997 - ------------------------------------------------------------------------------ Assets - ------------------------------------------------------------------------------ Cash $ 100 - ------------------------------------------------------------------------------ Shareholder's equity - ------------------------------------------------------------------------------ Preferred shares of beneficial interest, $.01 par value: 20,000,000 shares authorized; none issued or outstanding $ - Common shares of beneficial interest, $.01 par value: 100,000,000 shares authorized; 100 issued and outstanding 1 Additional paid-in-capital 99 - ------------------------------------------------------------------------------ Total shareholder's equity $ 100 - ------------------------------------------------------------------------------ See accompanying notes to balance sheet. 6 ELDERTRUST Notes to Balance Sheet December 31, 1997 - -------------------------------------------------------------------------------- ElderTrust Notes to Balance Sheet December 31, 1997 (1) Organization ElderTrust was formed in the State of Maryland on September 23, 1997 and issued a total of 100 shares to the Company's chief financial officer for a total consideration of $100. The Company completed its initial public offering on January 30, 1998 pursuant to which it issued 6,957,500 shares (the "Offering"). Net proceeds to the Company prior to deducting offering expenses were approximately $116.5 million. The Company had no operations through December 31, 1997. The Company intends to begin operations by 1) purchasing a diversified portfolio of healthcare properties, consisting primarily of assisted living and skilled nursing facilities which will be leased back to the current owners or other third parties; 2) making construction loans collateralized by healthcare properties under construction and making term loans collateralized by healthcare properties on which construction has been recently completed, but which are still in transition to occupancy levels required under purchase/leaseback agreements; 3) acquiring a first mortgage loan secured by an unoccupied personal care facility and 4) acquiring a 95% equity interest in an entity which will acquire a second mortgage loan. (2) Federal Income Taxes At the earliest possible date, the Company intends to qualify as a real estate investment trust under the Internal Revenue Code of 1986, as amended. Accordingly, upon such qualification it will not be subject to federal income taxes on amounts distributed to shareholders provided it distributes at least 95 percent of its taxable income and meets certain other conditions. The Company may, however, be subject to state or local taxation in various jurisdictions. (3) Planned Transactions The Company intends to contribute the proceeds of the Offering to an operating partnership in exchange for the sole general partner interest and a majority limited partner interest. The operating partnership expects to use the contributions from the Company and borrowings under a proposed credit facility to purchase 21 healthcare properties for an aggregate cost of $155.6 million and to fund construction and term loans on nine healthcare properties with an aggregate balance of $34.8 million. In addition, the Company expects to make a $5.6 million loan to ET Capital Corp. ("ET Capital") and expects to invest an additional $1.8 million to acquire a 95%, nonvoting equity interest in ET Capital. ET Capital expects to use the proceeds from the loan and the contributed capital from the Company and the Company's chief executive officer to purchase a $7.5 million working capital term note from Genesis Health Ventures, Inc. ("Genesis"), which is secured by a second lien on 11 skilled nursing facilities and related accounts receivable and other working capital assets. The Company also expects to acqure a $800,000 first mortgage note from Genesis. Thirteen of the properties to be purchased with an aggregate cost of $93.4 million are owned by Genesis and will be leased back to affiliates of Genesis or to third parties under long-term operating leases. A construction loan of approximately $2.0 million will be purchased from Genesis. Affiliates of Genesis will be the borrowers on seven of the nine construction and term loans, and Genesis manages the properties securing the working capital term note. The Chairman and chief executive officer of Genesis is chairman of the board of trustees of the Company. 7 - -------------------------------------------------------------------------------- (3) Continued The operating partnership has agreements to purchase the properties and to purchase or make the construction, term and first and second mortgage loans, subject to certain terms and conditions, including, among other things, successful completion of the Offering and obtaining a credit facility. The Company has obtained a commitment from an affiliate of a commercial bank for a secured credit facility which would be used to pay a portion of the purchase price of the properties and to fund the construction and term loans and which would be available for working capital needs and other general corporate purposes. Management believes that the Company will be able to obtain sufficient credit on acceptable terms. The Company has agreed to reimburse actual costs incurred on its behalf by Genesis upon consummation of the Offering. These costs relate to organizing the Company, negotiating property acquisitions, performing due diligence related to the properties, performing corporate work in contemplation of the Offering, and preparing the registration statement. This amount is estimated to be approximately $3.0 million and will be payable upon the closing of the Offering from the proceeds of the Offering. The Company and Genesis plan to enter into an agreement for a period of three years from the closing of the Offering (subject to annual renewal), pursuant to which Genesis has granted the Company a right of first refusal to purchase and leaseback to Genesis any assisted living, independent living or skilled nursing facility which Genesis determines to sell and leaseback (other than sale/leaseback transactions with commercial banking institutions). The agreement also would provide the Company with (i) a right to offer financing to Genesis and other developers of assisted and independent living facilities which, once developed, will be operated by Genesis and (ii) a right to offer financing to Genesis with respect to any new off-balance sheet financing of skilled nursing facilities currently owned by Genesis. The Company intends to provide Genesis with a first right of refusal to lease or manage any assisted living, independent living or skilled nursing facility financed or acquired by the Company within Genesis' markets unless the facility will be leased or managed by the developing or selling company or an affiliate thereof. (4) Employee Benefit Plans and Related Matters The Company's board of trustees intends to adopt a share option and incentive plan. The Company has reserved 9.9% of the total number of common shares and operating partnership units outstanding from time to time for issuance under the share option and incentive plan. As of the effective date of the Offering, the Company intends to grant options to purchase 497,500 shares. Of these options, 150,000 will vest immediately, and the remainder will vest over three to five years. The Company intends to adopt the intrinsic value approach to accounting for share-based compensation. The Company's president and chief executive officer and its chief financial officer were issued limited partnership interests in the operating partnership in consideration for services rendered in connection with the formation of the Company. It is anticipated that the operating partnership will issue 130,750 limited partnership units in respect of these interests at the time of the Offering. The operating partnership will recognize compensation expense equal to the estimated fair market value of the units awarded which will be reported in the Company's statement of operations upon completion of the Offering. These units are redeemable beginning fourteen months after completion of the Offering for either cash or, at the option of the Company, common shares on a one-for-one basis. 8 (4) Continued The Company will enter into an employment agreement with its president and chief executive officer upon consummation of the Offering. The agreement will have an initial term of three years, subject to automatic renewal for subsequent two year terms, and will cover matters including compensation, disability and termination. The agreement will also contain provisions which are intended to limit the president from competing with the Company throughout the term of the agreement and for a period of two years thereafter. The Company will also enter into a non-competition agreement with the chairman of the board of trustees. The agreement will be in effect during the period that he serves as chairman. 9 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant. The information set forth under the caption "Management -- Trustees, Trustee Nominees and Executive Officers" in the Company's Prospectus is incorporated herein by reference. Item 11. Executive Compensation. The information set forth under the captions "Management -- Compensation of the Board of Trustees," "1998 Share Option and Incentive Plan," "Employment and Non-Competition Agreements" and "Incentive Compensation" in the Company's Prospectus is incorporated herein by reference. Item 12. Securities Ownership of Certain Beneficial Owners and Management. The following table sets forth certain information as of March 20, 1998 regarding the beneficial ownership of Common Shares (or Common Shares for which units of beneficial interest ("Units") in the Operating Partnership are exchangeable) by (i) each trustee of the Company, (ii) each executive officer of the Company, (iii) all trustees and executive officers of the Company as a group, and (iv) each person or entity which is known by the Company to be the beneficial owner of 5% or more of the outstanding Common Shares. Except as indicated below, all of such Common Shares are owned directly, and the indicated person or entity has sole voting and investment power.
Number of Shares and Units Percentage of All Beneficially owned After Common Shares Percent of All the Offering and Common Name of Beneficial Owner (1) -------------------------- Units Shares (2) - ---------------------------- ----------------- -------------- Michael R. Walker................................ 265,625(3) 3.4% 3.5% Edward B. Romanov, Jr............................ 606,350(4) 7.7 7.9 Kent P. Dauten................................... 102,500(3) 1.3 1.4 Rodman W. Moorhead, III.......................... 27,500 * * Timothy T. Weglicki.............................. 2,500 * * D. Lee McCreary, Jr.............................. 24,200 * * All trustees and executive officers as a group. (6 persons).................................. 1,028,675(3)(4) 13.1% 13.7%
- ------------- * Less than 1%. (1) Address: c/o ElderTrust, 415 McFarlan Road, Suite 202, Kennett Square, Pennsylvania 19348. (2) Assumes that all Units held by the person are presented to the Operating Partnership for redemption and acquired by the Company for Common Shares. The total number of Common Shares outstanding used in calculating the percentage assumes that none of the Units held by other persons are similarly acquired for Common Shares. (3) Excludes the indirect interests of Messrs. Walker and Dauten as shareholders of Senior LifeChoice Corp. in 165,850 Units that are owned by that entity. (4) Includes presently exercisable options for 150,000 Common Shares. 10 Item 13. Certain Relationships and Related Transactions. The information set forth under the caption "Certain Relationships and Related Transactions" in the Company's Prospectus is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) List of documents filed as part of Form 10-K. (1) Financial Statements: Balance Sheet -- December 31, 1997. Notes to Balance Sheet. Report of Independent Auditors. (2) Financial Statements Schedules: All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable or are included in the consolidated balance sheet. (3) Exhibits: The exhibits filed as part of this Annual Report on Form 10-K are listed on the Index to Exhibits on pages 13 to 14 and are incorporated by reference herein. (b) Reports on Form 8-K. None. (c) Exhibits. The Company hereby files as part of this Annual Report on Form 10-K the exhibits listed in the Index to Exhibits. (d) Financial Statement Schedules. Not applicable. 11 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ELDERTRUST ---------------------------------------- Registrant By:/s/ Edward B. Romanov, Jr. ------------------------------------- Edward B. Romanov, Jr. President and Chief Executive Officer March 30, 1998 ------------------------------------- Date Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Edward B. Rommanov, Jr. March 30, 1998 By:---------------------------------- ---------------------- Edward B. Romanov, Jr. Date President, Chief Executive Officer and Trustee (Principal Executive Officer) /s/ D.Lee McCreary, Jr. March 30, 1998 By:---------------------------------- ---------------------- D. Lee McCreary, Jr. Date Vice President and Chief Financial Officer (Principal Financial and Principal Accounting Officer) /s/ Michael R. Walker March 30, 1998 By:---------------------------------- ---------------------- Michael R. Walker Date Chairman of the Board /s/ Kent P. Dauten March 30, 1998 By:---------------------------------- ---------------------- Kent P. Dauten Date Trustee /s/ Rodman W. Moorhead, III March 30, 1998 By:---------------------------------- ---------------------- Rodman W. Moorhead, III Date Trustee /s/ Timothy T. Weglicki March 30, 1998 By:---------------------------------- ---------------------- Timothy T. Weglicki Date Trustee 12 INDEX TO EXHIBITS
Page (by Sequential Exhibit Numbering Number Identity of Exhibit System) - ------- ------------------- ---------- 3.1 Amended and Restated Declaration of Trust of the Company 3.2 Amended and Restated Bylaws of the Company 10.1 Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership 10.2 Registration Rights Agreement between the Company and the persons named therein +10.3 1998 Share Option and Incentive Plan +10.4(1) Subscription Agreement between the Company and Edward B. Romanov, Jr. dated as of October 8, 1997 +10.5 Employment Agreement between the Company and Edward B. Romanov, Jr. +10.6 Non-Competition Agreement between the Company and Michael R. Walker +10.7(1) Form of Indemnification Agreement between the Company and each of its officers and trustees 10.8(1) Form of Asset Transfer Agreement between the Operating Partnership and Genesis Health Ventures, Inc. ("Genesis Health Ventures") (Heritage Woods, Willowbrook, Riverview Ridge, Pleasant View, Rittenhouse, Lopatcong, Phillipsburg, Wayne, POB 1, Lacey Bank Building, Belvedere, Chapel Manor and Pennsburg Manor) 10.9(1) Plan of Asset Transfer and Contribution Agreement between the Operating Partnership and Senior LifeChoice dated as of September 25, 1997 10.10(1) Form of Asset Transfer Agreement between Operating Partnership and certain limited partners in Senior LifeChoice of Paoli, L.P. and Senior LifeChoice of Kimberton, L.P. who are selling partnership interests for cash 10.11(1) Plan of Asset Transfer and Contribution Agreement among the Operating Partnership, GHV Associates and the partners in GHV Associates dated as of September 25, 1997 10.12(1) Plan of Asset Transfer and Contribution Agreement
8
among the Operating Partnership and certain partners in Salisbury Medical Office Building General Partnership dated as of September 25, 1997 10.13(1) Form of Asset Transfer Agreement between the Operating Partnership and certain parties in Salisbury Medical Office Building General Partnership who are selling partnership interests for cash 10.14.1(1) Form of Term Loan Agreement (Mifflin and Coquina Center (Genesis)) 10.14.2(1) Form of Secured Note (Mifflin and Coquina Center (Genesis)) 10.14.3(1) Form of Mortgage and Security Agreement (Mifflin and Coquina Center (Genesis)) 10.14.4(1) Form of Assignment of Rents and Leases (Mifflin and Coquina Center (Genesis)) 10.14.5(1) Form of Collateral Assignment of Agreements Affecting Real Estate (Mifflin and Coquina Center (Genesis)) 10.14.6(1) Form of Guaranty and Suretyship Agreement (Mifflin and Coquina Center (Genesis)) 10.15.1(1) Form of Construction Loan Agreement (Oaks (Genesis)) 10.15.2(1) Form of Secured Note (Oaks (Genesis)) 10.15.3(1) Form of Mortgage and Security Agreement (Oaks (Genesis)) 10.15.4(1) Form of Assignment of Rents and Leases (Oaks (Genesis)) 10.15.5(1) Form of Collateral Assignment of Agreements Affecting Real Estate (Oaks (Genesis)) 10.15.6(1) Form of Guaranty and Suretyship Agreement (Oaks (Genesis)) 10.16(1) Form of Assignment and Assumption Agreement between the Operating Partnership and Genesis (Montchanin Construction Loan) 10.17(1) Form of Construction Loan Commitment between the Operating Partnership and Genesis 10.18(1) Form of Assignment and Assumption Agreement Between the Operating Partnership and Genesis (Penn Mortgage)
9
10.19.1 Assignment and Assumption Agreement between ET Capital Corp. and Genesis (Florida Facilities Note) 10.19.2 Amendment of Working Capital Loan and Security Agreement among ET Capital Corp., Genesis and the Age Institute of Florida 10.19.3 Intercreditor Agreement among ET Capital Corp., Genesis and the Age Institute of Florida 10.20 Right of First Refusal Agreement between the Operating Partnership and Genesis 10.21 Option Agreement to purchase Holton Point facility between the Operating Partnership and Genesis 10.22(1) Form of Minimum Rent lease between the Operating Partnership and Genesis (Heritage Woods, Highgate at Paoli Pointe, Rittenhouse, Lopatcong, Phillipsburg and Wayne) 10.23(1) Form of Percentage Rent Lease between the Operating Partnership and Genesis (Willowbrook, Riverview Ridge and Pleasant View) 10.24(1) Form of Fixed Rent Lease between the Operating Partnership and Genesis (Salisbury Medical Office Building, Windsor Office Building and Windsor Clinic ant Training Facility) 10.25 Credit Facility 10.26 Cross Indemnification and Contribution Agreement between the Company and Genesis 21 Subsidiaries of the Company 27 Financial Data Schedule 99(2) The Company's Prospectus dated January 26, 1998
- -------------- + Management contract or compensatory plan or arrangement (1) Incorporated by reference to the Company's Form S-11 Registration Statement (331-37451) (2) Incorporated by reference to the Company's Prospectus dated January 26, 1998 filed pursuant to Rule 424(b)(4) 10 EX-3.1 2 EXHIBIT 3.1 ELDERTRUST ---------- ARTICLES OF AMENDMENT AND RESTATEMENT OF DECLARATION OF TRUST FIRST: ElderTrust, a Maryland real estate investment trust (the "Trust") under Title 8 of the Corporations and Associations Article of the Annotated Code of Maryland ("Title 8"), desires to amend and restate its Declaration of Trust as currently in effect (as so amended and restated, and as the same may be amended hereafter, the "Declaration of Trust"). SECOND: The following provisions are all the provisions of this Declaration of Trust currently in effect and as hereinafter amended: ARTICLE I FORMATION The Trust is a real estate investment trust within the meaning of Title 8. The Trust shall not be deemed to be a general partnership, limited partnership, joint venture, joint stock company or, except as provided in Section 13.4 hereof, a corporation (but nothing herein shall preclude the Trust from being treated for tax purposes as an association under the Internal Revenue Code of 1986, as amended (the "Code")). ARTICLE II NAME The name of the Trust is: ElderTrust. So far as may be practicable, the business of the Trust shall be conducted and transacted under that name, which name (and the word "Trust" wherever used in this Declaration of Trust, except where the context otherwise requires) shall refer to the Trustees (as hereinafter defined) collectively but not individually or personally and shall not refer to the Shareholders (as hereinafter defined) or to any officers, employees or agents of the Trust or of such Trustees. Under circumstances in which the Board of Trustees of the Trust (the "Board of Trustees" or "Board") determines that the use of the name of the Trust is not practicable, the Trust may use any other designation or name for the Trust. ARTICLE III PURPOSES AND POWERS Section 3.1 Purposes. The purposes for which the Trust is formed are to invest in and to acquire, hold, finance, manage, administer, control and dispose of property, including, without limitation or obligation, engaging in business as a real estate investment trust under the Code. Section 3.2 Powers. The Trust shall have all of the powers granted to real estate investment trusts pursuant to Title 8 or any successor statute and shall have all other and further powers set forth in this Declaration of Trust which are not inconsistent with law and are appropriate to promote and attain the purposes set forth in this Declaration of Trust. Section 3.3 Investment Policy. The fundamental investment policy of the Trust is to make investments in such a manner as to comply with the provisions of the Code applicable to real estate investment trusts and with the requirements of Title 8, with respect to the composition of the Trust's investments and the derivation of its income. Subject to Section 5.2(u) hereof, the Trustees will use their best efforts to carry out this fundamental investment policy and to conduct the affairs of the Trust in such a manner as to continue to qualify the Trust for the tax treatment provided for real estate investment trusts in the Code; provided, however, no Trustee, officer, employee or agent of the Trust shall be liable for any act or omission resulting in the loss of tax benefits under the Code, except to the extent provided in Section 9.2 hereof. The Trustees may change from time to time by resolution or in the bylaws of the Trust (the "Bylaws"), such investment policies as they determine to be in the best interests of the Trust, including prohibitions or restrictions upon certain types of investments. ARTICLE IV RESIDENT AGENT The name of the resident agent of the Trust in the State of Maryland is The Corporation Trust Incorporated, 300 E. Lombard St., Baltimore, MD 21202. Said resident agent is a Maryland corporation. The Trust may have such offices or places of business within or outside the State of Maryland as the Board of Trustees may from time to time determine. ARTICLE V BOARD OF TRUSTEES Section 5.1 Powers. Subject to any express limitations contained in this Declaration of Trust or in the Bylaws, (a) the business and affairs of the Trust shall be managed under the direction of the Board of Trustees and (b) the Board shall have full, exclusive and absolute power, control and authority over any and all property of the Trust. The Board may take any action as in its sole judgment and discretion is necessary or appropriate to conduct the business and affairs of the Trust. This Declaration of Trust shall be construed with a presumption in favor of the grant of power and authority to the Board. Any construction of this Declaration of Trust or determination made in good faith by the Board concerning its powers and authority hereunder shall be conclusive. The enumeration and definition of particular powers of the Trustees included in this Declaration of Trust or in the Bylaws shall in no way be limited or restricted by reference to or inference from the terms of this or any other provision of this Declaration of Trust or the Bylaws or construed or deemed by inference or otherwise in any manner to exclude or limit the powers conferred upon the Board or the Trustees under the general laws of the State of Maryland as now or hereafter in force or any other applicable laws. Section 5.2 Specific Powers and Authority. Subject only to the express limitations herein, and in addition to all other powers and authority conferred by this Declaration of Trust or by law, the Trustees, without any vote, action or consent by the Shareholders, shall have and may exercise, at any time or times, in the name of the Trust or on its behalf the following powers and authorities: (a) Investments. Subject to Section 9.4 hereof, to invest in, purchase or otherwise acquire and to hold real, personal or mixed, tangible or intangible, property of any kind wherever located, or rights or interests therein or in connection therewith, all without regard to whether such property, interests or rights are authorized by law for the investment of funds held by trustees or other fiduciaries, or whether obligations the Trust acquires have a term greater or lesser than the term of office of the Trustees or the possible termination of the Trust, for such consideration as the Trustees may deem proper (including cash, property of any kind or securities of the Trust); provided, however, that the Trustees shall take such actions as they deem necessary and desirable to comply with any requirements of Title 8 relating to the types of assets held by the Trust. (b) Sale, Disposition and Use of Property. Subject to Sections 3.3 and 9.4 and Article XI hereof: (i) to sell, rent, lease, hire, exchange, release, partition, assign, mortgage, grant security interests in, encumber, negotiate, dedicate, grant easements in and options with respect to, convey, transfer (including transfers to entities wholly or partially owned by the Trust or the Trustees) or otherwise dispose of any or all of the property of the Trust by deeds (including deeds in lieu of foreclosure with or without consideration), trust deeds, assignments, bills of sale, transfers, leases, mortgages, financing statements, security agreements and other instruments for any of such purposes executed and delivered for and on behalf of the Trust or the Trustees by one or more of the Trustees or by a duly authorized officer, employee, agent or nominee of the Trust, on such terms as they deem appropriate; (ii) to give consents and make contracts relating to the property of the Trust and its use or other property or matters; (iii) to develop, improve, manage, use, alter or otherwise deal with the property of the Trust; and (iv) to rent, lease or hire from others property of any kind; provided, however, that the Trust may not use or apply land for any purposes not permitted by applicable law. (c) Financings. To borrow or in any other manner raise money for the purposes and on the terms they determine, and to evidence the same by issuance of securities of the Trust, which may have such provisions as the Trustees determine; to reacquire such securities of the Trust; to enter into other contracts or obligations on behalf of the Trust; to guarantee, indemnify or act as surety with respect to payment or performance of obligations of any person; to mortgage, pledge, assign, grant security interests in or otherwise encumber the property of the Trust to secure any such securities of the Trust, contracts or obligations (including guarantees, indemnifications and suretyships); and to renew, modify, release, compromise, extend, consolidate or cancel, in whole or in part, any obligation to or of the Trust or participate in any reorganization of obligors to the Trust. (d) Loans. Subject to the provisions of Section 9.4 hereof, to lend money or other property of the Trust on such terms, for such purposes and to such persons as they may determine. (e) Issuance of Securities. Subject to the provisions of Article VI hereof: (i) to create and authorize and direct the issuance (on either a pro rata or a non-pro rata basis) by the Trust, in Shares (as hereinafter defined), units or amounts of one or more types, series or classes, of securities of the Trust, which may have such voting rights, dividend or interest rates, preferences, subordinations, conversion or redemption prices or rights, maturity dates, distribution, exchange, or liquidation rights or other rights as the Trustees may determine, without vote of or other action by the Shareholders, to such persons for such consideration, at such time or times and in such manner and on such terms as the Trustees determine; (ii) to list or to designate for listing or quotation any of the securities of the Trust on any national securities exchange or automated inter-dealer quotation system; and (iii) to purchase or otherwise acquire, hold, cancel, reissue, sell and transfer any securities of the Trust. (f) Expenses and Taxes. To pay any charges, expenses or liabilities necessary or desirable, in the sole discretion of the Trustees, for carrying out the purposes of this Declaration of Trust and conducting the business of the Trust, including compensation or fees to Trustees, officers, employees and agents of the Trust, and to persons contracting with the Trust, and any taxes, levies, charges and assessments of any kind imposed upon or chargeable against the Trust, the property of the Trust or the Trustees in connection therewith; and to prepare and file any tax returns, reports or other documents and take any other appropriate action relating to the payment of any such charges, expenses or liabilities. (g) Collection and Enforcement. To collect, sue for and receive money or other property due to the Trust; to consent to extensions of the time for payment, or to the renewal, of any securities or obligations; to engage or to intervene in, prosecute, defend, compound, enforce, compromise, release, abandon or adjust any actions, suits, proceedings, disputes, claims, demands, security interests or things relating to the Trust, the property of the Trust or the Trust's affairs; to exercise any rights and enter into any agreements and take any other action necessary or desirable in connection with the foregoing. (h) Deposits. To deposit funds or securities constituting part of the property of the Trust in banks, trust companies, savings and loan associations, financial institutions and other depositories, whether or not such deposits will draw interest, subject to withdrawal on such terms and in such manner as the Trustees determine. (i) Allocation; Accounts. To determine whether moneys, profits or other assets of the Trust shall be charged or credited to, or allocated between, income and capital, including whether or not to amortize any premium or discount and to determine in what manner any expenses or disbursements are to be borne as between income and capital (regardless of how such items would normally or otherwise be charged to or allocated between income and capital without such determination); to treat any dividend or other distribution on any investment as, or apportion it between, income and capital; in their discretion to provide reserves for depreciation, amortization, obsolescence or other purposes in respect of any property of the Trust in such amounts and by such methods as they determine; to determine what constitutes net earnings, profits or surplus; to determine the method or form in which the accounts and records of the Trust shall be maintained; and to allocate to the Shareholders' equity account less than all of the consideration paid for Shares and to allocate the balance to paid-in capital or capital surplus. (j) Valuation of Property. To determine the value of all or any part of the property of the Trust and of any services, securities, property or other consideration to be furnished to or acquired by the Trust, and to revalue all or any part of the property of the Trust, all in accordance with such appraisals or other information as are reasonable, in their sole judgment. (k) Ownership and Voting Powers. To exercise all of the rights, powers, options and privileges pertaining to the ownership of any mortgages, securities, real estate and other property of the Trust to the same extent that an individual owner might, including, without limitation, to vote or give any consent, request or notice or waive any notice, either in person or by proxy or power of attorney, which proxies and powers of attorney may be for any general or special meetings or action, and may include the exercise of discretionary powers. (l) Officers; Delegation of Powers. To elect, appoint or employ such officers for the Trust and such committees of the Board of Trustees with such powers and duties as the Trustees may determine or the Bylaws provide; to engage, employ or contract with and pay compensation to any person (including, subject to Section 9.4 hereof, any Trustee and any person who is an affiliate of any Trustee) as agent, representative, advisor, member of an advisory board, employee or independent contractor (including advisers, consultants, transfer agents, registrars, underwriters, accountants, attorneys-at-law, real estate agents, property and other managers, appraisers, brokers, architects, engineers, construction managers, general contractors or otherwise) in one or more capacities, to perform such services on such terms as the Trustees may determine; and to delegate to one or more Trustees, officers or other persons engaged or employed as aforesaid, or to committees of Trustees, the performance of acts or other things (including granting of consents), the making of decisions and the execution of such deeds, contracts or other instruments, in the name of the Trust or the Trustees, or as their attorneys or otherwise, as the Trustees may determine. (m) Associations. Subject to Section 9.4 hereof, to cause the Trust to enter into joint ventures, general or limited partnerships, participation or agency arrangements or any other lawful combinations, relationships or associations of any kind. (n) Reorganization; Merger, Consolidation or Sale of Trust Property. Subject to Article XI hereof: (i) to cause to be organized or assist in organizing any person under the laws of any jurisdiction to acquire all or any part of the property of the Trust, carry on any business in which the Trust shall have an interest or otherwise exercise the powers the Trustees deem necessary, useful or desirable to carry on the business of the Trust or to carry out the provisions of this Declaration of Trust; (ii) to merge or consolidate the Trust with any person; (iii) to sell, rent, lease, hire, convey, negotiate, assign, exchange or transfer all or any part of the property of the Trust to or with any person in exchange for securities of such person or otherwise; and (iv) to lend money to, subscribe for and purchase the securities of, and enter into any contracts with, any person in which the Trust holds, or is about to acquire, securities or any other interests. (o) Insurance. To purchase and pay for out of property of the Trust insurance policies insuring the Trust and the property of the Trust against any and all risks, and insuring the Shareholders, Trustees, officers, employees and agents of the Trust individually against all claims and liabilities of every nature arising by reason of holding or having held any such status, office or position or by reason of any action alleged to have been taken or omitted (including those alleged to constitute misconduct, gross negligence, reckless disregard of duty or bad faith) by any such person in such capacity, whether or not the Trust would have the power to indemnify such person against such claim or liability. (p) Executive Compensation, Pension and Other Plans. To adopt and implement executive compensation, pension, profit sharing, share option, share bonus, share purchase, share appreciation rights, restricted share, savings, thrift, retirement, incentive or benefit plans, trusts or provisions, applicable to any or all Trustees, officers, employees or agents of the Trust, or to other persons who have benefited the Trust, all on such terms and for such purposes as the Trustees may determine. (q) Distributions. To declare and pay dividends or other distributions to Shareholders, subject to the provisions of Section 6.5 hereof. (r) Indemnification. In addition to the indemnification provided for in Section 9.3 hereof, to indemnify any person, including any independent contractor, with whom the Trust has dealings. (s) Charitable Contributions. To make donations for the public welfare or for community, charitable, religious, educational, scientific, civic or similar purposes, regardless of any direct benefit to the Trust. (t) Discontinue Operations; Bankruptcy. To discontinue the operations of the Trust (subject to Section 12.2 hereof); to petition or apply for relief under any provision of federal or state bankruptcy, insolvency or reorganization laws or similar laws for the relief of debtors; to permit any property of the Trust to be foreclosed upon without raising any legal or equitable defenses that may be available to the Trust or the Trustees or otherwise defending or responding to such foreclosure; to confess judgment against the Trust; or to take such other action with respect to indebtedness or other obligations of the Trustees, in such capacity, the property of the Trust or the Trust as the Trustees in their discretion may determine. (u) Termination of Status. To terminate the status of the Trust as a real estate investment trust under the Code; provided, however, that the Board of Trustees shall take no action to terminate the Trust's status as a real estate investment trust under the Code until such time as (i) the Board of Trustees adopts a resolution recommending that the Trust terminate its status as a real estate investment trust under the Code, (ii) the Board of Trustees presents the resolution at an annual or special meeting of the Shareholders and (iii) such resolution is approved by the holders of a majority of the issued and outstanding Common Shares (as hereinafter defined). (v) Fiscal Year. Subject to the Code, to adopt, and from time to time change, a fiscal year for the Trust. (w) Seal. To adopt and use a seal, but the use of a seal shall not be required for the execution of instruments or obligations of the Trust. (x) Bylaws. To adopt, implement and from time to time alter, amend or repeal Bylaws relating to the business and organization of the Trust which are not inconsistent with the provisions of this Declaration of Trust. (y) Accounts and Books. To determine from time to time whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of the Trust, or any of them, shall be open to the inspection of Shareholders. (z) Voting Trust. To participate in, and accept securities issued under or subject to, any voting trust. (aa) Proxies. To solicit proxies of the Shareholders at the expense of the Trust. (bb) Ownership Limits. To determine that it is no longer in the best interests of the Trust to attempt to, or continue to, qualify as a real estate investment trust under the Code or that compliance with any restriction or limitations on ownership and transfers of Shares set forth in Article VII hereof is no longer required for the Trust to qualify as a real estate investment trust under the Code. (cc) Further Powers. To do all other acts and things and execute and deliver all instruments incident to the foregoing powers, and to exercise all powers which they deem necessary, useful or desirable to carry on the business of the Trust or to carry out the provisions of this Declaration of Trust, even if such powers are not specifically provided hereby. Section 5.3 Determination of Best Interest of Trust. In determining what is in the best interest of the Trust, a Trustee shall consider the interests of the Shareholders of the Trust and, in his sole and absolute discretion, may consider (a) the interests of the Trust's employees, suppliers, creditors and customers, (b) the economy of the nation, (c) community and societal interests and (d) the long-term as well as short-term interests of the Trust and its Shareholders, including the possibility that these interests may be best served by the continued independence of the Trust. Section 5.4 Number and Classification. The number of Trustees (the "Trustees") shall initially be two (2), which number (i) shall automatically be increased to five (5) effective immediately following the closing of the Trust's initial public offering and (ii) may be thereafter increased or decreased from time to time in accordance with the Bylaws of the Trust; provided, however, that, effective immediately following the closing of the Trust's initial public offering, the total number of Trustees shall not be fewer than three (3) and not more than nine (9). Notwithstanding the foregoing, if for any reason any or all of the Trustees cease to be Trustees, such event shall not terminate the Trust or affect this Declaration of Trust or the powers of any remaining Trustees. The names and addresses of the initial two (2) Trustees are: Name Address ---- ------- Michael R. Walker c/o Genesis Health Ventures, Inc. 148 West State Street Kennett Square, Pennsylvania 19348 Edward B. Romanov, Jr. c/o ElderTrust 415 McFarlan Road, Suite 202 Kennett Square, Pennsylvania 19348 Effective immediately following the closing of the Trust's initial public offering, the number of Trustees shall automatically be increased to five (5), whereupon the Trustees, including the initial Trustees, shall be divided into three classes as nearly equal in number as possible and initially consisting of one, two and two members, respectively, with the term of office of one class expiring each year. One class of Trustees, consisting initially of one member, shall hold office initially for a term expiring at the annual meeting of Shareholders in 1999; another class, consisting initially of two members, shall hold office initially for a term expiring at the annual meeting of Shareholders in 2000; and the third class, consisting initially of two members, shall hold office initially for a term expiring at the annual meeting of Shareholders in 2001. The Board of Trustees, by resolution, shall designate the Trustees who will serve in each class. The Trustees may fill any vacancy, whether resulting from an increase in the number of Trustees or otherwise, on the Board of Trustees. Beginning with the annual meeting of Shareholders in 1999 and at each succeeding annual meeting of Shareholders, the successor or successors to the class of Trustees whose term expires at such meeting shall be elected to hold office for a term expiring at the third succeeding annual meeting of Shareholders. Trustees shall hold office until their successors are duly elected and qualify. Election of Trustees by Shareholders shall require the vote and be in accordance with the procedures set forth in the Bylaws. It shall not be necessary to list in this Declaration of Trust the names and addresses of any Trustees hereafter elected. Section 5.5 Resignation, Removal or Death. Any Trustee may resign by written notice to the Board, effective upon execution and delivery to the Trust of such written notice or upon any future date specified in the notice. Subject to the rights of holders of one or more classes or series of Preferred Shares, as hereinafter defined, to elect one or more Trustees, a Trustee may be removed at any time, only with cause, at a meeting of the Shareholders, by the affirmative vote of the holders of a majority of the Shares then outstanding and entitled to vote for the election of Trustees. Upon the resignation or removal of any Trustee, or his otherwise ceasing to be a Trustee, he shall automatically cease to have any right, title or interest in and to the property of the Trust and shall execute and deliver such documents as the remaining Trustees require for the conveyance of any property of the Trust held in his name, and shall account to the remaining Trustees as they require for all property which he holds as Trustee. Upon the incapacity or death of any Trustee, his legal representative shall perform the acts described in the foregoing sentence. Section 5.6 Title to Property of the Trust. Legal title to all property of the Trust shall be vested in the Trustees, but they may cause legal title to any property of the Trust to be held by or in the name of any Trustee, or the Trust, or any other person as nominee. The right, title and interest of the Trustees in and to the property of the Trust shall automatically vest in successor and additional Trustees upon their qualification and acceptance of election or appointment as Trustees, and they shall thereupon have all the rights and obligations of Trustees, whether or not conveyancing documents have been executed and delivered pursuant to Section 5.5 hereof or otherwise. Written evidence of the qualification and acceptance of election or appointment of successor and additional Trustees may be filed with the records of the Trust and in such other offices, agencies or places as the Trustees may deem necessary or desirable. ARTICLE VI SHARES OF BENEFICIAL INTEREST Section 6.1 Authorized Shares. The Trust shall have the authority to issue a total of 120 million shares of beneficial interest ("Shares"), of which 100 million shall be common shares of beneficial interest, $.01 par value per share ("Common Shares"), and 20 million shall be preferred shares of beneficial interest, $.01 par value per share ("Preferred Shares"). The Board of Trustees, with the approval of the holders of record of outstanding Shares (the "Shareholders") by a majority of the votes entitled to be cast at a meeting of Shareholders duly called and at which a quorum is present, may amend this Declaration of Trust from time to time to increase or decrease the aggregate number of Shares or the number of Shares of any class that the Trust has authority to issue. This Amendment and Restatement is not increasing or decreasing the aggregate par value. Section 6.2 Common Shares. Subject to the provisions of Article VII, each Common Share shall entitle the holder thereof to one vote on each matter upon which holders of Common Shares are entitled to vote, and all Common Shares shall have equal dividend, distribution, liquidation and other rights, and shall have no preference, cumulative, preemptive, appraisal, conversion or exchange rights. Section 6.3 Preferred Shares. The Board of Trustees may classify any unissued Preferred Shares, and may reclassify any previously classified but unissued Preferred Shares of any series from time to time, in one or more series of Preferred Shares. Prior to issuance of classified or reclassified Preferred Shares of any series, the Board of Trustees by resolution shall (a) designate that series to distinguish it from all other series of Preferred Shares; (b) specify the number of Preferred Shares to be included in the series; (c) set, subject to the provisions of Article VII and subject to the express terms of any series of Preferred Shares outstanding at the time, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption for each series; and (d) cause the Trust to file Articles Supplementary with the State Department of Assessments and Taxation of Maryland (the "SDAT"). Any of the terms of any series of Preferred Shares set pursuant to clause (c) of this Section 6.3 may be made dependent upon facts ascertainable outside this Declaration of Trust (including, without limitation, the occurrence of any event or a determination or action by the Trust or any other person or body) and may vary among holders thereof, provided that the manner in which such facts or variations shall operate upon the terms of such series of Shares is clearly and expressly set forth in the Articles Supplementary filed with the SDAT. Section 6.4 Authorization by Board of Share Issuance. The Board of Trustees may authorize the issuance from time to time of Shares of any class or series, whether now or hereafter authorized, or securities or rights convertible into Shares of any class or series, whether now or hereafter authorized, for such consideration (whether in cash, property, past or future services, obligation for future payment or otherwise) as the Board of Trustees may deem advisable (or without consideration in the case of a Share split or Share dividend), subject to such restrictions or limitations, if any, as may be set forth in this Declaration of Trust or the Bylaws. Section 6.5 Dividends and Distributions. The Board of Trustees may from time to time authorize, declare and pay to Shareholders such dividends or distributions, in cash, property or other assets of the Trust or in securities of the Trust or from any other source as the Board of Trustees in its discretion shall determine. The Board of Trustees shall endeavor to declare and pay such dividends and distributions as shall be necessary for the Trust to qualify as a real estate investment trust under the Code; provided, however, that Shareholders shall have no right to any dividend or distribution unless and until authorized and declared by the Board. The exercise of the powers and rights of the Board of Trustees pursuant to this Section 6.5 shall be subject to the provisions of any class or series of Shares at the time outstanding. The receipt by any person in whose name any Shares are registered on the records of the Trust or by his duly authorized agent shall be a sufficient discharge for all dividends or distributions payable or deliverable in respect of such Shares and from all liability to see to the application thereof. Unless the status of the Trust as a real estate investment trust under the Code has been terminated pursuant to Section 5.2(u) hereof, no determination shall be made by the Board of Trustees nor shall any transaction be entered into by the Trust which would cause any Shares or other beneficial interest in the Trust not to constitute "transferable shares" or "transferable certificates of beneficial interest" under Section 856(a)(2) of the Code or which would cause any distribution to constitute a preferential dividend as described in Section 562(c) of the Code. Section 6.6 General Nature of Shares. All Shares shall be personal property entitling the Shareholders only to those rights provided in this Declaration of Trust. The Shareholders shall have no interest in the property of the Trust and shall have no right to compel any partition, division, dividend or distribution of the Trust or of the property of the Trust. The death of a Shareholder shall not terminate the Trust or give his legal representative any rights against other Shareholders, the Trustees or the property of the Trust, except the right, exercised in accordance with applicable provisions of the Bylaws, to receive a new certificate for Shares in exchange for the certificate held by the deceased Shareholder. The Trust is entitled to treat as Shareholders only those persons in whose names Shares are registered as holders of Shares on the beneficial interest ledger of the Trust. Section 6.7 Fractional Shares. The Trust may, without the consent or approval of any Shareholders, issue fractional Shares, eliminate a fraction of a Share by rounding up or down to a full Share, arrange for the disposition of a fraction of a Share by the person entitled to it, or pay cash for the fair value of a fraction of a Share. Section 6.8 Declaration and Bylaws. All Shareholders are subject to the provisions of this Declaration of Trust and the Bylaws. ARTICLE VII RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES Section 7.1 Definitions. For the purpose of this Article VII, the following terms shall have the following meanings: Beneficial Ownership. The term "Beneficial Ownership" shall mean ownership of Shares by a Person, whether the interest in Shares is held directly or indirectly (including by a nominee), and shall include interests that would be treated as owned through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms "Beneficial Owner," "Beneficially Own," "Beneficially Owns," "Beneficially Owning" and "Beneficially Owned" shall have the correlative meanings. Benefit Plan Investor. The term "Benefit Plan Investor" shall have the meaning provided in 29 C.F.R. ss. 2510.3-101(f)(2), or any successor regulation thereto. Business Day. The term "Business Day" shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York, New York are authorized or required by law, regulation or executive order to close. Charitable Beneficiary. The term "Charitable Beneficiary" shall mean one or more beneficiaries of the Charitable Trust as determined pursuant to Section 7.3.7, provided that each such organization must be described in Sections 501(c)(3), 170(b)(1)(A) (other than clause (vii) or (viii) thereof) and 170(c)(2) of the Code. Charitable Trust. The term "Charitable Trust" shall mean any trust provided for in Section 7.2.1(b)(i) and Section 7.3.1. Charitable Trustee. The term "Charitable Trustee" shall mean the Person unaffiliated with the Trust and a Prohibited Owner, that is appointed by the Trust to serve as trustee of the Charitable Trust. Closing Price. The "Closing Price" on any date shall mean the last sale price for such Shares, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, for such Shares, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if such Shares are not listed or admitted to trading on the NYSE, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such Shares are listed or admitted to trading or, if such Shares are not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the NASDAQ Stock Market or, if such system is no longer in use, the principal other automated inter-dealer quotation system that may then be in use or, if such Shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such Shares selected by the Board of Trustees or, in the event that no trading price is available for such Shares, the fair market value of Shares, as determined in good faith by the Board of Trustees. Constructive Ownership. The term "Constructive Ownership" shall mean ownership of Shares by a Person, whether the interest in Shares is held directly or indirectly (including by a nominee), and shall include interests that would be treated as owned through the application of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code. The terms "Constructive Owner," "Constructively Own," "Constructively Owns," "Constructively Owning" and "Constructively Owned" shall have the correlative meanings. Effective Date. The term "Effective Date" shall mean the date of the closing of the initial public offering of Common Shares. ERISA Investor. The term "ERISA Investor" shall mean any holder of Shares that is (i) an employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), (ii) a plan as defined in Section 4975(e) of the Code (any such employee benefit plan or plan described in clause (i) or this clause (ii) being referred to herein as a "Plan"), (iii) a trust which was established pursuant to a Plan, or a nominee for such trust or Plan, or (iv) an entity whose underlying assets include assets of a Plan by reason of such Plan's investment in such entity. Excepted Holder. The term "Excepted Holder" shall mean a Shareholder of the Trust for whom an Excepted Holder Limit is created by the Board of Trustees pursuant to Section 7.2.7. Excepted Holder Limit. The term "Excepted Holder Limit" shall mean, provided that the affected Excepted Holder agrees to comply with the requirements established by the Board of Trustees pursuant to Section 7.2.7, and subject to adjustment pursuant to Section 7.2.8, the percentage limit established by the Board of Trustees pursuant to Section 7.2.7. Excluded Holder. The term "Excluded Holder" shall mean Edward B. Romanov, Jr. and any other Person who is or would be either a Beneficial Owner or a Constructive Owner of either Common Shares or Preferred Shares as a result of the Beneficial Ownership or Constructive Ownership of either Common Shares or Preferred Shares by Edward B. Romanov, Jr. or whose ownership would cause Edward B. Romanov, Jr. to be a Beneficial Owner or Constructive Owner of such Shares. Excluded Holder Limit. The term "Excluded Holder Limit" shall mean (i) with respect to the Common Shares, 15.0% (in value or number of Shares, whichever is more restrictive) of the outstanding Common Shares of the Trust; and (ii) with respect to any class or series of Preferred Shares, 9.9% (in value or number of Shares, whichever is more restrictive) of the outstanding Shares of such class or series of Preferred Shares of the Trust. Initial Date. The term "Initial Date" shall mean September 23, 1997. Initial Shareholder. The term Initial Shareholder shall mean D. Lee McCreary, Jr. Market Price. The term "Market Price" on any date shall mean, with respect to any class or series of outstanding Shares, the Closing Price for such Shares on such date. NYSE. The term "NYSE" shall mean the New York Stock Exchange, Inc. Ownership Limit. The term "Ownership Limit" shall mean (i) with respect to the Common Shares, 8.6% (in value or number of Shares, whichever is more restrictive) of the outstanding Common Shares of the Trust; and (ii) with respect to any class or series of Preferred Shares, 9.9% (in value or number of Shares, whichever is more restrictive) of the outstanding Shares of such class or series of Preferred Shares of the Trust. Person. The term "Person" shall mean an individual, corporation, partnership, estate, trust (including a trust qualified under Sections 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended. Prohibited Owner. The term "Prohibited Owner" shall mean, with respect to any purported Transfer, any Person who, but for the provisions of Section 7.2.1, would Beneficially Own or Constructively Own Shares, and if appropriate in the context, shall also mean any Person who would have been the record owner of Shares that the Prohibited Owner would have so owned. Publicly Offered Securities. The term "Publicly Offered Securities" shall have the meaning provided in 29 C.F.R. ss. 2510.3-101(b)(2), or any successor regulation thereto. REIT. The term "REIT" shall mean a real estate investment trust within the meaning of Section 856 of the Code. Restriction Termination Date. The term "Restriction Termination Date" shall mean the first day after the Initial Date on which the Board of Trustees determines that it is no longer in the best interests of the Trust to attempt to, or continue to, qualify as a REIT or that compliance with the restrictions and limitations on Beneficial Ownership, Constructive Ownership and Transfers of Shares set forth herein is no longer required in order for the Trust to qualify as a REIT. Transfer. The term "Transfer" shall mean any issuance, sale, transfer, gift, assignment, devise or other disposition, as well as any other event that causes any Person to acquire Beneficial Ownership or Constructive Ownership, or any agreement to take any such actions or cause any such events, of Shares or the right to vote or receive dividends on Shares, including (a) a change in the capital structure of the Trust, (b) a change in the relationship between two or more Persons which causes a change in ownership of Shares by application of Section 544 of the Code, as modified by Section 856(h), (c) the granting or exercise of any option or warrant (or any disposition of any option or warrant), pledge, security interest, or similar right to acquire Shares, (d) any disposition of any securities or rights convertible into or exchangeable for Shares or any interest in Shares or any exercise of any such conversion or exchange right and (e) Transfers of interests in other entities that result in changes in Beneficial Ownership or Constructive Ownership of Shares; in each case, whether voluntary or involuntary, whether owned of record, Constructively Owned or Beneficially Owned and whether by operation of law or otherwise. (For purposes of this Article VII, the right of a limited partner in ElderTrust Operating Limited Partnership, a Delaware limited partnership, to require the partnership to redeem such limited partner's units of partnership interest pursuant to Section 8.6 of the Agreement of Limited Partnership of ElderTrust Operating Limited Partnership shall not be considered to be an option or similar right to acquire Shares of the Trust.) The terms "Transferring" and "Transferred" shall have the correlative meanings. Section 7.2 Restrictions on Ownership and Transfer of Shares. Section 7.2.1 Ownership Limitations. From the Initial Date and prior to the Restriction Termination Date: (a) Basic Restrictions. (i) (1) No Person, other than an Excepted Holder, an Excluded Holder or the Initial Shareholder, shall Beneficially Own or Constructively Own Shares in excess of the Ownership Limit, (2) no Excepted Holder shall Beneficially Own or Constructively Own Shares in excess of the Excepted Holder Limit for such Excepted Holder, (3) no Excluded Holder shall Beneficially Own or Constructively Own Shares in excess of the Excluded Holder Limit and (4) the Initial Shareholder shall not Beneficially Own or Constructively Own shares in excess of the Ownership Limit on any date after the Effective Date. (ii) No Person shall Beneficially Own or Constructively Own Shares to the extent that (1) such Beneficial Ownership of Shares would result in the Trust being "closely held" within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or (2) such Beneficial Ownership or Constructive Ownership of Shares would result in the Trust otherwise failing to qualify as a REIT (including, but not limited to, ownership that would result in the Trust actually owning or Constructively Owning an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Trust from such tenant would cause the Trust to fail to satisfy any of the gross income requirements of Section 856(c) of the Code). (iii) No Person shall Transfer any Shares if, as a result of the Transfer, the Shares would be Beneficially Owned by less than 100 Persons (determined without reference to the rules of attribution under Section 544 of the Code). Notwithstanding any other provisions contained herein (but subject to Section 7.5), any Transfer of Shares (whether or not such Transfer is the result of a transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system) that, if effective, would result in Shares being Beneficially Owned by less than 100 Persons (determined under the principles of Section 856(a)(5) of the Code) shall be void ab initio, and the intended transferee shall acquire no rights in such Shares. (b) Transfer in Trust. If any Transfer of Shares (whether or not such Transfer is the result of a transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system) occurs which, if effective, would result in any Person Beneficially Owning or Constructively Owning Shares in violation of Section 7.2.1(a)(i) or (ii), then: (i) that number of Shares the Beneficial Ownership or Constructive Ownership of which otherwise would cause such Person to violate Section 7.2.1(a)(i) or (ii) (rounded to the nearest whole share) shall be automatically transferred to a Charitable Trust for the benefit of a Charitable Beneficiary, as described in Section 7.3, effective as of the close of business on the Business Day prior to the date of such Transfer, and such Person shall acquire no rights in such Shares; or (ii) subject to Section 7.5, if the transfer to the Charitable Trust described in clause (i) of this sentence would not be effective for any reason to prevent the violation of Section 7.2.1(a)(i) or (ii), then the Transfer of that number of Shares that otherwise would cause any Person to violate Section 7.2.1(a)(i) or (ii) shall be void ab initio, and the intended transferee shall acquire no rights in such Shares. Section 7.2.2 Remedies for Breach. Subject to Section 7.5, if the Board of Trustees or any duly authorized committee thereof shall at any time determine in good faith that a Transfer or other event has taken place that results in a violation of Section 7.2.1 or that a Person intends to acquire or has attempted to acquire Beneficial Ownership or Constructive Ownership of any Shares in violation of Section 7.2.1 (whether or not such violation is intended), the Board of Trustees or a committee thereof shall take such action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, without limitation, causing the Trust to redeem Shares, refusing to give effect to such Transfer on the books of the Trust or instituting proceedings to enjoin such Transfer or other event; provided, however, that any Transfer or attempted Transfer or other event in violation of Section 7.2.1 shall automatically result in the transfer to the Charitable Trust described above, and, where applicable, such Transfer (or other event) shall be void ab initio as provided above irrespective of any action (or non-action) by the Board of Trustees or a committee thereof. Section 7.2.3 Notice of Restricted Transfer. Any Person who acquires or attempts or intends to acquire Beneficial Ownership or Constructive Ownership of Shares that will or may violate Section 7.2.1(a), or any Person who would have owned Shares that resulted in a transfer to the Charitable Trust pursuant to the provisions of Section 7.2.1(b), shall immediately give written notice to the Trust of such event, or in the case of such a proposed or attempted transaction, give at least 15 days prior written notice, and shall provide to the Trust such other information as the Trust may request in order to determine the effect, if any, of such acquisition or ownership on the Trust's status as a REIT. Section 7.2.4 Owners Required To Provide Information. From the Initial Date and prior to the Restriction Termination Date: (a) every owner of more than five percent (or such lower percentage as required by the Code or the regulations promulgated thereunder) of the outstanding Shares, within 30 days after the end of each taxable year, shall give written notice to the Trust stating the name and address of such owner, the number of Shares Beneficially Owned and a description of the manner in which such Shares are held; provided that a Shareholder of record who holds outstanding Shares as nominee for another Person, which other Person is required to include in gross income the dividends received on such Shares (an "Actual Owner"), shall give written notice to the Trust stating the name and address of such Actual Owner and the number of Shares of such Actual Owner with respect to which the Shareholder of record is nominee. Each owner shall provide to the Trust such additional information as the Trust may request in order to determine the effect, if any, of such Beneficial Ownership on the Trust's status as a REIT and to ensure compliance with the Ownership Limit. (b) each Person who is a Beneficial Owner or Constructive Owner of Shares and each Person (including the Shareholders of record) who is holding Shares for a Beneficial Owner or Constructive Owner shall provide to the Trust such information as the Trust may request, in good faith, in order to determine the Trust's status as a REIT and to comply with requirements of any taxing authority or governmental authority or to determine such compliance. Section 7.2.5 Remedies Not Limited. Subject to Section 5.2(u) and Section 7.5, nothing contained in this Section 7.2 shall limit the authority of the Board of Trustees to take such other action as it deems necessary or advisable to protect the Trust and the interests of its Shareholders in preserving the Trust's status as a REIT. Section 7.2.6 Ambiguity. In the case of an ambiguity in the application of any of the provisions of this Section 7.2, Section 7.3 or any definition contained in Section 7.1, the Board of Trustees shall have the power to determine the application of the provisions of this Section 7.2 or Section 7.3 with respect to any situation based on the facts known to it. If this Section 7.2 or Section 7.3 requires an action by the Board of Trustees and this Declaration of Trust fails to provide specific guidance with respect to such action, the Board of Trustees shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of this Section 7.2 or Sections 7.1 or 7.3. Section 7.2.7 Exceptions. (a) The Board, in its sole and absolute discretion, may grant to any Person who makes a request therefor an exception to the Ownership Limit or the Excluded Holder Limit with respect to the ownership of any series or class of Preferred Shares, subject to the following conditions and limitations: (A) the Board shall have determined that (x) assuming such Person would Beneficially Own or Constructively Own the maximum amount of Common Shares and Preferred Shares permitted as a result of the exception to be granted and (y) assuming that all other Persons who would be treated as "individuals" for purposes of Section 542(a)(2) of the Code (determined taking into account Section 856(h)(3)(A) of the Code) would Beneficially Own or Constructively Own the maximum amount of Common Shares and Preferred Shares permitted under this Article VII (taking into account any exception, waiver, or exemption granted under this Section 7.2.7 to (or with respect to) such Persons), the Trust would not be "closely held" within the meaning of Section 856(h) of the Code (assuming that the ownership of Shares is determined during the second half of a taxable year) and would not otherwise fail to qualify as a REIT; and (B) such Person provides to the Board such representations and undertakings, if any, as the Board may, in its sole and absolute discretion, determine to be necessary in order for it to make the determination that the conditions set forth in clause (A) above of this Section 7.2.7(a) have been or will continue to be satisfied (including, without limitation, an agreement as to a reduced Ownership Limit, Excepted Holder Limit or Excluded Holder Limit for such Person with respect to the Beneficial Ownership or Constructive Ownership of one or more other classes of Shares not subject to the exception), and such Person agrees that any violation of such representations and undertakings or any attempted violation thereof will result in the application of the remedies set forth in Section 7.2 with respect to Shares held in excess of the Ownership Limit, the Excepted Holder Limit or the Excluded Holder Limit (as may be applicable) with respect to such Person (determined without regard to the exception granted such Person under this subparagraph (a)). If a member of the Board requests that the Board grant an exception pursuant to this subparagraph (a) with respect to such member or with respect to any other Person if such Board member would be considered to be the Beneficial Owner or Constructive Owner of Shares owned by such Person, such member of the Board shall not participate in the decision of the Board as to whether to grant any such exception. (b) In addition to exceptions permitted under subparagraph (a) above, the Board in its sole and absolute discretion, may grant to any Person who makes a request therefor an exception from the Ownership Limit if: (i) such Person submits to the Board information satisfactory to the Board, in its reasonable discretion, demonstrating that such Person is not an individual for purposes of Section 542(a)(2) of the Code (determined taking into account Section 856(h)(3)(A) of the Code); (ii) such Person submits to the Board information satisfactory to the Board, in its reasonable discretion, demonstrating that no Person who is an individual for purposes of Section 542(a)(2) of the Code (determined taking into account Section 856(h)(3)(A) of the Code) would be considered to Beneficially Own Shares in excess of the Ownership Limit by reason of the Excepted Holder's ownership of Shares in excess of the Ownership Limit pursuant to the exception granted under this subparagraph (b); (iii) such Person submits to the Board information satisfactory to the Board, in its reasonable discretion, demonstrating that clause (2) of subparagraph (a)(ii) of Section 7.2.1 will not be violated by reason of the Excepted Holder's ownership of Shares in excess of the Ownership Limit pursuant to the exception granted under this subparagraph (b); and (iv) such Person provides to the Board such representations and undertakings, if any, as the Board may, in its reasonable discretion, require to ensure that the conditions in clauses (i), (ii) and (iii) hereof are satisfied and will continue to be satisfied throughout the period during which such Person owns Shares in excess of the Ownership Limit pursuant to any exception thereto granted under this subparagraph (b), and such Person agrees that any violation of such representations and undertakings or any attempted violation thereof will result in the application of the remedies set forth in Section 7.2 with respect to Shares held in excess of the Ownership Limit with respect to such Person (determined without regard to the exception granted such Person under this subparagraph (b)). (c) Prior to granting any exception or exemption pursuant to subparagraph (a) or (b), the Board must receive a ruling from the Internal Revenue Service or advice of counsel, in either case in form and substance satisfactory to the Board, in its sole and absolute discretion, as it may deem necessary or advisable in order to determine or ensure the Trust's status as a REIT. (d) Subject to Section 7.2.1(a)(ii), an underwriter that participates in a public offering or a private placement of Shares (or securities convertible into or exchangeable for Shares) may Beneficially Own or Constructively Own Shares (or securities convertible into or exchangeable for Shares) in excess of the Ownership Limit, but only to the extent necessary to facilitate such public offering or private placement; and, provided, that the ownership of Shares by such underwriter would not result in the Trust being "closely held" within the meaning of Section 856(h) of the Code, or otherwise result in the Trust's failing to qualify as a REIT. In this regard, at no time may either (x) an underwriter or (y) any Person who would Constructively Own Shares owned by an underwriter Constructively Own, concurrently, 10% or more of the outstanding securities of any class or series of (i) the Trust and any tenant or lessee of the Trust (which, as of the Effective Date, includes, but is not limited to, Genesis Health Ventures, Inc., Crozer-Genesis ElderCare Limited Partnership, Senior LifeChoice, LLC and the Age Institute of Florida or subsidiaries of any of the above), and (ii) the Trust and any Person that would be considered to Constructively Own or Beneficially Own 10% or more of any tenant or lessee of the Trust (which, as of the Effective Date, includes, but is not limited to, Genesis Health Ventures, Inc.). (e) The Board of Trustees may only reduce the Excepted Holder Limit for an Excepted Holder: (1) with the written consent of such Excepted Holder at any time; or (2) pursuant to the terms and conditions of the agreements and undertakings entered into with such Excepted Holder in connection with the establishment of the Excepted Holder Limit for that Excepted Holder. No Excepted Holder Limit shall be reduced to a percentage that is less than the Ownership Limit. Section 7.2.8 Increase in Ownership Limit. The Board of Trustees may from time to time increase the Ownership Limit, subject to the limitations provided in this Section 7.2.8. (a) The Ownership Limit may not be increased if, after giving effect to such increase, five Persons who are considered individuals pursuant to Section 542 of the Code, as modified by Section 856(h)(3) of the Code (taking into account all of the Excepted Holders and Excluded Holders), could Beneficially Own, in the aggregate, more than 49.5% of the value of the outstanding Shares. (b) Prior to the modification of the Ownership Limit pursuant to this Section 7.2.8, the Board may require such opinions of counsel, affidavits, undertakings or agreements as it may deem necessary or advisable in order to determine or ensure the Trust's status as a REIT if the modification in the Ownership Limit were to be made. Section 7.2.9 Legend. Each certificate for Shares shall bear substantially the following legend: The Shares represented by this certificate are subject to restrictions on Beneficial and Constructive Ownership and Transfer for the purpose of the Trust's maintenance of its status as a real estate investment trust (a "REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). Subject to certain further restrictions and except as expressly provided in the Trust's Declaration of Trust, (i) no Person may Beneficially Own or Constructively Own Common Shares of the Trust in excess of 8.6 percent (in value or number of Shares) of the outstanding Common Shares of the Trust unless such Person is an Excepted Holder or Excluded Holder (in which case the Excepted Holder Limit or Excluded Holder Limit, as applicable, shall apply); (ii) with respect to any class or series of Preferred Shares, no Person may Beneficially Own or Constructively Own more than 9.9 percent (in value or number of Shares) of the outstanding Shares of such class or series of Preferred Shares of the Trust, unless such Person is an Excepted Holder (in which case the Excepted Holder Limit shall be applicable); (iii) no Person may Beneficially Own or Constructively Own Shares that would result in the Trust being "closely held" under Section 856(h) of the Code or otherwise cause the Trust to fail to qualify as a REIT; and (iv) no Person may Transfer Shares if such Transfer would result in Shares of the Trust being owned by fewer than 100 Persons. Any Person who Beneficially Owns or Constructively Owns or attempts to Beneficially Own or Constructively Own Shares which cause or will cause a Person to Beneficially Own or Constructively Own Shares in excess or in violation of the above limitations must immediately notify the Trust. If any of the restrictions on transfer or ownership are violated, the Shares represented hereby will be automatically transferred to a Charitable Trustee of a Charitable Trust for the benefit of one or more Charitable Beneficiaries. In addition, upon the occurrence of certain events, attempted Transfers in violation of the restrictions described above may be void ab initio. A Person who attempts to Beneficially Own or Constructively Own Shares in violation of the ownership limitations described above shall have no claim, cause of action, or any recourse whatsoever against a transferor of such Shares. Unless otherwise defined herein, all capitalized terms in this legend have the meanings defined in the Trust's Declaration of Trust, as the same may be amended from time to time, a copy of which, including the restrictions on transfer and ownership, will be furnished to each holder of Shares of the Trust on request and without charge. Instead of the foregoing legend, the certificate may state that the Trust will furnish a full statement about certain restrictions on transferability to a Shareholder on request and without charge. Section 7.3 Transfer of Shares in Trust. Section 7.3.1 Ownership in Trust. Upon any purported Transfer or other event described in Section 7.2.1(b) that would result in a transfer of Shares to a Charitable Trust, such Shares shall be deemed to have been transferred to the Charitable Trustee as trustee of a Charitable Trust for the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Charitable Trustee shall be deemed to be effective as of the close of business on the Business Day prior to the purported Transfer or other event that results in the transfer to the Charitable Trust pursuant to Section 7.2.1(b). The Charitable Trustee shall be appointed by the Trust and shall be a Person unaffiliated with the Trust and any Prohibited Owner. Each Charitable Beneficiary shall be designated by the Trust as provided in Section 7.3.7. Section 7.3.2 Status of Shares Held by the Charitable Trustee. Shares held by the Charitable Trustee shall be issued and outstanding Shares of the Company. The Prohibited Owner shall have no rights in the Shares held by the Charitable Trustee. The Prohibited Owner shall not benefit economically from ownership of any Shares held in trust by the Charitable Trustee, shall have no rights to dividends or other distributions and shall not possess any rights to vote or other rights attributable to the Shares held in the Charitable Trust. The Prohibited Owner shall have no claim, cause of action, or any other recourse whatsoever against the purported transferor of such Shares. Section 7.3.3 Dividend and Voting Rights. The Charitable Trustee shall have all voting rights and rights to dividends or other distributions with respect to Shares held in the Charitable Trust, which rights shall be exercised for the exclusive benefit of the Charitable Beneficiary. Any dividend or other distribution paid prior to the discovery by the Trust that Shares have been transferred to the Charitable Trustee shall be paid by the recipient thereof with respect to such Shares to the Charitable Trustee upon demand and any dividend or other distribution authorized but unpaid shall be paid when due to the Charitable Trustee. Any dividends or distributions so paid over to the Charitable Trustee shall be held in trust for the Charitable Beneficiary. The Prohibited Owner shall have no voting rights with respect to Shares held in the Charitable Trust and, subject to Maryland law, effective as of the date that Shares have been transferred to the Charitable Trustee, the Charitable Trustee shall have the authority (at the Charitable Trustee's sole discretion) (i) to rescind as void any vote cast by a Prohibited Owner prior to the discovery by the Trust that Shares have been transferred to the Charitable Trustee and (ii) to recast such vote in accordance with the desires of the Charitable Trustee acting for the benefit of the Charitable Beneficiary; provided, however, that if the Trust has already taken irreversible action, then the Charitable Trustee shall not have the power to rescind and recast such vote. Notwithstanding the provisions of this Article VII, until the Trust has received notification that Shares have been transferred into a Charitable Trust, the Trust shall be entitled to rely on its share transfer and other Shareholder records for purposes of preparing lists of Shareholders entitled to vote at meetings, determining the validity and authority of proxies and otherwise conducting votes of Shareholders. Section 7.3.4 Rights Upon Liquidation. Upon any voluntary or involuntary liquidation, dissolution or winding up of or any distribution of the assets of the Trust, the Charitable Trustee shall be entitled to receive, ratably with each other holder of Shares of the class or series of Shares that is held in the Charitable Trust, that portion of the assets of the Trust available for distribution to the holders of such class or series (determined based upon the ratio that the number of Shares or such class or series of Shares held by the Charitable Trustee bears to the total number of Shares of such class or series of Shares then outstanding). The Charitable Trustee shall distribute any such assets received in respect of the Shares held in the Charitable Trust in any liquidation, dissolution or winding up of, or distribution of the assets of the Trust, in accordance with Section 7.3.5. Section 7.3.5 Sale of Shares by Charitable Trustee. Within 20 days of receiving notice from the Trust that Shares have been transferred to the Charitable Trust, the Charitable Trustee of the Charitable Trust shall sell the Shares held in the Charitable Trust to a person, designated by the Charitable Trustee, whose ownership of the Shares will not violate the ownership limitations set forth in Section 7.2.1(a). Upon such sale, the interest of the Charitable Beneficiary in the Shares sold shall terminate and the Charitable Trustee shall distribute the net proceeds of the sale to the Prohibited Owner and to the Charitable Beneficiary as provided in this Section 7.3.5. The Prohibited Owner shall receive the lesser of (1) the price paid by the Prohibited Owner for the Shares or, if the Prohibited Owner did not give value for the Shares in connection with the event causing the Shares to be held in the Charitable Trust (e.g., in the case of a gift, devise or other such transaction), the Market Price of the Shares on the day of the event causing the Shares to be held in the Charitable Trust and (2) the price per share received by the Charitable Trustee from the sale or other disposition of the Shares held in the Charitable Trust. Any net sales proceeds in excess of the amount payable to the Prohibited Owner shall be immediately paid to the Charitable Beneficiary. If, prior to the discovery by the Trust that Shares have been transferred to the Charitable Trustee, such Shares are sold by a Prohibited Owner, then (i) such Shares shall be deemed to have been sold on behalf of the Charitable Trust and (ii) to the extent that the Prohibited Owner received an amount for such Shares that exceeds the amount that such Prohibited Owner was entitled to receive pursuant to this Section 7.3.5, such excess shall be paid to the Charitable Trustee upon demand. Section 7.3.6 Purchase Right in Shares Transferred to the Charitable Trustee. Shares transferred to the Charitable Trustee shall be deemed to have been offered for sale to the Trust, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the Charitable Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Trust, or its designee, accepts such offer. The Trust shall have the right to accept such offer until the Charitable Trustee has sold the Shares held in the Charitable Trust pursuant to Section 7.3.5. Upon such a sale to the Trust, the interest of the Charitable Beneficiary in the Shares sold shall terminate and the Charitable Trustee shall distribute the net proceeds of the sale to the Prohibited Owner. Section 7.3.7 Designation of Charitable Beneficiaries. By written notice to the Charitable Trustee, the Trust shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Charitable Trust such that (i) Shares held in the Charitable Trust would not violate the restrictions set forth in Section 7.2.1(a) in the hands of such Charitable Beneficiary and (ii) each such organization must be described in Sections 501(c)(3), 170(b)(1)(A) or 170(c)(2) of the Code. Section 7.4. Restrictions on Ownership and Transfer of Shares by Benefit Plans. Section 7.4.1 Ownership Limitations. Notwithstanding any other provisions herein, if and to the extent that any Shares do not constitute Publicly Offered Securities, then Benefit Plan Investors may not, on any date, hold, individually or in the aggregate, 25 percent or more of the value of such class of Shares. For purposes of determining whether Benefit Plan Investors hold, individually or in the aggregate, 25 percent or more of the value of such class of Shares, the value of Shares of such class held by any Trustee or officer of the Trust, or any other Person who has discretionary authority or control with respect to the assets of the Trust, or any Person who provides investment advice for a fee to the Trust in connection with its assets, shall be disregarded. Section 7.4.2 Remedies for Violations by Benefit Plan Investors. If the Board of Trustees or any duly authorized committee thereof shall at any time determine in good faith that (i) a Transfer or other event has taken place that results in a violation of Section 7.4.1 or will otherwise result in the underlying assets and property of the Trust becoming assets of any ERISA Investor or (ii) that a Person intends to acquire or has attempted to acquire or hold Shares in a manner that will result in a violation of Section 7.4.1 or will otherwise result in the underlying assets and property of the Trust becoming assets of any ERISA Investor, the Board of Trustees or a committee thereof shall take such action as it deems advisable to mitigate, prevent or cure the consequences that might result to the Trust from such Transfer or other event, including without limitation, refusing to give effect to or preventing such Transfer or event through redemption of such Shares or refusal to give effect to the Transfer or event on the books of the Trust, or instituting proceedings to enjoin such Transfer or other event. Section 7.4.3 Information on Benefit Plan Status. Any Person who acquires or attempts or intends to acquire or hold Shares shall provide to the Trust such information as the Trust may request in order to determine whether such acquisition or holding has or will result in a violation of Section 7.4.1 or otherwise result in the underlying assets and property of the Trust becoming assets of any ERISA Investor, including the name and address of any Person for whom a nominee holds Shares and whether the underlying assets of such Person include assets of any Benefit Plan Investor. Section 7.5 NYSE Transactions. Nothing in this Article VII shall preclude the settlement of any transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system; provided, that the fact that the settlement of any transaction takes place shall not negate the effect of any other provision of this Article VII and any transferee in such a transaction shall be subject to all of the provisions and limitations set forth in this Article VII. Section 7.6 Enforcement. The Trust is authorized specifically to seek equitable relief, including injunctive relief, to enforce the provisions of this Article VII. Section 7.7 Non-Waiver. No delay or failure on the part of the Trust or the Board of Trustees in exercising any right hereunder shall operate as a waiver of any right of the Trust or the Board of Trustees, as the case may be, except to the extent specifically waived in writing. ARTICLE VIII SHAREHOLDERS Section 8.1 Meetings. There shall be an annual meeting of the Shareholders, to be held on proper notice at such time (after the delivery of the annual report as provided in the Bylaws) and convenient location as shall be determined by or in the manner prescribed in the Bylaws, for the election of the Trustees, if required, and for the transaction of any other business within the powers of the Trust. Except as otherwise provided in this Declaration of Trust, special meetings of Shareholders may be called in the manner provided in the Bylaws. If there are no Trustees, the officers of the Trust shall promptly call a special meeting of the Shareholders entitled to vote for the election of successor Trustees. Any meeting may be adjourned and reconvened as the Trustees determine or as provided in the Bylaws. Section 8.2 Voting Rights. Subject to the provisions of any class or series of Shares then outstanding, the Shareholders shall be entitled to vote only on the following matters: (a) election of Trustees as provided in Section 5.4 and the removal of Trustees as provided in Section 5.5; (b) amendment of this Declaration of Trust as provided in Article X; (c) termination of the Trust as provided in Section 12.2; (d) reorganization, merger or consolidation of the Trust, or the sale or disposition of substantially all of the property of the Trust, as provided in Article XI; (e) such other matters with respect to which the Board of Trustees has adopted a resolution declaring that a proposed action is advisable and directing that the matter be submitted to the Shareholders for approval or ratification (including, without limitation, a resolution recommending the termination of the Trust's status as a real estate investment trust under the Code pursuant to Section 5.2(u) hereof); and (f) such other matters as may be properly brought before a meeting by a Shareholder pursuant to the Bylaws. Except with respect to the foregoing matters, no action taken by the Shareholders at any meeting shall in any way bind the Board of Trustees. Section 8.3 Preemptive and Appraisal Rights. Except as may be provided by the Board of Trustees in setting the terms of classified or reclassified Preferred Shares pursuant to Section 6.3, no holder of Shares shall, as such holder, (a) have any preemptive right to purchase or subscribe for any additional Shares of the Trust or any other security of the Trust which it may issue or sell or (b) except as expressly required by Title 8, have any right to require the Trust to pay him the fair value of his Shares in an appraisal or similar proceeding. Section 8.4 Extraordinary Actions. Except as otherwise specifically provided in this Declaration of Trust (including without limitation, in those provisions relating to election and removal of Trustees and changes in the number of authorized Shares), notwithstanding any provision of law permitting or requiring any action to be taken or authorized by the affirmative vote of the holders of a greater number of votes, any such action shall be effective and valid if taken or authorized by the affirmative vote of not less than sixty-six and two-thirds percent (66 2/3%) of all the votes entitled to be cast on the matter. Section 8.5 Action By Shareholders without a Meeting. Subject to Title 8 and any other applicable provisions of law, the Bylaws may provide that any action required or permitted to be taken at a meeting of the Shareholders may be taken without a meeting by the written consent of all Shareholders entitled to vote on such matter; provided, that all Shareholders entitled to notice of any such meeting but not entitled to vote on such matter shall have made a written waiver of any right to dissent to such action taken without a meeting. ARTICLE IX LIABILITY LIMITATION, INDEMNIFICATION AND TRANSACTIONS WITH THE TRUST Section 9.1 Limitation of Shareholders' Liability. No Shareholder shall be liable for any debt, claim, demand, judgment or obligation of any kind of, against or with respect to the Trust by reason of his being a Shareholder, nor shall any Shareholders be subject to any personal liability whatsoever, in tort, contract or otherwise, to any person in connection with the property or the affairs of the Trust by reason of his being a Shareholder. Section 9.2 Limitation of Trustee and Officer Liability. To the maximum extent that Maryland law in effect from time to time permits limitation of the liability of trustees and officers of a real estate investment trust, no Trustee or officer of the Trust shall be liable to the Trust or to any Shareholders for money damages. Neither the amendment nor repeal of this Section 9.2, nor the adoption or amendment of any other provision of this Declaration of Trust inconsistent with this Section 9.2, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption. In the absence of any Maryland statute limiting the liability of trustees and officers of a Maryland real estate investment trust for money damages in a suit by or on behalf of the Trust or by any Shareholders, no Trustee or officer of the Trust shall be liable to the Trust or to any Shareholders for money damages except to the extent that (a) the Trustee or officer actually received an improper benefit or profit in money, property or services, for the amount of the benefit or profit in money, property or services actually received, or (b) a judgment or other final adjudication adverse to the Trustee or officer is entered in a proceeding based on a finding in the proceeding that the Trustee's or officer's action or failure to act was material to the cause of action adjudicated in the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty. Section 9.3 Indemnification. The Trust shall have the power, to the maximum extent permitted by Maryland law in effect from time to time, to obligate itself to indemnify, and to pay or reimburse reasonable expenses in advance of final disposition of a proceeding to, (a) any individual who is a present or former Shareholder, Trustee or officer of the Trust or (b) any individual who, while a Trustee of the Trust and at the request of the Trust, serves or has served as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise from and against any claim or liability to which such person may become subject or which such person may incur by reason of his status as a present or former Shareholder, Trustee or officer of the Trust. The Trust shall have the power, with the approval of its Board of Trustees, to provide such indemnification and advancement of expenses to a person who served a predecessor of the Trust in any of the capacities described in (a) or (b) above and to any employee or agent of the Trust or a predecessor of the Trust. Section 9.4 Transactions Between the Trust and its Trustees, Officers, Employees and Agents. Subject to any express restrictions in this Declaration of Trust or adopted by the Trustees in the Bylaws or by resolution, the Trust may enter into any contract or transaction of any kind with any person, including any Trustee, officer, employee or agent of the Trust or any person affiliated with a Trustee, officer, employee or agent of the Trust, whether or not any of them has a financial interest in such transaction. Section 9.5 Express Exculpatory Clauses in Instruments. The Board of Trustees shall cause to be inserted in every written agreement, undertaking or obligation made or issued on behalf of the Trust, an appropriate provision to the effect that neither the Shareholders nor the Trustees, officers, employees or agents of the Trust shall be liable under any written instrument creating an obligation of the Trust, and all persons shall look solely to the property of the Trust for the payment of any claim under or for the performance of that instrument. The omission of the foregoing exculpatory language from any instrument shall not affect the validity or enforceability of such instrument and shall not render any Shareholder, Trustee, officer, employee or agent liable thereunder to any third party nor shall the Trustees or any officer, employee or agent of the Trust be liable to anyone for such omission. ARTICLE X AMENDMENTS Section 10.1 General. The Trust reserves the right from time to time to make any amendment to this Declaration of Trust, now or hereafter authorized by law, including any amendment altering the terms or contract rights, as expressly set forth in this Declaration of Trust, of any Shares. All rights and powers conferred by this Declaration of Trust on Shareholders, Trustees and officers are granted subject to this reservation. Articles of Amendment to this Declaration of Trust (a) shall be signed and acknowledged by at least a majority of the Trustees, or an officer duly authorized by at least a majority of the Trustees, (b) shall be filed for record as provided in Section 13.5 and (c) shall become effective as of the later of the time the SDAT accepts the Articles of Amendment for record or the time established in the Articles of Amendment, not to exceed 30 days after the Articles of Amendment are accepted for record. All references to this Declaration of Trust shall include all amendments thereto. Section 10.2 By Trustees. The Trustees may amend this Declaration of Trust from time to time, in the manner provided by Title 8, without any action by the Shareholders, to qualify as a real estate investment trust under the Code or under Title 8. Section 10.3 By Shareholders. Except as otherwise provided in this Declaration of Trust, any amendment to this Declaration of Trust shall be valid only if proposed in a resolution adopted by the Board of Trustees, which resolution shall set forth the proposed amendment and declare that it is advisable, and approved at an annual or special meeting of Shareholders by the affirmative vote of not less than two-thirds of all the votes entitled to be cast on the matter. ARTICLE XI REORGANIZATION; MERGER, CONSOLIDATION OR SALE OF TRUST PROPERTY Section 11.1 Reorganization. Subject to the provisions of any class or series of Shares at the time outstanding, the Trustees shall have the power (i) to cause the organization of a corporation, association, trust or other organization to take over the property of the Trust and carry on the affairs of the Trust, or (ii) merge the Trust into, or sell, convey and transfer the property of the Trust to, any such corporation, association, trust or organization in exchange for securities thereof or beneficial interests therein, and the assumption by the transferee of the liabilities of the Trust, and upon the occurrence of (i) or (ii) above terminate the Trust and deliver such securities or beneficial interests ratably among the Shareholders according to the respective rights of the class or series of Shares held by them; provided, however, that any such action shall have been approved, at a meeting of the Shareholders called for that purpose, by the affirmative vote of the holders of not less than two-thirds of the Shares then outstanding and entitled to vote thereon. Section 11.2 Merger, Consolidation or Sale of Property of the Trust. Subject to the provisions of any class or series of Shares at the time outstanding, the Trustees shall have the power to (a) merge into another entity, (b) consolidate the Trust with one or more other entities into a new entity or (c) sell, lease, exchange or otherwise transfer or dispose of all or substantially all of the property of the Trust. Any such action must be approved by the Board of Trustees and, after notice to all Shareholders entitled to vote on the matter, by the affirmative vote of not less than two-thirds of all the votes entitled to be cast on the matter. ARTICLE XII DURATION AND TERMINATION OF TRUST Section 12.1 Duration. The Trust shall continue perpetually unless terminated pursuant to Section 12.2 or pursuant to any applicable provision of Title 8. Section 12.2 Termination. (a) Subject to the provisions of any class or series of Shares at the time outstanding, the Trust may be terminated at any meeting of Shareholders, by the affirmative vote of two-thirds of all the votes entitled to be cast on the matter. Upon the termination of the Trust: (i) The Trust shall carry on no business except for the purpose of winding up its affairs. (ii) The Trustees shall proceed to wind up the affairs of the Trust and all of the powers of the Trustees under this Declaration of Trust shall continue, including the powers to fulfill or discharge the Trust's contracts, collect its assets, sell, convey, assign, exchange, transfer or otherwise dispose of all or any part of the remaining property of the Trust to one or more persons at public or private sale for consideration which may consist in whole or in part of cash, securities or other property of any kind, discharge or pay its liabilities and do all other acts appropriate to liquidate its business. (iii) After paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities and agreements as they deem necessary for their protection, the Trustees may distribute the remaining property of the Trust among the Shareholders so that after payment in full or the setting apart for payment of such preferential amounts, if any, to which the holders of any Shares at the time outstanding shall be entitled, the remaining property of the Trust shall, subject to any participating or similar rights of Shares at the time outstanding, be distributed ratably among the holders of Common Shares at the time outstanding. (b) After termination of the Trust, the liquidation of its business and the distribution to the Shareholders as herein provided, a majority of the Trustees shall execute and file with the Trust's records a document certifying that the Trust has been duly terminated, and the Trustees shall be discharged from all liabilities and duties hereunder, and the rights and interests of all Shareholders shall cease. ARTICLE XIII MISCELLANEOUS Section 13.1 Governing Law. This Declaration of Trust is executed by the undersigned Trustees and delivered in the State of Maryland with reference to the laws thereof, and the rights of all parties and the validity, construction and effect of every provision hereof shall be subject to and construed according to the laws of the State of Maryland without regard to conflicts of laws provisions thereof. Section 13.2 Reliance by Third Parties. Any certificate shall be final and conclusive as to any person dealing with the Trust if executed by the Secretary or an Assistant Secretary of the Trust or a Trustee, and if certifying to: (a) the number or identity of Trustees, officers of the Trust or Shareholders; (b) the due authorization of the execution of any document; (c) the action or vote taken, and the existence of a quorum, at a meeting of the Board of Trustees or Shareholders; (d) a copy of this Declaration of Trust or of the Bylaws as a true and complete copy as then in force; (e) an amendment to this Declaration of Trust; (f) the termination of the Trust; or (g) the existence of any fact or relating to the affairs of the Trust. No purchaser, lender, transfer agent or other person shall be bound to make any inquiry concerning the validity of any transaction purporting to be made by the Trust on its behalf or by any officer, employee or agent of the Trust. Section 13.3 Severability. (a) The provisions of this Declaration of Trust are severable, and if the Board of Trustees shall determine, with the advice of counsel, that any one or more of such provisions (the "Conflicting Provisions") are in conflict with the Code, Title 8 or other applicable federal or state laws, the Conflicting Provisions, to the extent of the conflict, shall be deemed never to have constituted a part of this Declaration of Trust, even without any amendment of this Declaration of Trust pursuant to Article X and without affecting or impairing any of the remaining provisions of this Declaration of Trust or rendering invalid or improper any action taken or omitted prior to such determination. No Trustee shall be liable for making or failing to make such a determination. (b) If any provision of this Declaration of Trust shall be held invalid or unenforceable in any jurisdiction, such holding shall apply only to the extent of any such invalidity or unenforceability and shall not in any manner affect, impair or render invalid or unenforceable such provision in any other jurisdiction or any other provision of this Declaration of Trust in any jurisdiction. Section 13.4 Construction. In this Declaration of Trust, unless the context otherwise requires, words used in the singular or in the plural include both the plural and singular and words denoting any gender include all genders. The title and headings of different parts are inserted for convenience and shall not affect the meaning, construction or effect of this Declaration of Trust. In defining or interpreting the powers and duties of the Trust and its Trustees and officers, reference may be made by the Trustees or officers, to the extent appropriate and not inconsistent with the Code or Title 8, to Titles 1 through 3 of the Corporations and Associations Article of the Annotated Code of Maryland. Section 13.5 Recordation. This Declaration of Trust and any Articles of Amendment hereto shall be filed for record with the SDAT and may also be filed or recorded in such other places as the Trustees deem appropriate, but failure to file for record this Declaration of Trust or any Articles of Amendment hereto in any office other than in the State of Maryland shall not affect or impair the validity or effectiveness of this Declaration of Trust or any amendment hereto. A restated Declaration of Trust shall, upon filing, be conclusive evidence of all amendments contained therein and may thereafter be referred to in lieu of the original Declaration of Trust and the various Articles of Amendments thereto. THIRD: The amendment to and restatement of the Declaration of Trust of the Trust as hereinabove set forth has been duly approved and advised by the Board of Trustees by majority vote thereof and approved by the sole shareholder of the Trust as required by law. FOURTH: The current address of the principal office of the Trust is 415 McFarlan Road, Suite 202, Kennett Square, Pennsylvania 19348. FIFTH: The name and address of the Trust's current resident agent is as set forth in Article IV of the foregoing amendment and restatement of the Declaration of Trust of the Trust. SIXTH: The number of trustees of the Trust and the names of those currently in office are as set forth in Article V of the foregoing amendment and restatement of the Declaration of Trust of the Trust. IN WITNESS WHEREOF, these Articles of Amendment and Restatement of Declaration of Trust have been signed on this 27th day of January, 1998 by all of the Trustees of the Trust, each of whom acknowledges, that this document is his free act and deed, and that to the best of his knowledge, information, and belief, the matters and facts set forth herein are true in all material respects and that the statement is made under the penalties for perjury. /s/ Michael R. Walker _________________________ Michael R. Walker /s/ Edward B. Romanov, Jr. _________________________ Edward B. Romanov, Jr. EX-3.2 3 EXHIBIT 3.2 ELDERTRUST AMENDED AND RESTATED BYLAWS ElderTrust, a real estate investment trust organized under the laws of the State of Maryland (the "Trust") having The Corporation Trust Incorporated as its resident agent located at 32 South Street, Baltimore, Maryland 21202, hereby adopts the following as the Amended and Restated Bylaws (as the same may be amended from time to time, the "Bylaws") of the Trust: ARTICLE I OFFICES Section 1. PRINCIPAL OFFICE. The principal office ElderTrust (the "Trust") shall be located at such place or places as the Trustees may designate. Section 2. ADDITIONAL OFFICES. The Trust may have additional offices at such places as the Trustees may from time to time determine or the business of the Trust may require. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. PLACE. All meetings of shareholders shall be held at the principal office of the Trust or at such other place within the United States as shall be stated in the notice of the meeting. Section 2. ANNUAL MEETING. The Trust shall hold its first annual meeting of shareholders in January 1998. Thereafter, an annual meeting of the shareholders for the election of Trustees and the transaction of any business within the powers of the Trust shall be held during the month of May of each year, after the delivery of the annual report referred to in Section 12 of this Article II, at a convenient location and on proper notice, on a date and at the time set by the Trustees, beginning with the year 1999. Failure to hold an annual meeting does not invalidate the Trust's existence or affect any otherwise valid acts of the Trust. Section 3. SPECIAL MEETINGS. The Chairman of the Board or the President or one-third of the Trustees may call special meetings of the shareholders. Special meetings of shareholders shall also be called by the Secretary upon the written request of the holders of shares entitled to cast not less than a majority of all the votes entitled to be cast at such meeting. Such request shall state the purpose of such meeting and the matters proposed to be acted on at such meeting. Within ten (10) days of the receipt of such a request, the Secretary shall inform such shareholders of the reasonably estimated cost of preparing and mailing notice of the meeting (including all proxy materials that may be required in connection therewith) and, upon payment by such shareholders to the Trust of such costs, the Secretary shall, within thirty (30) days of such payment, or such longer period as may be necessitated by compliance with any applicable statutory or regulatory requirements, give notice to each shareholder entitled to notice of the meeting. Unless requested by shareholders entitled to cast a majority of all the votes entitled to be cast at such meeting, a special meeting need not be called to consider any matter which is substantially the same as a matter voted on at any meeting of the shareholders held during the preceding twelve months. Section 4. NOTICE. Not less than ten nor more than 90 days before each meeting of shareholders, the Secretary shall give to each shareholder entitled to vote at such meeting and to each shareholder not entitled to vote who is entitled to notice of the meeting written or printed notice stating the time and place of the meeting and, in the case of a special meeting or as otherwise may be required by any statute, the purpose for which the meeting is called, either by mail or by presenting it to such shareholder personally or by leaving it at his residence or usual place of business. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the shareholder at his post office address as it appears on the records of the Trust, with postage thereon prepaid. Section 5. SCOPE OF NOTICE. Any business of the Trust may be transacted at an annual meeting of shareholders without being specifically designated in the notice, except such business as is required by any statute to be stated in such notice. No business shall be transacted at a special meeting of shareholders except as specifically designated in the notice. Section 6. ORGANIZATION. At every meeting of the shareholders, the Chairman of the Board, if there be one, shall conduct the meeting or, in the case of vacancy in office or absence of the Chairman of the Board, one of the following officers present shall conduct the meeting in the order stated: the Vice Chairman of the Board, if there be one, the Chief Executive Officer, if there be one, the President, the Vice Presidents in their order of rank and seniority, or a Chairman chosen by the shareholders entitled to cast a majority of the votes which all shareholders present in person or by proxy are entitled to cast, shall act as Chairman, and the Secretary, or, in his absence, an Assistant Secretary, or in the absence of both the Secretary and Assistant Secretaries, a person appointed by the Chairman shall act as Secretary. Section 7. QUORUM. At any meeting of shareholders, the presence in person or by proxy of shareholders entitled to cast a majority of all the votes entitled to be cast at such meeting shall constitute a quorum; but this section shall not affect any requirement under any statute or the declaration of trust ("Declaration of Trust") for the vote necessary for the adoption of any measure. If, however, such quorum shall not be present at any meeting of the shareholders, the shareholders entitled to vote at such meeting, present in person or by proxy, shall have the power to adjourn the meeting from time to time to a date not more than 120 days after the original record date without notice other than announcement at the meeting. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified. Section 8. VOTING. Subject to the rights of the holders of any series of Preferred Shares (as defined in the Declaration of Trust) to elect additional Trustees under specified circumstances, a plurality of all the votes cast at a meeting of shareholders duly called and at which a quorum is present shall be sufficient to elect a Trustee. Each share may be voted for as many individuals as there are Trustees to be elected and for whose election the share is entitled to be voted. A majority of the votes cast at a meeting of shareholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting, unless more than a majority of the votes cast is required herein or by statute or by the Declaration of Trust. Unless otherwise provided in the Declaration of Trust, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. Section 9. PROXIES. A shareholder may cast the votes entitled to be cast by the shares owned of record by him either in person or by proxy executed in writing by the shareholder or by his duly authorized attorney in fact. Such proxy shall be filed with the Secretary of the Trust before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. Section 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares of the Trust registered in the name of a corporation, partnership, trust or other entity, if entitled to be voted, may be voted by the president or a vice president, a general partner or trustee thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such shares pursuant to a bylaw or a resolution of the governing board of such corporation or other entity or agreement of the partners of the partnership presents a certified copy of such bylaw, resolution or agreement, in which case such person may vote such shares. Any trustee or other fiduciary may vote shares registered in his name as such fiduciary, either in person or by proxy. Shares of the Trust directly or indirectly owned by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of outstanding shares at any given time. The Trustees may adopt by resolution a procedure by which a shareholder may certify in writing to the Trust that any shares registered in the name of the shareholder are held for the account of a specified person other than the shareholder. The resolution shall set forth the class of shareholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the share transfer books, the time after the record date or closing of the share transfer books within which the certification must be received by the Trust; and any other provisions with respect to the procedure which the Trustees consider necessary or desirable. On receipt of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the shareholder of record of the specified shares in place of the shareholder who makes the certification. Notwithstanding any other provision contained herein or in the Declaration of Trust or these Bylaws, Title 3, Subtitle 7 of the Corporations and Associations Article of the Annotated Code of Maryland (or any successor statute) shall not apply to any acquisition by any person of shares of beneficial interest of the Trust. This section may be repealed, in whole or in part, at any time, whether before or after an acquisition of control shares and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share acquisition. Section 11. INSPECTORS. At any meeting of shareholders, the chairman of the meeting may appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares represented at the meeting based upon their determination of the validity and effect of proxies, count all votes, report the results and perform such other acts as are proper to conduct the election and voting with impartiality and fairness to all the shareholders. Each report of an inspector shall be in writing and signed by him or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof. Section 12. REPORTS TO SHAREHOLDERS. The Trustees shall submit to the shareholders at or before the annual meeting of shareholders a report of the business and operations of the Trust during the prior fiscal year, containing a balance sheet and a statement of income and surplus of the Trust, accompanied by the certification of an independent certified public accountant, and such further information as the Trustees may determine is required pursuant to any law or regulation to which the Trust is subject. Within the earlier of 20 days after the annual meeting of shareholders or 120 days after the end of the fiscal year of the Trust, the Trustees shall place the annual report on file at the principal office of the Trust and with any governmental agencies as may be required by law and as the Trustees may deem appropriate. Section 13. NOMINATIONS AND PROPOSALS BY SHAREHOLDERS. (a) Annual Meetings of Shareholders. (1) Nominations of persons for election to the Board of Trustees and the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders (i) pursuant to the Trust's notice of meeting, (ii) by or at the direction of the Trustees or (iii) by any shareholder of the Trust who was a shareholder of record both at the time of giving of notice provided for in this Section 13 (a) and at the time of the annual meeting, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 13(a). (2) For nominations or other business to be properly brought before an annual meeting by a shareholder pursuant to clause (iii) of paragraph (a) (1) of this Section 13, the shareholder must have given timely notice thereof in writing to the Secretary of the Trust and such other business must otherwise be a proper matter for action by shareholders. To be timely, a shareholder's notice shall be delivered to the Secretary at the principal executive offices of the Trust not later than the close of business on the 60th day nor earlier than the close of business on the 90th day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date or if the Trust has not previously held an annual meeting, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made by the Trust. In no event shall the public announcement of a postponement or adjournment of an annual meeting to a later date or time commence a new time period for the giving of a shareholder's notice as described above. Such shareholder's notice shall set forth as to each person whom the shareholder proposes to nominate for election or reelection as a Trustee all information relating to such person that is required to be disclosed in solicitations of proxies for election of Trustees in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such person's written consent to being named in the proxy statement as a nominee and to serving as a Trustee if elected); (ii) as to any other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and of the beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (x) the name and address of such shareholder, as they appear on the Trust's books, and of such beneficial owner and (y) the number of each class of shares of the Trust which are owned beneficially and of record by such shareholder and such beneficial owner. (3) Notwithstanding anything in the second sentence of paragraph (a) (2) of this Section 13 to the contrary, in the event that the number of Trustees to be elected to the Board of Trustees is increased and there is no public announcement by the Trust naming all of the nominees for Trustee or specifying the size of the increased Board of Trustees at least 70 days prior to the first anniversary of the preceding year's annual meeting, a shareholder's notice required by this Section 13(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Trust not later than the close of business on the tenth day following the day on which such public announcement is first made by the Trust. (b) Special Meetings of Shareholders. Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the Trust's notice of meeting. Nominations of persons for election to the Board of Trustees may be made at a special meeting of shareholders at which Trustees are to be elected (i) pursuant to the Trust's notice of meeting (ii) by or at the direction of the Board of Trustees or (iii) provided that the Board of Trustees has determined that Trustees shall be elected at such special meeting, by any shareholder of the Trust who was a shareholder of record both at the time of giving of notice provided for in this Section 13(b) and at the time of the special meeting, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 13 (b). In addition to the foregoing requirements, for nominations or other business to be properly brought before a special meeting by a shareholder, such shareholder's notice containing the information required by paragraph (a) (2) of this Section 13 must be delivered to the Secretary at the principal executive offices of the Trust not earlier than the close of business on the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting. In no event shall the public announcement of a postponement or adjournment of a special meeting to a later date or time commence a new time period for the giving of a shareholder's notice as described above. (c) General. (1) Only such persons who are nominated in accordance with the procedures set forth in this Section 13 shall be eligible to serve as Trustees and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 13. The chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 13 and, if any proposed nomination or business is not in compliance with this Section 13, to declare that such nomination or proposal shall be disregarded. (2) For purposes of this Section 13, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable news service or in a document publicly filed by the Trust with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (3) Notwithstanding the foregoing provisions of this Section 13, a shareholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 13. Nothing in this Section 13 shall be deemed to affect any rights of shareholders to request inclusion of proposals in, nor any of the rights of the Trust to omit a proposal from, the Trust's proxy statement pursuant to Rule 14a-8 under the Exchange Act. Section 14. INFORMAL ACTION BY SHAREHOLDERS. Subject to the rights of the holders of any series of Preferred Shares to elect additional Trustees under specified circumstances and notwithstanding the provisions of Section 13 of this Article II, any action required or permitted to be taken at a meeting of shareholders may be taken without a meeting if a consent in writing, setting forth such action, is signed by all shareholders entitled to vote on such matter; provided, that all shareholders entitled to notice of any such meeting but not entitled to vote on such matter shall have made a written waiver of any right to dissent to such action taken without a meeting. Section 15. VOTING BY BALLOT. Voting on any question or in any election at a meeting of shareholders may be viva voce unless the presiding officer shall order or any shareholder present of such meeting in person or by proxy shall demand that voting be by ballot. ARTICLE III TRUSTEES Section 1. GENERAL POWERS; QUALIFICATIONS; TRUSTEES HOLDING OVER. The business and affairs of the Trust shall be managed under the direction of its Board of Trustees. A Trustee shall be an individual at least 21 years of age who is not under legal disability. In case of failure to elect Trustees at an annual meeting of the shareholders, the Trustees holding over shall continue to direct the management of the business and affairs of the Trust until their successors are elected and qualify. Section 2. NUMBER. At any regular meeting or at any special meeting called for that purpose, a majority of the entire Board of Trustees may establish, increase or decrease the number of Trustees, subject to any limitations on the number of Trustees set forth in the Declaration of Trust. Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Trustees shall be held immediately after and at the same place as the annual meeting of shareholders, no notice other than this Bylaw being necessary. The Trustees may provide, by resolution, the time and place, either within or without the State of Maryland, for the holding of regular meetings of the Trustees without other notice than such resolution. Section 4. SPECIAL MEETINGS. Special meetings of the Trustees may be called by or at the request of the Chairman of the Board, the Chief Executive Officer or the President or by a majority of the Trustees then in office. The person or persons authorized to call special meetings of the Trustees may fix any place, either within or without the State of Maryland, as the place for holding any special meeting of the Trustees called by them. Section 5. NOTICE. Notice of any special meeting shall be given by written notice delivered personally, telegraphed, facsimile-transmitted or mailed to each Trustee at his business or residence address. Personally delivered or telegraphed notices shall be given at least two days prior to the meeting. Notice by mail shall be given at least five days prior to the meeting. Telephone or facsimile-transmission notice shall be given at least 24 hours prior to the meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail properly addressed, with postage thereon prepaid. If given by telegram, such notice shall be deemed to be given when the telegram is delivered to the telegraph company. Telephone notice shall be deemed given when the Trustee is personally given such notice in a telephone call to which he is a party. Facsimile-transmission notice shall be deemed given upon completion of the transmission of the message to the number given to the Trust by the Trustee and receipt of a completed answer-back indicating receipt. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Trustees need be stated in the notice, unless specifically required by statute or these Bylaws. Section 6. QUORUM. A majority of the Trustees shall constitute a quorum for convening any meeting of the Trustees, provided that, if less than a majority of such Trustees are present at said meeting, a majority of the Trustees present may adjourn the meeting from time to time without further notice, and provided further that if, pursuant to the Declaration of Trust or these Bylaws, the vote of a majority of a particular group of Trustees is required for action, a quorum must also include a majority of such group. The Trustees present at a meeting which has been duly called and convened may continue to transact business until adjournment, notwithstanding the withdrawal of enough Trustees to leave less than a quorum. Section 7. VOTING. The action of the majority of the Trustees present at a meeting at which a quorum is present when such meeting is convened shall be the action of the Trustees, unless the concurrence of a greater proportion is required for such action by applicable statute, the Declaration of Trust or these Bylaws. Section 8. TELEPHONE MEETINGS. Trustees may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting. Section 9. INFORMAL ACTION BY TRUSTEES. Any action required or permitted to be taken at any meeting of the Trustees may be taken without a meeting, if a consent in writing to such action is signed by each Trustee and such written consent is filed with the minutes of proceedings of the Trustees. Section 10. VACANCIES. If for any reason any or all of the Trustees cease to be Trustees, such event shall not terminate the Trust or affect these Bylaws or the powers of the remaining Trustees hereunder (even if fewer than two Trustees remain). Any vacancy (including a vacancy created by an increase in the number of Trustees) shall be filled, at any regular meeting or at any special meeting called for that purpose, by a majority of the Trustees. Any individual so elected as Trustee shall hold office until the next annual meeting of Shareholders and until his successor is elected and qualifies. Section 11. CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The Trustees may from time to time appoint a Chairman of the Board and a Vice Chairman of the Board. The Chairman of the Board shall preside over the meetings of the Trustees and of the shareholders at which he shall be present and shall in general oversee all of the business and affairs of the Trust. In the absence of the Chairman of the Board, the Vice Chairman of the Board shall preside at such meetings at which he shall be present. The Chairman and the Vice Chairman of the Board may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Trustees or by these Bylaws to an officer or some other agent of the Trust or shall be required by law to be otherwise executed. The Chairman of the Board and the Vice Chairman of the Board shall perform such other duties as may be assigned to him or them by the Trustees. Section 12. COMPENSATION. Trustees shall not receive any stated salary for their services as Trustees but, by resolution of the Trustees, may receive fixed sums per year or per meeting or per visit to real property owned or to be acquired by the Trust and for any service or activity they perform or engage in as Trustees. Such fixed sums may be paid either in cash or in shares of the Trust. Trustees may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the Trustees or of any committee thereof; and for their expenses, if any, in connection with each property visit and any other service or activity performed or engaged in as Trustees; but nothing herein contained shall be construed to preclude any Trustees from serving the Trust in any other capacity and receiving compensation therefor. Section 13. REMOVAL OF TRUSTEES. The shareholders may, at any time, remove any Trustee in the manner provided in the Declaration of Trust. Subject to the rights of the holders of any series of Preferred Shares to elect additional Trustees resulting from the removal of one or more Trustees or under other specified circumstances, the shareholders may elect a successor to fill a vacancy on the Board of Trustees which results from the removal of a Trustee. Section 14. LOSS OF DEPOSITS. No Trustee shall be liable for any loss which may occur by reason of the failure of the bank, trust company, savings and loan association, or other institution with whom moneys or shares have been deposited. Section 15. SURETY BONDS. Unless required by law, no Trustee shall be obligated to give any bond or surety or other security for the performance of any of his duties. Section 16. RELIANCE. Each Trustee, officer, employee and agent of the Trust shall, in the performance of his duties with respect to the Trust, be fully justified and protected with regard to any act or failure to act in reliance in good faith upon the books of account or other records of the Trust, upon an opinion of counsel or upon reports made to the Trust by any of its officers or employees or by the adviser, accountants, appraisers or other experts or consultants selected by the Trustees or officers of the Trust, regardless of whether such counsel or expert may also be a Trustee. Section 17. INTERESTED TRUSTEE TRANSACTIONS. Section 2-419 of the Maryland General Corporation Law (the "MGCL") shall be available for and apply to any contract or other transaction between the Trust and any of its Trustees or between the Trust and any other trust, corporation, firm or other entity in which any of its Trustees is a trustee or director or has a material financial interest. Section 18. CERTAIN RIGHTS OF TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS. The Trustees shall have no responsibility to devote their full time to the affairs of the Trust. Any Trustee or officer, employee or agent of the Trust (other than a full-time officer, employee or agent of the Trust), in his personal capacity or in a capacity as an affiliate, employee, or agent of any other person, or otherwise, may have business interests and engage in business activities similar or in addition to those of or relating to the Trust.) ARTICLE IV COMMITTEES Section 1. NUMBER, TENURE AND QUALIFICATION. The Trustees may appoint from among its members an Executive Committee, an Audit Committee and a Compensation Committee, each composed of at least two Trustees, and other committees, each composed of one or more Trustees, to serve at the pleasure of the Trustees; provided, that the membership of the Compensation Committee shall consist of a majority of Independent Trustees and the membership of the Audit Committee shall consist only of Independent Trustees so long as they continue in office. An individual shall be deemed to be an "Independent Trustee" hereunder if such individual is not an affiliate of the Trust and is not an employee of the Trust. Section 2. POWERS. The Trustees may delegate to committees appointed under Section 1 of this Article IV any of the powers of the Trustees, except as prohibited by law. Section 3. MEETINGS. Notice of committee meetings shall be given in the same manner as notice for special meetings of the Board of Trustees. One-third, but not less than two (except for one-member committees), of the members of any committee shall be present in person at any meeting of such committee in order to constitute a quorum for the transaction of business at such meeting, and the act of a majority present shall be the act of such committee. The Board of Trustees may designate a chairman of any committee, and such chairman or any two members of any committee (except for one-member committees) may fix the time and place of its meetings unless the Board shall otherwise provide. In the absence or disqualification of any member of any such committee, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another Trustee to act at the meeting in the place of such absent or disqualified members. Each committee shall keep minutes of its proceedings and shall report the same to the Board of Trustees at the next succeeding meeting, and any action by the committee shall be subject to revision and alteration by the Board of Trustees, provided that no rights of third persons shall be affected by any such revision or alteration. Section 4. TELEPHONE MEETINGS. Members of a committee of the Trustees may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting. Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or permitted to be taken at any meeting of a committee of the Trustees may be taken without a meeting, if a consent in writing to such action is signed by each member of the committee and such written consent is filed with the minutes of proceedings of such committee. Section 6. VACANCIES. Subject to the provisions hereof, the Board of Trustees shall have the power at any time to change the membership of any committee, to fill all vacancies, to designate alternate members to replace any absent or disqualified member or to dissolve any such committee. Section 7. EMERGENCY. In the event of a state of disaster of sufficient severity to prevent the conduct and management of the affairs and business of the Trust by its Trustees and officers as contemplated by the Declaration of Trust and these Bylaws, any two or more available members of the then incumbent Executive Committee shall constitute a quorum of that Committee for the full conduct and management of the affairs and business of the Trust in accordance with the provisions of this Article IV. In the event of the unavailability, at such time, of a minimum of two members of the then incumbent Executive Committee, the available Trustees shall elect an Executive Committee composed of any two members of the Board of Trustees, whether or not they be officers of the Trust, which two members shall constitute the Executive Committee for the full conduct and management of the affairs of the Trust in accordance with the foregoing provisions of this Section 7. This Section 7 shall be subject to implementation by resolution of the Board of Trustees passed from time to time for that purpose, and any provisions of the Bylaws (other than this Section 7) and any resolutions which are contrary to the provisions of this Section 7 or to the provisions of any such implementing resolutions shall be suspended until it shall be determined by any interim Executive Committee acting under this Section 7 that it shall be to the advantage of the Trust to resume the conduct and management of its affairs and business under all the other provisions of these Bylaws. ARTICLE V OFFICERS Section 1. GENERAL PROVISIONS. The officers of the Trust shall include a President, a Secretary and a Treasurer and may include a Chief Executive Officer, a Chief Operating Officer, a Chief Financial Officer, a Chief Legal Counsel, one or more Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers. In addition, the Trustees may from time to time appoint such other officers with such powers and duties as they shall deem necessary or desirable. The officers of the Trust shall be elected annually by the Trustees at the first meeting of the Trustees held after each annual meeting of shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as may be convenient. Each officer shall hold office until his successor is elected and qualifies or until his death, resignation or removal in the manner hereinafter provided. Any two or more offices except President and Vice President may be held by the same person. In their discretion, the Trustees may leave unfilled any office except that of President and Secretary. Election of an officer or agent shall not of itself create contract rights between the Trust and such officer or agent. Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the Trust may be removed at any time by the Trustees if in their judgment the best interests of the Trust would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer of the Trust may resign at any time by giving written notice of his resignation to the Trustees, the Chairman of the Board, the President or the Secretary. Any resignation shall take effect at any time subsequent to the time specified therein or, if the time when it shall become effective is not specified therein, immediately upon its receipt. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. Such resignation shall be without prejudice to the contract rights, if any, of the Trust. Section 3. VACANCIES. A vacancy in any office may be filled by the Trustees for the balance of the term. Section 4. CHIEF EXECUTIVE OFFICER. The Trustees may designate a Chief Executive Officer from among the elected officers. The Chief Executive Officer shall have responsibility for implementation of the policies of the Trust, as determined by the Trustees, and for the administration of the business affairs of the Trust. In the absence of both the Chairman and Vice Chairman of the board, the Chief Executive Officer shall preside over the meetings of the Trustees and of the shareholders at which he shall be present. Section 5. PRESIDENT. In the absence of the Chairman, the Vice Chairman of the Board and the Chief Executive Officer, the President shall preside over the meetings of the Trustees and of the shareholders at which he shall be present. In the absence of a designation of a Chief Executive Officer by the Trustees, the President shall be the Chief Executive Officer and shall be ex officio a member of all committees that may, from time to time, be constituted by the Trustees. The President may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Trustees or by these Bylaws to some other officer or agent of the Trust or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the Chief Executive Officer or the Trustees from time to time. Section 6. CHIEF OPERATING OFFICER. The Trustees may designate a Chief Operating Officer from among the elected officers. Said officer will have the responsibilities and duties as set forth by the Chief Executive Officer, the President or the Trustees. Section 7. VICE PRESIDENTS. In the absence of the President or in the event of a vacancy in such office, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall perform the duties of the President and when so acting shall have all the powers of and be subject to all the restrictions upon the President; and shall perform such other duties as from time to time may be assigned to him or her by the Chief Executive Officer, the President or the Trustees. The Trustees may designate one or more Vice Presidents as Executive Vice President, Senior Vice President or as Vice President for particular areas of responsibility. Section 8. TREASURER. The Treasurer shall have the custody of the funds and securities of the Trust and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Trust and shall deposit all moneys and other valuable effects in the name and to the credit of the Trust in such depositories as may be designated by the Trustees. The Treasurer shall disburse the funds of the Trust as may be ordered by the Trustees, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer, the President and the Trustees, at the regular meetings of the Trustees or whenever they may require it, an account of all his or her transactions as Treasurer and of the financial condition of the Trust. If required by the Trustees, the Treasurer shall give the Trust a bond in such sum and with such surety or sureties as shall be satisfactory to the Trustees for the faithful performance of the duties of his or her office and for the restoration to the Trust, in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, moneys and other property of whatever kind in his or her possession or under his or her control belonging to the Trust. Section 9. CHIEF FINANCIAL OFFICER. The Trustees may designate a Chief Financial Officer from among the elected officers. Said officer will have the responsibilities and duties as set forth by the Chief Executive Officer, the President or the Trustees. Section 10. CHIEF LEGAL COUNSEL. The Trustees may designate a Chief Legal Counsel from among the elected officers. Said officer will have the responsibilities and duties as set forth by the Chief Executive Officer, the President or the Trustees. Section 11. SECRETARY. The Secretary shall (a) keep the minutes of the proceedings of the shareholders, the Trustees and committees of the Trustees in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the trust records and of the seal of the Trust; (d) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (e) have general charge of the share transfer books of the Trust; and (f) in general perform such other duties as from time to time may be assigned to him by the Chief Executive Officer, the President or the Trustees. Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The Assistant Secretaries and Assistant Treasurers, in general, shall perform such duties as shall be assigned to them by the Secretary or Treasurer, respectively, or by the Chief Executive Officer, the President or the Trustees. The Assistant Treasurers shall, if required by the Trustees, give bonds for the faithful performance of their duties in such sums and with such surety or sureties as shall be satisfactory to the Trustees. Section 13. SALARIES. The salaries and other compensation of the officers shall be fixed from time to time by the Trustees and no officer shall be prevented from receiving such salary or other compensation by reason of the fact that he or she is also a Trustee. ARTICLE VI CONTRACTS, LOANS, CHECKS AND DEPOSITS Section 1. CONTRACTS. The Trustees may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Trust and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document executed by one or more of the Trustees or by an authorized person shall be valid and binding upon the Trustees and upon the Trust when authorized or ratified by action of the Trustees. Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Trust shall be signed by such officer or agent of the Trust in such manner as shall from time to time be determined by the Trustees. Section 3. DEPOSITS. All funds of the Trust not otherwise employed shall be deposited from time to time to the credit of the Trust in such banks, trust companies or other depositories as the Trustees may designate. ARTICLE VII SHARES Section 1. CERTIFICATES. Each shareholder shall be entitled to a certificate or certificates which shall represent and certify the number of shares of each class of beneficial interest held by him in the Trust. Each certificate shall be signed by the Chief Executive Officer, the President or a Vice President and countersigned by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer and may be sealed with the seal, if any, of the Trust. The signatures may be either manual or facsimile. Certificates shall be consecutively numbered; and if the Trust shall, from time to time, issue several classes of shares, each class may have its own number series. A certificate is valid and may be issued whether or not an officer who signed it is still an officer when it is issued. Each certificate representing shares which are restricted as to their transferability or voting powers, which are preferred or limited as to their dividends or as to their allocable portion of the assets upon liquidation or which are redeemable at the option of the Trust, shall have a statement of such restriction, limitation, preference or redemption provision, or a summary thereof, plainly stated on the certificate. In lieu of such statement or summary, the Trust may set forth upon the face or back of the certificate a statement that the Trust will furnish to any shareholder, upon request and without charge, a full statement of such information. Section 2. TRANSFERS. Certificates shall be treated as negotiable and title thereto and to the shares they represent shall be transferred by delivery thereof to the same extent as those of a Maryland stock corporation. Upon surrender to the Trust or the transfer agent of the Trust of a share certificate duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Trust shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. The Trust shall be entitled to treat the holder of record of any share or shares as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Maryland. Notwithstanding the foregoing, transfers of shares of beneficial interest of the Trust will be subject in all respects to the Declaration of Trust and all of the terms and conditions contained therein. Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the Trustees may direct a new certificate to be issued in place of any certificate previously issued by the Trust alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing the issuance of a new certificate, an officer designated by the Trustees may, in his discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or the owner's legal representative to advertise the same in such manner as he shall require or to give bond, with sufficient surety, to the Trust to indemnify it against any loss or claim which may arise as a result of the issuance of a new certificate. Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The Trustees may set, in advance, a record date for the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or determining shareholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of shareholders for any other proper purpose. Such date, in any case, shall not be prior to the close of business on the day the record date is fixed and shall be not more than 90 days and, in the case of a meeting of shareholders not less than ten days, before the date on which the meeting or particular action requiring such determination of shareholders of record is to be held or taken. In lieu of fixing a record date, the Trustees may provide that the share transfer books shall be closed for a stated period but not longer than 20 days. If the share transfer books are closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days before the date of such meeting. If no record date is fixed and the share transfer books are not closed for the determination of shareholders, (a) the record date for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day on which the notice of meeting is mailed or the 30th day before the meeting, whichever is the closer date to the meeting; and (b) the record date for the determination of shareholders entitled to receive payment of a dividend or an allotment of any other rights shall be the close of business on the day on which the resolution of the Trustees, declaring the dividend or allotment of rights, is adopted. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof, except when (i) the determination has been made through the closing of the transfer books and the stated period of closing has expired or (ii) the meeting is adjourned to a date more than 120 days after the record date fixed for the original meeting, in either of which case a new record date shall be determined as set forth herein. Section 5. SHARE LEDGER. The Trust shall maintain at its principal office or at the office of its counsel, accountants or transfer agent, an original or duplicate share ledger containing the name and address of each shareholder and the number of shares of each class held by such shareholder. Section 6. FRACTIONAL SHARES; ISSUANCE OF UNITS. The Trustees may issue fractional shares or provide for the issuance of scrip, all on such terms and under such conditions as they may determine. Notwithstanding any other provision of the Declaration of Trust or these Bylaws, the Trustees may issue units consisting of different securities of the Trust. Any security issued in a unit shall have the same characteristics as any identical securities issued by the Trust, except that the Trustees may provide that for a specified period securities of the Trust issued in such unit may be transferred on the books of the Trust only in such unit. ARTICLE VIII FISCAL YEAR The Trustees shall have the power, from time to time, to fix the fiscal year of the Trust by a duly adopted resolution. ARTICLE IX DISTRIBUTIONS Section 1. AUTHORIZATION. Dividends and other distributions upon the shares of beneficial interest of the Trust may be authorized and declared by the Trustees, subject to the provisions of law and the Declaration of Trust. Dividends and other distributions may be paid in cash, property or shares of the Trust, subject to the provisions of law and the Declaration of Trust. Section 2. CONTINGENCIES. Before payment of any dividends or other distributions, there may be set aside out of any funds of the Trust available for dividends or other distributions such sum or sums as the Trustees may from time to time, in their absolute discretion, think proper as a reserve fund for contingencies, for equalizing dividends or other distributions, for repairing or maintaining any property of the Trust or for such other purpose as the Trustees shall determine to be in the best interest of the Trust, and the Trustees may modify or abolish any such reserve in the manner in which it was created. ARTICLE X PROHIBITED INVESTMENTS AND ACTIVITIES; INVESTMENT POLICIES Notwithstanding anything to the contrary in the Declaration of Trust, the Trust shall not enter into any transaction referred to in (i), (ii) or (iii) below which it does not believe is in the best interests of the Trust, and will not, without the approval of a majority of the disinterested Trustees, (i) acquire from or sell to any Trustee, officer or employee of the Trust, any corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in which a Trustee, officer or employee of the Trust owns more than a one percent interest or any affiliate of any of the foregoing, any of the assets or other property of the Trust, except for the acquisition directly or indirectly of certain properties or interest therein, directly or indirectly, through entities in which it owns an interest in connection with the initial public offering of shares by the Trust or pursuant to agreements entered into in connection with such offering, which properties shall be described in the prospectus relating to such initial public offering, (ii) make any loan to or borrow from any of the foregoing persons or (iii) engage in any other transaction with any of the foregoing persons. Each such transaction will be in all respects on such terms as are, at the time of the transaction and under the circumstances then prevailing, fair and reasonable to the Trust. Subject to the foregoing and the provisions of the Declaration of Trust, the Board of Trustees may from time to time adopt, amend, revise or terminate any policy or policies with respect to investments by the Trust as it shall deem appropriate in its sole discretion. ARTICLE XI SEAL Section 1. SEAL. The Trustees may authorize the adoption of a seal by the Trust. The seal shall have inscribed thereon the name of the Trust and the year of its formation. The Trustees may authorize one or more duplicate seals and provide for the custody thereof. Section 2. AFFIXING SEAL. Whenever the Trust is permitted or required to affix its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place the word "(SEAL)" adjacent to the signature of the person authorized to execute the document on behalf of the Trust. ARTICLE XII INDEMNIFICATION AND ADVANCE OF EXPENSES To the maximum extent permitted by Maryland law in effect from time to time, the Trust shall indemnify (a) any Trustee, officer or shareholder or any former Trustee, officer or shareholder (including among the foregoing, for all purposes of this Article XII and without limitation, any individual who, while a Trustee, officer or shareholder and at the express request of the Trust, serves or has served another corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, shareholder, partner or trustee of such corporation, partnership, joint venture, trust, employee benefit plan or other enterprise) who has been successful, on the merits or otherwise, in the defense of a proceeding to which he was made a party by reason of service in such capacity, against reasonable expenses incurred by him in connection with the proceeding, (b) any Trustee or officer or any former Trustee or officer against any claim or liability to which he may become subject by reason of such status unless it is established that (i) his act or omission was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, (ii) he actually received an improper personal benefit in money, property or services or (iii) in the case of a criminal proceeding, he had reasonable cause to believe that his act or omission was unlawful and (c) each shareholder or former shareholder against any claim or liability to which he may become subject by reason of such status. In addition, the Trust shall, without requiring a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse, in advance of final disposition of a proceeding, reasonable expenses incurred by a Trustee, officer or shareholder or former Trustee, officer or shareholder made a party to a proceeding by reason such status, provided that, in the case of a Trustee or officer, the Trust shall have received (i) a written affirmation by the Trustee or officer of his good faith belief that he has met the applicable standard of conduct necessary for indemnification by the Trust as authorized by these Bylaws and (ii) a written undertaking by or on his behalf to repay the amount paid or reimbursed by the Trust if it shall ultimately be determined that the applicable standard of conduct was not met. The Trust may, with the approval of its Trustees, provide such indemnification or payment or reimbursement of expenses to any Trustee, officer or shareholder or any former Trustee, officer or shareholder who served a predecessor of the Trust and to any employee or agent of the Trust or a predecessor of the Trust. Neither the amendment nor repeal of this Article, nor the adoption or amendment of any other provision of the Declaration of Trust or these Bylaws inconsistent with this Article, shall apply to or affect in any respect the applicability of this Article with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption. Any indemnification or payment or reimbursement of the expenses permitted by these Bylaws shall be furnished in accordance with the procedures provided for indemnification or payment or reimbursement of expenses, as the case may be, under Section 2-418 of the MGCL for directors of Maryland corporations. The Trust may provide to Trustees, officers and shareholders such other and further indemnification or payment or reimbursement of expenses, as the case may be, to the fullest extent permitted by the MGCL, as in effect from time to time, for directors of Maryland corporations. ARTICLE XIII WAIVER OF NOTICE Whenever any notice is required to be given pursuant to the Declaration of Trust or Bylaws or pursuant to applicable law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice, unless specifically required by statute. The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE XIV AMENDMENT OF BYLAWS The Trustees shall have the exclusive power to adopt, alter or repeal any provision of these Bylaws and to make new Bylaws. ARTICLE XV MISCELLANEOUS All references to the Declaration of Trust shall include any amendments thereto. In these Bylaws, unless the context otherwise requires, words used in the singular or in the plural include both the plural and singular and words denoting any gender include all genders. * * * * EX-10.1 4 EXHIBIT 10.1 ----------------------------------------- SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF ELDERTRUST OPERATING LIMITED PARTNERSHIP ----------------------------------------- TABLE OF CONTENTS ARTICLE I DEFINED TERMS.......................................................1 ARTICLE II ORGANIZATIONAL MATTERS.............................................14 Section 2.1 Organization................................................14 Section 2.2 Name........................................................15 Section 2.3 Registered Office and Agent; Principal Office...............15 Section 2.4 Term........................................................15 ARTICLE III PURPOSE...........................................................15 Section 3.1 Purpose and Business........................................15 Section 3.2 Powers......................................................16 ARTICLE IV CAPITAL CONTRIBUTIONS AND ISSUANCES OF PARTNERSHIP INTERESTS...................................................16 Section 4.1 Capital Contributions of the Partners; Restatement of Capital Accounts on the Effective Date...........................16 Section 4.2 Issuances of Partnership Interests..........................17 Section 4.3 No Preemptive Rights........................................19 Section 4.4 Other Contribution Provisions...............................19 Section 4.5 No Interest on Capital......................................19 ARTICLE V DISTRIBUTIONS.......................................................19 Section 5.1 Requirement and Characterization of Distributions...........19 Section 5.2 Amounts Withheld............................................23 Section 5.3 Distributions Upon Liquidation..............................23 Section 5.4 Revisions to Reflect Issuance of Partnership Interests......23 ARTICLE VI ALLOCATIONS........................................................23 Section 6.1 Allocations For Capital Account Purposes....................23 Section 6.2 Revisions to Allocations to Reflect Issuance of Partnership Interests........................................................24 ARTICLE VII MANAGEMENT AND OPERATIONS OF BUSINESS.............................25 Section 7.1 Management..................................................25 Section 7.2 Certificate of Limited Partnership..........................29 Section 7.3 Title to Partnership Assets.................................30 Section 7.4 Reimbursement of the General Partner........................30 Section 7.5 Outside Activities of the General Partner; Relationship of Shares to Partnership Units; Funding Debt........................32 Section 7.6 Transactions with Affiliates................................33 Section 7.7 Indemnification.............................................34 Section 7.8 Liability of the General Partner............................36 Section 7.9 Other Matters Concerning the General Partner................37 Section 7.10 Reliance by Third Parties..................................37 Section 7.11 Restrictions on General Partner's Authority................38 Section 7.12 Loans by Third Parties.....................................39 ARTICLE VIII RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.......................39 Section 8.1 Limitation of Liability.....................................39 Section 8.2 Management of Business......................................39 Section 8.3 Outside Activities of Limited Partners......................39 Section 8.4 Return of Capital...........................................40 Section 8.5 Rights of Limited Partners Relating to the Partnership......40 i Section 8.6 Redemption Right............................................41 ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS.............................44 Section 9.1 Records and Accounting......................................44 Section 9.2 Fiscal Year.................................................44 Section 9.3 Reports.....................................................44 ARTICLE X TAX MATTERS.........................................................45 Section 10.1 Preparation of Tax Returns.................................45 Section 10.2 Tax Elections..............................................45 Section 10.3 Tax Matters Partner........................................45 Section 10.4 Organizational Expenses....................................47 Section 10.5 Withholding................................................47 ARTICLE XI TRANSFERS AND WITHDRAWALS..........................................48 Section 11.1 Transfer...................................................48 Section 11.2 Transfers of Partnership Interests of General Partner......48 Section 11.3 Limited Partners' Rights to Transfer.......................49 Section 11.4 Substituted Limited Partners...............................51 Section 11.5 Assignees..................................................51 Section 11.6 General Provisions.........................................52 ARTICLE XII ADMISSION OF PARTNERS.............................................54 Section 12.1 Admission of a Successor General Partner...................54 Section 12.2 Admission of Additional Limited Partners...................54 Section 12.3 Amendment of Agreement and Certificate of Limited Partnership......................................................55 ARTICLE XIII DISSOLUTION AND LIQUIDATION......................................55 Section 13.1 Dissolution................................................55 Section 13.2 Winding Up.................................................56 Section 13.3 Compliance with Timing Requirements of Regulations.........57 Section 13.4 Deemed Distribution and Recontribution.....................58 Section 13.5 Rights of Limited Partners.................................58 Section 13.6 Notice of Dissolution......................................58 Section 13.7 Cancellation of Certificate of Limited Partnership.........58 Section 13.8 Reasonable Time for Winding Up.............................59 Section 13.9 Waiver of Partition........................................59 Section 13.10 Liability of Liquidator...................................59 ARTICLE XIV AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS......................59 Section 14.1 Amendments.................................................59 Section 14.2 Meetings of the Partners...................................61 ARTICLE XV GENERAL PROVISIONS.................................................62 Section 15.1 Addresses and Notice.......................................62 Section 15.2 Titles and Captions........................................62 Section 15.3 Pronouns and Plurals.......................................62 Section 15.4 Further Action.............................................62 Section 15.5 Binding Effect.............................................62 Section 15.6 Creditors..................................................62 Section 15.7 Waiver.....................................................63 Section 15.8 Counterparts...............................................63 Section 15.9 Applicable Law.............................................63 ii Section 15.10 Invalidity of Provisions..................................63 Section 15.11 Power of Attorney.........................................63 Section 15.12 Entire Agreement..........................................65 Section 15.13 No Rights as Shareholders.................................65 Section 15.14 Limitation to Preserve REIT Status........................65 iii EXHIBIT A --------- PARTNERS AND PARTNERSHIP INTERESTS EXHIBIT B --------- CAPITAL ACCOUNT MAINTENANCE EXHIBIT C --------- SPECIAL ALLOCATION RULES EXHIBIT D --------- NOTICE OF REDEMPTION EXHIBIT E --------- VALUE OF CONTRIBUTED PROPERTY EXHIBIT F --------- FORM OF PARTNERSHIP UNIT CERTIFICATE EXHIBIT G --------- DEFICIT RESTORATION OBLIGATIONS iv SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF ELDERTRUST OPERATING LIMITED PARTNERSHIP THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as of __, 1998, is entered into by and among ElderTrust, a Maryland real estate investment trust, as the General Partner of the Partnership, and Thomas W. Balderston, Gregory H. Doyle, Richard R. Howard, D. Lee McCreary, Jr., MGI Limited Partnership, a Delaware limited partnership, Edward B. Romanov, Jr., Senior LifeChoice Corporation, a Pennsylvania corporation, Michael R. Walker and Joseph A. Williamson, as Limited Partners, together with any other Persons who become Partners in the Partnership as provided herein. WHEREAS, the Partnership was formed on July 30, 1997, and, on July 30, 1997 the Partnership, adopted an Agreement of Limited Partnership; WHEREAS, on September 10, 1997, the Partnership adopted a First Amended and Restated Agreement of Limited Partnership in the form of the Prior Agreement; WHEREAS, the General Partner has been admitted to the Partnership as an additional general partner pursuant to the terms of the Prior Agreement; WHEREAS, ElderTrust Realty Group, a Maryland corporation and the initial general partner of the Partnership, has withdrawn from the Partnership effective as of the Effective Date; and WHEREAS, the Partners desire to continue the business of the Partnership pursuant to this Agreement; NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby amend and restate the Prior Agreement in its entirety and agree to continue the Partnership as a limited partnership under the Delaware Revised Uniform Limited Partnership Act, as amended from time to time, as follows: ARTICLE I DEFINED TERMS The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement. "Act" means the Delaware Revised Uniform Limited Partnership Act, as it may be amended from time to time, and any successor to such statute. "Additional Limited Partner" means a Person admitted to the Partnership as a Limited Partner pursuant to Section 12.2 hereof and who is shown as such on the books and records of the Partnership. "Adjusted Capital Account" means the Capital Account maintained for each Partner as of the end of each Partnership Year (i) increased by any amounts which such Partner is obligated to restore pursuant to any provision of this Agreement or is deemed to be obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (ii) decreased by the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. "Adjusted Capital Account Deficit" means, with respect to any Partner, the deficit balance, if any, in such Partner's Adjusted Capital Account as of the end of the relevant Partnership Year. "Adjusted Property" means any property the Carrying Value of which has been adjusted pursuant to Exhibit B. "Adjustment Date" has the meaning set forth in Section 4.2.B. "Affiliate" means, with respect to any Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) any Person owning or controlling ten percent (10%) or more of the outstanding voting interests of such Person, (iii) any Person of which such Person owns or controls ten percent (10%) or more of the voting interests or (iv) any officer, director, general partner or trustee of such Person or any Person referred to in clauses (i), (ii), and (iii) above. For purposes of this definition, "control," when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agreed Value" means (i) in the case of any Contributed Property contributed to the Partnership as of the Effective Date, the amount set forth on Exhibit E as the Agreed Value of such Property; (ii) in the case of any other Contributed Property, the 704(c) Value of such property as of the time of its contribution to the Partnership, reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed; and (iii) in the case of any property distributed to a Partner by the Partnership, the Partnership's Carrying Value of such property at the time such property is distributed, reduced by any indebtedness either assumed by such Partner upon such distribution or to which such property is subject at the time of distribution as determined under Section 752 of the Code and the regulations thereunder. "Agreement" means this Agreement of Limited Partnership, as it may be amended, supplemented or restated from time to time. 2 "Assignee" means a Person to whom one or more Partnership Units have been transferred in a manner permitted under this Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5. "Available Cash" means, subject to the final sentence of this definition, with respect to any period for which such calculation is being made: (a) all cash revenues and funds received by the Partnership from whatever source (excluding the proceeds of any Capital Contribution) plus the amount of any reduction (including, without limitation, a reduction resulting because the General Partner determines such amounts are no longer necessary) in reserves of the Partnership, which reserves are referred to in clause (b)(iv) below; (b) less the sum of the following (except to the extent made with the proceeds of any Capital Contribution): (i) all interest, principal and other debt payments made during such period by the Partnership, (ii) all cash expenditures (including capital expenditures) made by the Partnership during such period, (iii) investments in any entity (including loans made thereto) to the extent that such investments are permitted under this Agreement and are not otherwise described in clauses (b)(i) or (ii), and (iv) the amount of any increase in reserves established during such period which the General Partner determines is necessary or appropriate in its sole and absolute discretion. Notwithstanding the foregoing, (i) during the term of the Credit Agreement, Available Cash for any fiscal quarter of the Partnership shall not exceed an amount which would result in a distribution to the General Partner, in accordance with the provisions of Article V of this Agreement, of an amount equal to 89% of the General Partner's estimated funds from operations for such fiscal quarter; provided, that Available Cash may exceed the limit set forth in this clause (i) to enable the General Partner to distribute Available Cash to the General Partner in an amount sufficient to enable the General Partner Entity to pay shareholder dividends that will (1) satisfy the REIT Requirements of, and (2) avoid any federal income or excise tax liability for, the General Partner Entity, and (ii) Available Cash shall not include any cash received or reductions in reserves, or take into account any disbursements made or reserves established, after commencement of the dissolution and liquidation of the Partnership. "Book-Tax Disparities" means, with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for federal income tax purposes as of such date. A Partner's share of the Partnership's Book-Tax Disparities in all of its Contributed Property and Adjusted Property will be reflected by the difference between such Partner's Capital Account balance as maintained pursuant to Exhibit B and the hypothetical balance of such Partner's Capital Account computed as if it had been maintained strictly in accordance with federal income tax accounting principles. 3 "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in Philadelphia, Pennsylvania are authorized or required by law to close. "Capital Account" means the Capital Account maintained for a Partner pursuant to Exhibit B. The initial Capital Account balance for each Partner who is a Partner on the Effective Date shall be the amount set forth opposite such Partner's name on Exhibit A hereto. "Capital Contribution" means, with respect to any Partner, any cash, cash equivalents or the Agreed Value of Contributed Property which such Partner contributes or is deemed to contribute to the Partnership pursuant to Section 4.1 or 4.2. "Carrying Value" means (i) with respect to a Contributed Property or Adjusted Property, the 704(c) Value of such property reduced (but not below zero) by all Depreciation with respect to such Contributed Property or Adjusted Property, as the case may be, charged to the Partners' Capital Accounts and (ii) with respect to any other Partnership property, the adjusted basis of such property for federal income tax purposes, all as of the time of determination. The Carrying Value of any property shall be adjusted from time to time in accordance with Exhibit B, and to reflect changes, additions (including capital improvements thereto) or other adjustments to the Carrying Value for dispositions and acquisitions of Partnership properties, as deemed appropriate by the General Partner. "Cash Amount" means an amount of cash equal to the Value on the Valuation Date of the Shares Amount. "Certificate" means the Certificate of Limited Partnership relating to the Partnership filed in the office of the Delaware Secretary of State, as amended from time to time in accordance with the terms hereof and the Act. "Class A" has the meaning set forth in Section 5.1.C. "Class A Share" has the meaning set forth in Section 5.1.C. "Class A Unit" means any Partnership Unit that is not specifically designated by the General Partner as being of another specified class of Partnership Units. "Class B" has the meaning set forth in Section 5.1.C. "Class B Share" has the meaning set forth in Section 5.1.C. "Class B Unit" means a Partnership Unit that is specifically designated by the General Partner as being a Class B Unit. 4 "Code" means the Internal Revenue Code of 1986, as amended and in effect from time to time, as interpreted by the applicable regulations thereunder. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law. "Consent" means the consent or approval of a proposed action by a Partner given in accordance with Section 14.2. "Consent of the Outside Limited Partners" means the Consent of Limited Partners (excluding for this purpose any Limited Partnership Interests held by the General Partner, any Person of which the General Partner owns or controls more than fifty percent (50%) of the voting interests and any Person directly or indirectly owning or controlling more than fifty percent (50%) of the outstanding voting interests of the General Partner) holding Percentage Interests that are greater than fifty percent (50%) of the aggregate Percentage Interest of all Limited Partners who are not excluded for the purposes hereof. "Contributed Property" means each property or other asset contributed to the Partnership, in such form as may be permitted by the Act, but excluding cash contributed or deemed contributed to the Partnership. Once the Carrying Value of a Contributed Property is adjusted pursuant to Exhibit B, such property shall no longer constitute a Contributed Property for purposes of Exhibit B, but shall be deemed an Adjusted Property for such purposes. "Conversion Factor" means 1.0; provided that, if the General Partner Entity (i) declares or pays a dividend on its outstanding Shares in Shares or makes a distribution to all holders of its outstanding Shares in Shares, (ii) subdivides its outstanding Shares or (iii) combines its outstanding Shares into a smaller number of Shares, the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which shall be the number of Shares issued and outstanding on the record date for such dividend, distribution, subdivision or combination (assuming for such purposes that such dividend, distribution, subdivision or combination has occurred as of such time) and the denominator of which shall be the actual number of Shares (determined without the above assumption) issued and outstanding on the record date for such dividend, distribution, subdivision or combination; and provided further that if an entity shall cease to be the General Partner Entity (the "Predecessor Entity") and another entity shall become the General Partner Entity (the "Successor Entity"), the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which is the Value of one Share of the Predecessor Entity, determined as of the date when the Successor Entity becomes the General Partner Entity, and the denominator of which is the Value of one Share of the Successor Entity, determined as of that same date. (For purposes of the second provision in the preceding sentence, if any shareholders of the Predecessor Entity will receive consideration in connection with the transaction in which the Successor Entity becomes the General Partner Entity, the numerator in the fraction described above for determining the adjustment to the Conversion Factor (that is, the Value of one Share of the Predecessor Entity) shall be the sum of the greatest amount of cash and the fair market value (as determined in good faith by the General Partner) of any securities and other consideration that the holder of one Share in the Predecessor Entity could have received in such transaction (determined without regard to any provisions governing fractional shares).) Any adjustment to the Conversion 5 Factor shall become effective immediately after the effective date of the event retroactive to the record date, if any, for the event giving rise thereto, it being intended that (x) adjustments to the Conversion Factor are to be made to avoid unintended dilution or anti-dilution as a result of transactions in which Shares are issued, redeemed or exchanged without a corresponding issuance, redemption or exchange of Partnership Units and (y) if a Specified Redemption Date shall fall between the record date and the effective date of any event of the type described above, that the Conversion Factor applicable to such redemption shall be adjusted to take into account such event. "Convertible Funding Debt" has the meaning set forth in Section 7.5.F. "Credit Agreement" means that certain Credit Agreement dated as of the Effective Date among the General Partner, the Partnership, Various Banks, Deutsche Bank AG, New York Branch, as Issuing Bank, and German American Capital Corporation, as Administrative Agent. "Debt" means, as to any Person, as of any date of determination, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, (ii) all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under letters of credit, surety bonds and other similar instruments guaranteeing payment or other performance of obligations by such Person, (iii) all indebtedness for borrowed money or for the deferred purchase price of property or services secured by any lien on any property owned by such Person, to the extent attributable to such Person's interest in such property, even though such Person has not assumed or become liable for the payment thereof, and (iv) obligations of such Person incurred in connection with entering into a lease which, in accordance with generally accepted accounting principles, should be capitalized. "Declaration of Trust" means the Declaration of Trust of the General Partner filed in the State of Maryland on September 23, 1997, as amended or restated from time to time. "Deemed Partnership Interest Value" means, as of any date with respect to any class of Partnership Interests, the Deemed Value of the Partnership Interest of such class multiplied by the applicable Partner's Percentage Interest of such class. "Deemed Value of the Partnership Interest" means, as of any date with respect to any class of Partnership Interests, (a) if the common shares of beneficial interest (or other comparable equity interests) of the General Partner Entity are Publicly Traded (i) the total number of shares of beneficial interest (or other comparable equity interest) of the General Partner Entity corresponding to such class of Partnership Interest (as provided for in Section 4.2.B) issued and outstanding as of the close of business on such date (excluding any treasury shares) multiplied by the Value of a share of such beneficial interest (or other comparable equity interest) on such date divided by (ii) the Percentage Interest of the General Partner in such class of Partnership Interests on such date, and (b) otherwise, the aggregate Value of such class of Partnership Interests determined as set forth in the fourth and fifth sentences of the definition of Value. 6 "Deficit Restoration Agreement" means an agreement made by a Partner and accepted by the Partnership whereby such Partner agrees to contribute an amount of cash set forth in such Deficit Restoration Agreement to the Partnership in the event of the liquidation of the Partnership pursuant to Article XIII. "Depreciation" means, for each fiscal year, an amount equal to the federal income tax depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such year, except that if the Carrying Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Carrying Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such year bears to such beginning adjusted tax basis; provided, however, that if the federal income tax depreciation, amortization, or other cost recovery deduction for such year is zero, Depreciation shall be determined with reference to such beginning Carrying Value using any reasonable method selected by the General Partner. "Distribution Period" has the meaning set forth in Section 5.1.C. "Effective Date" means the date of the closing of the initial public offering of the General Partner pursuant to the Purchase Agreement. "ElderTrust Realty Group" means ElderTrust Realty Group, Inc., a Maryland corporation and the initial general partner of the Partnership. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Plan Investor" means (i) a Plan, (ii) a trust which was established pursuant to a Plan, or a nominee for such trust or Plan, or (iii) an entity whose underlying assets include assets of a Plan by reason of such Plan's investment in such entity. "ET Partnership" means ET Partnership, a Pennsylvania general partnership. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Funding Debt" means the incurrence of any Debt by or on behalf of the General Partner Entity for the purpose of providing funds to the Partnership. "General Partner" means ElderTrust, a Maryland real estate investment trust, or any of its successors as a general partner of the Partnership. "General Partner Entity" means the General Partner; provided, however, that if (i) the common shares of beneficial interest (or other comparable equity interests) of the General Partner are at any time not Publicly Traded and (ii) the common shares of beneficial interest (or other comparable equity interests) of an entity that owns, directly or indirectly, fifty percent (50%) or more of the common shares of beneficial interest (or other comparable equity interests) of the General Partner are Publicly Traded, the term "General Partner Entity" shall refer to such entity whose common shares of beneficial interest (or other comparable equity securities) are Publicly Traded. If both requirements set forth in clauses (i) and (ii) above are not satisfied, then the term "General Partner Entity" shall mean the General Partner. 7 "General Partner Payment" has the meaning set forth in Section 15.14 hereof. "General Partnership Interest" means a Partnership Interest held by the General Partner that is a general partnership interest. A General Partnership Interest may be expressed as a number of Partnership Units. "IRS" means the Internal Revenue Service, which administers the internal revenue laws of the United States. "Immediate Family" means, with respect to any natural Person, such natural Person's spouse, parents, descendants, nephews, nieces, brothers, and sisters. "Incapacity" or "Incapacitated" means, (i) as to any individual Partner, death, total physical disability or entry by a court of competent jurisdiction adjudicating such Partner incompetent to manage his or her Person or estate, (ii) as to any corporation which is a Partner, the filing of a certificate of dissolution, or its equivalent, for the corporation or the revocation of its charter, (iii) as to any partnership or limited liability company which is a Partner, the dissolution and commencement of winding up of the partnership or limited liability company, (iv) as to any estate which is a Partner, the distribution by the fiduciary of the estate's entire interest in the Partnership, (v) as to any trustee of a trust which is a Partner, the termination of the trust (but not the substitution of a new trustee) or (vi) as to any Partner, the bankruptcy of such Partner. For purposes of this definition, bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner commences a voluntary proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect, (b) the Partner is adjudged as bankrupt or insolvent, or a final and nonappealable order for relief under any bankruptcy, insolvency or similar law now or hereafter in effect has been entered against the Partner, (c) the Partner executes and delivers a general assignment for the benefit of the Partner's creditors, (d) the Partner files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Partner in any proceeding of the nature described in clause (b) above, (e) the Partner seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator for the Partner or for all or any substantial part of the Partner's properties, (f) any proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect has not been dismissed within one hundred twenty (120) days after the commencement thereof, (g) the appointment without the Partner's consent or acquiescence of a trustee, receiver of liquidator has not been vacated or stayed within ninety (90) days of such appointment or (h) an appointment referred to in clause (g) is not vacated within ninety (90) days after the expiration of any such stay. "Indemnitee" means (i) any Person made a party to a proceeding by reason of its status as (A) the General Partner, (B) a Limited Partner, or (C) a trustee, director or officer of the Partnership, or the General Partner and (ii) such other Persons (including Affiliates of the 8 General Partner, a Limited Partner or the Partnership) as the General Partner may designate from time to time (whether before or after the event giving rise to potential liability), in its sole and absolute discretion. "Limited Partner" means any Person named as a Limited Partner in Exhibit A, as such Exhibit may be amended from time to time, or any Substituted Limited Partner or Additional Limited Partner, in such Person's capacity as a Limited Partner in the Partnership. "Limited Partnership Interest" means a Partnership Interest of a Limited Partner in the Partnership representing a fractional part of the Partnership Interests of all Limited Partners and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. A Limited Partnership Interest may be expressed as a number of Partnership Units. "Liquidating Event" has the meaning set forth in Section 13.1. "Liquidator" has the meaning set forth in Section 13.2.A. "MGI" means MGI Limited Partnership, a Delaware limited partnership. "Net Income" means, for any taxable period, the excess, if any, of the Partnership's items of income and gain for such taxable period over the Partnership's items of loss and deduction for such taxable period. The items included in the calculation of Net Income shall be determined in accordance with Exhibit B. If an item of income, gain, loss or deduction that has been included in the initial computation of Net Income is subjected to the special allocation rules in Exhibit C, Net Income or the resulting Net Loss, whichever the case may be, shall be recomputed without regard to such item. "Net Loss" means, for any taxable period, the excess, if any, of the Partnership's items of loss and deduction for such taxable period over the Partnership's items of income and gain for such taxable period. The items included in the calculation of Net Loss shall be determined in accordance with Exhibit B. If an item of income, gain, loss or deduction that has been included in the initial computation of Net Loss is subjected to the special allocation rules in Exhibit C, Net Loss or the resulting Net Income, whichever the case may be, shall be recomputed without regard to such item. "New Securities" means (i) any rights, options, warrants or convertible or exchangeable securities having the right to subscribe for or purchase shares of beneficial interest (or other comparable equity interest) of the General Partner, excluding grants under any Share Option Plan, or (ii) any Debt issued by the General Partner that provides any of the rights described in clause (i). "Nonrecourse Built-in Gain" means, with respect to any Contributed Properties or Adjusted Properties that are subject to a mortgage or negative pledge securing a Nonrecourse Liability, the amount of any taxable gain that would be allocated to the Partners pursuant to Section 2.B of Exhibit C if such properties were disposed of in a taxable transaction in full 9 satisfaction of such liabilities and for no other consideration. "Nonrecourse Deductions" has the meaning set forth in Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Partnership Year shall be determined in accordance with the rules of Regulations Section 1.704-2(c). "Nonrecourse Liability" has the meaning set forth in Regulations Section 1.752-1(a)(2). "Notice of Redemption" means a Notice of Redemption substantially in the form of Exhibit D. "Partner" means the General Partner or a Limited Partner, and "Partners" means the General Partner and the Limited Partners. "Partner Minimum Gain" means an amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i)(3). "Partner Nonrecourse Debt" has the meaning set forth in Regulations Section 1.704-2(b)(4). "Partner Nonrecourse Deductions" has the meaning set forth in Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a Partnership Year shall be determined in accordance with the rules of Regulations Section 1.704-2(i)(2). "Partnership" means the limited partnership formed under the Act upon the terms and conditions set forth in this Agreement, or any successor to such limited partnership. "Partnership Interest" means a Limited Partnership Interest or the General Partnership Interest and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. A Partnership Interest may be expressed as a number of Partnership Units. "Partnership Minimum Gain" has the meaning set forth in Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net increase or decrease in Partnership Minimum Gain, for a Partnership Year shall be determined in accordance with the rules of Regulations Section 1.704-2(d). "Partnership Record Date" means the record date established by the General Partner either (i) for the distribution of Available Cash pursuant to Section 5.1 hereof, which record date shall be the same as the record date established by the General Partner Entity for a distribution to its shareholders of some or all of its portion of such distribution, or (ii) if applicable, for determining the Partners entitled to vote on or consent to any proposed action for which the consent or approval of the Partners is sought pursuant to Section 14.2 hereof. 10 "Partnership Unit" means a fractional, undivided share of the Partnership Interests of all Partners issued pursuant to Sections 4.1 and 4.2, and includes Class A Units, Class B Units and any other classes or series of Partnership Units established after the date hereof. The number of Partnership Units outstanding and the Percentage Interests in the Partnership represented by such Partnership Units are set forth in Exhibit A, as such Exhibit may be amended from time to time. The ownership of Partnership Units shall be evidenced by a certificate in a form approved by the General Partner. "Partnership Year" means the fiscal year of the Partnership, which shall be the calendar year. "Percentage Interest" means, as to a Partner holding a class of Partnership Interests, its interest in such class, determined by dividing the Partnership Units of such class owned by such Partner by the total number of Partnership Units of such class then outstanding as specified in Exhibit A, as such exhibit may be amended from time to time, multiplied by the aggregate Percentage Interest allocable to such class of Partnership Interests. If the Partnership shall at any time have outstanding more than one class of Partnership Interests, the Percentage Interest attributable to each class of Partnership Interests shall be determined as set forth in Section 4.2.B. "Person" means a natural person, partnership (whether general or limited), trust, estate, association, corporation, limited liability company, unincorporated organization, custodian, nominee or any other individual or entity in its own or any representative capacity. "Plan" means (i) an employee benefit plan subject to Title I of ERISA or (ii) a plan as defined in Section 4975(e) of the Code. "Predecessor Entity" has the meaning set forth in the definition of "Conversion Factor" herein. "Prior Agreement" means the First Amended and Restated Agreement of Limited Partnership of the Partnership dated as of September 10, 1997, which Prior Agreement is amended and restated in its entirety by this Agreement as of the Effective Date. "Publicly Traded" means listed or admitted to trading on the New York Stock Exchange, the American Stock Exchange or another national securities exchange or designated for quotation on The Nasdaq Stock Market, Inc. National Market, or any successor to any of the foregoing. "Purchase Agreement" means that certain purchase agreement among the General Partner and Merrill Lynch & Co., BT Alex. Brown Incorporated and Goldman Sachs & Co., as representatives of the several underwriters, in connection with the initial public offering of Shares by the General Partner "Qualified REIT Subsidiary" means any Subsidiary of the General Partner that is a "qualified REIT subsidiary" within the meaning of Section 856(i) of the Code. 11 "Recapture Income" means any gain recognized by the Partnership (computed without regard to any adjustment required by Section 734 or Section 743 of the Code) upon the disposition of any property or asset of the Partnership, which gain is characterized as ordinary income because it represents the recapture of deductions previously taken with respect to such property or asset. "Redeeming Partner" has the meaning set forth in Section 8.6.A. "Redemption Amount" means either the Cash Amount or the Shares Amount, as determined by the General Partner, in its sole and absolute discretion; provided that if the Shares are not Publicly Traded at the time a Redeeming Partner exercises its Redemption Right, the Redemption Amount shall be paid only in the form of the Cash Amount unless the Redeeming Partner, in its sole and absolute discretion, consents to payment of the Redemption Amount in the form of the Shares Amount. A Redeeming Partner shall have no right, without the General Partner's consent, in its sole and absolute discretion, to receive the Redemption Amount in the form of the Shares Amount. "Redemption Right" has the meaning set forth in Section 8.6.A. "Regulation" or "Regulations" means the Income Tax Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "REIT" means a real estate investment trust under Section 856 of the Code. "REIT Requirements" has the meaning set forth in Section 5.1.A. "Residual Gain" or "Residual Loss" means any item of gain or loss, as the case may be, of the Partnership recognized for federal income tax purposes resulting from a sale, exchange or other disposition of Contributed Property or Adjusted Property, to the extent such item of gain or loss is not allocated pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit C to eliminate Book-Tax Disparities. "Safe Harbor" has the meaning set forth in Section 11.6.F. "Securities Act" means the Securities Act of 1933, as amended. "704(c) Value" of any Contributed Property means the fair market value of such property at the time of contribution as determined by the General Partner using such reasonable method of valuation as it may adopt; provided, however, subject to Exhibit B, the General Partner shall, in its sole and absolute discretion, use such method as it deems reasonable and appropriate to allocate the aggregate of the 704(c) Value of Contributed Properties in a single or integrated transaction among each separate property on a basis proportional to its fair market values. The 704(c) Values of the Contributed Properties contributed to the Partnership as of the Effective Date are set forth on Exhibit E. "Share" means a share of beneficial interest (or other comparable equity interest) of the General Partner Entity. Shares may be issued in one or more classes or series in accordance with the terms of the Declaration of Trust (or, if the General Partner is not the General Partner Entity, the organizational documents of the General Partner Entity). If there is more than one class or series of Shares, the term "Shares" shall, as the context requires, be deemed to refer to the class or series of Shares that correspond to the class or series of Partnership Interests for which the reference to Shares is made. When used with reference to Class A Units, the term "Shares" refers to common shares of beneficial interest (or other comparable equity interest) of the General Partner Entity. 12 "Shares Amount" means a number of Shares equal to the product of the number of Partnership Units offered for redemption by a Redeeming Partner times the Conversion Factor; provided that, if the General Partner Entity issues to all holders of Shares rights, options, warrants or convertible or exchangeable securities entitling such holders to subscribe for or purchase Shares or any other securities or property (collectively, the "rights"), then the Shares Amount shall also include such rights that a holder of that number of Shares would be entitled to receive. "Share Option Plan" means any equity incentive plan of the General Partner, the Partnership and/or any Affiliate of the Partnership. "Specified Redemption Date" means the tenth Business Day after receipt by the General Partner of a Notice of Redemption; provided that, if the Shares are not Publicly Traded, the Specified Redemption Date means the thirtieth Business Day after receipt by the General Partner of a Notice of Redemption. "Subsidiary" means, with respect to any Person, any corporation, limited liability company, trust, partnership or joint venture, or other entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests is owned, directly or indirectly, by such Person. "Substituted Limited Partner" means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 11.4. "Successor Entity" has the meaning set forth in the definition of "Conversion Factor" herein. "Terminating Capital Transaction" means any sale or other disposition of all or substantially all of the assets of the Partnership for cash or a related series of transactions that, taken together, result in the sale or other disposition of all or substantially all of the assets of the Partnership for cash. "Termination Transaction" has the meaning set forth in Section 11.2.B. "Unrealized Gain" attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (i) the fair market value of such property (as determined under Exhibit B) as of such date, over (ii) the Carrying Value of such property (prior to any adjustment to be made pursuant to Exhibit B) as of such date. "Unrealized Loss" attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (i) the Carrying Value of such property (prior to any adjustment to be made pursuant to Exhibit B) as of such date, over (ii) the fair market value of such property (as determined under Exhibit B) as of such date. 13 "Valuation Date" means the date of receipt by the General Partner of a Notice of Redemption or, if such date is not a Business Day, the first Business Day thereafter. "Value" means, with respect to any outstanding Shares of the General Partner Entity that are Publicly Traded, the average of the daily market price for the ten consecutive trading days immediately preceding the date with respect to which value must be determined. The market price for each such trading day shall be the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day. If the outstanding Shares of the General Partner Entity are Publicly Traded and the Shares Amount includes rights that a holder of Shares would be entitled to receive, then the Value of such rights shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. If the Shares of the General Partner Entity are not Publicly Traded, the Value of the Shares Amount per Partnership Unit offered for redemption (which will be the Cash Amount per Partnership Unit offered for redemption payable pursuant to Section 8.6.A) means the amount that a holder of one Partnership Unit would receive if each of the assets of the Partnership were to be sold for its fair market value on the Specified Redemption Date, the Partnership were to pay all of its outstanding liabilities, and the remaining proceeds were to be distributed to the Partners in accordance with the terms of this Agreement. Such Value shall be determined by the General Partner, acting in good faith and based upon a commercially reasonable estimate of the amount that would be realized by the Partnership if each asset of the Partnership (and each asset of each partnership, limited liability company, trust, joint venture or other entity in which the Partnership owns a direct or indirect interest) were sold to an unrelated purchaser in an arms' length transaction where neither the purchaser nor the seller were under economic compulsion to enter into the transaction (without regard to any discount in value as a result of the Partnership's minority interest in any property or any illiquidity of the Partnership's interest in any property). In connection with determining the Deemed Value of the Partnership Interest for purposes of determining the number of additional Partnership Units issuable upon a Capital Contribution funded by an underwritten public offering or an arm's length private placement of shares of beneficial interest (or other comparable equity interest) of the General Partner, the Value of such shares shall be the public offering or arm's length private placement price per share of such class of beneficial interest (or other comparable equity interest) sold. ARTICLE II ORGANIZATIONAL MATTERS Section 2.1 Organization The Partnership is a limited partnership organized pursuant to the provisions of the Act and upon the terms and conditions set forth in the Prior Agreement. The Partners hereby agree to continue the business of the Partnership upon the terms and conditions set forth in this Agreement. Except 14 as expressly provided herein to the contrary, the rights and obligations of the Partners and the administration and termination of the Partnership shall be governed by the Act. The Partnership Interest of each Partner shall be personal property for all purposes. Section 2.2 Name The name of the Partnership is ElderTrust Operating Limited Partnership. The Partnership's business may be conducted under any other name or names deemed advisable by the General Partner, including the name of the General Partner or any Affiliate thereof. The words "Limited Partnership," "L.P.," "Ltd." or similar words or letters shall be included in the Partnership's name where necessary for the purposes of complying with the laws of any jurisdiction that so requires. The General Partner in its sole and absolute discretion may change the name of the Partnership at any time and from time to time and shall notify the Limited Partners of such change in the next regular communication to the Limited Partners. Section 2.3 Registered Office and Agent; Principal Office The address of the registered office of the Partnership in the State of Delaware shall be located at Corporation Trust Center, 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801, and the registered agent for service of process on the Partnership in the State of Delaware at such registered office shall be Corporation Trust Company. The principal office of the Partnership shall be 415 McFarlan Road, Suite 202, Kennett Square, PA 19348, or such other place as the General Partner may from time to time designate by notice to the Limited Partners. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner deems advisable. Section 2.4 Term The term of the Partnership commenced on July 30, 1997 and shall continue until December 31, 2096, unless it is dissolved sooner pursuant to the provisions of Article XIII or as otherwise provided by law. ARTICLE III PURPOSE Section 3.1 Purpose and Business The purpose and nature of the business to be conducted by the Partnership is (i) to conduct any business that may be lawfully conducted by a limited partnership organized pursuant to the Act; provided, however, that such business shall be limited to and conducted in such a manner as to permit the General Partner Entity at all times to be classified as a REIT, unless the General Partner Entity ceases to qualify or is not qualified as a REIT for any reason or reasons not related to the business conducted by the Partnership, (ii) to enter into any corporation, partnership, joint venture, 15 trust, limited liability company or other similar arrangement to engage in any of the foregoing or the ownership of interests in any entity engaged, directly or indirectly, in any of the foregoing and (iii) to do anything necessary or incidental to the foregoing. In connection with the foregoing, the Partners acknowledge that the status of the General Partner Entity as a REIT inures to the benefit of all the Partners and not solely to the General Partner Entity or its Affiliates. Section 3.2 Powers The Partnership is empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described herein and for the protection and benefit of the Partnership, including, without limitation, full power and authority, directly or through its ownership interest in other entities, to enter into, perform and carry out contracts of any kind, borrow money and issue evidences of indebtedness, whether or not secured by mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and develop real property, and lease, sell, transfer and dispose of real property; provided, however, that the Partnership shall not take, or refrain from taking, any action which, in the judgment of the General Partner, in its sole and absolute discretion, (i) could adversely affect the ability of the General Partner Entity to continue to qualify as a REIT, (ii) could subject the General Partner Entity to any additional taxes under Section 857 or Section 4981 of the Code or (iii) could violate any law or regulation of any governmental body or agency having jurisdiction over the General Partner or its securities, unless such action (or inaction) shall have been specifically consented to by the General Partner in writing. ARTICLE IV CAPITAL CONTRIBUTIONS AND ISSUANCES OF PARTNERSHIP INTERESTS Section 4.1 Capital Contributions of the Partners; Restatement of Capital Accounts on the Effective Date ElderTrust Realty Group, Edward B. Romanov, Jr., D. Lee McCreary, Jr. and ET Partnership previously made Capital Contributions to the Partnership. Pursuant to the Act and the Prior Agreement, the General Partner has been admitted to the Partnership as an additional limited partner without having made a capital contribution. On the Effective Date, ElderTrust Realty Group shall withdraw from the Partnership. Also on the Effective Date, ET Partnership shall be liquidated and Michael R. Walker, Edward B. Romanov, Jr. and MGI shall acquire the limited partnership interests previously held by ET Partnership. On the Effective Date, the General Partner and the Limited Partners other than MGI, Edward B. Romanov, Jr. and D. Lee McCreary, Jr. shall make the Capital Contributions described in the section captioned "Formation Transactions" in the final prospectus of the General Partner in connection with the initial public offering of the Shares. On the Effective Date, the Partnership shall be recapitalized so that the Partners shall own Partnership Units in the amounts set forth in Exhibit A and shall have a Percentage Interest in the Partnership as set forth in Exhibit A, which Percentage Interest shall be adjusted in Exhibit A from time to time by the General 16 Partner to the extent necessary to reflect accurately redemptions, Capital Contributions, the issuance of additional Partnership Units or similar events having an effect on a Partner's Percentage Interest. To the extent the Partnership acquires any property by the merger of any other Person into the Partnership, Persons who receive Partnership Interests in exchange for their interests in the Person merging into the Partnership shall become Partners and shall be deemed to have made Capital Contributions as provided in the applicable merger agreement and as set forth in Exhibit A. A number of Partnership Units held by the General Partner equal to one-tenth of one percent (0.1%) of all outstanding Partnership Units (as of the Effective Date) shall be deemed to be the General Partner Partnership Units and shall be the General Partnership Interest of such General Partner. All other Partnership Units held by the General Partners shall be deemed to be Limited Partnership Interests and shall be held by the General Partner in its capacity as a Limited Partner in the Partnership. Except as provided in Sections 7.5 and 10.5 hereof, the Partners shall have no obligation to make any additional Capital Contributions or provide any additional funding to the Partnership (whether in the form of loans, repayments of loans or otherwise). Except for those Partners listed on Exhibit G who have entered into one or more Deficit Restoration Obligation Agreements and have agreed thereby to contribute an amount of cash up to the amount listed next to each such Partner's name on Exhibit G in the event of the liquidation of the Partnership pursuant to Article XIII, no Partner shall have any obligation to restore any deficit that may exist in its Capital Account, either upon a liquidation of the Partnership or otherwise. Section 4.2 Issuances of Partnership Interests A. General. The General Partner is hereby authorized to cause the Partnership from time to time to issue to Partners (including the General Partner and its Affiliates) or other Persons (including, without limitation, in connection with the contribution of property to the Partnership) Partnership Units or other Partnership Interests in one or more classes, or in one or more series of any of such classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to Limited Partnership Interests, all as shall be determined, subject to applicable Delaware law, by the General Partner in its sole and absolute discretion, including, without limitation, (i) the allocations of items of Partnership income, gain, loss, deduction and credit to each such class or series of Partnership Interests, (ii) the right of each such class or series of Partnership Interests to share in Partnership distributions and (iii) the rights of each such class or series of Partnership Interests upon dissolution and liquidation of the Partnership; provided that, no such Partnership Units or other Partnership Interests shall be issued to the General Partner unless either (a) the Partnership Interests are issued in connection with the grant, award or issuance of Shares or other equity interests in the General Partner having designations, preferences and other rights such that the economic interests attributable to such Shares or other equity interests are substantially similar to the designations, preferences and other rights (except voting rights) of the Partnership Interests issued to the General Partner in accordance with this Section 4.2.A or (b) the additional 17 Partnership Interests are issued to all Partners holding Partnership Interests in the same class in proportion to their respective Percentage Interests in such class. If the Partnership issues Partnership Interests pursuant to this Section 4.2.A, the General Partner shall make such revisions to this Agreement (including but not limited to the revisions described in Section 5.4, Section 6.2 and Section 8.6) as it deems necessary to reflect the issuance of such Partnership Interests. B. Percentage Interest Adjustments in the Case of Capital Contributions for Partnership Units. Upon the acceptance of additional Capital Contributions in exchange for Partnership Units and if the Partnership shall have outstanding more than one class of Partnership Interests, the Percentage Interest related thereto shall be equal to a fraction, the numerator of which is equal to the amount of cash, if any, plus the Agreed Value of Contributed Property, if any, contributed with respect to such additional Partnership Units and the denominator of which is equal to the sum of (i) the Deemed Value of the Partnership Interests for all outstanding classes (computed as of the Business Day immediately preceding the date on which the additional Capital Contributions are made (an "Adjustment Date")) plus (ii) the aggregate amount of additional Capital Contributions contributed to the Partnership on such Adjustment Date in respect of such additional Partnership Units. The Percentage Interest of each other Partner holding Partnership Interests not making a full pro rata Capital Contribution shall be adjusted to a fraction the numerator of which is equal to the sum of (i) the Deemed Partnership Interest Value of such Limited Partner (computed as of the Business Day immediately preceding the Adjustment Date) plus (ii) the amount of additional Capital Contributions (such amount being equal to the amount of cash, if any, plus the Agreed Value of Contributed Property, if any, so contributed), if any, made by such Partner to the Partnership in respect of such Partnership Interest as of such Adjustment Date and the denominator of which is equal to the sum of (i) the Deemed Value of the Partnership Interests of all outstanding classes (computed as of the Business Day immediately preceding such Adjustment Date) plus (ii) the aggregate amount of the additional Capital Contributions contributed to the Partnership on such Adjustment Date in respect of such additional Partnership Interests. For purposes of calculating a Partner's Percentage Interest pursuant to this Section 4.2.B, cash Capital Contributions by a General Partner will be deemed to equal the cash contributed by such General Partner plus (a) in the case of cash contributions funded by an offering of any equity interests in or other securities of the General Partner, the offering costs attributable to the cash contributed to the Partnership, and (b) in the case of Partnership Units issued pursuant to Section 7.5.E, an amount equal to the difference between the Value of the Shares sold pursuant to any Share Option Plan and the net proceeds of such sale. C. Classes of Partnership Units. From and after the Effective Date, subject to Section 4.2.A above, the Partnership shall have two classes of Partnership Units entitled "Class A Units" and "Class B Units." Either Class A Units or Class B Units, at the election of the General Partner, in its sole and absolute discretion, may be issued to newly admitted Partners in exchange for the contribution by such Partners of cash, real estate partnership interests, stock, notes or other assets or consideration; provided, that all Partnership Units issued to Partners on the Effective Date shall be Class A Units; and, provided further, that any Partnership Unit that is not specifically designated by the General Partner as being of a particular class shall be deemed to be a Class A Unit. Each Class B Unit shall be converted automatically into a Class A Unit on the day immediately following the Partnership Record Date for the Distribution Period (as defined in Section 18 5.1.C) in which such Class B Unit was issued, without the requirement for any action by either the Partnership or the Partner holding the Class B Unit. D. Certain Restrictions on Issuances of Partnership Units or Other Partnership Interests. Notwithstanding the foregoing, in no event may the General Partner cause the Partnership to issue to Partners (including the General Partner and its affiliates) or other Persons any Partnership Units or other Partnership Interests (i) if such issuance would cause the Partnership Interests of "benefit plan investors" to become "significant," as those terms are used in 29 C.F.R. ss. 2510.3-101(f), or any successor regulation thereto, or would cause the Partnership to become, with respect to any employee benefit plan subject to Title I of ERISA, a "party-in-interest" (as defined in Section 3(14) of ERISA) or, with respect to any plan defined in Section 4975(e) of the Code, a "disqualified person" (as defined in Section 4975(e) of the Code), or (ii) if such issuance would, in the opinion of counsel to the Partnership, cause any portion of the assets of the Partnership to constitute assets of any ERISA Plan Investor pursuant to 29 C.F.R. ss. 2510.3-101, or any successor regulation thereto. Section 4.3 No Preemptive Rights Except to the extent expressly granted by the Partnership pursuant to another agreement, no Person shall have any preemptive, preferential or other similar right with respect to (i) additional Capital Contributions or loans to the Partnership or (ii) issuance or sale of any Partnership Units or other Partnership Interests. Section 4.4 Other Contribution Provisions If any Partner is admitted to the Partnership and is given a Capital Account in exchange for services rendered to the Partnership, such transaction shall be treated by the Partnership and the affected Partner as if the Partnership had compensated such Partner in cash, and the Partner had contributed such cash to the capital of the Partnership. Section 4.5 No Interest on Capital No Partner shall be entitled to interest on its Capital Contributions or its Capital Account. ARTICLE V DISTRIBUTIONS Section 5.1 Requirement and Characterization of Distributions A. General. The General Partner shall distribute at least quarterly an amount equal to one hundred percent (100%) of Available Cash generated by the Partnership during such quarter or shorter period to the Partners who are Partners on the Partnership Record Date with respect to such quarter or shorter period as provided in Sections 5.1.B, 5.1.C and 5.1.D; 19 provided, that during the term of the Credit Agreement, the General Partner may not make any distribution with respect to a fiscal quarter until the General Partner has released its quarterly earnings report with respect to such fiscal quarter. Notwithstanding anything to the contrary contained herein, in no event may a Partner receive a distribution of Available Cash with respect to a Partnership Unit for a quarter or shorter period if such Partner is entitled to receive a distribution with respect to a Share for which such Partnership Unit has been redeemed or exchanged. Unless otherwise expressly provided for herein or in an agreement at the time a new class of Partnership Interests is created in accordance with Article IV hereof, no Partnership Interest shall be entitled to a distribution in preference to any other Partnership Interest. The General Partner shall make such reasonable efforts, as determined by it in its sole and absolute discretion and consistent with the qualification of the General Partner Entity as a REIT, to distribute Available Cash (a) to Limited Partners so as to preclude any such distribution or portion thereof from being treated as part of a sale of property of the Partnership by a Limited Partner under Section 707 of the Code or the Regulations thereunder; provided that, the General Partners and the Partnership shall not have liability to a Limited Partner under any circumstances as a result of any distribution to a Limited Partner being so treated, and (b) to the General Partner in an amount sufficient to enable the General Partner Entity to pay shareholder dividends that will (1) satisfy the requirements for qualification as a REIT under the Code and the Regulations (the "REIT Requirements") of, and (2) avoid any federal income or excise tax liability for, the General Partner Entity. B. Method. (i) Each holder of Partnership Interests that is entitled to any preference in distribution shall be entitled to a distribution in accordance with the rights of any such class of Partnership Interests (and, within such class, pro rata in proportion to the respective Percentage Interests on such Partnership Record Date); and (ii) To the extent there is Available Cash remaining after the payment of any preference in distribution in accordance with the foregoing clause (i), with respect to Partnership Interests that are not entitled to any preference in distribution, pro rata to each such class in accordance with the terms of such class (and, within each such class, pro rata in proportion to the respective Percentage Interests on such Partnership Record Date). C. Distributions When Class B Units Are Outstanding. If for any quarter or shorter period with respect to which a distribution is to be made (a "Distribution Period") Class B Units are outstanding on the Partnership Record Date for such Distribution Period, the General Partner shall allocate the Available Cash with respect to such Distribution Period available for distribution with respect to the Class A Units and Class B Units collectively between the Partners who are holders of Class A Units ("Class A") and the Partners who are holders of Class B Units ("Class B") as follows: 20 (1) Class A shall receive that portion of the Available Cash (the "Class A Share") determined by multiplying the amount of Available Cash by the following fraction: A x Y -------------------------- (A x Y)+(B x X) (2) Class B shall receive that portion of the Available Cash (the "Class B Share") determined by multiplying the amount of Available Cash by the following fraction: B x X -------------------------- (A x Y)+(B x X) (3) For purposes of the foregoing formulas, (i) "A" equals the number of Class A Units outstanding on the Partnership Record Date for such Distribution Period; (ii) "B" equals the number of Class B Units outstanding on the Partnership Record Date for such Distribution Period; (iii) "Y" equals the number of days in the Distribution Period; and (iv) "X" equals the number of days in the Distribution Period for which the Class B Units were issued and outstanding. The Class A Share shall be distributed among Partners holding Class A Units on the Partnership Record Date for the Distribution Period in accordance with the number of Class A Units held by each Partner on such Partnership Record Date; provided that, in no event may a Partner receive a distribution of Available Cash with respect to a Class A Unit if a Partner is entitled to receive a distribution out of such Available Cash with respect to a Share for which such Class A Unit has been redeemed or exchanged. The Class B Shares shall be distributed among the Partners holding Class B Units on the Partnership Record Date for the Distribution Period in accordance with the number of Class B Units held by each Partner on such Partnership Record Date. In no event shall any Class B Units be entitled to receive any distribution of Available Cash for any Distribution Period ending prior to the date on which such Class B Units are issued. D. Distributions When Class B Units Have Been Issued on Different Dates. If Class B Units which have been issued on different dates are outstanding on the Partnership Record Date for any Distribution Period, then the Class B Units issued on each particular date shall be treated as a separate series of Partnership Units for purposes of making the allocation of 21 Available Cash for such Distribution Period among the holders of Partnership Units (and the formula for making such allocation, and the definitions of variables used therein, shall be modified accordingly). Thus, for example, if two series of Class B Units are outstanding on the Partnership Record Date for any Distribution Period, the allocation formula for each series, "Series B1" and "Series B2" would be as follows: (1) Series B1 shall receive that portion of the Available Cash determined by multiplying the amount of Available Cash by the following fraction: B1 x X1 -------------------------------------- (A x Y)+(B1 x X1)+(B2 x X2) (2) Series B2 shall receive that portion of the Available Cash determined by multiplying the amount of Available Cash by the following fraction: B2 x X2 -------------------------------------- (A x Y)+(B1 x X1)+(B2 x X2) (3) For purposes of the foregoing formulas the definitions set forth in Section 5.1.C.3 remain the same except that (i) "B1" equals the number of Partnership Units in Series B1 outstanding on the Partnership Record Date for such Distribution Period; (ii) "B2" equals the number of Partnership Units in Series B2 outstanding on the Partnership Record Date for such Distribution Period; (iii) "X1" equals the number of days in the Distribution Period for which the Partnership Units in Series B1 were issued and outstanding; and (iv) "X2" equals the number of days in the Distribution Period for which the Partnership Units in Series B2 were issued and outstanding. E. Minimum Distributions if Shares Not Publicly Traded. In addition (and without regard to the amount of Available Cash), if the Shares of the General Partner Entity are not Publicly Traded, the General Partner shall make cash distributions with respect to the Class A Units at least annually for each taxable year of the Partnership beginning prior to the fifteenth (15th) anniversary of the Effective Date in an aggregate amount with 22 respect to each such taxable year at least equal to 95% of the Partnership's taxable income for such year allocable to the Class A Units, with such distributions to be made not later than 60 days after the end of such year. Section 5.2 Amounts Withheld All amounts withheld pursuant to the Code or any provisions of any state or local tax law and Section 10.5 with respect to any allocation, payment or distribution to the General Partner, the Limited Partners or Assignees shall be treated as amounts distributed to the General Partner, Limited Partners or Assignees pursuant to Section 5.1 for all purposes under this Agreement. Section 5.3 Distributions Upon Liquidation Proceeds from a Terminating Capital Transaction shall be distributed to the Partners in accordance with Section 13.2. Section 5.4 Revisions to Reflect Issuance of Partnership Interests If the Partnership issues Partnership Interests to the General Partner or any Additional Limited Partner pursuant to Article IV hereof, the General Partner shall make such revisions to this Article V and Exhibit A as it deems necessary to reflect the issuance of such additional Partnership Interests without the requirements for any other consents or approvals. ARTICLE VI ALLOCATIONS Section 6.1 Allocations For Capital Account Purposes For purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the Partnership's items of income, gain, loss and deduction (computed in accordance with Exhibit B) shall be allocated among the Partners in each taxable year (or portion thereof) as provided herein below. A. Net Income. After giving effect to the special allocations set forth in Section 1 of Exhibit C, Net Income shall be allocated (i) first, to the General Partner to the extent that Net Losses previously allocated to the General Partner pursuant to the last sentence of Section 6.1.B exceed Net Income previously allocated to the General Partner pursuant to this clause (i) of Section 6.1.A, (ii) second, to the holders of any Partnership Interests that are entitled to any preference in distribution in accordance with the rights of any such class of Partnership Interests until each such Partnership Interest has been allocated, on a cumulative basis pursuant to this clause (ii), Net Income equal to the amount of distributions received which are attributable to the preference of such class of Partnership Interests (and, within such class, pro rata in proportion to the respective Percentage Interests as of the last day of the period for which such allocation is being made) and (iii) third, with respect to Partnership Interests that are not entitled to any preference in the allocation of Net 23 Income, pro rata to each such class in accordance with the terms of such class (and, within such class, pro rata in proportion to the respective Percentage Interests as of the last day of the period for which such allocation is being made). B. Net Losses. After giving effect to the special allocations set forth in Section 1 of Exhibit C, Net Losses shall be allocated (i) first, to the holders of any Partnership Interests that are entitled to any preference in distribution in accordance with the rights of any such class of Partnership Interests to the extent that any prior allocations of Net Income to such class of Partnership Interests pursuant to Section 6.1.A(ii) exceed, on a cumulative basis, distributions with respect to such Partnership Interests pursuant to clause (i) of Section 5.1.B (and, within such class, pro rata in proportion to the respective Percentage Interests as of the last day of the period for which such allocation is being made) and (ii) second, with respect to classes of Partnership Interests that are not entitled to any preference in distribution, pro rata to each such class in accordance with the terms of such class (and, within such class, pro rata in proportion to the respective Percentage Interests as of the last day of the period for which such allocation is being made); provided that Net Losses shall not be allocated to any Partner (including the General Partner) pursuant to this Section 6.1.B to the extent that such allocation would cause such Partner (including the General Partner) to have an Adjusted Capital Account Deficit (or increase any existing Adjusted Capital Account Deficit) at the end of such taxable year (or portion thereof). All Net Losses in excess of the limitations set forth in this Section 6.1.B shall be allocated to the General Partner. C. Allocation of Nonrecourse Debt. For purposes of Regulation Section 1.752-3(a), the Partners agree that Nonrecourse Liabilities of the Partnership in excess of the sum of (i) the amount of Partnership Minimum Gain and (ii) the total amount of Nonrecourse Built-in Gain shall be allocated among the Partners in accordance with their respective Percentage Interests. D. Recapture Income. Any gain allocated to the Partners upon the sale or other taxable disposition of any Partnership asset shall, to the extent possible after taking into account other required allocations of gain pursuant to Exhibit C, be characterized as Recapture Income in the same proportions and to the same extent as such Partners have been allocated any deductions directly or indirectly giving rise to the treatment of such gains as Recapture Income. Section 6.2 Revisions to Allocations to Reflect Issuance of Partnership Interests If the Partnership issues Partnership Interests to the General Partner or any Additional Limited Partner pursuant to Article IV hereof, the General Partner shall make such revisions to this Article VI and Exhibit A as it deems necessary to reflect the terms of the issuance of such Partnership Interests, including making preferential allocations to classes of Partnership Interests that are entitled thereto. Such revisions shall not require the consent or approval of any other Partner. 24 ARTICLE VII MANAGEMENT AND OPERATIONS OF BUSINESS Section 7.1 Management A. Powers of General Partner. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership are and shall be exclusively vested in the General Partner, and no Limited Partner shall have any right to participate in or exercise control or management power over the business and affairs of the Partnership. The General Partner may not be removed by the Limited Partners with or without cause. In addition to the powers now or hereafter granted a general partner of a limited partnership under applicable law or which are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to Section 7.11, shall have full power and authority to do all things deemed necessary or desirable by it to conduct the business of the Partnership, to exercise all powers set forth in Section 3.2 and to effectuate the purposes set forth in Section 3.1, including, without limitation: (1) the making of any expenditures, the lending or borrowing of money (including, without limitation, making prepayments on loans and borrowing money to permit the Partnership to make distributions to its Partners in such amounts as are required under Section 5.1.E or will permit the General Partner Entity (so long as the General Partner Entity qualifies as REIT) to avoid the payment of any federal income tax (including, for this purpose, any excise tax pursuant to Section 4981 of the Code) and to make distributions to its shareholders sufficient to permit the General Partner Entity to maintain REIT status), the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness (including the securing of same by mortgage, deed of trust or other lien or encumbrance on the Partnership's assets) and the incurring of any obligations the General Partner Entity deems necessary for the conduct of the activities of the Partnership; (2) the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Partnership; (3) the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any or all of the assets of the Partnership (including the exercise or grant of any conversion, option, privilege or subscription right or other right available in connection with any assets at any time held by the Partnership) or the merger or other combination of the 25 Partnership with or into another entity on such terms as the General Partner deems proper; (4) the use of the assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with the terms of this Agreement and on any terms it sees fit, including, without limitation, the financing of the conduct of the operations of the General Partner, the Partnership or any of the Partnership's Subsidiaries, the lending of funds to other Persons (including, without limitation, the Partnership's Subsidiaries) and the repayment of obligations of the Partnership and its Subsidiaries and any other Person in which the Partnership has an equity investment and the making of capital contributions to its Subsidiaries; (5) the management, operation, leasing, landscaping, repair, alteration, demolition or improvement of any real property or improvements owned by the Partnership or any Subsidiary of the Partnership or any Person in which the Partnership has made a direct or indirect equity investment; (6) the negotiation, execution, and performance of any contracts, conveyances or other instruments that the General Partner considers useful or necessary to the conduct of the Partnership's operations or the implementation of the General Partner's powers under this Agreement, including contracting with contractors, developers, consultants, accountants, legal counsel, other professional advisors and other agents and the payment of their expenses and compensation out of the Partnership's assets; (7) the mortgage, pledge, encumbrance or hypothecation of any assets of the Partnership, and the use of the assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with the terms of this Agreement and on any terms it sees fit, including, without limitation, the financing of the conduct or the operations of the General Partner or the Partnership, the lending of funds to other Persons (including, without limitation, any Subsidiaries of the Partnership) and the repayment of obligations of the Partnership, any of its Subsidiaries and any other Person in which it has an equity investment; (8) the distribution of Partnership cash or other Partnership assets in accordance with this Agreement; (9) the holding, managing, investing and reinvesting of cash and other assets of the Partnership; 26 (10) the collection and receipt of revenues and income of the Partnership; (11) the selection, designation of powers, authority and duties and the dismal of employees of the Partnership (including, without limitation, employees having titles such as "president," "vice president," "secretary" and "treasurer") and agents, outside attorneys, accountants, consultants and contractors of the Partnership and the determination of their compensation and other terms of employment or hiring; (12) the maintenance of such insurance for the benefit of the Partnership and the Partners as it deems necessary or appropriate; (13) the formation of, or acquisition of an interest (including non-voting interests in entities controlled by Affiliates of the Partnership or third parties) in, and the contribution of property to, any further limited or general partnerships, joint ventures, limited liability companies or other relationships that it deems desirable (including, without limitation, the acquisition of interests in, and the contributions of funds or property to, or making of loans to, its Subsidiaries and any other Person in which it has an equity investment from time to time, or the incurrence of indebtedness on behalf of such Persons or the guarantee of the obligations of such Persons); provided that, as long as the General Partner has determined to continue to qualify as a REIT, the Partnership may not engage in any such formation, acquisition or contribution that would cause the General Partner to fail to qualify as a REIT; (14) the control of any matters affecting the rights and obligations of the Partnership, including the settlement, compromise, submission to arbitration or any other form of dispute resolution or abandonment of any claim, cause of action, liability, debt or damages due or owing to or from the Partnership, the commencement or defense of suits, legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, the representation of the Partnership in all suits or legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, the incurring of legal expense and the indemnification of any Person against liabilities and contingencies to the extent permitted by law; (15) the determination of the fair market value of any Partnership property distributed in kind, using such reasonable method of valuation as the General Partner may adopt; 27 (16) the exercise, directly or indirectly, through any attorney-in-fact acting under a general or limited power of attorney, of any right, including the right to vote, appurtenant to any assets or investment held by the Partnership; (17) the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of or in connection with any Subsidiary of the Partnership or any other Person in which the Partnership has a direct or indirect interest, individually or jointly with any such Subsidiary or other Person; (18) the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of any Person in which the Partnership does not have any interest pursuant to contractual or other arrangements with such Person; (19) the making, executing and delivering of any and all deeds, leases, notes, deeds to secure debt, mortgages, deeds of trust, security agreements, conveyances, contracts, guarantees, warranties, indemnities, waivers, releases or other legal instruments or agreements in writing necessary or appropriate in the judgment of the General Partner for the accomplishment of any of the powers of the General Partner enumerated in this Agreement; (20) the distribution of cash to acquire Partnership Units held by a Limited Partner in connection with a Limited Partner's exercise of its Redemption Right under Section 8.6; (21) the amendment and restatement of Exhibit A to reflect accurately at all times the Capital Contributions and Percentage Interests of the Partners as the same are adjusted from time to time to the extent necessary to reflect redemptions, Capital Contributions, the issuance of Partnership Units, the admission of any Additional Limited Partner or any Substituted Limited Partner or otherwise, which amendment and restatement, notwithstanding anything in this Agreement to the contrary, shall not be deemed an amendment of this Agreement, as long as the matter or event being reflected in Exhibit A otherwise is authorized by this Agreement; and (22) the acceptance on behalf of the Partnership of any Deficit Restoration Obligation Agreement made by any Partner, and the amendment and restatement of Exhibit G to reflect accurately at all times the names of the Partners who have made one or more Deficit Restoration Agreements which have been accepted by the Partnership and the aggregate amounts obligated by such Partners pursuant to such Deficit Restoration Agreements, which 28 amendment and restatement, notwithstanding anything in this Agreement to the contrary, shall not be deemed an amendment of this Agreement. B. No Approval by Limited Partners. Except as provided in Section 7.11, each of the Limited Partners agrees that the General Partner is authorized to execute, deliver and perform the above-mentioned agreements and transactions on behalf of the Partnership without any further act, approval or vote of the Partners, notwithstanding any other provision of this Agreement, the Act or any applicable law, rule or regulation, to the full extent permitted under the Act or other applicable law. The execution, delivery or performance by the General Partner or the Partnership of any agreement authorized or permitted under this Agreement shall not constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any other Persons under this Agreement or of any duty stated or implied by law or equity. C. Insurance. At all times from and after the date hereof, the General Partner may cause the Partnership to obtain and maintain (i) casualty, liability and other insurance on the properties of the Partnership and (ii) liability insurance for the Indemnitees hereunder and (iii) such other insurance as the General Partner, in its sole and absolute discretion, determines to be necessary. D. Working Capital and Other Reserves. At all times from and after the date hereof, the General Partner may cause the Partnership to establish and maintain working capital reserves in such amounts as the General Partner, in its sole and absolute discretion, deems appropriate and reasonable from time to time, including upon liquidation of the Partnership under Article XIII. E. No Obligation to Consider Tax Consequences of Limited Partners. In exercising its authority under this Agreement, the General Partner may, but shall be under no obligation to, take into account the tax consequences to any Partner (including the General Partner) of any action taken (or not taken) by any of them. The General Partner and the Partnership shall not have liability to a Limited Partner for monetary damages or otherwise for losses sustained, liabilities incurred or benefits not derived by such Limited Partner in connection with such decisions, provided that the General Partner has acted in good faith and pursuant to its authority under this Agreement. Section 7.2 Certificate of Limited Partnership The General Partner has previously filed the Certificate with the Secretary of State of Delaware. To the extent that such action is determined by the General Partner to be reasonable and necessary or appropriate, the General Partner shall file amendments to and restatements of the Certificate and do all the things to maintain the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) under the laws of the State of Delaware and each other state, the District of Columbia or other jurisdiction in which the Partnership may elect to do business or own property. Subject to the terms of Section 8.5.A(4), the General Partner shall not be required, before or after filing, to deliver or 29 mail a copy of the Certificate or any amendment thereto to any Limited Partner. The General Partner shall use all reasonable efforts to cause to be filed such other certificates or documents as may be reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and any other state, the District of Columbia or other jurisdiction in which the Partnership may elect to do business or own property. Section 7.3 Title to Partnership Assets Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partners, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine, including Affiliates of the General Partner. The General Partner hereby declares and warrant that any Partnership assets for which legal title is held in the name of the General Partner or any nominee or Affiliate of the General Partner shall be held by that entity for the use and benefit of the Partnership in accordance with the provisions of this Agreement. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which legal title to such Partnership assets is held. Section 7.4 Reimbursement of the General Partner A. No Compensation. Except as provided in this Section 7.4 and elsewhere in this Agreement (including the provisions of Articles V and VI regarding distributions, payments and allocations to which it may be entitled), the General Partner shall not be compensated for its services as general partner of the Partnership. B. Responsibility for Partnership Expenses. The Partnership shall be responsible for and shall pay all expenses relating to the Partnership's organization, the ownership of its assets and its operations. The General Partner shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine in its sole and absolute discretion, for all expenses it incurs relating to the ownership and operation of, or for the benefit of, the Partnership (including, without limitation, expenses related to the operations of the General Partner and to the management and administration of any Subsidiaries of the General Partner or the Partnership or Affiliates of the Partnership, such as auditing expenses and filing fees); provided that, the amount of any such reimbursement shall be reduced by (i) any interest earned by the General Partner with respect to bank accounts or other instruments or accounts held by it on behalf of the Partnership as permitted in Section 7.5.A (which interest is considered to belong to the Partnership and shall be paid over to the Partnership to the extent not applied to reimburse the General Partner for expenses hereunder); and (ii) any amount derived by the General Partner from any investments permitted in Section 7.5.A. The General Partner shall determine in good faith the amount of expenses incurred by it related to the ownership and operation 30 of, or for the benefit of, the Partnership. If certain expenses are incurred for the benefit of the Partnership and other entities (including the General Partner), such expenses will be allocated to the Partnership and such other entities in such a manner as the General Partner in its sole and absolute discretion deems fair and reasonable. Such reimbursements shall be in addition to any reimbursement to the General Partner pursuant to Section 10.3.C and as a result of indemnification pursuant to Section 7.7. All payments and reimbursements hereunder shall be characterized for federal income tax purposes as expenses of the Partnership incurred on its behalf, and not as expenses of the General Partner. C. Partnership Interest Issuance Expenses. The General Partner shall also be reimbursed for all expenses it incurs relating to any issuance of Partnership Interests, Shares, Debt of the Partnership or the General Partner or rights, options, warrants or convertible or exchangeable securities pursuant to Article IV (including, without limitation, all costs, expenses, damages and other payments resulting from or arising in connection with litigation related to any of the foregoing), all of which expenses are considered by the Partners to constitute expenses of, and for the benefit of, the Partnership. D. Purchases of Shares by the General Partner. If the General Partner exercises its rights under the Declaration of Trust to purchase Shares or otherwise elects to purchase from its shareholders Shares in connection with a share repurchase or similar program or for the purpose of delivering such Shares to satisfy an obligation under any dividend reinvestment or equity purchase program adopted by the General Partner, any employee equity purchase plan adopted by the General Partner or any similar obligation or arrangement undertaken by the General Partner in the future, the purchase price paid by the General Partner for those Shares and any other expenses incurred by the General Partner in connection with such purchase shall be considered expenses of the Partnership and shall be reimbursable to the General Partner, subject to the conditions that: (i) if those Shares subsequently are to be sold by the General Partner, the General Partner shall pay to the Partnership any proceeds received by the General Partner for those Shares (provided that a transfer of Shares for Partnership Units pursuant to Section 8.6 would not be considered a sale for such purposes); and (ii) if such Shares are not retransferred by the General Partner within thirty (30) days after the purchase thereof, the General Partner shall cause the Partnership to cancel a number of Partnership Units (rounded to the nearest whole Partnership Unit) held by the General Partner equal to the product attained by multiplying the number of those Shares by a fraction, the numerator of which is one and the denominator of which is the Conversion Factor. E. Reimbursement not a Distribution. If and to the extent any reimbursement made pursuant to this Section 7.4 is determined for federal income tax purposes not to constitute a payment of expenses of the Partnership, the amount so determined shall constitute a guaranteed payment with respect to capital within the meaning of Section 707(c) of the Code, shall be treated consistently therewith by the Partnership and all Partners and shall not be treated as a distribution for purposes of computing the Partners' Capital Accounts. 31 Section 7.5 Outside Activities of the General Partner; Relationship of Shares to Partnership Units; Funding Debt A. General. Without the Consent of the Outside Limited Partners, the General Partner shall not, directly or indirectly, enter into or conduct any business other than in connection with the ownership, acquisition and disposition of Partnership Interests as a General Partner or Limited Partner and the management of the business of the Partnership and such activities as are incidental thereto. Without the Consent of the Outside Limited Partners, the assets of the General Partner shall be limited to Partnership Interests and permitted debt obligations of the Partnership (as contemplated by Section 7.5.F), so that Shares and Partnership Units are completely fungible except as otherwise specifically provided herein; provided, that the General Partner shall be permitted to hold such bank accounts or similar instruments or accounts in its name as it deems necessary to carry out its responsibilities and purposes as contemplated under this Agreement and its organizational documents (provided that accounts held on behalf of the Partnership to permit the General Partner to carry out its responsibilities under this Agreement shall be considered to belong to the Partnership and the interest earned thereon shall, subject to Section 7.4.B, be applied for the benefit of the Partnership); and, provided further, that the General Partner shall be permitted to acquire, directly or through a Qualified REIT Subsidiary or limited liability company, up to a one percent (1%) interest in any partnership or limited liability company at least ninety-nine percent (99%) of the equity of which is owned, directly or indirectly, by the Partnership. The General Partner and any of its Affiliates may acquire Limited Partnership Interests and shall be entitled to exercise all rights of a Limited Partner relating to such Limited Partnership Interests. B. Repurchase of Shares. If the General Partner exercises its rights under the Declaration of Trust to purchase Shares or otherwise elects to purchase from its shareholders Shares in connection with a share repurchase or similar program or for the purpose of delivering such shares to satisfy an obligation under any dividend reinvestment or share purchase program adopted by the General Partner, any employee share purchase plan adopted by the General Partner or any similar obligation or arrangement undertaken by the General Partner in the future, then the General Partner shall cause the Partnership to purchase from the General Partner that number of Partnership Units of the appropriate class equal to the product obtained by multiplying the number of Shares purchased by the General Partner times a fraction, the numerator of which is one and the denominator of which is the Conversion Factor, on the same terms and for the same aggregate price that the General Partner purchased such Shares. C. Forfeiture of Shares. If the Partnership or the General Partner acquires Shares as a result of the forfeiture of such Shares under a restricted or similar share plan, then the General Partner shall cause the Partnership to cancel that number of Partnership Units equal to the number of Shares so acquired, and, if the Partnership acquired such Shares, it shall transfer such Shares to the General Partner for cancellation. D. Issuances of Shares. After the Effective Date, the General Partner shall not grant, award, or issue any additional Shares (other than Shares issued pursuant to Section 8.6 hereof or pursuant to a dividend or 32 distribution (including any share split) of Shares to all of its shareholders), other equity securities of the General Partner, New Securities or Convertible Funding Debt unless (i) the General Partner shall cause, pursuant to Section 4.2.A hereof, the Partnership to issue to the General Partner Partnership Interests or rights, options, warrants or convertible or exchangeable securities of the Partnership having designations, preferences and other rights, all such that the economic interests are substantially the same as those of such additional Shares, other equity securities, New Securities or Convertible Funding Debt, as the case may be, and (ii) the General Partner transfers to the Partnership, as an additional Capital Contribution, the proceeds from the grant, award, or issuance of such additional Shares, other equity securities, New Securities or Convertible Funding Debt, as the case may be, or from the exercise of rights contained in such additional Shares, other equity securities, New Securities or Convertible Funding Debt, as the case may be. Without limiting the foregoing, the General Partner is expressly authorized to issue additional Shares, other equity securities, New Securities or Convertible Funding Debt, as the case may be, for less than fair market value, and the General Partner is expressly authorized, pursuant to Section 4.2.A hereof, to cause the Partnership to issue to the General Partner corresponding Partnership Interests, as long as (a) the General Partner concludes in good faith that such issuance is in the interests of the General Partner and the Partnership (for example, and not by way of limitation, the issuance of Shares and corresponding Partnership Units pursuant to a share purchase plan providing for purchases of Shares, either by employees or shareholders, at a discount from fair market value or pursuant to employee share options that have an exercise price that is less than the fair market value of the Shares, either at the time of issuance or at the time of exercise) and (b) the General Partner transfers all proceeds from any such issuance or exercise to the Partnership as an additional Capital Contribution. E. Share Option Plan. If at any time or from time to time, the General Partner sells Shares pursuant to any Share Option Plan, the General Partner shall transfer the net proceeds of the sale of such Shares to the Partnership as an additional Capital Contribution in exchange for an amount of additional Partnership Units equal to the number of Shares so sold divided by the Conversion Factor. F. Funding Debt. The General Partner may incur a Funding Debt, including, without limitation, a Funding Debt that is convertible into Shares or otherwise constitutes a class of New Securities ("Convertible Funding Debt"), subject to the condition that the General Partner lend to the Partnership the net proceeds of such Funding Debt; provided, that Convertible Funding Debt shall be issued pursuant to Section 7.5.D above; and, provided further, that the General Partner shall not be obligated to lend the net proceeds of any Funding Debt to the Partnership in a manner that would be inconsistent with the General Partner's ability to remain qualified as a REIT. If the General Partner enters into any Funding Debt, the loan to the Partnership shall be on comparable terms and conditions, including interest rate, repayment schedule and costs and expenses, as are applicable with respect to or incurred in connection with such Funding Debt. Section 7.6 Transactions with Affiliates A. Transactions with Certain Affiliates. Except as expressly permitted by this Agreement, the Partnership shall not, directly or 33 indirectly, sell, transfer or convey any property to, or purchase any property from, or borrow funds from, or lend funds to, any Partner or any Affiliate of the Partnership or the General Partner that is not also a Subsidiary of the Partnership, except pursuant to transactions that are on terms that are fair and reasonable and no less favorable to the Partnership than would be obtained from an unaffiliated third party. B. Conflict Avoidance. The General Partner is expressly authorized to enter into, in the name and on behalf of the Partnership, a right of first opportunity arrangement and other conflict avoidance agreements with various Affiliates of the Partnership and the General Partner on such terms as the General Partner, in its sole and absolute discretion, believes is advisable. C. Benefit Plans Sponsored by the Partnership. The General Partner, in its sole and absolute discretion and without the approval of the Limited Partners, may propose and adopt on behalf of the Partnership employee benefit plans funded by the Partnership for the benefit of employees of the General Partner, the Partnership, Subsidiaries of the Partnership or any Affiliate of any of them. Section 7.7 Indemnification A. General. The Partnership shall indemnify each Indemnitee to the fullest extent provided by the Act from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including, without limitation, attorneys fees and other legal fees and expenses), judgments, fines, settlements and other amounts arising from or in connection with any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, incurred by the Indemnitee and relating to the Partnership or the General Partner or the operation of, or the ownership of property by, any of them as set forth in this Agreement in which any such Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, unless it is established by a final determination of a court of competent jurisdiction that: (i) the act or omission of the Indemnitee was material to the matter giving rise to the proceeding and either was committed in bad faith or was the result of active and deliberate dishonesty, (ii) the Indemnitee actually received an improper personal benefit in money, property or services or (iii) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful. Without limitation, the foregoing indemnity shall extend to any liability of any Indemnitee, pursuant to a loan guarantee, contractual obligation for any indebtedness or other obligation or otherwise, for any indebtedness of the Partnership or any Subsidiary of the Partnership (including, without limitation, any indebtedness which the Partnership or any Subsidiary of the Partnership has assumed or taken subject to), and the General Partner is hereby authorized and empowered, on behalf of the Partnership, to enter into one or more indemnity agreements consistent with the provisions of this Section 7.7 in favor of any Indemnitee having or potentially having liability for any such indebtedness. The termination of any proceeding by judgment, order or settlement does not create a presumption that the Indemnitee did not meet the requisite standard of conduct set forth in this Section 7.7.A. The termination of any proceeding by conviction or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the Indemnitee acted in a manner contrary to that specified in this Section 7.7.A with respect to the subject 34 matter of such proceeding. Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Partnership, and any insurance proceeds from the liability policy covering the General Partner and any Indemnitee, and neither the General Partner nor any Limited Partner shall have any obligation to contribute to the capital of the Partnership or otherwise provide funds to enable the Partnership to fund its obligations under this Section 7.7. B. Advancement of Expenses. Reasonable expenses expected to be incurred by an Indemnitee shall be paid or reimbursed by the Partnership in advance of the final disposition of any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative made or threatened against an Indemnitee upon receipt by the Partnership of (i) a written affirmation by the Indemnitee of the Indemnitee's good faith belief that the standard of conduct necessary for indemnification by the Partnership as authorized in this Section 7.7.A has been met and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct has not been met. C. No Limitation of Rights. The indemnification provided by this Section 7.7 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity unless otherwise provided in a written agreement pursuant to which such Indemnitee is indemnified. D. Insurance. The Partnership may purchase and maintain insurance on behalf of the Indemnitees and such other Persons as the General Partner shall determine against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Partnership's activities, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement. E. Benefit Plan Fiduciary. For purposes of this Section 7.7, (i) excise taxes assessed on an Indemnitee, or for which the Indemnitee is otherwise found liable, in connection with an ERISA Plan Investor pursuant to applicable law shall constitute fines within the meaning of this Section 7.7 and (ii) actions taken or omitted by the Indemnitee in connection with an ERISA Plan Investor in the performance of its duties shall be deemed to be for a purpose which is not opposed to the best interests of the Partnership. F. No Personal Liability for Limited Partners. In no event may an Indemnitee subject any of the Partners to personal liability by reason of the indemnification provisions set forth in this Agreement. G. Interested Transactions. An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement. 35 H. Benefit. The provisions of this Section 7.7 are for the benefit of the Indemnitees, their employees, officers, directors, trustees, heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons. Any amendment, modification or repeal of this Section 7.7, or any provision hereof, shall be prospective only and shall not in any way affect the limitation on the Partnership's liability to any Indemnitee under this Section 7.7 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or related to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted. I. Indemnification Payments Not Distributions. If and to the extent any payments to the General Partner pursuant to this Section 7.7 constitute gross income to the General Partner (as opposed to the repayment of advances made on behalf of the Partnership), such amounts shall constitute guaranteed payments within the meaning of Section 707(c) of the Code, shall be treated consistently therewith by the Partnership and all Partners, and shall not be treated as distributions for purposes of computing the Partners' Capital Accounts. J. Exception to Indemnification. Notwithstanding anything to the contrary in this Agreement, the General Partner shall not be entitled to indemnification hereunder for any loss, claim, damage, liability or expense for which the General Partner is obligated to indemnify the Partnership under any other agreement between the General Partner and the Partnership. Section 7.8 Liability of the General Partner A. General. Notwithstanding anything to the contrary set forth in this Agreement, the General Partner shall not be liable for monetary damages to the Partnership, any Partners or any Assignees for losses sustained, liabilities incurred or benefits not derived as a result of errors in judgment or mistakes of fact or law or of any act or omission unless the General Partner acted in bad faith and the act or omission was material to the matter giving rise to the loss, liability or benefit not derived. B. No Obligation to Consider Separate Interests of Limited Partners or Shareholders. The Limited Partners expressly acknowledge that the General Partner is acting on behalf of the Partnership, that the General Partner is under no obligation to consider the separate interests of the Limited Partners (including, without limitation, the tax consequences to Limited Partners or Assignees) in deciding whether to cause the Partnership to take (or decline to take) any actions, and that the General Partner shall not be liable for monetary damages for losses sustained, liabilities incurred or benefits not derived by Limited Partners in connection with such decisions, provided that the General Partner has acted in good faith. C. Actions of Agents. Subject to its obligations and duties as General Partner set forth in Section 7.1.A, the General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents. The General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by the General Partner in good faith. 36 D. Effect of Amendment. Notwithstanding any other provision contained herein, any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the General Partner's liability to the Partnership and the Limited Partners under this Section 7.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted. Section 7.9 Other Matters Concerning the General Partner A. Reliance on Documents. The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other paper or document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties. B. Reliance on Advisors. The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion of such Persons as to matters which the General Partner reasonably believes to be within such Person's professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion. C. Action Through Agents. The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers and a duly appointed attorney or attorneys-in-fact. Each such attorney shall, to the extent provided by the General Partner in the power of attorney, have full power and authority to do and perform all and every act and duty which is permitted or required to be done by the General Partner hereunder. D. Actions to Maintain REIT Status or Avoid Taxation of the General Partner Entity. Notwithstanding any other provisions of this Agreement or the Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership undertaken in the good faith belief that such action or omission is necessary or advisable in order (i) to protect the ability of the General Partner Entity to continue to qualify as a REIT or (ii) to allow the General Partner Entity to avoid incurring any liability for taxes under Section 857 or 4981 of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners. Section 7.10 Reliance by Third Parties Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority, without consent or approval of 37 any other Partner or Person, to encumber, sell or otherwise use in any manner any and all assets of the Partnership, to enter into any contracts on behalf of the Partnership and to take any and all actions on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner as if the General Partner were the Partnership's sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies which may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing. In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (i) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (ii) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership, and (iii) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership. Section 7.11 Restrictions on General Partner's Authority A. Consent Required. The General Partner may not take any action in contravention of an express prohibition or limitation of this Agreement without the written Consent of (i) all Partners adversely affected or (ii) such lower percentage of the Limited Partnership Interests as may be specifically provided for under a provision of this Agreement or the Act. B. Sale of All Assets of the Partnership. Except as provided in Article XIII, the General Partner may not, directly or indirectly, cause the Partnership to sell, exchange, transfer or otherwise dispose of all or substantially all of the Partnership's assets in a single transaction or a series of related transactions (including by way of merger (including a triangular merger), consolidation or other combination with any other Persons) (i) if such merger, sale or other transaction is in connection with a Termination Transaction permitted under Section 11.2.B hereof, without the Consent of the Partners holding at least a majority of the then outstanding Partnership Units (including any Partnership Units held by the General Partner), or (ii) otherwise, without the Consent of the Outside Limited Partners; provided, that the General Partner may cause the Partnership to enter into the Credit Agreement as of the Effective Date and to execute such transactions in connection therewith (including a transfer of Partnership property pursuant to a mortgage or deed of trust, a pledge agreement or any similar security agreement) as the General Partner deems appropriate in its sole discretion. 38 Section 7.12 Loans by Third Parties The Partnership may incur Debt, or enter into similar credit, guarantee, financing or refinancing arrangements for any purpose (including, without limitation, in connection with any acquisition of property) with any Person that is not the General Partner upon such terms as the General Partner determines appropriate; provided that, except for Debt incurred by the General Partner in connection with the Credit Agreement, the Partnership shall not incur any Debt that is recourse to the General Partner, except to the extent otherwise agreed to by such General Partner in its sole discretion. ARTICLE VIII RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS Section 8.1 Limitation of Liability The Limited Partners shall have no liability under this Agreement except as expressly provided in this Agreement, including Section 10.5 and Section 13.3, or under the Act. Section 8.2 Management of Business No Limited Partner or Assignee (other than the General Partner, any of its Affiliates or any officer, director, employee, partner, agent or trustee of the General Partner, the Partnership or any of their Affiliates, in their capacity as such) shall take part in the operation, management or control (within the meaning of the Act) of the Partnership's business, transact any business in the Partnership's name or have the power to sign documents for or otherwise bind the Partnership. The transaction of any such business by the General Partner, any of its Affiliates or any officer, director, employee, partner, agent or trustee of the General Partner, the Partnership or any of their Affiliates, in their capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Limited Partners or Assignees under this Agreement. Section 8.3 Outside Activities of Limited Partners Subject to Section 7.5 hereof, and subject to any agreements entered into pursuant to Section 7.6.C hereof and to any other agreements entered into by a Limited Partner or its Affiliates with the Partnership or a Subsidiary, any Limited Partner (other than the General Partner) and any officer, director, employee, agent, trustee, Affiliate or shareholder of any Limited Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities in direct or indirect competition with the Partnership. Neither the Partnership nor any Partners shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner or Assignee. None of the Limited Partners nor any other Person shall have any rights by virtue of this Agreement or the partnership relationship established hereby in any business ventures of any other Person (other than the General Partner to the extent expressly provided herein), and 39 such Person (other than the General Partner) shall have no obligation pursuant to this Agreement to offer any interest in any such business ventures to the Partnership, any Limited Partner or any such other Person, even if such opportunity is of a character which, if presented to the Partnership, any Limited Partner or such other Person, could be taken by such Person. Section 8.4 Return of Capital Except pursuant to the right of redemption set forth in Section 8.6, no Limited Partner shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent of distributions made pursuant to this Agreement or upon termination of the Partnership as provided herein. No Limited Partner or Assignee shall have priority over any other Limited Partner or Assignee either as to the return of Capital Contributions (except as permitted by Section 4.2.A) or, except to the extent provided by Exhibit C or as permitted by Sections 4.2.A, 5.1.B(i), 6.1.A(ii) and 6.1.B(i), or otherwise expressly provided in this Agreement, as to profits, losses, distributions or credits. Section 8.5 Rights of Limited Partners Relating to the Partnership A. General. In addition to other rights provided by this Agreement or by the Act, and except as limited by Section 8.5.D, each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner's interest as a limited partner in the Partnership, upon written demand with a statement of the purpose of such demand and at such Limited Partner's own expense: (1) to obtain a copy of the most recent annual and quarterly reports filed with the Securities and Exchange Commission by the General Partner Entity pursuant to the Exchange Act; (2) to obtain a copy of the Partnership's federal, state and local income tax returns for each Partnership Year; (3) to obtain a current list of the name and last known business, residence or mailing address of each Partner; (4) to obtain a copy of this Agreement and the Certificate and all amendments thereto, together with executed copies of all powers of attorney pursuant to which this Agreement, the Certificate and all amendments thereto have been executed; and (5) to obtain true and full information regarding the amount of cash and a description and statement of any other property or services contributed by each Partner and which each Partner has agreed to contribute in the future, and the date on which each became a Partner. 40 B. Notice of Conversion Factor. The Partnership shall notify each Limited Partner upon request of the then current Conversion Factor and any changes that have been made thereto. C. Notice of Extraordinary Transaction of the General Partner Entity. The General Partner Entity shall not make any extraordinary distributions of cash or property to its shareholders or effect a merger (including, without limitation, a triangular merger), a sale of all or substantially all of its assets or any other similar extraordinary transaction without notifying the Limited Partners of its intention to make such distribution or effect such merger, sale or other extraordinary transaction at least twenty (20) Business Days prior to the record date to determine shareholders eligible to receive such distribution or to vote upon the approval of such merger, sale or other extraordinary transaction (or, if no such record date is applicable, at least twenty (20) business days before consummation of such merger, sale or other extraordinary transaction). This provision for such notice shall not be deemed (i) to permit any transaction that otherwise is prohibited by this Agreement or requires a Consent of the Partners or (ii) to require a Consent of the Limited Partners to a transaction that does not otherwise require Consent under this Agreement. Each Limited Partner agrees, as a condition to the receipt of the notice pursuant hereto, to keep confidential the information set forth therein until such time as the General Partner Entity has made public disclosure thereof and to use such information during such period of confidentiality solely for purposes of determining whether to exercise the Redemption Right; provided, however, that a Limited Partner may disclose such information to its attorney, accountant and/or financial advisor for purposes of obtaining advice with respect to such exercise so long as such attorney, accountant and/or financial advisor agrees to receive and hold such information subject to this confidentiality requirement. D. Confidentiality. Notwithstanding any other provision of this Section 8.5, the General Partner may keep confidential from the Limited Partners, for such period of time as the General Partner determines in its sole and absolute discretion to be reasonable, any information that (i) the General Partner reasonably believes to be in the nature of trade secrets or other information the disclosure of which the General Partner in good faith believes is not in the best interests of the Partnership or could damage the Partnership or its business or (ii) the Partnership is required by law or by agreements with unaffiliated third parties to keep confidential. Section 8.6 Redemption Right A. General. (i) Subject to Section 8.6.C, at any time on or after fourteen months following the closing of the initial public offering of Shares by the General Partner, the holder of a Partnership Unit (if other than the General Partner or the General Partner Entity or any Subsidiary of either the General Partner or the General Partner Entity) shall have the right (the "Redemption Right") to require the Partnership to redeem such Partnership Unit, with such redemption to occur on the Specified Redemption Date and at a redemption price equal to and in the form of the Cash Amount to be paid by the Partnership. Any such Redemption Right shall be exercised pursuant to a Notice of Redemption delivered to the Partnership (with a copy to the General Partner) by the Limited Partner who is exercising the Redemption Right (the "Redeeming Partner"). A Limited Partner may exercise the Redemption Right from 41 time to time, without limitation as to frequency, with respect to part or all of the Units that it owns, as selected by the Limited Partner, provided that a Limited Partner may not exercise the Redemption Right for less than one thousand (1,000) Partnership Units unless such Redeeming Partner then holds less than one thousand (1,000) Partnership Units, in which event the Redeeming Partner must exercise the Redemption Right for all of the Partnership Units held by such Redeeming Partner, and provided further that, with respect to a Limited Partner which is an entity, such a Limited Partner may exercise the Redemption Right for less than one thousand (1,000) Partnership Units without regard to whether or not such Limited Partner is exercising the Redemption Right for all of the Partnership Units held by such Limited Partner as long as such Limited Partner is exercising the Redemption Right on behalf of one or more of its equity owners in respect of one hundred percent (100%) of such equity owners' interests in such Limited Partner. (ii) The Redeeming Partner shall have no right with respect to any Partnership Units so redeemed to receive any distributions paid after the Specified Redemption Date with respect to such Partnership Units. (iii) The Assignee of any Limited Partner may exercise the rights of such Limited Partner pursuant to this Section 8.6, and such Limited Partner shall be deemed to have assigned such rights to such Assignee and shall be bound by the exercise of such rights by such Limited Partner's Assignee. In connection with any exercise of such rights by such Assignee on behalf of such Limited Partner, the Cash Amount shall be paid by the Partnership directly to such Assignee and not to such Limited Partner. (iv) If the General Partner provides notice to the Limited Partners, pursuant to Section 8.5.C hereof, the Redemption Right shall be exercisable, without regard to whether the Partnership Units have been outstanding for any specified period, during the period commencing on the date on which the General Partner provides such notice and ending on the record date to determine shareholders eligible to receive such distribution or to vote upon the approval of such merger, sale or other extraordinary transaction (or, if no such record date is applicable, at least twenty (20) business days before the consummation of such merger, sale or other extraordinary transaction). If this subparagraph (iv) applies, the Specified Redemption Date is the date on which the Partnership and the General Partner receive notice of exercise of the Redemption Right, rather than ten (10) Business Days after receipt of the notice of redemption. (v) Notwithstanding anything contained herein to the contrary, the Partners hereby agree that immediately following the recapitalization of the Partnership as provided in Section 4.1 hereof, Edward B. Romanov, Jr. and Michael R. Walker shall be permitted to redeem certain Partnership Units which they will own as of the Effective Time for Shares on a one-for-one basis, as provided in the section captioned "Formation Transactions" in the final prospectus of the General Partner in connection with the initial public offering of the Shares. B. General Partner Assumption of Right. (i) If a Limited Partner has delivered a Notice of Redemption, the General Partner may, in its sole and absolute discretion (subject to the limitations on ownership and 42 transfer of Shares set forth in the Declaration of Trust), elect to assume directly and satisfy a Redemption Right by paying to the Redeeming Partner either the Cash Amount or the Shares Amount, as the General Partner determines in its sole and absolute discretion (provided that payment of the Redemption Amount in the form of Shares shall be in Shares registered for resale under Section 12 of the Exchange Act and listed for trading on the exchange or national market on which the Shares are Publicly Traded, and provided further that, if the Shares are not Publicly Traded at the time a Redeeming Partner exercises its Redemption Right, the Redemption Amount shall be paid only in the form of the Cash Amount unless the Redeeming Partner, in its sole and absolute discretion, consents to payment of the Redemption Amount in the form of the Shares Amount), on the Specified Redemption Date, whereupon the General Partner shall acquire the Partnership Units offered for redemption by the Redeeming Partner and shall be treated for all purposes of this Agreement as the owner of such Partnership Units. Unless the General Partner, in its sole and absolute discretion, shall exercise its right to assume directly and satisfy the Redemption Right, the General Partner shall not have any obligation to the Redeeming Partner or to the Partnership with respect to the Redeeming Partner's exercise of the Redemption Right. If the General Partner shall exercise its right to satisfy the Redemption Right in the manner described in the first sentence of this Section 8.6.B and shall fully perform its obligations in connection therewith, the Partnership shall have no right or obligation to pay any amount to the Redeeming Partner with respect to such Redeeming Partner's exercise of the Redemption Right, and each of the Redeeming Partner, the Partnership and the General Partner shall, for federal income tax purposes, treat the transaction between the General Partner and the Redeeming Partner as a sale of the Redeeming Partner's Partnership Units to the General Partner. Nothing contained in this Section 8.6.B shall imply any right of the General Partner to require any Limited Partner to exercise the Redemption Right afforded to such Limited Partner pursuant to Section 8.6.A. (ii) If the General Partner determines to pay the Redeeming Partner the Redemption Amount in the form of Shares, the total number of Shares to be paid to the Redeeming Partner in exchange for the Redeeming Partner's Partnership Units shall be the applicable Shares Amount. If this amount is not a whole number of Shares, the Redeeming Partner shall be paid (i) that number of Shares which equals the nearest whole number less than such amount plus (ii) an amount of cash which the General Partner determines, in its reasonable discretion, to represent the fair value of the remaining fractional Share which would otherwise be payable to the Redeeming Partner. (iii) Each Redeeming Partner agrees to execute such documents as the General Partner may reasonably require in connection with the issuance of Shares upon exercise of the Redemption Right. C. Exceptions to Exercise of Redemption Right. Notwithstanding the provisions of Sections 8.6.A and 8.6.B, a Partner shall not be entitled to exercise the Redemption Right pursuant to Section 8.6.A if (but only as long as) the delivery of Shares to such Partner on the Specified Redemption Date (i) would be prohibited under the Declaration of Trust or (ii) would be prohibited under applicable federal or state securities laws or regulations (in each case regardless of whether the General Partner would in fact assume and satisfy the Redemption Right). 43 D. No Liens on Partnership Units Delivered for Redemption. Each Limited Partner covenants and agrees with the General Partner that all Partnership Units delivered for redemption shall be delivered to the Partnership or the General Partner, as the case may be, free and clear of all liens, and, notwithstanding anything contained herein to the contrary, neither the General Partner nor the Partnership shall be under any obligation to acquire Partnership Units which are or may be subject to any liens. Each Limited Partner further agrees that, if any state or local property transfer tax is payable as a result of the transfer of its Partnership Units to the Partnership or the General Partner, such Limited Partner shall assume and pay such transfer tax. E. Additional Partnership Interests. If the Partnership issues Partnership Interests to any Additional Limited Partner pursuant to Article IV, the General Partner shall make such revisions to this Section 8.6 as it determines are necessary to reflect the issuance of such Partnership Interests (including setting forth any restrictions on the exercise of the Redemption Right with respect to such Partnership Interests). ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS Section 9.1 Records and Accounting The General Partner shall keep or cause to be kept at the principal office of the Partnership appropriate books and records with respect to the Partnership's business, including, without limitation, all books and records necessary to provide to the Limited Partners any information, lists and copies of documents required to be provided pursuant to Section 9.3. Any records maintained by or on behalf of the Partnership in the regular course of its business may be kept on, or be in the form of, punch cards, magnetic tape, photographs, micrographics or any other information storage device, provided that the records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial and tax reporting purposes, on an accrual basis in accordance with generally accepted accounting principles. Section 9.2 Fiscal Year The fiscal year of the Partnership shall be the calendar year. Section 9.3 Reports A. Annual Reports. As soon as practicable, but in no event later than the date on which the General Partner Entity mails its annual report to its shareholders, the General Partner Entity shall cause to be mailed to each Limited Partner an annual report, as of the close of the most recently ended Partnership Year, containing financial statements of the Partnership, or of the General Partner Entity if such statements are prepared solely on a consolidated basis with the Partnership, for such Partnership Year, presented in accordance with generally accepted accounting principles, such statements to be audited by a nationally recognized firm of independent 44 public accountants selected by the General Partner Entity. B. Quarterly Reports. If and to the extent that the General Partner Entity mails quarterly reports to its shareholders, as soon as practicable, but in no event later than the date on such reports are mailed, the General Partner Entity shall cause to be mailed to each Limited Partner a report containing unaudited financial statements, as of the last day of such calendar quarter, of the Partnership, or of the General Partner Entity if such statements are prepared solely on a consolidated basis with the Partnership, and such other information as may be required by applicable law or regulation, or as the General Partner determines to be appropriate. ARTICLE X TAX MATTERS Section 10.1 Preparation of Tax Returns The General Partner shall arrange for the preparation and timely filing of all returns of Partnership income, gains, deductions, losses and other items required of the Partnership for federal and state income tax purposes and shall use all reasonable efforts to furnish, within ninety (90) days of the close of each taxable year, the tax information reasonably required by Limited Partners for federal and state income tax reporting purposes. Section 10.2 Tax Elections Except as otherwise provided herein, the General Partner shall, in its sole and absolute discretion, determine whether to make any available election pursuant to the Code (including, without limitation, the election under Section 754 of the Code). The General Partner shall have the right to seek to revoke any such election upon the General Partner's determination in its sole and absolute discretion that such revocation is in the best interests of the Partners. Section 10.3 Tax Matters Partner A. General. The General Partner shall be the "tax matters partner" of the Partnership for federal income tax purposes. Pursuant to Section 6223(c)(3) of the Code, upon receipt of notice from the IRS of the beginning of an administrative proceeding with respect to the Partnership, the tax matters partner shall furnish the IRS with the name, address, tax payer identification number and profit interest of each of the Limited Partners and any Assignees; provided, however, that such information is provided to the Partnership by the Limited Partners. B. Powers. The tax matters partner is authorized, but not required: (1) to enter into any settlement with the IRS with respect to any administrative or judicial proceedings for the adjustment of Partnership items required to be taken 45 into account by a Partner for income tax purposes (such administrative proceedings being referred to as a "tax audit" and such judicial proceedings being referred to as "judicial review"), and in the settlement agreement the tax matters partner may expressly state that such agreement shall bind all Partners, except that such settlement agreement shall not bind any Partner (i) who (within the time prescribed pursuant to the Code and Regulations) files a statement with the IRS providing that the tax matters partner shall not have the authority to enter into a settlement agreement on behalf of such Partner or (ii) who is a "notice partner" (as defined in Section 6231(a)(8) of the Code) or a member of a "notice group" (as defined in Section 6223(b)(2) of the Code); (2) if a notice of a final administrative adjustment at the Partnership level of any item required to be taken into account by a Partner for tax purposes (a "final adjustment") is mailed to the tax matters partner, to seek judicial review of such final adjustment, including the filing of a petition for readjustment with the Tax Court or the filing of a complaint for refund with the United States Claims Court or the District Court of the United States for the district in which the Partnership's principal place of business is located; (3) to intervene in any action brought by any other Partner for judicial review of a final adjustment; (4) to file a request for an administrative adjustment with the IRS at any time and, if any part of such request is not allowed by the IRS, to file an appropriate pleading (petition or complaint) for judicial review with respect to such request; (5) to enter into an agreement with the IRS to extend the period for assessing any tax which is attributable to any item required to be taken into account by a Partner for tax purposes, or an item affected by such item; and (6) to take any other action on behalf of the Partners of the Partnership in connection with any tax audit or judicial review proceeding to the extent permitted by applicable law or regulations. The taking of any action and the incurring of any expense by the tax matters partner in connection with any such proceeding, except to the extent required by law, is a matter in the sole and absolute discretion of the tax matters partner and the provisions relating to indemnification of the General Partner set forth in Section 7.7 shall be fully applicable to the tax matters partner in its capacity as such. 46 C. Reimbursement. The tax matters partner shall receive no compensation for its services. All third party costs and expenses incurred by the tax matters partner in performing its duties as such (including legal and accounting fees and expenses) shall be borne by the Partnership. Nothing herein shall be construed to restrict the Partnership from engaging an accounting firm and/or law firm to assist the tax matters partner in discharging its duties hereunder, so long as the compensation paid by the Partnership for such services is reasonable. Section 10.4 Organizational Expenses The Partnership shall elect to deduct expenses, if any, incurred by it in organizing the Partnership ratably over a sixty (60) month period as provided in Section 709 of the Code. Section 10.5 Withholding Each Limited Partner hereby authorizes the Partnership to withhold from or pay on behalf of or with respect to such Limited Partner any amount of federal, state, local, or foreign taxes that the General Partner determines that the Partnership is required to withhold or pay with respect to any amount distributable or allocable to such Limited Partner pursuant to this Agreement, including, without limitation, any taxes required to be withheld or paid by the Partnership pursuant to Section 1441, 1442, 1445 or 1446 of the Code. Any amount paid on behalf of or with respect to a Limited Partner shall constitute a loan by the Partnership to such Limited Partner, which loan shall be repaid by such Limited Partner within fifteen (15) days after notice from the General Partner that such payment must be made unless (i) the Partnership withholds such payment from a distribution which would otherwise be made to the Limited Partner or (ii) the General Partner determines, in its sole and absolute discretion, that such payment may be satisfied out of the available funds of the Partnership which would, but for such payment, be distributed to the Limited Partner. Any amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be treated as having been distributed to such Limited Partner. Each Limited Partner hereby unconditionally and irrevocably grants to the Partnership a security interest in such Limited Partner's Partnership Interest to secure such Limited Partner's obligation to pay to the Partnership any amounts required to be paid pursuant to this Section 10.5. If a Limited Partner fails to pay any amounts owed to the Partnership pursuant to this Section 10.5 when due, the General Partner may, in its sole and absolute discretion, elect to make the payment to the Partnership on behalf of such defaulting Limited Partner, and in such event shall be deemed to have loaned such amount to such defaulting Limited Partner and shall succeed to all rights and remedies of the Partnership as against such defaulting Limited Partner (including, without limitation, the right to receive distributions). Any amounts payable by a Limited Partner hereunder shall bear interest at the base rate on corporate loans at large United States money center commercial banks, as published from time to time in The Wall Street Journal, plus four (4) percentage points (but not higher than the maximum lawful rate under the laws of the Commonwealth of Pennsylvania) from the date such amount is due (i.e., fifteen (15) days after demand) until such amount is paid in full. Each 47 Limited Partner shall take such actions as the Partnership or the General Partner shall request to perfect or enforce the security interest created hereunder. ARTICLE XI TRANSFERS AND WITHDRAWALS Section 11.1 Transfer A. Definition. The term "transfer," when used in this Article XI with respect to a Partnership Interest or a Partnership Unit, shall be deemed to refer to a transaction by which a General Partner purports to assign all or any part of its General Partnership Interest to another Person or by which a Limited Partner purports to assign all or any part of its Limited Partnership Interest to another Person, and includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or otherwise. The term "transfer" when used in this Article XI does not include any redemption or repurchase of Partnership Units by the Partnership from a Partner or acquisition of Partnership Units from a Limited Partner by the General Partner pursuant to Section 8.6 or otherwise. No part of the interest of a Limited Partner shall be subject to the claims of any creditor, any spouse for alimony or support, or to legal process, and may not be voluntarily or involuntarily alienated or encumbered except as may be specifically provided for in this Agreement. B. General. No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article XI. Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article XI shall be null and void. Section 11.2 Transfers of Partnership Interests of General Partner A. The General Partner may not transfer any of its Partnership Interest (including both its General Partnership Interest and its Limited Partnership Interest) except in connection with a transaction described in Section 11.2.B, as permitted pursuant to Section 11.2.C or as otherwise expressly permitted under this Agreement, nor shall the General Partner withdraw as General Partner except in connection with a transaction described in Section 11.2.B. B. The General Partner shall not engage in any merger (including a triangular merger), consolidation or other combination with or into another person, sale of all or substantially all of its assets or any reclassification, recapitalization or change of outstanding Shares (other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination as described in the definition of "Conversion Factor") ("Termination Transaction"), unless the Termination Transaction has been approved by the Consent of the Partners holding at least a majority of the then outstanding Partnership Units (including any Partnership Units held by the General Partner) and in connection with which all Limited Partners either will receive, or will have the right to elect to receive, for each Partnership Unit an amount of cash, securities, or other property equal to the product of the Conversion Factor multiplied by the greatest amount of cash, 48 securities or other property paid to a holder of Shares corresponding to such Partnership Unit in consideration of one such Share at any time during the period from and after the date on which the Termination Transaction is consummated; provided that, if, in connection with the Termination Transaction, a purchase, tender or exchange offer shall have been made to and accepted by the holders of more than fifty percent (50%) of the outstanding Shares, each holder of Partnership Units shall receive, or shall have the right to elect to receive without any right of Consent set forth above in this subsection B, the greatest amount of cash, securities, or other property which such holder would have received had it exercised the Redemption Right and received Shares in exchange for its Partnership Units immediately prior to the expiration of such purchase, tender or exchange offer and had thereupon accepted such purchase, tender or exchange offer. C. Notwithstanding the foregoing, with the consent of the Partners holding at least a majority of the outstanding Partnership Units (including any Partnership Units held by the General Partner), the General Partner may transfer all or a portion of its Partnership Interest pursuant to a grant of a security interest or other encumbrance effected in a bona fide transaction or as a result of the exercise of remedies related thereto; provided, that the Partners hereby agree that, effective as of the Effective Date, the General Partner may pledge any or all of its Partnership Interest to one or more lenders in connection with the execution and delivery of the Credit Agreement. Section 11.3 Limited Partners' Rights to Transfer A. General. Except to the extent expressly permitted in Sections 11.3 B, 11.3.C and 11.3.D or in connection with the exercise of a Redemption Right pursuant to Section 8.6, a Limited Partner may not transfer all or any portion of its Partnership Interest, or any of such Limited Partner's rights as a Limited Partner, without the prior written consent of the General Partner. Any transfer otherwise permitted under Sections 11.3B, 11.3C or 11.3D shall be subject to the conditions set forth in Section 11.3E, 11.3 F and 11.3G, and all permitted transfers shall be subject to Section 11.4. B. Incapacitated Limited Partners. If a Limited Partner is subject to Incapacity, the executor, administrator, trustee, committee, guardian, conservator or receiver of such Limited Partner's estate shall have all the rights of a Limited Partner, but not more rights than those enjoyed by other Limited Partners for the purpose of settling or managing the estate and such power as the Incapacitated Limited Partner possessed to transfer all or any part of its interest in the Partnership. The Incapacity of a Limited Partner, in and of itself, shall not dissolve or terminate the Partnership. C. Permitted Transfers. A Limited Partner may transfer, with or without the consent of the General Partner, all or a portion of its Partnership Interest (i) in the case of a Limited Partner who is an individual, to a member of his Immediate Family, any trust formed for the benefit of himself and/or members of his Immediate Family, or any partnership, 49 limited liability company, joint venture, corporation or other business entity comprised only of himself and/or members of his Immediate Family and entities the ownership interests in which are owned by or for the benefit of himself and/or members of his Immediate Family, (ii) in the case of a Limited Partner which is a trust, to the beneficiaries of such trust, (iii) in the case of a Limited Partner which is a partnership, limited liability company, joint venture, corporation or other business entity to which Partnership Units were transferred pursuant to (i) above, to its partners, owners, or stockholders, as the case may be, who are members of the Immediate Family of or are actually the Person(s) who transferred Partnership Units to it pursuant to (i) above, (iv) in the case of a Limited Partner which acquired Partnership Units as of the Effective Date and which is a partnership, limited liability company, joint venture, corporation or other business entity, to its partners, owners, or stockholders, as the case may be, or the Persons owning the beneficial interests in any of its partners, owners or stockholders which are entities, (v) pursuant to a gift or other transfer without consideration, (vi) pursuant to applicable laws of descent or distribution, (vii) to another Limited Partner, and (vii) pursuant to a grant of security interest or other encumbrance effected in a bona fide transaction or as a result of the exercise of remedies related thereto, subject to the provisions of Section 11.3G hereof. A trust or other entity will be considered formed "for the benefit" of a Partner's Immediate Family even though some other Person has a remainder interest under or with respect to such trust or other entity. D. Transfers After One Year From Closing of Initial Public Offering. A Limited Partner may transfer, with or without the consent of the General Partner, all or a portion of his Partnership Units at any time after the date that is twelve (12) months after the closing of the initial public offering of Shares by the General Partner. E. No Transfers Violating Securities Laws. The General Partner may prohibit any transfer of Partnership Units by a Limited Partner unless it receives a written opinion of legal counsel (which opinion and counsel shall be reasonably satisfactory to the Partnership) to such Limited Partner that such transfer would not require filing of a registration statement under the Securities Act or would not otherwise violate any federal, or state securities laws or regulations applicable to the Partnership or the Partnership Unit or, at the option of the Partnership, an opinion of legal counsel to the Partnership to the same effect. F. No Transfers Affecting Tax Status of Partnership. No transfer of Partnership Units by a Limited Partner (including a redemption or exchange pursuant to Section 8.6) may be made to any Person if (i) in the opinion of legal counsel for the Partnership, it would result in the Partnership being treated as an association taxable as a corporation for federal income tax purposes or would result in a termination of the Partnership for federal income tax purposes (except as a result of the redemption or exchange for Shares of all Partnership Units held by all Limited Partners other than the General Partner or the General Partner Entity or any Subsidiary of either the General Partner or the General Partner Entity or pursuant to a transaction expressly permitted under Section 7.11.B or Section 11.2), (ii) in the opinion of legal counsel for the Partnership, it would adversely affect the ability of the General Partner Entity to continue to qualify as a REIT or would subject the General Partner Entity to any additional taxes under Section 857 or Section 4981 of the Code or (iii) such transfer is effectuated through an "established securities market" or a "secondary market (or the substantial equivalent thereof)" within the meaning of Section 7704 of the Code. G. No Transfers to Holders of Nonrecourse Liabilities. No pledge or transfer of any Partnership Units may be made to a lender to the Partnership or any Person who is related (within the meaning of Section 1.752-4(b) of the Regulations) to any lender to the Partnership whose loan 50 constitutes a Nonrecourse Liability without the consent of the General Partner, in its sole and absolute discretion; provided that, as a condition to such consent the lender will be required to enter into an arrangement with the Partnership and the General Partner to exchange or redeem for the Redemption Amount any Partnership Units in which a security interest is held simultaneously with the time at which such lender would be deemed to be a partner in the Partnership for purposes of allocating liabilities to such lender under Section 752 of the Code. Section 11.4 Substituted Limited Partners A. Consent of General Partner. No Limited Partner shall have the right to substitute a transferee as a Limited Partner in its place. The General Partner shall, however, have the right to consent to the admission of a transferee of the interest of a Limited Partner pursuant to this Section 11.4 as a Substituted Limited Partner, which consent may be, given or withheld by the General Partner in its sole and absolute discretion. The General Partner's failure or refusal to permit a transferee of any such interests to become a Substituted Limited Partner shall not give rise to any cause of action against the Partnership or any Partner. B. Rights of Substituted Limited Partner. A transferee who has been admitted as a Substituted Limited Partner in accordance with this Article XI shall have all the rights and powers and be subject to all the restrictions and liabilities of a Limited Partner under this Agreement. The admission of any transferee as a Substituted Limited Partner shall be conditioned upon the transferee executing and delivering to the Partnership an acceptance of all the terms and conditions of this Agreement (including, without limitation, the provisions of Section 15.11) and such other documents or instruments as may be required to effect the admission. C. Amendment of Exhibit A. Upon the admission of a Substituted Limited Partner, the General Partner shall amend Exhibit A to reflect the name, address, Capital Account, number of Partnership Units, and Percentage Interest of such Substituted Limited Partner and to eliminate or adjust, if necessary, the name, address, Capital Account and Percentage Interest and interest of the predecessor of such Substituted Limited Partner. Section 11.5 Assignees If the General Partner, in its sole and absolute discretion, does not consent to the admission of any permitted transferee under Section 11.3 as a Substituted Limited Partner, as described in Section 11.4, such transferee shall be considered an Assignee for purposes of this Agreement. An Assignee shall be entitled to all the rights of an assignee of a limited partnership interest under the Act, including the right to receive distributions from the Partnership and the share of Net Income, Net Losses, gain, loss and Recapture Income attributable to the Partnership Units assigned to such transferee, and shall have the rights granted to the Limited Partners under Section 8.6, but shall not be deemed to be a holder of Partnership Units for any other purpose under this Agreement, and shall not be entitled to vote such Partnership Units in any matter presented to the Limited Partners for a vote (such Partnership Units being deemed to have been voted on such matter in the same proportion as all other Partnership Units held by Limited Partners are voted). If any such transferee desires to make a further assignment of any such Partnership Units, such transferee shall be subject to all the provisions 51 of this Article XI to the same extent and in the same manner as any Limited Partner desiring to make an assignment of Partnership Units. Section 11.6 General Provisions A. Withdrawal of Limited Partner. No Limited Partner may withdraw from the Partnership other than as a result of a permitted transfer of all of such Limited Partner's Partnership Units in accordance with this Article XI or pursuant to redemption of all of its Partnership Units under Section 8.6. B. Termination of Status as Limited Partner. Any Limited Partner who shall transfer all of its Partnership Units in a transfer permitted pursuant to this Article XI or pursuant to redemption of all of its Partnership Units under Section 8.6 shall cease to be a Limited Partner. C. Timing of Transfers. Transfers pursuant to this Article XI may only be made upon three business days prior notice, unless the General Partner otherwise agrees. D. Allocations. If any Partnership Interest is transferred during any quarterly segment of the Partnership's fiscal year in compliance with the provisions of this Article XI or redeemed or transferred pursuant to Section 8.6, Net Income, Net Losses, each item thereof and all other items attributable to such interest for such fiscal year shall be divided and allocated between the transferor Partner and the transferee Partner by taking into account their varying interests during the fiscal year in accordance with Section 706(d) of the Code, using the interim closing of the books method (unless the General Partner, in its sole and absolute discretion, elects to adopt a daily, weekly, or a monthly proration period, in which event Net Income, Net Losses, each item thereof and all other items attributable to such interest for such fiscal year shall be prorated based upon the applicable method selected by the General Partner). Solely for purposes of making such allocations, each of such items for the calendar month in which the transfer or redemption occurs shall be allocated to the Person who is a Partner as of midnight on the last day of said month. All distributions of Available Cash attributable to any Partnership Unit with respect to which the Partnership Record Date is before the date of such transfer, assignment or redemption shall be made to the transferor Partner or the Redeeming Partner, as the case may be, and, in the case of a transfer or assignment other than a redemption, all distributions of Available Cash thereafter attributable to such Partnership Unit shall be made to the transferee Partner. E. Additional Restrictions. In addition to any other restrictions on transfer herein contained, including without limitation the provisions of this Article XI, in no event may any transfer or assignment of a Partnership Interest by any Partner (including pursuant to Section 8.6) be made without the express consent of the General Partner, in its sole and 52 absolute discretion, (i) to any person or entity who lacks the legal right, power or capacity to own a Partnership Interest; (ii) in violation of applicable law; (iii) of any component portion of a Partnership Interest, such as the Capital Account, or rights to distributions, separate and apart from all other components of a Partnership Interest; (iv) if in the opinion of legal counsel to the Partnership such transfer would cause a termination of the Partnership for federal or state income tax purposes (except as a result of the redemption or exchange for Shares of all Partnership Units held by all Limited Partners or pursuant to a transaction expressly permitted under Section 7.11.B or Section 11.2); (v) if in the opinion of counsel to the Partnership, such transfer would cause the Partnership to cease to be classified as a partnership for federal income tax purposes (except as a result of the redemption or exchange for Shares of all Partnership Units held by all Limited Partners or pursuant to a transaction expressly permitted under Section 7.11.B or Section 11.2); (vi) if such transfer would cause the Partnership Interests of "benefit plan investors" to become "significant," as those terms are used in 29 C.F.R. ss. 2510.3-101(f), or any successor regulation thereto, or would cause the Partnership to become, with respect to any employee benefit plan subject to Title I of ERISA, a "party-in-interest" (as defined in Section 3(14) of ERISA) or, with respect to any plan defined in Section 4975(e) of the Code, a "disqualified person" (as defined in Section 4975(e) of the Code); (vii) if such transfer would, in the opinion of counsel to the Partnership, cause any portion of the assets of the Partnership to constitute assets of any ERISA Plan Investor pursuant to 29 C.F.R. ss. 2510.3-101, or any successor regulation thereto; (viii) if such transfer requires the registration of such Partnership Interest pursuant to any applicable federal or state securities laws; (ix) if such transfer is effectuated through an "established securities market" or a "secondary market" (or the substantial equivalent thereof) within the meaning of Section 7704 of the Code or such transfer causes the Partnership to become a "publicly traded partnership," as such term is defined in Section 469(k)(2) or Section 7704(b) of the Code (provided that this clause (ix) shall not be the basis for limiting or restricting in any manner the exercise of the Redemption Right under Section 8.6 unless, and only to the extent that, outside tax counsel provides to the General Partner an opinion to the effect that, in the absence of such limitation or restriction, there is a significant risk that the Partnership will be treated as a "publicly traded partnership" and, by reason thereof, taxable as a corporation); (x) if such transfer subjects the Partnership or the activities of the Partnership to regulation under the Investment Company Act of 1940, the Investment Advisors Act of 1940 or ERISA, each as amended; (xi) such transfer could adversely affect the ability of the General Partner Entity to remain qualified as a REIT; or (xii) if in the opinion of legal counsel for the transferring Partner (which opinion and counsel shall be reasonably satisfactory to the Partnership) or legal counsel for the Partnership, such transfer would adversely affect the ability of the General Partner Entity to continue to qualify as a REIT or subject the General Partner Entity to any additional taxes under Section 857 or Section 4981 of the Code. F. Avoidance of "Publicly Traded Partnership" Status. The General Partner shall monitor the transfers of interests in the Partnership to determine (i) if such interests are being traded on an "established securities market" or a "secondary market (or the substantial equivalent thereof)" within the meaning of Section 7704 of the Code and (ii) whether additional transfers of interests would result in the Partnership being unable to qualify for at least one of the "safe harbors" set forth in Regulations Section 1.7704-1 (or such other guidance subsequently published by the IRS setting forth safe harbors under which interests will not be treated as "readily tradable on a secondary market (or the substantial equivalent thereof)" within the meaning 53 of Section 7704 of the Code) (the "Safe Harbors"). The General Partner shall take all steps reasonably necessary or appropriate to prevent any trading of interests or any recognition by the Partnership of transfers made on such markets and, except as otherwise provided herein, to insure that at least one of the Safe Harbors is met; provided, however, that the foregoing shall not authorize the General Partner to limit or restrict in any manner the right of any holder of a Partnership Unit to exercise the Redemption Right in accordance with the terms of Section 8.6 unless, and only to the extent that, outside tax counsel provides to the General Partner an opinion to the effect that, in the absence of such limitation or restriction, there is a significant risk that the Partnership will be treated as a "publicly traded partnership" and, by reason thereof, taxable as a corporation. ARTICLE XII ADMISSION OF PARTNERS Section 12.1 Admission of a Successor General Partner A successor to all of the General Partner's General Partnership Interest pursuant to Section 11.2 who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner, effective upon such transfer. Any such transferee shall carry on the business of the Partnership without dissolution. In each case, the admission shall be subject to such successor General Partner executing and delivering to the Partnership an acceptance of all of the terms and conditions of this Agreement and such other documents or instruments as may be required to effect the admission. Section 12.2 Admission of Additional Limited Partners A. General. No Person shall be admitted as an Additional Limited Partner without the consent of the General Partner, which consent shall be given or withheld in the General Partner's sole and absolute discretion. A Person who makes a Capital Contribution to the Partnership in accordance with this Agreement, including without limitation, under Section 4.1.C, or who exercises an option to receive Partnership Units shall be admitted to the Partnership as an Additional Limited Partner only with the consent of the General Partner and only upon furnishing to the General Partner (i) evidence of acceptance in form satisfactory to the General Partner of all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 15.11 and (ii) such other documents or instruments as may be required in the discretion of the General Partner to effect such Person's admission as an Additional Limited Partner. The admission of any Person as an Additional Limited Partner shall become effective on the date upon which the name of such Person is recorded on the books and records of the Partnership, following the consent of the General Partner to such admission. B. Allocations to Additional Limited Partners. If any Additional Limited Partner is admitted to the Partnership on any day other than the first day of a Partnership Year, then Net Income, Net Losses, each 54 item thereof and all other items allocable among Partners and Assignees for such Partnership Year shall be allocated among such Additional Limited Partner and all other Partners and Assignees by taking into account their varying interests during the Partnership Year in accordance with Section 706(d) of the Code, using the interim closing of the books method (unless the General Partner, in its sole and absolute discretion, elects to adopt a daily, weekly or monthly proration method, in which event Net Income, Net Losses, and each item thereof would be prorated based upon the applicable period selected by the General Partner). Solely for purposes of making such allocations, each of such items for the calendar month in which an admission of any Additional Limited Partner occurs shall be allocated among all the Partners and Assignees including such Additional Limited Partner. All distributions of Available Cash with respect to which the Partnership Record Date is before the date of such admission shall be made solely to Partners and Assignees other than the Additional Limited Partner, and all distributions of Available Cash thereafter shall be made to all the Partners and Assignees including such Additional Limited Partner. Section 12.3 Amendment of Agreement and Certificate of Limited Partnership For the admission to the Partnership of any Partner, the General Partner shall take all steps necessary and appropriate under the Act to amend the records of the Partnership and, if necessary, to prepare as soon as practical an amendment of this Agreement (including an amendment of Exhibit A) and, if required by law, shall prepare and file an amendment to the Certificate and may for this purpose exercise the power of attorney granted pursuant to Section 15.11 hereof. ARTICLE XIII DISSOLUTION AND LIQUIDATION Section 13.1 Dissolution The Partnership shall not be dissolved by the admission of Substituted Limited Partners or Additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the withdrawal of the General Partner, any successor General Partner shall continue the business of the Partnership. The Partnership shall dissolve, and its affairs shall be wound up, upon the first to occur of any of the following ("Liquidating Events") : (i) the expiration of its term as provided in Section 2.4 hereof; (ii) an event of withdrawal of the General Partner, as defined in the Act (other than an event of bankruptcy), unless, within ninety (90) days after the withdrawal a "majority in interest" (as defined below) of the remaining Partners Consent in writing to continue the business of the Partnership and to the appointment, effective as of the date of withdrawal, of a substitute General Partner; (iii) through December 31, 2046, an election to dissolve the Partnership made by the General Partner with the consent of Limited Partners who hold ninety percent (90%) of the outstanding Units held by Limited Partners (including Units held by the General Partner); 55 (iv) an election to dissolve the Partnership made by the General Partner, in its sole and absolute discretion after December 31, 2046; (v) entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Act; (vi) the sale of all or substantially all of the assets and properties of the Partnership for cash or for marketable securities; or (vii) a final and non-appealable judgment is entered by a court of competent jurisdiction ruling that the General Partner is bankrupt or insolvent, or a final and non-appealable order for relief is entered by a court with appropriate jurisdiction against the General Partner, in each case under any federal or state bankruptcy or insolvency laws as now or hereafter in effect, unless prior to or at the time of the entry of such order or judgment a "majority in interest" (as defined below) of the remaining Partners Consent in writing to continue the business of the Partnership and to the appointment, effective as of a date prior to the date of such order or judgment, of a substitute General Partner. As used herein, a "majority in interest" shall refer to Partners (excluding the General Partner) who hold more than fifty percent (50%) of the outstanding Percentage Interests not held by the General Partner. Section 13.2 Winding Up A. General. Upon the occurrence of a Liquidating Event, the Partnership shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Partners. No Partner shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Partnership's business and affairs. The General Partner (or, if there is no remaining General Partner, any Person elected by a majority in interest of the Limited Partners (the "Liquidator")) shall be responsible for overseeing the winding up and dissolution of the Partnership and shall take full account of the Partnership's liabilities and property and the Partnership property shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom (which may, to the extent determined by the General Partners, include equity or other securities of the General Partners or any other entity) shall be applied and distributed in the following order: (1) First, to the payment and discharge of all of the Partnership's debts and liabilities to creditors other than the Partners; (2) Second, to the payment and discharge of all of the Partnership's debts and liabilities to the General Partners; (3) Third, to the payment and discharge of all of the Partnership's debts and liabilities to the Limited Partners; and 56 (4) The balance, if any, to the Partners in accordance with their Capital Accounts, after giving effect to all contributions, distributions, and allocations for all periods. The General Partner shall not receive any additional compensation for any services performed pursuant to this Article XIII. B. Deferred Liquidation. Notwithstanding the provisions of Section 13.2.A which require liquidation of the assets of the Partnership, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Partnership the Liquidator determines that an immediate sale of part or all of the Partnership's assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in its sole and absolute discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Partnership (including to those Partners as creditors) or distribute to the Partners, in lieu of cash, as tenants in common and in accordance with the provisions of Section 13.2.A, undivided interests in such Partnership assets as the Liquidator deems not suitable for liquidation. Any such distributions in kind shall be made only if, in the good faith judgment of the Liquidator, such distributions in kind are in the best interest of the Partners, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operation of such properties at such time. The Liquidator shall determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt. Section 13.3 Compliance with Timing Requirements of Regulations Subject to Section 13.4, if the Partnership is "liquidated" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made under this Article XIII to the General Partner and Limited Partners who have positive Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2). Except for those Partners listed on Exhibit G who have entered into one or more Deficit Restoration Obligation Agreements and have agreed thereby to contribute an amount of cash up to the amount listed next to each such Partner's name on Exhibit 4.6 in the event of the liquidation of the Partnership pursuant to this Article XIII, if any Partner has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for all taxable years, including the year during which such liquidation occurs), such Partner shall have no obligation to make any contribution to the capital of the Partnership with respect to such deficit, and such deficit shall not be considered a debt owed to the Partnership or to any other Person for any purpose whatsoever. In the discretion of the General Partner, a pro rata portion of the distributions that would otherwise be made to the General Partner and Limited Partners pursuant to this Article XIII may be: (A) distributed to a trust established for the benefit of the General Partner and Limited Partners for the purposes of liquidating Partnership assets, collecting amounts owed to the Partnership and paying any contingent or unforeseen liabilities or obligations of the Partnership or of the General Partner arising out of or in connection with the Partnership (in which case the assets of any such trust shall be distributed to the General Partner and Limited Partners from time to time, in the reasonable discretion of the General Partner, in the same proportions as the amount distributed to such trust by the Partnership would otherwise have been 57 distributed to the General Partner and Limited Partners pursuant to this Agreement); or (B) withheld to provide a reasonable reserve for Partnership liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Partnership, provided that such withheld amounts shall be distributed to the General Partner and Limited Partners as soon as practicable. Section 13.4 Deemed Distribution and Recontribution Notwithstanding any other provision of this Article XIII, if the Partnership is deemed liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Liquidating Event has occurred, the Partnership's property shall not be liquidated, the Partnership's liabilities shall not be paid or discharged and the Partnership's affairs shall not be wound up. Instead, for federal income tax purposes and for purposes of maintaining Capital Accounts pursuant to Exhibit B, the Partnership shall be deemed to have distributed its assets in kind to the General Partner and Limited Partners, who shall be deemed to have assumed and taken such assets subject to all Partnership liabilities, all in accordance with their respective Capital Accounts. Immediately thereafter, the General Partner and Limited Partners shall be deemed to have recontributed the Partnership assets in kind to the Partnership, which shall be deemed to have assumed and taken such assets subject to all such liabilities. Section 13.5 Rights of Limited Partners Except as otherwise provided in this Agreement, each Limited Partner shall look solely to the assets of the Partnership for the return of its Capital Contributions and shall have no right or power to demand or receive property other than cash from the Partnership. Except as otherwise expressly provided in this Agreement, no Limited Partner shall have priority over any other Limited Partner as to the return of its Capital Contributions, distributions, or allocations. Section 13.6 Notice of Dissolution If a Liquidating Event occurs or an event occurs that would, but for provisions of an election or objection by one or more Partners pursuant to Section 13.1, result in a dissolution of the Partnership, the General Partner shall, within thirty (30) days thereafter, provide written notice thereof to each of the Partners and to all other parties with whom the Partnership regularly conducts business (as determined in the discretion of the General Partner). Section 13.7 Cancellation of Certificate of Limited Partnership Upon the completion of the liquidation of the Partnership cash and property as provided in Section 13.2, the Partnership shall be terminated and the Certificate and all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the State of Delaware shall be canceled and such other actions as may be necessary to terminate the Partnership shall be taken. 58 Section 13.8 Reasonable Time for Winding Up A reasonable time shall be allowed for the orderly winding up of the business and affairs of the Partnership and the liquidation of its assets pursuant to Section 13.2, to minimize any losses otherwise attendant upon such winding-up, and the provisions of this Agreement shall remain in effect among the Partners during the period of liquidation. Section 13.9 Waiver of Partition Each Partner hereby waives any right to partition of the Partnership property. Section 13.10 Liability of Liquidator The Liquidator shall be indemnified and held harmless by the Partnership in the same manner and to the same degree as an Indemnitee may be indemnified pursuant to Section 7.7. ARTICLE XIV AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS Section 14.1 Amendments A. General. Amendments to this Agreement may be proposed by a General Partner or by any Limited Partners holding twenty-five percent (25%) or more of the Partnership Interests. Following such proposal (except an amendment pursuant to Section 14.1.B), the General Partner shall submit any proposed amendment to the Limited Partners. The General Partner shall seek the written vote of the Partners on the proposed amendment or shall call a meeting to vote thereon and to transact any other business that it may deem appropriate. For purposes of obtaining a written vote, the General Partner may require a response within a reasonable specified time, but not less than fifteen (15) days, and failure to respond in such time period shall constitute a vote which is consistent with the General Partner's recommendation with respect to the proposal. Except as provided in Section 14.1.B, 14.1.C or 14.1.D, a proposed amendment shall be adopted and be effective as an amendment hereto if it is approved by the General Partner and it receives the Consent of Partners holding a majority of the Percentage Interests of the Limited Partners (including Limited Partnership Interests held by the General Partner). B. Amendments Not Requiring Limited Partner Approval. Notwithstanding Section 14.1.A or 14.1.C, the General Partner shall have the power, without the consent of the Limited Partners, to amend this Agreement as may be required to facilitate or implement any of the following purposes: (1) to add to the obligations of the General Partner or surrender any right or power granted to the General Partner or any Affiliate of the General Partner for the benefit of the Limited Partners; 59 (2) to reflect the admission, substitution, termination, or withdrawal of Partners in accordance with this Agreement (which may be effected through the replacement of Exhibit A with an amended Exhibit A); (3) to set forth the designations, rights, powers, duties, and preferences of the holders of any additional Partnership Interests issued pursuant to Article IV; (4) to reflect a change that does not adversely affect the Limited Partners in any material respect, or to cure any ambiguity, correct or supplement any provision in this Agreement not inconsistent with law or with other provisions of this Agreement, or make other changes with respect to matters arising under this Agreement that will not be inconsistent with law or with the provisions of this Agreement; and (5) to satisfy any requirements, conditions, or guidelines contained in any order, directive, opinion, ruling or regulation of a federal, state or local agency or contained in federal, state or local law. The General Partner shall notify the Limited Partners when any action under this Section 14.1.B is taken in the next regular communication to the Limited Partners. C. Amendments Requiring Limited Partner Approval (Excluding General Partners). Notwithstanding Section 14.1.A, without the Consent of the Outside Limited Partners, the General Partner shall not amend Section 4.2.A, Section 5.1.E, Section 7.1.A (second sentence only), Section 7.5, Section 7.6, Section 7.8, Section 7.11.B, Section 11.2, Section 13.1 (other than Section 13.1(iii) which can be amended only with a Consent of 90% of the Partnership Units (including Partnership Units held by the General Partner), this Section 14.1.C or Section 14.2. D. Other Amendments Requiring Certain Limited Partner Approval. Notwithstanding anything in this Section 14.1 to the contrary, this Agreement shall not be amended with respect to any Partner adversely affected without the Consent of such Partner adversely affected if such amendment would (i) convert a Limited Partner's interest in the Partnership into a general partner's interest, (ii) modify the limited liability of a Limited Partner, (iii) amend Section 7.11.A, (iv) amend Article V or Article VI (except as permitted pursuant to Sections 4.2, 5.1.E, 5.4, 6.2 and 14.1(B)(3)), (v) amend Section 8.6 or any defined terms set forth in Article I that relate to the Redemption Right (except as permitted in Section 8.6.E), or (vi) amend this Section 14.1.D. This Section 14.1.D does not require unanimous consent of all Partners adversely affected unless the amendment is to be effective against all Partners adversely affected. E. Amendment and Restatement of Exhibit A or Exhibit G Not An Amendment. Notwithstanding anything in this Article XIV or elsewhere in 60 this Agreement to the contrary, any amendment and restatement of Exhibit A or Exhibit G hereto by the General Partner to reflect events or changes otherwise authorized or permitted by this Agreement, whether pursuant to Section 7.1.A(21) or Section 7.1A(22) hereof or otherwise, shall not be deemed an amendment of this Agreement and may be done at any time and from time to time, as necessary by the General Partner without the Consent of the Limited Partners. Section 14.2 Meetings of the Partners A. General. Meetings of the Partners may be called by the General Partner and shall be called upon the receipt by the General Partner of a written request by Limited Partners holding twenty-five percent (25%) or more of the Partnership Interests. The call shall state the nature of the business to be transacted. Notice of any such meeting shall be given to all Partners not less than seven (7) days nor more than thirty (30) days prior to the date of such meeting. Partners may vote in person or by proxy at such meeting. Whenever the vote or Consent of Partners is permitted or required under this Agreement, such vote or Consent may be given at a meeting of Partners or may be given in accordance with the procedure prescribed in Section 14.1.A. Except as otherwise expressly provided in this Agreement, the Consent of holders of a majority of the Percentage Interests held by Limited Partners (including Limited Partnership Interests held by the General Partner) shall control. B. Actions Without a Meeting. Any action required or permitted to be taken at a meeting of the Partners may be taken without a meeting if a written consent setting forth the action so taken is signed by a majority of the Percentage Interests of the Partners (or such other percentage as is expressly required by this Agreement). Such consent may be in one instrument or in several instruments, and shall have the same force and effect as a vote of a majority of the Percentage Interests of the Partners (or such other percentage as is expressly required by this Agreement). Such consent shall be filed with the General Partner. An action so taken shall be deemed to have been taken at a meeting held on the effective date so certified. C. Proxy. Each Limited Partner may authorize any Person or Persons to act for him by proxy on all matters in which a Limited Partner is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Limited Partner or its attorney-in-fact. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Limited Partner executing it, such revocation to be effective upon the Partnership's receipt of written notice thereof. D. Conduct of Meeting. Each meeting of Partners shall be conducted by the General Partner or such other Person as the General Partner may appoint pursuant to such rules for the conduct of the meeting as the General Partner or such other Person deem appropriate. 61 ARTICLE XV GENERAL PROVISIONS Section 15.1 Addresses and Notice Any notice, demand, request or report required or permitted to be given or made to a Partner or Assignee under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by other means of written communication to the Partner or Assignee at the address set forth in Exhibit A or such other address as the Partners shall notify the General Partner in writing. Section 15.2 Titles and Captions All article or section titles or captions in this Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Except as specifically provided otherwise, references to "Articles" "Sections" and "Exhibits" are to Articles, Sections and Exhibits of this Agreement. Section 15.3 Pronouns and Plurals Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa. Section 15.4 Further Action The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement. Section 15.5 Binding Effect This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns. Section 15.6 Creditors Other than as expressly set forth herein with regard to any Indemnitee, none of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership. 62 Section 15.7 Waiver No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition. Section 15.8 Counterparts This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto. Section 15.9 Applicable Law This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law. Section 15.10 Invalidity of Provisions If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. Section 15.11 Power of Attorney A. General. Each Limited Partner and each Assignee who accepts Partnership Units (or any rights, benefits or privileges associated therewith) is deemed to irrevocably constitute and appoint the General Partner, any Liquidator and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead to: (1) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (a) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate and all amendments or restatements thereof) that the General Partner or any Liquidator deems 63 appropriate or necessary to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property, (b) all instruments that the General Partner or any Liquidator deem appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its terms, (c) all conveyances and other instruments or documents that the General Partner or any Liquidator deems appropriate or necessary to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement, including, without limitation, a certificate of cancellation, (d) all instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to, or other events described in, Article XI, XII or XIII hereof or the Capital Contribution of any Partner and (e) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of Partnership Interests; and (2) execute, swear to, acknowledge and file all ballots, consents, approvals, waivers, certificates and other instruments appropriate or necessary, in the sole and absolute discretion of the General Partner or any Liquidator, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action which is made or given by the Partners hereunder or is consistent with the terms of this Agreement or appropriate or necessary, in the sole discretion of the General Partner or any Liquidator, to effectuate the terms or intent of this Agreement. Nothing contained in this Section 15.11 shall be construed as authorizing the General Partner or any Liquidator to amend this Agreement except in accordance with Article XIV hereof or as may be otherwise expressly provided for in this Agreement. B. Irrevocable Nature. The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, in recognition of the fact that each of the Partners will be relying upon the power of the General Partner or any Liquidator to act as contemplated by this Agreement in any filing or other action by it on behalf of the Partnership, and it shall survive and not be affected by the subsequent Incapacity of any Limited Partner or Assignee and the transfer of all or any portion of such Limited Partner's or Assignee's Partnership Units and shall extend to such Limited Partner's or Assignee's heirs, successors, assigns and personal representatives. Each such Limited Partner or Assignee hereby agrees to be bound by any representation made by the General Partner or any Liquidator, acting in good faith pursuant to such power of attorney; and each such Limited Partner or Assignee hereby waives any and all defenses which may be available to contest, negate or disaffirm the action of the General Partner or any Liquidator, taken in good faith under such power of attorney. Each Limited Partner or Assignee shall execute and deliver to the General Partner or the Liquidator, within fifteen (15) days after receipt of the General Partner's or Liquidator's request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator, as the case may be, deems necessary to effectuate this Agreement and the purposes of the Partnership. 64 Section 15.12 Entire Agreement This Agreement contains the entire understanding and agreement among the Partners with respect to the subject matter hereof and supersedes any prior written oral understandings or agreements among them with respect thereto. Section 15.13 No Rights as Shareholders Nothing contained in this Agreement shall be construed as conferring upon the holders of the Partnership Units any rights whatsoever as partners or shareholders of the General Partner Entity, including, without limitation, any right to receive dividends or other distributions made to shareholders of the General Partner Entity or to vote or to consent or receive notice as shareholders in respect to any meeting of shareholders for the election of trustees of the General Partner Entity or any other matter. Section 15.14 Limitation to Preserve REIT Status To the extent that any amount paid or credited to the General Partner or any of its officers, directors, trustees, employees or agents pursuant to Section 7.4 or Section 7.7 would constitute gross income to the General Partner for purposes of Section 856(c)(2) or 856(c)(3) of the Code (a "General Partner Payment") then, notwithstanding any other provision of this Agreement, the amount of such General Partner Payment for any fiscal year shall not exceed the lesser of: (i) an amount equal to the excess, if any, of (a) 4.20% of the General Partner's total gross income (but not including the amount of any General Partner Payments) for the fiscal year which is described in subsections (A) though (H) of Section 856(c)(2) of the Code over (b) the amount of gross income (within the meaning of Section 856(c)(2) of the Code) derived by the General Partner from sources other than those described in subsections (A) through (H) of Section 856(c)(2) of the Code (but not including the amount of any General Partner Payments); or (ii) an amount equal to the excess, if any of (a) 25% of the General Partner's total gross income (but not including the amount of any General Partner Payments) for the fiscal year which is described in subsections (A) through (I) of Section 856(c)(3) of the Code over (b) the amount of gross income (within the meaning of Section 856(c)(3) of the Code) derived by the General Partner from sources other than those described in subsections (A) through (I) of Section 856(c)(3) of the Code (but not including the amount of any General Partner Payments); provided, however, that General Partner Payments in excess of the amounts set forth in subparagraphs (i) and (ii) above may be made if the General Partner, as a condition precedent, obtains an opinion of tax counsel that the receipt of such excess amounts would not adversely affect the General Partner's ability to qualify as a REIT. To the extent General Partner Payments may not be made in a year due to the foregoing limitations, such General Partner Payments shall carry over and be treated as arising in the following year, provided, however, that such amounts shall not carry over for 65 more than five years, and if not paid within such five year period, shall expire; provided further, that (i) as General Partner Payments are made, such payments shall be applied first to carry over amounts outstanding, if any, and (ii) with respect to carry over amounts for more than one Partnership Year, such payments shall be applied to the earliest Partnership Year first. 66 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. GENERAL PARTNER: ELDERTRUST By: /s/ Edward B. Romanov, Jr. -------------------------- Name: Edward B. Romanov, Jr. Title: President and Chief Executive Officer LIMITED PARTNERS: /s/ D. Lee McCreary, Jr. ------------------------ D. Lee McCreary, Jr. MGI Limited Partnership By: MGI, Inc. By: /s/ Michael R. Walker ------------------------- Michael R. Walker President /s/ Edward B. Romanov, Jr. -------------------------------- Edward B. Romanov, Jr. Thomas W. Balderston Gregory H. Doyle Richard R. Howard Senior LifeChoice Corp. Michael R. Walker Joseph A. Williamson By: /s/ Edward B. Romanov, Jr. ----------------------------------- Edward B. Romanov, Jr. Attorney-in-Fact 67 EXHIBIT A PARTNERS AND PARTNERSHIP INTERESTS
Class A Class B Agreed Initial Percentage Name and Address of Partner Partnership Partnership Capital Account Interest - --------------------------- ----------- ----------- --------------- ---------- GENERAL PARTNER: ElderTrust 7,873 -- $ 141,714 0.100% 415 McFarlan Road Suite 202 Kennett Square, PA 19348 LIMITED PARTNERS: Thomas W. Balderston 8,330 -- $ 149,940 0.106% 1972 Thatch Palm Drive Boca Raton, FL 33432 Gregory H. Doyle 13,545 -- $ 243,810 0.172% 2462 River Road New Hope, PA 18938 ElderTrust 7,382,227 -- $ 132,880,086 93.777% 415 McFarlan Road Suite 202 Kennett Square, PA 19348 Richard R. Howard 5,215 -- $ 93,870 0.066% c/o Genesis Health Ventures, Inc. 148 West State Street Kennett Square, PA 19348 D. Lee McCreary, Jr. 12,000 -- $ 216,000 0.152% c/o ElderTrust 415 McFarlan Road Suite 202 Kennett Square, PA 19348 MGI Limited Partnership 131,250 -- $ 2,362,500 1.667% c/o Genesis Health Ventures, Inc. 148 West State Street Kennett Square, PA 19348
Class A Class B Agreed Initial Percentage Name and Address of Partner Partnership Partnership Capital Account Interest - --------------------------- ------------ ----------- --------------- ---------- Edward B. Romanov, Jr. 118,750 -- $ 2,137,500 1.509% c/o ElderTrust 415 McFarlan Road Suite 202 Kennett Square, PA 19348 Senior LifeChoice Corp. 165,850 -- $ 2,985,300 2.107% 2393 Kimberton Road Suite 200 Kimberton, PA 19442 Michael R. Walker 21,875 -- $ 393,750 0.278% c/o ElderTrust 415 McFarlan Road Suite 202 Kennett Square, PA 19348 Joseph A. Williamson 5,215 -- $ 93,870 0.066% P.O. Box 450 Unionville, PA 19375 TOTAL 7,872,130 -- $ 141,698,340 100.000% ============ =========== ============= ==========
A-2 EXHIBIT B CAPITAL ACCOUNT MAINTENANCE 1. Capital Accounts of the Partners A. The Partnership shall maintain for each Partner a separate Capital Account in accordance with the rules of Regulations Section l.704-l(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of all Capital Contributions and any other deemed contributions made by such Partner to the Partnership pursuant to this Agreement and (ii) all items of Partnership income and gain (including income and gain exempt from tax) computed in accordance with Section 1.B hereof and allocated to such Partner pursuant to Section 6.1 of the Agreement and Exhibit C thereof, and decreased by (x) the amount of cash or Agreed Value of all actual and deemed distributions of cash or property made to such Partner pursuant to this Agreement and (y) all items of Partnership deduction and loss computed in accordance with Section 1.B hereof and allocated to such Partner pursuant to Section 6.1 of the Agreement and Exhibit C thereof. B. For purposes of computing the amount of any item of income, gain, deduction or loss to be reflected in the Partners' Capital Accounts, unless otherwise specified in this Agreement, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes determined in accordance with Section 703(a) of the Code (for this purpose all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a) (1) of the Code shall be included in taxable income or loss), with the following adjustments: (1) Except as otherwise provided in Regulations Section 1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction shall be made without regard to any election under Section 754 of the Code which may be made by the Partnership, provided that the amounts of any adjustments to the adjusted bases of the assets of the Partnership made pursuant to Section 734 of the Code as a result of the distribution of property by the Partnership to a Partner (to the extent that such adjustments have not previously been reflected in the Partners' Capital Accounts) shall be reflected in the Capital Accounts of the Partners in the manner and subject to the limitations prescribed in Regulations Section l.704-1(b)(2)(iv) (m)(4). (2) The computation of all items of income, gain, and deduction shall be made without regard to the fact that items described in Sections 705(a)(l)(B) or 705(a)(2)(B) of the Code are not includable in gross income or are neither currently deductible nor capitalized for federal income tax purposes. (3) Any income, gain or loss attributable to the taxable disposition of any Partnership property shall be determined as if the adjusted basis of such property as of such date of disposition were equal in amount to the Partnership's Carrying Value with respect to such property as of such date. (4) In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such fiscal year. (5) In the event the Carrying Value of any Partnership Asset is adjusted pursuant to Section 1.D hereof, the amount of any such adjustment shall be taken into account as gain or loss from the disposition of such asset. (6) Any items specially allocated under Section 2 of Exhibit C hereof shall not be taken into account. C. Generally, a transferee (including any Assignee) of a Partnership Unit shall succeed to a pro rata portion of the Capital Account of the transferor; provided, however, that, if the transfer causes a termination of the Partnership under Section 708(b)(l)(B) of the Code, the Partnership's properties shall be deemed, solely for federal income tax purposes, to have been distributed in liquidation of the Partnership to the holders of the Partnership units (including the transferee) and recontributed by such Persons in reconstitution of the Partnership. In such event, the Carrying Values of the Partnership properties shall be adjusted immediately prior to such deemed distribution pursuant to Section 1.D(2) hereof. The Capital Accounts of such reconstituted Partnership shall be maintained in accordance with the principles of this Exhibit B. D. (1) Consistent with the provisions of Regulations Section 1.704-1(b)(2)(iv)(f), and as provided in Section 1.D(2), the Carrying Values of all Partnership assets shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as of the times of the adjustments provided in Section 1.D(2) hereof, as if such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property and allocated pursuant to Section 6.1 of the Agreement. (2) Such adjustments shall be made as of the following times: (a) immediately prior to the acquisition of an additional interest in the Partnership by any new or existing Partner in exchange for more than a de minimis Capital Contribution; (b) immediately prior to the distribution by the Partnership to a Partner of more than a de minimis amount of property as consideration for an interest in the Partnership; and (c) immediately prior to the liquidation of the Partnership within the meaning of Regulations Section 1.704-l(b)(2)(ii)(g), provided however that adjustments pursuant to clauses (a) and (b) above shall be made only if the General Partner determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership. B-2 (3) In accordance with Regulations Section 1.704- l(b)(2)(iv)(e), the Carrying Value of Partnership assets distributed in kind shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as of the time any such asset is distributed. (4) In determining Unrealized Gain or Unrealized Loss for purposes of this Exhibit B, the aggregate cash amount and fair market value of all Partnership assets (including cash or cash equivalents) shall be determined by the General Partner using such reasonable method of valuation as it may adopt, or in the case of a liquidating distribution pursuant to Article XIII of the Agreement, shall be determined and allocated by the Liquidator using such reasonable methods of valuation as it may adopt. The General Partner, or the Liquidator, as the case may be, shall allocate such aggregate fair market value among the assets of the Partnership in such manner as it determines in its sole and absolute discretion to arrive at a fair market value for individual properties. E. The provisions of the Agreement (including this Exhibit B and the other Exhibits to the Agreement) relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Regulations. In the event the General Partner shall determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributed or distributed property or which are assumed by the Partnership, the General Partner, or the Limited Partners) are computed in order to comply with such Regulations, the General Partner may make such modification without regard to Article XIV of the Agreement, provided that it is not likely to have a material effect on the amounts distributable to any Person pursuant to Article XIII of the Agreement upon the dissolution of the Partnership. The General Partner also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Partners and the amount of Partnership capital reflected on the Partnership's balance sheet, as computed for book purposes, in accordance with Regulations Section l.704-l(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section l.704-1(b). 2. No Interest ----------- No interest shall be paid by the Partnership on Capital Contributions or on balances in Partners' Capital Accounts. 3. No Withdrawal ------------- No Partner shall be entitled to withdraw any part of its Capital Contribution or Capital Account or to receive any distribution from the Partnership, except as provided in Articles IV, V, VII and XIII of the Agreement. B-3 EXHIBIT C SPECIAL ALLOCATION RULES 1. Special Allocation Rules. Notwithstanding any other provision of the Agreement or this Exhibit C, the following special allocations shall be made in the following order: A. Minimum Gain Chargeback. Notwithstanding the provisions of Section 6.1 of the Agreement or any other provisions of this Exhibit C, if there is a net decrease in Partnership Minimum Gain during any Partnership Year, each Partner shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Partner's share of the net decrease in Partnership Minimum Gain, as determined under Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(f)(6). This Section 1.A is intended to comply with the minimum gain chargeback requirements in Regulations Section 1.704-2(f) and for purposes of this Section 1.A only, each Partner's Adjusted Capital Account Deficit shall be determined prior to any other allocations pursuant to Section 6.1 of this Agreement with respect to such Partnership Year and without regard to any decrease in Partner Minimum Gain during such Partnership Year. B. Partner Minimum Gain Chargeback. Notwithstanding any other provision of Section 6.1 of this Agreement or any other provisions of this Exhibit C (except Section 1.A hereof), if there is a net decrease in Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any Partnership Year, each Partner who has a share of the Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i) (5), shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Partner's share of the net decrease in Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i) (5). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each General Partner and Limited Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(i) (4). This Section 1.B is intended to comply with the minimum gain chargeback requirement in such Section of the Regulations and shall be interpreted consistently therewith. Solely for purposes of this Section 1.B, each Partner's Adjusted Capital Account Deficit shall be determined prior to any other allocations pursuant to Section 6.1 of the Agreement or this Exhibit with respect to such Partnership Year, other than allocations pursuant to Section 1.A hereof. C. Qualified Income Offset. In the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Regulations Sections 1.704-l(b)(2)(ii)(d)(4), l.704-1(b)(2)(ii)(d)(5), or 1.704- l(b)(2)(ii)(d)(6), and after giving effect to the allocations required under Sections 1.A and 1.B hereof with respect to such Partnership Year, such Partner has an Adjusted Capital Account Deficit, items of Partnership income and gain (consisting of a pro rata portion of each item of Partnership income, including gross income and gain for the Partnership Year) shall be specifically allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Regulations, its Adjusted Capital Account Deficit created by such adjustments, allocations or distributions as quickly as possible. This Section 1.C is intended to constitute a "qualified income offset" under Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. D. Gross Income Allocation. In the event that any Partner has an Adjusted Capital Account Deficit at the end of any Partnership Year (after taking into account allocations to be made under the preceding paragraphs hereof with respect to such Partnership Year), each such Partner shall be specially allocated items of Partnership income and gain (consisting of a pro rata portion of each item of Partnership income, including gross income and gain for the Partnership Year) in an amount and manner sufficient to eliminate, to the extent required by the Regulations, its Adjusted Capital Account Deficit. E. Nonrecourse Deductions. Nonrecourse Deductions for any Partnership Year shall be allocated to the Partners in accordance with their respective Percentage Interests. If the General Partner determines in its good faith discretion that the Partnership's Nonrecourse Deductions must be allocated in a different ratio to satisfy the safe harbor requirements of the Regulations promulgated under Section 704(b) of the Code, the General Partner is authorized, upon notice to the Limited Partners, to revise the prescribed ratio for such Partnership Year to the numerically closest ratio which would satisfy such requirements. F. Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for any Partnership Year shall be specially allocated to the Partner who bears the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Regulations Sections 1.704-2(b)(4) and 1.704-2(i). G. Code Section 754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Regulations Section 1.704-l(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such item of gain or loss shall be specially allocated to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Regulations. 2. Allocations for Tax Purposes ---------------------------- A. Except as otherwise provided in this Section 2, for federal income tax purposes, each item of income, gain, loss and deduction shall be allocated among the Partners in the same manner as its correlative item of "book" income, gain, loss or deduction is allocated pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C. B. In an attempt to eliminate Book-Tax Disparities attributable to a Contributed Property or Adjusted Property, items of income, gain, loss, and deduction shall be allocated for federal income tax purposes among the Partners as follows: C-2 (1) (a) In the case of a Contributed Property, such items attributable thereto shall be allocated among the Partners consistent with the principles of Section 704(c) of the Code to take into account the variation between the 704(c) Value of such property and its adjusted basis at the time of contribution (taking into account Section 2.C of this Exhibit C); and (b) any item of Residual Gain or Residual Loss attributable to a Contributed Property shall be allocated among the Partners in the same manner as its correlative item of "book" gain or loss is allocated pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C. (2) (a) In the case of an Adjusted Property, such items shall (i) first, be allocated among the Partners in a manner consistent with the principles of Section 704(c) of the Code to take into account the Unrealized Gain or Unrealized Loss attributable to such property and the allocations thereof pursuant to Exhibit B; (ii) second, in the event such property was originally a Contributed Property, be allocated among the Partners in a manner consistent with Section 2.B(1) of this Exhibit C; and (b) any item of Residual Gain or Residual Loss attributable to an Adjusted Property shall be allocated among the Partners in the same manner its correlative item of "book" gain or loss is allocated pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C. (3) all other items of income, gain, loss and deduction shall be allocated among the Partners the same manner as their correlative item of "book" gain or loss is allocated pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C. C. To the extent Regulations promulgated pursuant to Section 704(c) of the Code permit a Partnership to utilize alternative methods to eliminate the disparities between the Carrying Value of property and its adjusted basis, the General Partner shall, subject to the following, have the authority to elect the method to be used by the Partnership and such election shall be binding on all Partners. With respect to the Contributed Property transferred to the Partnership as of the Effective Date, the Partnership shall elect to use the "traditional method" set forth in Treasury Regulation ss. 1.704-3(b). C-3 EXHIBIT D NOTICE OF REDEMPTION The undersigned hereby irrevocably (i) redeems _________ Partnership Units in ElderTrust Operating Limited Partnership in accordance with the terms of the Agreement of Limited Partnership of ElderTrust Operating Limited Partnership, as amended, and the Redemption Right referred to therein, (ii) surrenders such Partnership Units and all right, title and interest therein and (iii) directs that the Cash Amount or Shares Amount (as determined by the General Partner) deliverable upon exercise of the Redemption Right be delivered to the address specified below, and if Shares are to be delivered, such Shares be registered or placed in the name(s) and at the address(es) specified below. The undersigned hereby represents, warrants, and certifies that the undersigned (a) has marketable and unencumbered title to such Partnership Units, free and clear of the rights of or interests of any other person or entity, (b) has the full right, power and authority to redeem and surrender such Partnership Units as provided herein and (c) has obtained the consent or approval of all persons or entities, if any, having the right to consult or approve such redemption and surrender. Dated:________ Name of Limited Partner:___________________ ------------------------------------ (Signature of Limited Partner) ------------------------------------ (Street Address) ------------------------------------ (City) (State) (Zip Code) Signature Guaranteed by: ------------------------------------ If Shares are to be issued, issue to: Name: Please insert social security or identifying number: EXHIBIT E VALUE OF CONTRIBUTED PROPERTY
Partner Underlying Property 704(c) Value Agreed Value - ------- ------------------- ------------ ------------ ElderTrust Cash $ 133,021,800 $ 133,021,800 Thomas W. Balderston Interest in Windsor Office $ 435,940 $ 149,940 Building and Windsor Clinic and Training Facility Properties Gregory H. Doyle Interest in Windsor Office $ 435,940 $ 149,940 Building and Windsor Clinic and Training Facility Properties General Partnership Interest in $ 213,537 $ 93,870 Salisbury Medical Office Building General Partnership Richard R. Howard General Partnership Interest in $ 213,537 $ 93,870 Salisbury Medical Office Building General Partnership D. Lee McCreary, Jr. Restatement of Pre-existing $ 216,000 $ 216,000 Equity Interest in Partnership MGI Limited Partnership Restatement of Pre-existing $ 2,362,500 $ 2,362,500 Equity Interest in Partnership Edward B. Romanov, Jr. Restatement of Pre-existing $ 2,137,500 $ 2,137,500 Equity Interest in Partnership
Partner Underlying Property 704(c) Value Agreed Value - ------- ------------------- ------------ ------------ Senior LifeChoice Corp. General Partner Interest in $ 21,081,450 $ 2,985,300 Senior LifeChoice of Paoli, L.P. and General Partner and Limited Partner Interests in Senior LifeChoice of Kimberton, L.P. Michael R. Walker Interest in Windsor Office $ 299,880 $ 299,880 Building and Windsor Clinic and Training Facility Properties General Partnership Interest in $ 93,870 $ 93,870 Salisbury Medical Office Building General Partnership Joseph A. Williamson General Partnership Interest in $ 213,537 $ 93,870 Salisbury Medical Office Building General Partnership
E-2 EXHIBIT F FORM OF UNIT CERTIFICATE ================================================================================ ELDERTRUST OPERATING LIMITED PARTNERSHIP (A Delaware Limited Partnership) CERTIFICATE NUMBER Number Of Class A Units A-___ _________ THIS CERTIFIES THAT [PARTNER] is the owner of record of the number of Class A Partnership Units of limited partnership interest ("Partnership Units") indicated above in ElderTrust Operating Limited Partnership, a Delaware limited partnership (the "Partnership"). This Certificate has been issued solely to evidence that the above named partner appears as a signatory to, and that the above number of Partnership Units stand in such partner's name in the Second Amended and Restated Agreement of Limited Partnership of the Partnership, as amended (the "Partnership Agreement"). This Certificate does not grant or carry with it any rights to the income, profits or assets of the Partnership, such rights and interests being derived solely from the Partnership Agreement. The interest represented by all or any of the Partnership Units may not be transferred except in accordance with the terms of the Partnership Agreement. ELDERTRUST OPERATING LIMITED PARTNERSHIP Dated: January 30, 1998 By: ELDERTRUST General Partner By ___________________________ D. Lee McCreary, Jr. Vice President and Chief Financial Officer ================================================================================ F-2 EXHIBIT G DEFICIT RESTORATION OBLIGATIONS The following Partners have made one or more Deficit Restoration Obligation Agreements which have been accepted by the Partnership whereby each such Partner has agreed to contribute the aggregate amount of cash set forth next to such Partner's name below in the event of the liquidation of the Partnership: Partner Aggregate Deficit Restoration Obligation ------- ---------------------------------------- [TO BE COMPLETED FOLLOWING COMPLETION OF FINAL TAX RETURNS FOR PROPERTY PARTNERSHIPS] EX-10.2 5 EXHIBIT 10.2 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of January 30, 1998 by and between ElderTrust, a Maryland real estate investment trust (the "Company"), and the holders of Units listed on Schedule A hereto (each, individually, a "Holder," and, collectively, the "Holders"). WHEREAS, on the date hereof, the Holders are receiving Class A units of limited partnership interest ("Units") in the ElderTrust Operating, Limited Partnership, a Delaware limited partnership (the "Operating Partnership"); WHEREAS, in connection therewith, the Company has agreed to grant to the Holders the Registration Rights (as defined in Section 1 hereof); NOW, THEREFORE, the parties hereto, in consideration of the foregoing, the mutual covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, hereby agree as follows: Section 1. Registration Rights If a Holder receives common shares of beneficial interest ("Common Shares") of the Company upon redemption of Units (the "Redemption Shares") pursuant to the terms of the First Amended and Restated Agreement of Limited Partnership of the Operating Partnership (the "Operating Partnership Agreement"), then unless such Redemption Shares are issued to such Holder pursuant to an Issuer Registration Statement as provided in Section 2 below, Holder shall be entitled to offer for sale pursuant to a Registration Statement (as defined in Section 3 hereof) the Redemption Shares at any time after the date which is 14 months following the date of the closing of the Company's initial public offering of Common Shares (the "Effective Date"), subject to the terms and conditions set forth in Section 3 hereof (the "Registration Rights"). Section 2. Issuer Registration Statement Anything contained herein to the contrary notwithstanding, in the event that Redemption Shares are issued by the Company to a Holder pursuant to an effective registration statement (an "Issuer Registration Statement") filed with the Securities and Exchange Commission (the "SEC"), the Company shall be deemed to have satisfied all of its registration obligations under this Agreement. Section 3. Demand Registration Rights 3.1(a) Registration Procedure. Unless such Redemption Shares are issued pursuant to an Issuer Registration Statement as provided in Section 2 hereof, then subject to Sections 3.1(c) and 3.2 hereof, if any Holder desires to exercise its Registration Rights with respect to any Redemption Shares issued to such Holder, the Holder shall deliver to the Company a written notice (a "Registration Notice") informing the Company of such exercise and specifying the number of shares to be offered by such Holder (such shares to be offered being referred to herein as the "Registrable Securities"). Such notice may be given at any time on or after the later of (i) the Effective Date or (ii) the date a notice of redemption is delivered by the Holder to the Operating Partnership pursuant to the Operating Partnership Agreement, but must be given at least fifteen (15) business days prior to the consummation of any sale of Registrable Securities. Upon receipt of the Registration Notice, the Company, if it has not already caused the Registrable Securities to be included as part of an existing shelf registration statement and related prospectus (the "Shelf Registration Statement") that the Company then has on file with the SEC (in which event the Company shall be deemed to have satisfied its registration obligation under this Section 3), will cause to be filed with the SEC as soon as reasonably practicable after receiving such Registration Notice a new registration statement and related prospectus (a "New Registration Statement") that complies as to form in all material respects with applicable SEC rules providing for the sale by the Holder of the Registrable Securities, and agrees (subject to Section 3.2 hereof) to use its best efforts to cause such New Registration Statement to be declared effective by the SEC as soon as practicable. (As used herein, "Registration Statement" and "Prospectus" refer to the Shelf Registration Statement and related prospectus (including any preliminary prospectus) or the New Registration Statement and related prospectus (including any preliminary prospectus), whichever is utilized by the Company to satisfy each Holder's Registration Rights pursuant to this Section 3, including in each case any documents incorporated therein by reference.) Each Holder agrees to provide in a timely manner information regarding the proposed distribution by such Holder of the Registrable Securities and such other information reasonably requested by the Company in connection with the preparation of and for inclusion in the Registration Statement. The Company agrees (subject to Section 3.2 hereof) to use its best efforts to keep the Registration Statement effective (including the preparation and filing of any amendments and supplements thereto necessary for that purpose) until the earlier of (i) the date on which the applicable Holder or Holders consummate the sale of all of the Registrable Securities registered under the Registration Statement or (ii) the date on which all of the Registrable Securities are eligible for sale pursuant to Rule 144(k) (or any successor provision) or in a single transaction pursuant to Rule 144(e) (or any successor provision) under the Securities Act of 1933, as amended (the "Securities Act"). The Company agrees to provide to each Holder a reasonable number of copies of the final Prospectus and any amendments or supplements thereto relating to Registrable Securities held by such Holder. Notwithstanding the foregoing, the Company may at any time, in its sole discretion and prior to receiving any Redemption Notice from any Holder, include all of the Redemption Shares or any portion thereof in any Shelf Registration Statement. In connection with any Registration Statement utilized by the Company to satisfy any Holder's Registration Rights pursuant to this Section 3, each Holder agrees that it will respond within three (3) Business Days to any request by the Company to provide or verify information regarding such Holder or such Holder's Registrable Securities as may be required to be included in such Registration Statement pursuant to the rules and regulations of the SEC. 3.1(b) Offers and Sales. All offers and sales by a Holder pursuant to a Registration Statement referred to in this Section 3 shall be completed within the period during which such Registration Statement is required to remain effective pursuant to Section 3.1(a), and upon expiration 2 of such period no Holder will offer or sell any Registrable Securities pursuant to such Registration Statement. If directed by the Company, a Holder will return all undistributed copies of any Prospectus in its possession upon the expiration of such period. 3.1(c) Limitations on Registration Rights. Each exercise of the Registration Right shall be effected with respect to a minimum of the lesser of (i) Ten Thousand (10,000) Common Shares or (ii) the total number of Redemption Shares held by the exercising Holder at such time plus the number of Redemption Shares that may be issued to such Holder upon redemption of Units by such Holder; provided, however, that, with respect to a Holder which is an entity, such a Holder may exercise the Registration Right for less than Ten Thousand (10,000) Common Shares without regard to whether or not such Holder is exercising the Registration Right for all of the Redemption Shares held by such Holder as long as such Holder is exercising the Registration Right on behalf of one or more of its direct equity owners (e.g., shareholders, partners or members) or beneficiaries in respect of one hundred percent (100%) of such equity owners' interest in such Holder. The right of any Holder to deliver a Registration Notice commences upon the later of (i) the Effective Date or (ii) the date such Holder is permitted to redeem Units pursuant to the Operating Partnership Agreement. The right of a Holder to deliver a Registration Notice shall expire on the date on which all of the Redemption Shares held by such Holder or issuable upon redemption of Units held by such Holder are eligible for sale pursuant to Rule 144(k) (or any successor provision) or in a single transaction pursuant to Rule 144(e) (or any successor provision) under the Securities Act. The Registration Rights granted pursuant to this Section 3.1 may not be exercised in connection with any underwritten public offering by the Company or by any Holder without the prior written consent of the Company. 3.2 Suspension of Offering. Upon any notice by the Company, either before or after a Holder has delivered a Registration Notice, that a negotiation or consummation of a transaction by the Company or its subsidiaries is pending or an event has occurred, which negotiation, consummation or event would require additional disclosure by the Company in the Registration Statement of material information which the Company has a bona fide business purpose for keeping confidential and the nondisclosure of which in the Registration Statement might cause the Registration Statement to fail to comply with applicable disclosure requirements (a "Materiality Notice"), such Holder agrees that it will immediately discontinue offers and sales of the Registrable Securities under the Registration Statement until Holder receives copies of a supplemented or amended Prospectus that corrects the misstatement(s) or omission(s) referred to above and receives notice that any post-effective amendment has become effective; provided, that the Company may delay, suspend or withdraw the Registration Statement for such reason for no more than sixty (60) days after delivery of the Materiality Notice at any one time. If so directed by the Company, such Holder will deliver to the Company all copies of the Prospectus covering the Registrable Securities current at the time of receipt of any Materiality Notice. 3.3 Qualification. The Company agrees to use its best efforts to register or qualify the Registrable Securities by the time the applicable Registration Statement is declared effective by the SEC under all applicable state securities or "blue sky" laws of such jurisdictions as the applicable Holder shall reasonably request in writing, to keep each such registration or qualification effective during the period such Registration 3 Statement is required to be kept effective or during the period offers or sales are being made by such Holder after delivery of a Registration Notice to the Company, whichever is shorter, and to do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of the Registrable Securities owned by such Holder; provided, however, that the Company shall not be required to (x) qualify generally to do business in any jurisdiction or to register as a broker or dealer in such jurisdiction where it would not otherwise be required to qualify but for this Section 3.3, (y) subject itself to taxation in any such jurisdiction or (z) submit to the general service of process in any such jurisdiction. 3.4 Indemnification by the Company. The Company agrees to indemnify and hold harmless each Holder and each person, if any, who controls any Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) pursuant to which the Registrable Securities were registered under the Securities Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto), including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, as incurred (including reasonable fees and disbursements of counsel), reasonably incurred in investigating, preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, in each case whether or not a party, or any claim whatsoever based upon any such untrue 4 statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above; provided, however, that the indemnity provided pursuant to this Section 3.4 does not apply to any Holder with respect to any loss, liability, claim, damage or expense to the extent arising out of (A) any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by such Holder expressly for use in the Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto), or (B) such Holder's failure to deliver an amended or supplemental Prospectus if such loss, liability, claim, damage or expense would not have arisen had such delivery occurred. 3.5 Indemnification by Each Holder. Each Holder (and each permitted assignee of a Holder, on a several basis) agrees to indemnify and hold harmless the Company, and each of its trustees and officers (including each trustee and officer of the Company who signed a Registration Statement), and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) pursuant to which the Registrable Securities were registered under the Securities Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto), including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of such Holder; and (iii) against any and all expense whatsoever, as incurred (including reasonable fees and disbursements of counsel), reasonably incurred in investigating, preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, in each case whether or not a party, or any claim whatsoever based upon any such untrue statement or 5 omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above; provided, however, that the indemnity provided pursuant to this Section 3.5 shall only apply with respect to any loss, liability, claim, damage or expense to the extent arising out of (A) any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by such Holder expressly for use in the Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto) or (B) such Holder's failure to deliver an amended or supplemental Prospectus if such loss, liability, claim, damage or expense would not have arisen had such delivery occurred. Notwithstanding the provisions of this Section 3.5, a Holder and any permitted assignee shall not be required to indemnify the Company, its officers, trustees or control persons with respect to any amount in excess of the amount of the total proceeds to such Holder or such permitted assignee, as the case may be, from sales of the Registrable Securities of such Holder under the Registration Statement, and no Holder shall be liable under this Section 3.5 for any statements or omissions of any other Holder. 3.6 Conduct of Indemnification Proceedings. The indemnified party hereunder shall give reasonably prompt notice to the indemnifying party of any action, suit, proceeding or investigation or written threat thereof (a "Proceeding") commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify the indemnifying party (i) shall not relieve it from any liability which it may have under the indemnity agreement provided in Section 3.4 or 3.5 above, unless and to the extent it did not otherwise learn of such Proceeding and the lack of notice by the indemnified party results in the forfeiture by the indemnifying party of substantial rights and defenses, and (ii) shall not, in any event, relieve the indemnifying party from any obligations to the indemnified party other than the indemnification obligation provided under Section 3.4 or 3.5 above. If the indemnifying party so elects within a reasonable time after receipt of such notice, the indemnifying party may assume the defense of such Proceeding at such indemnifying party's own expense with counsel chosen by the indemnifying party and approved by the indemnified party, which approval shall not be unreasonably withheld; provided, however, that the indemnifying party will not settle any such Proceeding without the written consent of the indemnified party unless, as a condition to such settlement, the indemnifying party secures the unconditional release of the indemnified party; and provided further, that if the indemnified party reasonably determines that a conflict of interest exists where it is advisable for the indemnified party to be represented by separate counsel or that, upon advice of counsel, there may be legal defenses available to it which are different from or in addition to those available to the indemnifying party, then the indemnifying party shall not be entitled to assume such defense and the indemnified party shall be entitled to separate counsel at the indemnifying party's expense. If the indemnifying party is not entitled to assume the defense of such Proceeding as a result of the second proviso to the preceding sentence, the indemnifying party's counsel shall be entitled to conduct the indemnifying party's defense and counsel for the indemnified party shall be entitled to conduct the defense of the indemnified party, it being understood that both such counsel will cooperate with each other to conduct the defense of such Proceeding as efficiently as possible. If the indemnifying party is not so entitled to assume the defense of such Proceeding or does not assume such defense, after 6 having received the notice referred to in the first sentence of this paragraph, the indemnifying party will pay the reasonable fees and expenses of counsel for the indemnified party. In such event, however, the indemnifying party will not be liable for any settlement effected without the written consent of the indemnifying party. If an indemnifying party is entitled to assume, and assumes, the defense of such Proceeding in accordance with this paragraph, the indemnifying party shall not be liable for any fees and expenses of counsel for the indemnified party incurred thereafter in connection with such Proceeding. 3.7 Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in Sections 3.4 and 3.5 above is for any reason held to be unenforceable by the indemnified party although applicable in accordance with its terms, the Company and the relevant Holder shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement incurred by the Company and such Holder, (i) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and such Holder on the other, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative fault of but also the relative benefits to the Company on the one hand and such Holder on the other, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits to the indemnifying party and indemnified party shall be determined by reference to, among other things, the total proceeds received by the indemnifying party and indemnified party in connection with the offering to which such losses, claims, damages, liabilities or expenses relate. The relative fault of the indemnifying party and indemnified party shall be determined by reference to, among other things, whether the action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, the indemnifying party or the indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The parties hereto agree that it would not be just or equitable if contribution pursuant to this Section 3.7 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 3.7, a Holder shall not be required to contribute any amount in excess of the amount of the total proceeds to such Holder from sales of the Registrable Securities of such Holder under the Registration Statement. Notwithstanding the foregoing, no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 3.7, each person, if any, who controls a Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as such Holder, and each trustee of the Company, each officer of the Company who signed a Registration Statement and each person, if 7 any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company. Section 4. Expenses The Company shall pay all expenses incident to the performance by it of its registration obligations under Sections 2 and 3, including (i) all stock exchange, SEC and state securities registration, listing and filing fees, (ii) all expenses incurred in connection with the preparation, printing and distributing of the Registration Statement and Prospectus and (iii) fees and disbursements of counsel for the Company and of the independent public accountants of the Company. Each Holder shall be responsible for the payment of (i) any brokerage and sales commissions, (ii) fees and disbursements of such Holder's counsel, accountants and other advisors and (iii) any transfer taxes relating to the sale or disposition of the Registrable Securities by such Holder pursuant to Section 3 or otherwise. Section 5. Rule 144 Compliance The Company covenants that it will use its best efforts to file in a timely manner the reports required to be filed by the Company under the Securities Act and the Exchange Act so as to enable each Holder to sell Registrable Securities pursuant to Rule 144 under the Securities Act. In connection with any sale, transfer or other disposition by a Holder of any Registrable Securities pursuant to Rule 144 under the Securities Act, the Company shall cooperate with the Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any Securities Act legend, and to enable certificates for such Registrable Securities to be for such number of shares and registered in such names as such Holder may reasonably request at least ten (10) business days prior to any sale of Registrable Securities hereunder. Section 6. Miscellaneous 6.1 Integration; Amendment. This Agreement constitutes the entire agreement among the parties hereto with respect to the matters set forth herein and supersedes and renders of no force and effect all prior oral or written agreements, commitments and understandings among the parties with respect to the matters set forth herein. Except as otherwise expressly provided in this Agreement, no amendment, modification or discharge of this Agreement shall be valid or binding unless set forth in writing and duly executed by the Company and each Holder against whom such amendment, modification or discharge is sought to be enforced. 6.2 Waivers. No waiver by a party hereto shall be effective unless made in a written instrument duly executed by the party against whom such waiver is sought to be enforced, and only to the extent set forth in such instrument. Neither the waiver by any of the parties hereto of a breach or a default under any of the provisions of this Agreement, nor the failure of any of the parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any such provisions, rights or privileges hereunder. 8 6.3 Assignment; Successors and Assigns. This Agreement and the rights granted hereunder may not be assigned by any Holder without the written consent of the Company; provided, however, that any Holder may assign its rights and obligations hereunder, in whole or in part, following at least ten (10) days prior written notice to the Company, (i) to such Holder's direct equity owners (e.g., shareholders, partners or members) or beneficiaries in connection a distribution of such Holder's Units to its direct equity owners or beneficiaries and (ii) to a permitted transferee in connection with a transfer of the Units in accordance with the terms of the Operating Partnership Agreement, if, in the case of either (i) or (ii) above, such persons agree in writing to be bound by all of the provisions hereof. 6.4 Burden and Benefit. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, personal and legal representatives, successors and, subject to Section 6.3 above, assigns. 6.5 Notices. All notices called for under this Agreement shall be in writing and shall be given by hand delivery, registered first class mail, telecopier or any courier guaranteeing overnight delivery, and shall be addressed (return receipt requested), postage prepaid, (i) if to the Company, at its address appearing on the signature page hereto, or (ii) if to a Holder, to the addresses set forth opposite its name in Schedule A hereto, or to any other address or addressee as any party entitled to receive notice under this Agreement shall designate, from time to time, to others in the manner provided in this Section 6.5 for the service of notices. All such notices shall be deemed to have been given: at the time delivered by hand, if personally delivered; three (3) business days after being deposited in the mail, if mailed; when receipt is acknowledged, if telecopied; or at the time delivered, if delivered by a courier guaranteeing overnight delivery. 6.6 Specific Performance. The parties hereto acknowledge that the obligations undertaken by them hereunder are unique and that there would be no adequate remedy at law if any party fails to perform any of its obligations hereunder, and accordingly agree that each party, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to (i) compel specific performance of the obligations, covenants and agreements of any other party under this Agreement in accordance with the terms and conditions of this Agreement and (ii) obtain preliminary injunctive relief to secure specific performance and to prevent a breach or contemplated breach of this Agreement in any court of the United States or any State thereof having jurisdiction. 6.7 Governing Law. This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto, shall be governed by and construed in accordance with the laws of the State of Maryland, but not including the choice of law rules thereof. 6.8 Headings. Section and subsection headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof. 9 6.9 Pronouns. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or entity may require. 6.10 Execution in Counterparts. To facilitate execution, this Agreement may be executed in as many counterparts as may be required. It shall not be necessary that the signature of or on behalf of each party appears on each counterpart, but it shall be sufficient that the signature of or on behalf of each party appears on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. It shall not be necessary in any proof of this Agreement to produce or account for more than a number of counterparts containing the respective signatures of or on behalf of all of the parties. 6.11 Severability. If fulfillment of any provision of this Agreement, at the time such fulfillment shall be due, shall transcend the limit of validity prescribed by law, then the obligation to be fulfilled shall be reduced to the limit of such validity; and if any clause or provision contained in this Agreement operates or would operate to invalidate this Agreement, in whole or in part, then such clause or provision only shall be held ineffective, as though not herein contained, and the remainder of this Agreement shall remain operative and in full force and effect. 10 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed on its behalf as of the date first hereinabove set forth. COMPANY: Address: ElderTrust 415 McFarlan Road Suite 202 Kennett Square, PA 19348 By: /s/ D. Lee McCreary, Jr. --------------------------------------- Name: D. Lee McCreary, Jr. --------------------------------------- Title: Vice President and Secretary --------------------------------------- HOLDERS: /s/ D. Lee McCreary, Jr. --------------------------------------- D. Lee McCreary, Jr. MGI Limited Partnership By: MGI, Inc. By: /s/ Michael R. Walker ---------------------------- Michael R. Walker President /s/ Edward B. Romanov, Jr. --------------------------------------- Edward B. Romanov, Jr. Thomas W. Balderston Gregory H. Doyle Richard R. Howard Senior LifeChoice Corp. Michael R. Walker Joseph A. Williamson By: /s/ Edward B. Romanov, Jr. ---------------------------- Edward B. Romanov, Jr. Attorney-in-Fact 11 SCHEDULE A ----------- HOLDERS Thomas W. Balderston Gregory H. Doyle Richard R. Howard D. Lee McCreary, Jr. MGI Limited Partnership Edward B. Romanov, Jr. Senior LifeChoice Corp. Michael R. Walker Joseph A. Williamson EX-10.3 6 EXHIBIT 10.3 ELDERTRUST 1998 SHARE OPTION AND INCENTIVE PLAN TABLE OF CONTENTS Page ---- SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS...........................1 SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT PARTICIPANTS AND DETERMINE AWARDS..............3 SECTION 3. SHARES ISSUABLE UNDER THE PLAN; RECAPITALIZATIONS; MERGERS; SUBSTITUTE AWARDS.........................................4 SECTION 4. ELIGIBILITY........................................................6 SECTION 5. SHARE OPTIONS......................................................6 SECTION 6. RESTRICTED SHARE AWARDS............................................9 SECTION 7. DEFERRED SHARE AWARDS..............................................11 SECTION 8. UNRESTRICTED SHARE AWARDS..........................................12 SECTION 9. PERFORMANCE SHARE AWARDS...........................................12 SECTION 10. DISTRIBUTION EQUIVALENT RIGHTS....................................13 SECTION 11. TAX WITHHOLDING...................................................13 SECTION 12. TRANSFER, LEAVE OF ABSENCE, ETC...................................14 SECTION 13. AMENDMENTS AND TERMINATION........................................14 SECTION 14. STATUS OF PLAN....................................................14 SECTION 15. CHANGE OF CONTROL PROVISIONS......................................15 SECTION 16. GENERAL PROVISIONS................................................15 SECTION 17. EFFECTIVE DATE OF PLAN............................................16 SECTION 18. GOVERNING LAW.....................................................16 i ELDERTRUST 1998 SHARE OPTION AND INCENTIVE PLAN SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS The name of the plan is the ElderTrust 1998 Share Option and Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and enable the officers, employees, Non-Employee Trustees and other key persons of ElderTrust (the "Company"), and the employees and other key persons of ElderTrust Operating Limited Partnership (the "Operating Partnership") and the Company's other Subsidiaries, upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business to acquire a proprietary interest in the Company. It is anticipated that providing such persons with a direct stake in the Company's welfare will assure a closer identification of their interests with those of the Company, thereby stimulating their efforts on the Company's behalf and strengthening their desire to remain with the Company. The following terms shall be defined as set forth below: "Act" means the Securities Exchange Act of 1934, as amended from time to time. "Administrator" means either the Board or the Committee, to the extent the Committee has been delegated authority pursuant to Section 2. "Award" or "Awards," except where referring to a particular category of grant under the Plan, shall include Incentive Share Options, Non-Qualified Share Options, Restricted Share Awards, Deferred Share Awards, Unrestricted Share Awards, Performance Share Awards and Distribution Equivalent Rights. "Board" means the Board of Trustees of the Company as constituted from time to time. "Change of Control" is defined in Section 15. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor Code, and related rules, regulations and interpretations. "Committee" means the Committee of the Board referred to in Section 2(b). "Company" means ElderTrust, a Maryland real estate investment trust, and any successor thereto. "Deferred Share Award" means Awards granted pursuant to Section 7. "Distribution Equivalent Right" means Awards granted pursuant to Section 10. "Effective Date" means the date on which the Plan is initially approved by Shareholders as set forth in Section 17. "Fair Market Value" on any given date means the last reported sale price at which Shares are traded on such date or, if no Shares are traded on such date, the next preceding date on which Shares were traded, as reflected on the principal stock exchange or, if applicable, any other national stock exchange on which the Shares are traded or admitted to trading. Notwithstanding the foregoing, the Fair Market Value on the first day of the Company's initial public offering of Shares shall be the initial public offering price as set forth in the final prospectus for the Company's initial public offering. "Incentive Share Option" means any Share Option that qualifies as and is designated in writing in the related Option agreement as constituting an "incentive stock option" as defined in Section 422 of the Code. "Non-Employee Trustee" means a member of the Board who is not also an employee of the Company or any Subsidiary. "Non-Qualified Share Option" means any Share Option that is not an Incentive Share Option. "Operating Partnership" means ElderTrust Operating Limited Partnership, a Delaware limited partnership, and any successor thereto. "Option" or "Share Option" means any option to purchase Shares granted pursuant to Section 5. "Performance Share Award" means Awards granted pursuant to Section 9. "Restricted Share Award" means Awards granted pursuant to Section 6. "Shares" means the common shares of beneficial interest, par value $.01 per share, of the Company, subject to adjustments pursuant to Section 3. "Subsidiary" means any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities beginning with the Company if each of the corporations or entities (other than the last corporation or entity in the unbroken chain) owns Shares or other interests possessing 50 percent or more of the economic interest or the total combined voting power of all classes of Shares or other interests in one of the other corporations or entities in the chain. 2 "Unrestricted Share Award" means any Award granted pursuant to Section 8. SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT PARTICIPANTS AND DETERMINE AWARDS (a) The Plan shall be administered by the Board, which shall have the full power and authority to take all actions and to make all determinations required or provided for under the Plan or any Award granted or agreement entered into hereunder and all such other actions and determinations not inconsistent with the specific terms and provisions of the Plan deemed by the Board to be necessary or appropriate to the administration of the Plan or any Award granted or agreement entered into hereunder. (b) The Board from time to time may appoint a Committee consisting of two or more members of the Board who, in the sole discretion of the Board, may be the same trustees who serve on the Compensation Committee, or may appoint the Compensation Committee to serve as the Committee. The Board, in its sole discretion, may provide that the role of the Committee shall be limited to making recommendations to the Board concerning any determinations to be made and actions to be taken by the Board pursuant to or with respect to the Plan, or the Board may delegate to the Committee such powers and authorities related to the administration of the Plan, as set forth in Section 2(a) above, as the Board shall determine, consistent with the By-Laws of the Company and applicable law. In the event that the Plan or any Award granted or agreement entered into hereunder provides for any action to be taken by or determination to be made by the Board, such action may be taken by or such determination may be made by the Committee if the power and authority to do so has been delegated to the Committee by the Board as provided for in this Section 2. (c) Powers of Administrator. The Administrator shall have the power and authority to grant Awards consistent with the terms of the Plan, including the power and authority: (i) to select the individuals to whom Awards may from time to time be granted; (ii) to determine the time or times of grant, and the extent, if any, of Incentive Share Options, Non-Qualified Share Options, Restricted Share Awards, Deferred Share Awards, Unrestricted Share Awards, Performance Share Awards and Distribution Equivalent Rights, or any combination of the foregoing, granted to any one or more participants; 3 (iii) to determine the number of Shares to be covered by any Award; (iv) to determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of any Award, which terms and conditions may differ among individual Awards and participants, and to approve the form of written instruments evidencing the Awards; (v) to accelerate at any time the exercisability or vesting of all or any portion of any Award; (vi) subject to the provisions of Section 5(a)(ii), to extend at any time the post-termination period in which Share Options may be exercised; (vii) to determine at any time whether, to what extent, and under what circumstances Shares and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the participant and whether and to what extent the Company shall pay or credit amounts constituting deemed interest (at rates determined by the Administrator) or distributions or deemed distributions on such deferrals; and (viii) at any time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments); to make all determinations it deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the Plan. All decisions and interpretations of the Administrator shall be made in the Administrator's sole and absolute discretion and shall be final and binding on all persons, including the Company and Plan participants. SECTION 3. SHARES ISSUABLE UNDER THE PLAN; RECAPITALIZATIONS; MERGERS; SUBSTITUTE AWARDS (a) Shares Issuable. The maximum number of Shares reserved and available for issuance under the Plan shall be such aggregate number of Shares as does not exceed the sum of (i) 779,340 Shares; plus (ii) as of January 1, 1999, 9.9 percent of any net increase since the Company's initial public offering in the total number of Shares actually outstanding (assuming all units of partnership interests in the Operating Partnership that are subject to redemption rights are converted into Shares); plus (iii) as of each 4 January 1 thereafter, 9.9 percent of any net increase since the preceding January 1 in the total number of Shares actually outstanding (assuming all units of partnership interests in the Operating Partnership that are subject to redemption rights are converted into Shares). Notwithstanding the foregoing, the maximum number of Shares for which Incentive Share Options may be granted under the Plan shall not exceed 779,340 Shares, reduced by the aggregate number of Shares subject to outstanding Awards granted under the Plan. For purposes of this limitation, if any portion of an Award is forfeited, canceled, reacquired by the Company, satisfied without the issuance of Shares or otherwise terminated, the Shares underlying such portion of the Award shall be added back to the Shares available for issuance under the Plan. Subject to such overall limitation, Shares may be issued up to such maximum number pursuant to any type or types of Award; provided, however, that on and after the date the Company is first subject to the provisions of Section 162(m) of the Code with respect to grants made or compensation earned under the Plan, Shares Options with respect to no more than 500,000 Shares may be granted to any one individual participant during any one calendar year period. The Shares available for issuance under the Plan may be authorized but unissued Shares or Shares reacquired by the Company. (b) Recapitalizations. If, through, or as a result of any merger, consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, reclassification, share dividend, share split, reverse share split or other similar transaction, the outstanding Shares are increased or decreased or are exchanged for a different number or kind of shares or other securities of the Company, or additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such Shares or other securities, the Administrator may make an appropriate or proportionate adjustment in (i) the maximum number of Shares reserved for issuance under the Plan, (ii) the number of Share Options that can be granted to any one individual participant, (iii) the number and kind of shares or other securities subject to any then outstanding Awards under the Plan, (iv) the maximum number of Shares for which Incentive Share Options may be granted under the Plan, and (v) the price for each share subject to any then outstanding Share Options under the Plan, without changing the aggregate exercise price (i.e., the exercise price multiplied by the number of Share Options) as to which such Share Options remain exercisable. The adjustment by the Administrator shall be final, binding and conclusive. No fractional Shares shall be issued under the Plan resulting from any such adjustment, but the Administrator in its discretion may make a cash payment in lieu of fractional shares. (c) Mergers. In contemplation of and subject to the consummation of a consolidation or merger or sale of all or substantially all of the assets of the Company in which outstanding Shares are exchanged for securities, cash or other property of an unrelated corporation or business entity or in the event of a liquidation of the Company (in each case, a "Transaction"), the Board, or the board of directors of any entity assuming the obligations of the Company, may, in its discretion, take any one or more of the following actions, as to outstanding Awards: (i) provide that such 5 Awards shall be assumed or equivalent awards shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof), and/or (ii) upon written notice to the participants, provide that all Awards will terminate immediately prior to the consummation of the Transaction. In the event that, pursuant to clause (ii) above, Awards will terminate immediately prior to the consummation of the Transaction, all vested Awards, other than Share Options, shall be fully settled in cash or in kind at such appropriate consideration as determined by the Administrator in its sole discretion after taking into account the consideration payable per Share pursuant to the business combination (the "Merger Price") and all Share Options shall be fully settled, in cash or in kind, in an amount equal to the difference between (A) the Merger Price times the number of Shares subject to such outstanding Share Options (to the extent then exercisable at prices not in excess of the Merger Price) and (B) the aggregate exercise price of all such outstanding Share Options; provided, however, that each participant shall be permitted, within a specified period determined by the Administrator prior to the consummation of the Transaction, to exercise all outstanding Share Options, including those that are not then exercisable, subject to the consummation of the Transaction. (d) Substitute Awards. The Administrator may grant Awards under the Plan in substitution for Shares and Share based awards held by employees of another corporation who become employees of the Company or a Subsidiary as the result of a merger or consolidation of the employing corporation with the Company or a Subsidiary or the acquisition by the Company or a Subsidiary of property or Shares of the employing corporation. The Administrator may direct that the substitute awards be granted on such terms and conditions as the Administrator considers appropriate in the circumstances. SECTION 4. ELIGIBILITY Participants in the Plan will be such full or part-time officers and other employees, Non-Employee Trustees and key persons of the Company, the Operating Partnership and the Company's other Subsidiaries who are responsible for or contribute to the management, growth or profitability of the Company, the Operating Partnership and the Company's other Subsidiaries as are selected from time to time by the Administrator in its sole discretion. SECTION 5. SHARE OPTIONS Any Share Option granted under the Plan shall be in such form as the Administrator may from time to time approve. Share Options granted under the Plan may be either Incentive Share Options or Non-Qualified Share Options. Incentive Share Options may be granted only to employees of the Company or any Subsidiary that is a "subsidiary corporation" within the meaning of Section 424(f) of the Code. To the extent that any Option does not qualify as an Incentive Share Option, it 6 shall be deemed a Non-Qualified Share Option. No Incentive Share Option shall be granted under the Plan after January 26, 2008. (a) Share Options Granted to Employees and Key Persons and Non-Employee Trustees. The Administrator in its discretion may grant Share Options to eligible employees and key persons of the Company or any Subsidiary and to Non-Employee Trustees. Share Options granted pursuant to this Section 5(a) shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable. If the Administrator so determines, Share Options may be granted in lieu of cash compensation at the participant's election, subject to such terms and conditions as the Administrator may establish, as well as in addition to other compensation. (i) Exercise Price. The exercise price per share for the Shares covered by a Share Option granted pursuant to this Section 5(a) shall be determined by the Administrator at the time of grant but shall not be less than 100 percent of the Fair Market Value on the date of grant in the case of Incentive Share Options, or par value in the case of Non-Qualified Share Options. If an employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10 percent of the combined voting power of all classes of Shares of the Company or any parent or subsidiary corporation and an Incentive Share Option is granted to such employee, the exercise price of such Incentive Share Option shall be not less than 110 percent of the Fair Market Value on the grant date. (ii) Option Term. The term of each Share Option shall be fixed by the Administrator, but no Incentive Share Option shall be exercisable more than ten years after the date the Share Option is granted. If an employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10 percent of the combined voting power of all classes of Shares of the Company or any parent or subsidiary corporation and an Incentive Share Option is granted to such employee, the term of such Share Option shall be no more than five years from the date of grant. (iii) Exercisability; Rights of a Shareholder. Share Options shall become exercisable at such time or times, whether or not in installments, as shall be determined by the Administrator at or after the grant date; provided, however, that Share Options granted in lieu of compensation shall be exercisable in full as of the grant date unless the Administrator otherwise provides in the Option Award agreement. The Administrator may at any time 7 accelerate the exercisability of all or any portion of any Share Option. A participant shall have the rights of a Shareholder only as to Shares acquired upon the exercise of a Share Option and not as to unexercised Share Options. (iv) Method of Exercise. Share Options may be exercised in whole or in part, by giving written notice of exercise to the Company, specifying the number of shares to be purchased. Payment of the purchase price may be made by one or more of the following methods to the extent provided in the Option Award agreement: (A) In cash, by certified or bank check or other instrument acceptable to the Administrator; (B) In the form of Shares that are not then subject to restrictions under any Company plan and that have been beneficially owned by the participant for at least six months, if permitted by the Administrator in its discretion. Such surrendered Shares shall be valued at Fair Market Value on the exercise date; (C) By the participant delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the purchase price; provided that in the event the participant chooses to pay the purchase price as so provided, the participant and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; or (D) By the participant delivering to the Company a promissory note if the Administrator has expressly authorized the loan of funds to the participant for the purpose of enabling or assisting the participant to effect the exercise of his Share Option; provided that at least so much of the exercise price as represents the par value of the Shares shall be paid other than with a promissory note. Payment instruments will be received subject to collection. The delivery of certificates representing the Shares to be purchased pursuant to the exercise of a Share Option will be contingent upon receipt from the participant (or a purchaser acting in his stead in accordance with the provisions of the Share Option) by the Company of the full purchase price for such shares and the fulfillment of any other requirements contained in the Share Option or applicable provisions of laws. 8 (v) Annual Limit on Incentive Share Options. To the extent required for "incentive stock option" treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the Shares with respect to which Incentive Share Options granted under this Plan and any other plan of the Company or its parent and subsidiary corporations become exercisable for the first time by a participant during any calendar year shall not exceed $100,000. To the extent that any Share Option exceeds this limit, it shall constitute a Non-Qualified Share Option. (b) Reload Options. At the discretion of the Administrator and subject to such restrictions, terms and conditions as the Administrator may establish, Options granted under the Plan may include a "reload" feature pursuant to which a participant exercising a Share Option by the delivery of a number of Shares in accordance with Section 5(a)(iv)(B) hereof would automatically be granted an additional Share Option (with an exercise price equal to the Fair Market Value of the Shares on the date the additional Share Option is granted and with such other terms as the Administrator may provide) to purchase that number of Shares equal to the number delivered to exercise the original Share Option with an Option term equal to the remainder of the original Option term unless the Administrator otherwise determines in the Option Award agreement for the original grant. (c) Non-transferability of Share Options. No Share Option shall be transferable by the participant otherwise than by will or by the laws of descent and distribution and all Share Options shall be exercisable, during the participant's lifetime, only by the participant. Notwithstanding the foregoing, the Administrator, in its sole discretion, may provide in the Award agreement regarding a given Share Option that the participant may transfer, without consideration for the transfer, his Non-Qualified Share Options to members of his family, to trusts for the benefit of such family members, or to partnerships in which such family members are the only partners, provided that the transferee agrees in writing with the Company to be bound by all of the terms and conditions of this Plan and the applicable Option Award agreement. (d) Termination. Except as may otherwise be provided by the Administrator either in the Award agreement, or, subject to Section 13 below, in writing after the Award agreement is issued, a participant's rights in all Share Options shall automatically terminate upon the participant's termination of employment (or cessation of business relationship) with the Company and its Subsidiaries for any reason. SECTION 6. RESTRICTED SHARE AWARDS (a) Nature of Restricted Share Awards. A Restricted Share Award is an Award entitling the recipient to acquire, at par value or such other higher purchase price determined by the Administrator, Shares subject to such restrictions and conditions as the Administrator may determine at the time of grant ("Restricted Shares"). Conditions may be based on continuing employment (or other business relationship) and/or achievement of 9 pre-established performance goals and objectives. Such performance goals and objectives shall be established in writing by the Administrator prior to the ninetieth day of the year in which the grant is made and while the outcome is substantially uncertain. Performance goals and objectives shall be based on Share price, market share, sales, earnings per Share, return on equity, costs, or any combination of these factors. Performance goals and objectives may include positive results, maintaining the status quo or limiting economic losses. The grant of a Restricted Share Award is contingent on the participant executing the Restricted Share Award agreement. The terms and conditions of each such agreement shall be determined by the Administrator, and such terms and conditions may differ among individual Awards and participants. (b) Rights as a Shareholder. Upon execution of the Restricted Share Award agreement and paying any applicable purchase price, a participant shall have the rights of a Shareholder with respect to the voting of the Restricted Share, subject to such terms and conditions as may be contained in the Restricted Share Award agreement. Unless the Administrator shall otherwise determine, certificates evidencing the Restricted Shares shall remain in the possession of the Company until such Restricted Shares are vested as provided in Section 6(d) below, and the participant shall be required, as a condition of the grant, to deliver to the Company a Share power endorsed in blank. (c) Restrictions. Restricted Shares may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided herein or in the Restricted Share Award agreement. If a participant's employment (or other business relationship) with the Company and its Subsidiaries terminates for any reason, the Company shall have the right to repurchase Restricted Shares that have not vested at the time of termination at their original purchase price, from the participant or the participant's legal representative. (d) Vesting of Restricted Shares. The Administrator at the time of grant shall specify the date or dates and/or the attainment of pre-established performance goals, objectives and other conditions on which the non-transferability of the Restricted Shares and the Company's right of repurchase or forfeiture shall lapse. Subsequent to such date or dates and/or the attainment of such pre-established performance goals, objectives and other conditions, the shares on which all restrictions have lapsed shall no longer be Restricted Shares and shall be deemed "vested." Except as may otherwise be provided by the Administrator either in the Award agreement or, subject to Section 13 below, in writing after the Award agreement is issued, a participant's rights in any shares of Restricted Shares that have not vested shall automatically terminate upon the participant's termination of employment (or other business relationship) with the Company and its Subsidiaries and such shares shall be subject to the Company's right of repurchase as provided in Section 6(c) above. 10 (e) Waiver, Deferral and Reinvestment of Distributions. The Restricted Share Award agreement may require or permit the immediate payment, waiver, deferral or reinvestment (in the form of additional Restricted Shares) of distributions paid on the Restricted Shares. SECTION 7. DEFERRED SHARE AWARDS (a) Nature of Deferred Share Awards. A Deferred Share Award is an Award of phantom Share units to a participant, subject to restrictions and conditions as the Administrator may determine at the time of grant. Conditions may be based on continuing employment (or other business relationship) and/or achievement of pre-established performance goals and objectives. The grant of a Deferred Share Award is contingent on the participant executing the Deferred Share Award agreement. The terms and conditions of each such agreement shall be determined by the Administrator, and such terms and conditions may differ among individual Awards and participants. At the end of the deferral period, the Deferred Share Award, to the extent vested, shall be paid to the participant in the form of Shares. (b) Election to Receive Deferred Share Awards in Lieu of Compensation. The Administrator may, in its sole discretion, permit a participant to elect to receive a portion of the cash compensation or Restricted Share Award otherwise due to such participant in the form of a Deferred Share Award. Any such election shall be made in writing and shall be delivered to the Company no later than the date specified by the Administrator and in accordance with rules and procedures established by the Administrator. The Administrator shall have the sole right to determine whether and under what circumstances to permit such elections and to impose such limitations and other terms and conditions thereon as the Administrator deems appropriate. (c) Rights as a Shareholder. During the deferral period, a participant shall have no rights as a Shareholder; provided, however, that the participant may be credited with Distribution Equivalent Rights with respect to the phantom Share units underlying his Deferred Share Award, subject to such terms and conditions as the Administrator may determine. (d) Restrictions. A Deferred Share Award may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of during the deferral period. (e) Termination. Except as may otherwise be provided by the Administrator either in the Award agreement or, subject to Section 13 below, in writing after the Award agreement is issued, a participant's right in all Deferred Share Awards that have not vested shall automatically terminate upon the participant's termination of employment (or cessation of business relationship) with the Company and its Subsidiaries for any reason. 11 SECTION 8. UNRESTRICTED SHARE AWARDS Grant or Sale of Unrestricted Shares. The Administrator may, in its sole discretion, grant (or sell at par value or such other higher purchase price determined by the Administrator) an Unrestricted Share Award to any participant pursuant to which such participant may receive Shares free of any restrictions ("Unrestricted Shares") under the Plan. Unrestricted Share Awards may be granted or sold as described in the preceding sentence in respect of past services or other valid consideration, or in lieu of any cash compensation due to such participant. SECTION 9. PERFORMANCE SHARE AWARDS (a) Nature of Performance Share Awards. A Performance Share Award is an Award entitling the recipient to acquire Shares upon the attainment of specified performance goals. The Administrator may make Performance Share Awards independent of or in connection with the granting of any other Award under the Plan. The Administrator in its sole discretion shall determine whether and to whom Performance Share Awards shall be made, the performance goals applicable under each such Award, the periods during which performance is to be measured, and all other limitations and conditions applicable to the awarded Performance Shares; provided, however, that the Administrator may rely on the performance goals and other standards applicable to other performance unit plans of the Company in setting the standards for Performance Share Awards under the Plan. (b) Rights as a Shareholder. A participant receiving a Performance Share Award shall have the rights of a Shareholder only as to shares actually received by the participant under the Plan and not with respect to shares subject to the Award but not actually received by the participant. A participant shall be entitled to receive a Share certificate evidencing the acquisition of Shares under a Performance Share Award only upon satisfaction of all conditions specified in the written instrument evidencing the Performance Share Award (or in a performance plan adopted by the Administrator). (c) Termination. Except as may otherwise be provided by the Administrator either in the Award agreement or, subject to Section 13 below, in writing after the Award agreement is issued, a participant's rights in all Performance Share Awards shall automatically terminate upon the participant's termination of employment (or cessation of business relationship) with the Company and its Subsidiaries for any reason. (d) Acceleration, Waiver, Etc. At any time prior to the participant's termination of employment (or other business relationship) by the Company and its Subsidiaries, the Administrator may in its sole discretion accelerate, waive or, subject to Section 13, amend any or all of the goals, restrictions or conditions imposed under any Performance Share Award. 12 SECTION 10. DISTRIBUTION EQUIVALENT RIGHTS (a) Distribution Equivalent Rights. A Distribution Equivalent Right is an Award entitling the recipient to receive credits based on cash distributions that would have been paid on the Shares specified in the Distribution Equivalent Right (or other award to which it relates) if such shares had been issued to and held by the recipient. A Distribution Equivalent Right may be granted hereunder to any participant as a component of another Award or as a freestanding award. The terms and conditions of Distribution Equivalent Rights shall be specified in the grant. Distribution equivalents credited to the holder of a Distribution Equivalent Right may be paid currently or may be deemed to be reinvested in additional Shares, which may thereafter accrue additional equivalents. Any such reinvestment shall be at Fair Market Value on the date of reinvestment. Distribution Equivalent Rights may be settled in cash or Shares or a combination thereof, in a single installment or installments, all determined in the sole discretion of the Administrator. A Distribution Equivalent Right granted as a component of another Award may provide that such Distribution Equivalent Right shall be settled upon exercise, settlement, or payment of, or lapse of restrictions on, such other award, and that such Distribution Equivalent Right shall expire or be forfeited or annulled under the same conditions as such other award. A Distribution Equivalent Right granted as a component of another Award may also contain terms and conditions different from such other award. (b) Interest Equivalents. Any Award under this Plan that is settled in whole or in part in cash on a deferred basis may provide in the grant for interest equivalents to be credited with respect to such cash payment. Interest equivalents may be compounded and shall be paid upon such terms and conditions as may be specified by the grant. (c) Termination. Except as may otherwise be provided by the Administrator either in the Award agreement or, subject to Section 13 below, in writing after the Award agreement is issued, a participant's rights in all Distribution Equivalent Rights or interest equivalents shall automatically terminate upon the participant's termination of employment (or cessation of business relationship) with the Company and its Subsidiaries for any reason. SECTION 11. TAX WITHHOLDING (a) Payment by Participant. Each participant shall, no later than the date as of which the value of an Award or of any Shares or other amounts received thereunder first becomes includable in the gross income of the participant for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Administrator regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld with respect to such income. The Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of 13 any kind otherwise due to the participant. The Company's obligation to deliver Share certificates to any participant is subject to and conditioned on tax obligations being satisfied by the participant. (b) Payment in Shares. Subject to approval by the Administrator, a participant may elect to have such tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from Shares to be issued pursuant to any Award a number of shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due, or (ii) transferring to the Company Shares owned by the participant with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due. SECTION 12. TRANSFER, LEAVE OF ABSENCE, ETC. For purposes of the Plan, the following events shall not be deemed a termination of employment: (a) a transfer to the employment of the Company from a Subsidiary or from the Company to a Subsidiary, or from one Subsidiary to another; or (b) an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the employee's right to reemployment is guaranteed either by a statute or by contract or under the written policy pursuant to which the leave of absence was granted or if the Administrator otherwise so provides in writing. SECTION 13. AMENDMENTS AND TERMINATION The Board may, at any time, amend or discontinue the Plan and the Administrator may, at any time, amend or cancel any outstanding Award for the purpose of satisfying changes in law or for any other lawful purpose, but no such action shall adversely affect rights under any outstanding Award without the holder's written consent. The Administrator may provide substitute Awards at the same or reduced exercise or purchase price or with no exercise or purchase price in a manner not inconsistent with the terms of the Plan, but such price, if any, must satisfy the requirements which would apply to the substitute or amended Award if it were then initially granted under this Plan, but no such action shall adversely affect rights under any outstanding Award without the holder's written consent. Nothing in this Section 13 shall limit the Board's authority to take any action permitted pursuant to Section 3(c). SECTION 14. STATUS OF PLAN Unless the Administrator shall otherwise expressly determine in writing, with respect to the portion of any Award which has not been exercised and any payments in cash, Shares or other consideration not received by a participant, a participant shall have no rights greater than those of a 14 general creditor of the Company. In its sole discretion, the Administrator may authorize the creation of trusts or other arrangements to meet the Company's obligations to deliver Shares or make payments with respect to Awards hereunder, provided that the existence of such trusts or other arrangements is consistent with the foregoing sentence. SECTION 15. CHANGE OF CONTROL PROVISIONS (a) Upon the occurrence of a Change of Control as defined in this Section 15 or as otherwise defined in the Award agreement, each Award shall be subject to such terms, if any, with respect to a Change of Control as have been provided by the Administrator either in the Award agreement or, subject to Section 13 above, in writing after the Award agreement is issued. (b) "Change of Control" shall mean the occurrence of any one of the following events: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Act), becomes the "beneficial owner" (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding securities; (ii) during any two (2) year period, individuals who at the beginning of such period constitute the Board of Trustees, including for this purpose any new trustee whose election resulted from a vacancy on the Board of Trustees caused by the mandatory retirement, death, or disability of a trustee and was approved by a vote of at least two-thirds (2/3rds) of the trustees then still in office who were trustees at the beginning of the period, cease for any reason to constitute a majority thereof; (iii) notwithstanding clauses (i) or (v) of this Section 15(b), the Company consummates a merger or consolidation of the Company with or into another corporation or trust, the result of which is that the shareholders of the Company at the time of the execution of the agreement to merge or consolidate own less than eighty percent (80%) of the total equity of the entity surviving or resulting from the merger or consolidation or of a entity owning, directly or indirectly, one hundred percent (100%) of the total equity of such surviving or resulting entity; (iv) the sale in one or a series of transactions of all or substantially all of the assets of the Company; (v) any person, has commenced a tender or exchange offer, or entered into an agreement or received an option to acquire beneficial ownership of fifty percent (50%) or more of the total number of voting shares of the Company unless the Board of Trustees has made a determination that such action does not constitute and will not constitute a change in the persons in control of the Company; or (vi) there is a change of control in the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act other than in circumstances specifically covered by clauses (i) - (v) above. 15 SECTION 16. GENERAL PROVISIONS (a) No Distribution; Compliance with Legal Requirements. The Administrator may require each person acquiring Shares pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the shares without a view to distribution thereof. No Shares shall be issued pursuant to an Award until all applicable securities law and other legal and stock exchange or similar requirements have been satisfied. The Administrator may require the placing of such stop-orders and restrictive legends on certificates for Shares and Awards as it deems appropriate. (b) Delivery of Share Certificates. Share certificates to be delivered to participants under this Plan shall be deemed delivered for all purposes when the Company or a Share transfer agent of the Company shall have mailed such certificates in the United States mail, addressed to the participant, at the participant's last known address on file with the Company. (c) Other Compensation Arrangements; No Employment Rights. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, including trusts, and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of this Plan and the grant of Awards shall not confer upon any employee any right to continued employment with the Company or any Subsidiary and shall not interfere in any way with the right of the Company or any Subsidiary to terminate the employment of any of its employees at any time. (d) Trading Policy Restrictions. Option exercises and other Awards under the Plan shall be subject to such Company insider-trading-policy-related restrictions, terms and conditions as may be established by the Administrator, or in accordance with policies set by the Administrator, from time to time. SECTION 17. EFFECTIVE DATE OF PLAN This Plan shall become effective upon approval by the holders of a majority of the votes cast at a meeting of Shareholders at which a quorum is present or by a unanimous written consent of Shareholders. Subject to such approval by the Shareholders and to the requirement that no Share may be issued hereunder prior to such approval, Share Options and other Awards may be granted hereunder on and after adoption of this Plan by the Board. SECTION 18. GOVERNING LAW This Plan and all Awards and actions taken thereunder shall be governed by, and construed in accordance with, the laws of the State of Maryland, applied without regard to conflict of law principles. 16 EX-10.5 7 EXHIBIT 10.5 EXHIBIT 10.5 EMPLOYMENT AGREEMENT THIS AGREEMENT, made as of this 30th day of January, 1998, by and between Edward B. Romanov, Jr. ("Employee") and ElderTrust, a Maryland real estate investment trust ("Employer"). BACKGROUND The Board of Trustees of the Employer (the "Board of Trustees") recognizes that the Employee's contribution to the growth and success of the Employer will be substantial. The Board desires to provide for the employment of the Employee. The Employee is willing to commit himself to serve the Employer, on the terms and conditions herein provided. In order to effect the foregoing, the Employer and the Employee wish to enter into an employment agreement on the terms and conditions set forth below. Accordingly, in consideration of the premises and the respective covenants and agreements of the parties herein contained, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Employment and Duties. Employer shall employ Employee as Employer's President and Chief Executive Officer during the term of employment set forth in Section 2 hereof. Employee shall perform the duties of the President and Chief Executive Officer of Employer and shall provide to Employer such other services befitting Employee's position as are reasonably requested of him from time to time by the Board of Trustees of Employer, including responsibility for the following: (i) implementation of the Company's investment and growth strategies including establishment of investment policies; (ii) review, analysis and execution of investment decisions; (iii) maximization of return on portfolio; (iv) procurement of capital; (v) oversight of investor relations; (vi) assurance of proper financial reporting and securities law compliance; and (vii) establishment of corporate governance and employee policies. Employee shall have supervision and control over, and responsibility for, the business and affairs of Employer as provided in the Bylaws of Employer, subject to the direction of Employer's Board of Trustees. Employee shall report only to the Board of Trustees of Employer and his powers and authority shall be superior to those of any officer or employee of Employer. Employee shall devote his full time, energy, skill and best efforts to the business and affairs of Employer provided, however, that nothing herein shall preclude Employee from serving as a director, trustee, officer of, or partner in, any other firm, trust, corporation or partnership or from pursuing personal investments, as long as such activities do not interfere with Employee's performance of his duties hereunder. Employee agrees to serve, without additional compensation, as a trustee of the Employer and a trustee or director of any of its subsidiaries and in one or more executive offices of any of the Employer's subsidiaries. 2. Term. The term of Employee's employment under this Agreement shall be a three year period commencing on the closing date (the "Effective Date") of the Company's initial public offering of its common shares of beneficial interest, par value $.01 per share ("Common Shares") and ending on the third anniversary of the Effective Date, unless further extended or sooner terminated in accordance with the other provisions hereof (the "Term"). On the third anniversary of the Effective Date and on the last day of every second contract year thereafter, the Term shall be automatically extended for two years. The last day of the Term, as from time to time extended, is hereinafter referred to as the "Expiration Date." Employer or Employee may elect to terminate the automatic extension of the Term set forth in this section by giving written notice of such election not less than one ( 1 ) year prior to the end of the then current term. The Effective Date shall be confirmed by the parties in writing. 3. Compensation. 3.1 Base Salary. Employer shall pay to Employee as his base compensation for all services rendered hereunder an annual base salary of $250,000 per year ("Base Salary"), for the first contract year, increasing to such higher rate as may from time to time be determined by the Board of Trustees, payable in accordance with Employer's normal payroll practices for employees. Employer shall deduct or cause to be deducted from the Base Salary all taxes and amounts required by law to be withheld. Employee's Base Salary shall be reviewed by the Board of Trustees no less frequently than annually, with the first such review to be made one year after the Effective Date. 3.2 Benefits. During the Term, subject to the other provisions of this Agreement, Employee shall be entitled to participate and shall be included in any savings, 401(k), pension, profit-sharing, group medical, group life, group disability or similar plan adopted by Employer now existing, or established hereafter, to the extent he is eligible under the general provisions thereof. 3.3 Discretionary Bonuses. During the term of this Agreement, Employee shall be entitled to such bonuses as may be authorized, declared, and paid by the Board of Trustees in its sole discretion. The Board of Trustees shall review Employee's entitlement to a bonus no less frequently than annually, with the first such review to be made one year after the Effective Date. 3.4 Distribution Equivalent Rights. Employee will participate in Employer's 1998 Share Option and Incentive Plan (the "Plan") and will receive a grant of 37,500 Distribution Equivalent Rights ("Rights"). Employee will be assigned an account under the Plan (the "Distribution Equivalent Account") -2- which will be credited with distribution equivalents as and when distributions on the Common Shares are declared and paid by the Board of Trustees, which distribution equivalents will be in an amount equal to the distribution amount per Common Share declared and paid by the Board of Trustees at any time, multiplied by the number of Rights credited to Employee as of such time. Any such distribution equivalents credited to Employee's Distribution Equivalent Account will be deemed to be reinvested in Common Shares upon receipt at a rate equal to the distribution yield rate on the Common Shares as of the first day of each fiscal year, compounded quarterly. Employee's interest in the Distribution Equivalent Account will vest at a rate of 20% per year over five years; provided, however, that Employee's interest in the Distribution Equivalent Account will become fully vested on a Change in Control (as defined below). Notwithstanding the foregoing, during the first year following the Effective Date, the distribution yield rate shall be deemed to equal the Prime Rate as determined from time to time by Mellon Bank, N.A. 3.5 Share Options. On the Effective Date, Employee will be granted options to purchase 300,000 Common Shares pursuant to the Plan (the "Initial Options"). The option exercise price for the Initial Options will be the offering price per Common Share in Employer's initial public offering. Of the Initial Options, Options for 150,000 Common Shares will vest immediately and Options for 150,000 Common Shares will vest at a rate of 50,000 per year beginning on the first anniversary of the Effective Date; provided, however, that these latter Initial Options will become fully vested on a Change in Control. Employee may be granted additional options to purchase Common Shares pursuant to the Plan at any time and from time to time as the Board of Trustees determines in its sole discretion. Any such additional options granted to Employee will be subject to the terms of the Plan. 3.6 Fringe Benefits. 3.6.1 Vacation. Employee shall be entitled to five weeks of vacation during each year. 3.6.2 Reimbursement of Expenses. Employee is authorized to incur ordinary, necessary and reasonable expenses in the course of Employer's business. Employer shall reimburse Employee for such expenses upon presentation by Employee of an itemized account of such expenditures in accordance with Employer's established policy, unless such expenses have been paid directly by Employer. 3.7 Entire Compensation. The compensation provided for in this Section 3 shall be the full consideration for the services to be rendered by Employee to Employer hereunder. -3- 4. Termination. 4.1 Notice of Termination. Any termination by Employer or by Employee shall be communicated by written Notice of Termination to the other party hereto. As used in this Agreement, "Notice of Termination" means a notice specifying the termination provision in this Agreement relied upon and setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee's employment under the provision specified. As used in this Agreement, "Date of Termination" shall mean the date specified in the Notice of Termination. 4.2 Grounds for Termination. 4.2.1 Termination upon Death. Employee's employment with Employer and all of Employee's rights to compensation and benefits hereunder shall automatically terminate upon his death, except that Employee's heirs, personal representatives or estate shall be entitled to any unpaid portion of his Salary and accrued benefits up to the Date of Termination and shall also be entitled to reimbursement for any expenses incurred by Employee hereunder. In addition, Employee's heirs, personal representatives or estate shall be entitled to receive the bonus, if any, earned by Employee prior to death (in accordance with Section 3.3 hereof); all of Employee's Initial Options shall vest; and if the termination event occurs (a) prior to the third anniversary of the Effective Date, they will receive 60% or (b) after the third anniversary, they will receive 100% of Employee's Distribution Equivalent Account. 4.2.2 Termination Upon Disability. If Employee becomes disabled, Employee shall continue to receive all of his compensation and benefits in accordance with Section 3 for a period of six (6) months following the Onset of Disability (as defined in this Section 4.2.2). Any amounts due to Employee as compensation under this Section 4.2.2 shall be reduced, dollar-for-dollar, by any amounts received by Employee under any disability insurance policy or plan provided to Employee by Employer. "Onset of Disability" means the first day on which Employee shall be unable to attend to the regular affairs of Employer on a full time basis by reason of physical or mental incapacity, sickness or infirmity. If Employee's disability continues for more than six (6) months after the Onset of Disability or for periods aggregating more than nine (9) months during any twenty-four (24) month period, then Employer shall have the right to terminate Employee's employment immediately upon notice, and all of his rights to compensation and benefits hereunder shall simultaneously terminate, except that Employee shall be entitled to any unpaid portion of his Salary, bonus and accrued benefits up to the Date of Termination and to any benefits which are to be continued or paid after the Date of Termination in accordance with the terms of the corresponding benefit plans. -4- 4.2.3 Termination for Cause. At any time during the Term, Employer may terminate Employee's employment hereunder for Cause (as defined herein), effective immediately upon notice to Employee, if at a duly convened meeting of the Board of Trustees of which Employee was given reasonable advance notice and at which Employee and his counsel had the opportunity to be heard, a resolution was duly adopted by the affirmative vote of not less than two-thirds of the entire membership of the Board of Trustees finding that, in the good faith judgment of the Board of Trustees, (1) an event (which is described in the resolution in reasonable detail) constituting Cause has occurred, and (2) either Employee had a reasonable opportunity to take remedial action but failed or refused to do so, or an opportunity to take remedial action would not have been meaningful or appropriate under the circumstances. For purposes of this Agreement, Cause shall mean: (1) Employee willfully breaches or fails to diligently perform any or all of his duties under this Agreement (other than such failure resulting from Employee's incapacity due to physical or mental illness) and Employee continues to do so after demand for substantial performance is delivered by the Employer that specifically identifies the manner in which the Employer believes the Employee has not diligently performed his duties under this Agreement, (2) Employee commits an act of dishonesty or breach of trust, (3) Employee willfully violates or breaches any of the material provisions of this Agreement, (4) Employee's act or omission to act results in or is intended to result directly in unjust gain to or personal enrichment of Employee at Employer's expense, or (5) Employee is indicted for or convicted of a felony, including, without limitation, involving larceny, embezzlement or moral turpitude. Notwithstanding anything to the contrary contained herein, except for an act set forth in subsection (5) above, the term "Cause" shall not include any act or omission to act of the Employee: (1) if such act or omission has been approved by the Board of Trustees of Employer; or (2) which is the result of bad judgment or negligence on the part of the Employee. On termination of this Agreement pursuant to this Section 4.2.3, all rights to compensation and benefits of Employee shall cease as of the Date of Termination, except Employee shall be entitled to any unpaid portion of his Salary and benefits earned to the Date of Termination. The Employee shall have the option to have assigned to him at no cost and with no apportionment of prepaid premiums any assignable insurance policy owned by the Employer and relating specifically to the Employee. 4.2.4 Termination without Cause. This Agreement may be terminated by the corporation upon thirty (30) days' prior written notice without Cause being assigned therefor upon affirmative vote of a majority of the members of -5- the Board of Trustees entitled to vote on the matter. On termination of this Agreement without Cause, Employee shall be entitled to the payments he would have received had the Agreement been terminated under the provisions of Section 4.2.3, all of his Initial Options shall vest, and shall, in addition, be entitled to severance compensation equal to two times his then current Base Salary and most recent annual bonus, if any. In addition, if the Agreement is terminated without cause (a) prior to the third anniversary of the Effective Date, Employee will receive 60% or (b) after the third anniversary Employee will receive 100%, of his Distribution Equivalent Account. 4.2.5 Termination for "Good Reason". Employee may, upon thirty (30) days' prior written notice, terminate this Agreement for Good Reason if (1) Employer elects to terminate the automatic extension of the Term, (2) if Employer significantly changes Employee's duties or reduces Employee's responsibility or authority or (3) other than at the request of Employee, Employer transfers Employee to a location that results in a commuting distance for Employee that is more than ten (10) miles greater than Employee's commute as of the Effective Date. If Employee terminates this Agreement for Good Reason, he shall be entitled to the payments he would have received under Section 4.2.3, all of his Initial Options shall vest and shall, in addition, be entitled to receive severance compensation equal to two (2) times his then current Base Salary and most recent annual bonus, if any. In addition, if the Agreement is terminated for Good Reason (a) prior to the third anniversary of the Effective Date, Employee will receive 60% or (b) after the third anniversary, Employee will receive 100% of his Distribution Equivalent Account. 4.3 Mitigation. Employee shall not be required to mitigate the amount of any payment provided-for in Section 4 by seeking employment or otherwise. Employer shall not be entitled to set off against the amounts payable to Employee hereunder any amounts earned by Employee in other employment after termination of his employment with Employer hereunder or any amounts which might have been earned by Employee in other employment had he sought such other employment. The amounts payable to Employee hereunder shall not be treated as damages but as severance compensation to which Employee is entitled by reason of termination of his employment in the circumstances contemplated by this Agreement. 4.4 Procedure Upon Termination. On termination of employment regardless of the reason, Employee shall promptly return to Employer all documents (including copies) and other property of Employer, including without limitation, customer lists, manuals, letters, materials, reports, and records in his possession or control no matter from whom or in what manner acquired. -6- 5. Employee's Covenants. 5.1 Discoveries. Employee shall communicate to Employer and preserve as confidential information of Employer each discovery, idea, design, invention and improvement relating in any manner to Employer's business, whether or not patentable and whether or not reduced to practice, which is conceived, developed or made by Employee, whether alone, or jointly with others, at any time during the Term hereof (such discoveries, ideas, designs, inventions and improvements are referred to as "Employee's Discoveries"). All of Employee's Discoveries shall be Employer's exclusive property, and all of Employee's right, title and interest therein are hereby irrevocably assigned to Employer, Employee shall not, except with Employer's express prior written consent, or except in the proper course of his employment with Employer, use any of Employee's Discoveries for his own benefit or the benefit of any Person (as defined herein), or disclose any of Employee's Discoveries to any outside Person through publication or in any other manner. For purposes of this Agreement, the term "Person" means a natural person, corporation, partnership, trust, estate, joint venture, sole proprietorship, government (and any branch or subdivision thereof), governmental agency, association, cooperative or other entity. 5.2 Nondisclosure. At all times during and after the Term, Employee shall keep confidential and shall not, except with Employer's express prior written consent, or except in the proper course of his employment with Employer, directly or indirectly, communicate, disclose, divulge, publish or otherwise express, to any Person, or use for his own benefit or the benefit of any Person, any trade secrets, confidential or proprietary knowledge or information, no matter when or how acquired, concerning the conduct and details of Employer's business, including without limitation names of customers and suppliers, marketing methods, unique financing methods, trade secrets, policies, prospects and financial condition. For purposes of this Section 5.2, confidential information shall not include any information which is now known by or readily available to the general public or which becomes known by or readily available to the general public other than as a result of any improper act or omission of Employee. 5.3 Non-competition. During the Term hereof and for a period of two (2) years thereafter, Employee shall not, except with Employer's express prior written consent, directly or indirectly, in any capacity, for the benefit of any Person: (1) communicate with or solicit any Person who is or during such period becomes a customer, supplier, employee, salesman, agent or representative of Employer, in any manner which interferes or might interfere with -7- such Person's relationship with Employer, or in an effort to obtain such Person as customer, supplier, employee, salesman, agent, or representative of any business in competition with Employer within 100 miles of any office or facility owned, leased or operated by Employer. (2) Establish, engage, own, manage, operate, join or control, or participate in the establishment, ownership (other than as the owner of less than 1% of the stock of a corporation whose shares are publicly traded), management, operation or control of, or be a director, trustee, officer, employee, salesman, agent or representative of, or be a consultant to, any Person in any business in competition with Employer, at any location within 100 miles of any office or facility owned, leased or operated by Employer, or act or conduct himself in any manner which he would have reason to believe inimical or contrary to the best interests of Employer. 5.4 Enforcement. Employee acknowledges that any breach by him of any of the covenants and agreements of this Section 5 ("Covenants") will result in irreparable injury to Employer for which money damages could not adequately compensate Employer, and therefore, in the event of any such breach, Employer shall be entitled, in addition to all other rights and remedies which Employer may have at law or in equity, to have an injunction issued by any competent court enjoining and restraining Employee and/or all other Persons involved therein from continuing such breach. The existence of any claim or cause of action which Employee or any such other Person may have against Employer shall not constitute a defense or bar to the enforcement of any of the Covenants. If Employer is obliged to resort to litigation to enforce any of the Covenants which has a fixed term, then such term shall be extended for a period of time equal to the period during which a material breach of such Covenant was occurring, beginning on the date of a final court order (without further right of appeal) holding that such a material breach occurred or, if later, the last day of the original fixed term of such Covenant. 5.5 Consideration. Employee expressly acknowledges that the Covenants are a material part of the consideration bargained for by Employer and, without the agreement of Employee to be bound by the Covenants, Employer would not have agreed to enter into this Agreement. 5.6 Scope. If any portion of any Covenant or its application is construed to be invalid, illegal, or unenforceable, then the other portions and their application shall not be affected thereby and shall be enforceable without regard thereto. If any of the Covenants is determined to be unenforceable because of its scope, duration, geographical area or similar factor, then the court making such determination shall have the power to reduce or limit such scope, duration, area or other factor, and such Covenant shall then be enforceable in its reduced or limited form. -8- 6. Miscellaneous. 6.1 Notices. All notices, requests, demands, consents or other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if and when (1) delivered personally, (2) mailed by first class certified mail, return receipt requested, postage prepaid, or (3) sent by a nationally recognized express courier service postage or delivery charges prepaid, to the parties at their respective addresses stated below or to such other addresses of which the parties may give notice in accordance with this Section. If to Employer, to: ElderTrust 415 McFarlan Road, Suite 202 Kennett Square, PA 19348 Attention: Chairman of the Board If to Employee, to: Edward B. Romanov, Jr. c/o ElderTrust 415 McFarlan Road, Suite 202 Kennett Square, PA 19348 6.2 Entire Understanding. This Agreement, sets forth the entire understanding between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous, written, oral, expressed or implied, communications, agreements and understandings with respect to the subject matter hereof. 6.3 Modification. This Agreement shall not be amended, modified, supplemented or terminated except in writing signed by both parties. No action taken by Employer hereunder, including without limitation any waiver, consent or approval, shall be effective unless approved by a majority of the Board of Trustees. 6.4 Prior Agreements. Employee represents to Employer (1) that there are no restrictions, agreements understandings whatsoever to which Employee is a party which would prevent or make unlawful his execution of this Agreement or his employment hereunder, (2) that his execution of this Agreement and his employment hereunder shall not constitute a breach of any contract, agreement or understanding, oral or written to which he is a party or by which he is bound and (3) that he is free and able to execute this Agreement and to enter into employment by Employer. -9- 6.5 Parties in Interest. This Agreement and all rights of Employee hereunder shall inure to the benefit of, bind and be enforceable by Employee and his heirs, personal representatives, estate and beneficiaries, and Employer and its successors and assigns. This Agreement is a personal employment contract of Employer, being for the personal services of Employee, and shall not be assignable by Employee. 6.6 Severability. If any provision of this Agreement is construed to be invalid, illegal or unenforceable, then the remaining provisions hereof shall not be affected thereby and shall be enforceable without regard thereto. 6.7 Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original hereof and it shall not be necessary in making proof of this Agreement to produce or account for more than one counterpart hereof. 6.8 Section Headings. Section and subsection headings in this Agreement are inserted for convenience of reference only, and shall neither constitute a part of this Agreement nor affect its construction, interpretation, meaning or effect. 6.9 References. All words used in this Agreement shall be construed to be of such number and gender as the context requires or permits. 6.10 Controlling Law. This Agreement is made under, and shall be governed by, construed and enforced in accordance with, the substantive laws of Pennsylvania applicable to agreements made and to be performed entirely therein. 6.11 Settlement of Disputes. Any claims, controversies, demands, disputes or differences between or among the parties hereto or any persons bound hereby arising out of, or by virtue of, or in connection with, or relating to this Agreement shall be submitted to and settled by arbitration in Philadelphia Pennsylvania, before and in accordance with the rule, then obtaining of the American Arbitration Association ("AAA"). In the event AAA does not exist for settlement of disputes at the time either or both of the parties desire to submit a claim, controversy, demand, dispute or difference to arbitration, then such claim, controversy, demand, dispute or difference shall be submitted to and settled by arbitration in Philadelphia, Pennsylvania before a single arbitrator who shall be knowledgeable in the field of business law and employment relations and such arbitration shall be in accordance with the rules then obtaining of the American Arbitration Association. The parties agree to bear joint and equal responsibility for all fees of the arbitrator, abide by any decision rendered as final and binding, and -10- waive the right to submit the dispute to a public tribunal for a jury or non-jury trial. 6.12 Approval and Authorizations. The execution and the implementation of the terms and conditions of this Agreement have been fully authorized by the Board of Trustees. 6.13 Indulgences, Etc. Neither the failure nor delay on the part of either party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall the single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver. 6.14 Legal Expenses. In the event that the Employee institutes any legal action to enforce his rights under, or to recover damages for breach of this Agreement, the Employee, if he is the prevailing party, shall be entitled to recover from the Employer any actual expenses for attorney's fees and disbursements incurred by him. 6.15 Definition of "Change in Control". A "Change in Control" shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), becomes, after the date hereof, the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Employer representing fifty percent (50%) or more of the combined voting power of the Employer's then outstanding securities; (ii) during any two (2) year period, individuals who at the beginning of such period constitute the Board of Trustees, including for this purpose any new trustee whose election resulted from a vacancy on the Board of Trustees caused by the mandatory retirement, death, or disability of a trustee and was approved by a vote of at least two-thirds (2/3rds) of the trustees then still in office who were trustees at the beginning of the period, cease for any reason to constitute a majority thereof, (iii) notwithstanding clauses (i) or (v) of this Section 6.15, the Employer consummates a merger or consolidation of the Employer with or into another corporation or trust, the result of which is that the shareholders of the Employer at the time of the execution of the agreement to merge or consolidate own less than eighty percent (80%) of the total equity of the entity surviving or resulting from the merger or consolidation or of a entity owning, directly or indirectly, one hundred percent (100%) of the total equity of such surviving or resulting entity; (iv) the sale in one or a series of transactions of all or substantially all of the assets of the Employer; (v) any person, has commenced a tender or exchange offer, or entered into an agreement or received an option to -11- acquire beneficial ownership of fifty percent (50%) or more of the total number of voting shares of the Employer unless the Board of Trustees has made a determination that such action does not constitute and will not constitute a change in the persons in control of the Employer; or (vi) there is a change of control in the Employer of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act other than in circumstances specifically covered by clauses (i) - (v) above. 6.16 Notwithstanding anything else in this Agreement, solely in the event of a Change of Control, the amount of severance compensation paid to Employee under this Agreement, shall not include any amount that the Corporation is prohibited from deducting for federal income tax purposes by virtue of Section 280 G of the Internal Revenue Code or any successor provision. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above mentioned. EMPLOYER: ELDERTRUST By: /s/ D. Lee McCreary, Jr. ----------------------------- D. Lee McCreary, Jr. Vice President & Chief Financial Officer Date of execution: 3/4/98 ------ EMPLOYEE: /s/ Edward B. Romanov, Jr. --------------------------- Edward B. Romanov, Jr. Date of execution: 3/4/98 ------ -12- As contemplated by the last sentence of Section 2, the parties hereto hereby confirm in writing that the "Effective Date" for purposes of this Agreement means January 30, 1998. EMPLOYER: ELDERTRUST By: /s/ D. Lee McCreary, Jr. ------------------------- D. Lee McCreary, Jr. Vice President & Chief Financial Officer Date of execution: 3/4/98 ------ EMPLOYEE: /s/ Edward B. Romanov, Jr. --------------------------- Edward B. Romanov, Jr. Date of execution: 3/4/98 ------ -13- EX-10.6 8 EXHIBIT 10.6 EXHIBIT 10.6 NON-COMPETITION AGREEMENT AGREEMENT made this 30th day of January, 1998, between ElderTrust, a Maryland real estate investment trust (the "Company"), and Michael R. Walker, Chairman of the Board of Trustees of the Company ("Walker"). WHEREAS, the Company and Walker are interested in entering into this Agreement governing, non-competition; NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements of the parties contained herein and other good and valuable consideration the receipt of which is hereby acknowledged, the parties hereby agree as follows: Section 1. Non-competition. During the period during which Walker serves as a trustee of the Company, Walker shall not, except with the Company's express prior written consent, directly or indirectly, in any capacity, for the benefit of any Person: (1) communicate with or solicit any Person who is or during such period becomes a customer, supplier, employee, salesman, agent or representative of Company, in any manner which interferes or might interfere with such Person's relationship with the Company, or, in an effort to obtain such Person as a customer, supplier, employee, salesman, agent or representative of any business in competition with the Company within 10 miles of any office or facility owned, leased or operated by the Company; (2) Establish, engage, own, manage, operate, join or control or participate in the establishment, ownership (other than as the owner of less than 1% of the stock of a corporation whose shares are publicly traded), management, operation or control of, or be a director, trustee, officer, employee, salesman, agent or representative of, or be a consultant to, any Person in any business in competition with the Company, at any location within 10 miles of any office or facility owned, leased or operated by Company, or act or conduct himself in any manner which he would have reason to believe inimical or contrary to the best interests of the Company; provided, however, that any activity engaged in by Walker as an officer, director or employee of, or any interest of Walker as a stockholder in, Genesis Health Ventures, Inc. shall not be limited in any way by this Agreement; and provided further that, notwithstanding the foregoing provisions, Walker shall be entitled to retain his position on the Board of Trustees of Universal Health Realty Income Trust and to develop office and similar development projects not related to the healthcare business. For purposes of this Agreement, the term "Person" means a natural person, corporation, limited liability company, partnership, trust, estate, joint venture, sole proprietorship, government (and any branch or subdivision thereof), governmental agency, association, cooperative or other entity. Section 2. Enforcement. Walker acknowledges that any breach by him of any of the covenants and agreements of this Agreement ("Covenants") will result in irreparable injury to the Company for which money damages could not adequately compensate the Company, and therefore, in the event of any such breach, the Company shall be entitled, in addition to all other rights and remedies which the Company may have at law or in equity, to have an injunction issued by any competent court enjoining and restraining Walker and/or all other Persons involved therein from continuing such breach. The existence of any claim or cause of action which Walker or any such other Person may have against the Company shall not constitute a defense or bar to the enforcement of any of the Covenants. If the Company is obliged to resort to litigation to enforce any of the Covenants which has a fixed term, then such term shall be extended for a period of time equal to the period during which a material breach of such Covenant was occurring, beginning on the date of a final court order (without further right of appeal) holding that such a material breach occurred or, if later, the last day of the original fixed term of such Covenant. Section 3. Consideration. Walker expressly acknowledges that the Covenants are a material part of the consideration bargained for by the Company. Section 4. Scope. If any portion of any Covenant or its application is construed to be invalid, illegal, or unenforceable, then the other portions and their application shall not be affected thereby and shall be enforceable without regard thereto. If any of the Covenants is determined to be unenforceable because of its scope, duration, geographical area or similar factor, then the court making such determination shall have the power to reduce or limit such scope, duration, area or other factor, and such Covenant shall then be enforceable in its reduced or limited form. Section 5. Assignment. The rights and obligations of the Company under this Agreement shall be binding upon its successors and assigns and may be assigned by the Company to the successors in interest of the Company. The rights and obligations of Walker under this Agreement shall be binding upon his heirs, legatees, personal representatives, executors or administrators. Section 6. Notice. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when hand delivered, sent by overnight courier, or mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, or transmitted by telegram, telecopy, or telex, addressed as follows: -2- if to the Company: ElderTrust 415 McFarlan Road, Suite 202 Kennett Square, Pennsylvania 19348 Attention: President Telecopy No.: (610) 444-0815; and if to Walker: at the address specified under Walker's signature below; or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. Section 7. Headings. Section headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof. Section 8. Severability. If any part of any provision of this Agreement shall be invalid or unenforceable under applicable law, such part shall be ineffective to the extent of such invalidity or unenforceability only, without in any way affecting the remaining parts of such provision or the remaining provisions of this Agreement. Section 9. Governing Law. This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto, shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania (without reference to the choice of law rules thereof). Section 10. Amendment; Modification; Waiver. No amendment, modification or waiver of the terms of this Agreement shall be valid unless made in writing and duly executed by Walker and the Company. No delay or failure at any time on the part of the Company in exercising any right, power or privilege under this Agreement, or in enforcing any provision of this Agreement, shall impair any such right, power, or privilege, or be construed as a waiver of any default or as any acquiescence therein, or shall affect the right of the Company thereafter to enforce each and every provision of this Agreement in accordance with its terms. -3- Section 11. Gender and Number. Throughout this Agreement, the masculine and neuter genders shall be deemed to include all genders, and the singular, the plural and vice versa, except where such construction would be unreasonable. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on January 30, 1998 to be effective as of such date. ELDERTRUST By: /s/ Edward B. Romanov, Jr. ------------------------------------- Edward B. Romanov, Jr. President and Chief Executive Officer Date of execution: 3/9/98 ----------------------- /s/ Michael R. Walker ----------------------------------------- Michael R. Walker c/o Genesis Health Ventures, Inc. 148 West State Street Kennett Square, Pennsylvania 19348 Telecopy Number: (610) 444-3365 Date of execution: ----------------------- EX-10.19.1 9 EXHIBIT 10.19.1 ASSIGNMENT AND ASSUMPTION AGREEMENT ----------------------------------- THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") is made and entered into as of January 30, 1998, among (i) Genesis Health Ventures, Inc., a Pennsylvania corporation, in its capacity as the assigning lender hereunder ("Genesis"), (ii) ET Capital Corp., a Delaware corporation ("ET Capital", together with Genesis and their successors and assigns, the "Lenders") and in its capacity as agent for the Lenders (the "Agent") and (iii) Age Institute of Florida, Inc., a Florida non-profit corporation (together with its successors and assigns, the "Borrower"). WHEREAS, Genesis and the Borrower entered into that certain Working Capital Loan and Security Agreement, dated as of August 31, 1996 (as may be amended or assigned from time to time, the "Loan Agreement"), pursuant to which Genesis agreed to make a loan to the Borrower in the aggregate principal amount of $10,000,000 (the "Loan") and the Borrower granted Genesis a security interest in certain collateral to secure its obligations in connection with the Loan; WHEREAS, the Loan was evidenced by that certain Promissory Note, dated August 31, 1996 (the "Note"), payable to the order of Genesis in the principal amount of $10,000,000; WHEREAS, simultaneously with the execution and delivery of the Loan Agreement, the Borrower and Genesis entered into that certain Security Agreement, dated as of August 31, 1996 (the "Security Agreement"), whereby the Borrower granted Genesis a security interest in all of its accounts, inventory, equipment and general intangibles to secure the obligations of the Borrower in connection with, among other things, the Loan; WHEREAS, ET Capital has agreed to purchase, and Genesis has agreed to sell, a portion of the principal amount of the Note equal to $7,500,000 on the terms and conditions set forth herein; WHEREAS, ET Capital wishes to become a party to the Loan Agreement as a lender and is willing to assume the rights and obligations of a lender therein contained; WHEREAS, Genesis and ET Capital, as lenders, wish to appoint ET Capital to act as their Agent under the Loan Agreement, the Security Agreement and the other agreements, instruments and documents executed and delivered in connection therewith; WHEREAS, Genesis has agreed to grant ET Capital an option to purchase the remaining principal amount of the Note on the terms and conditions set forth herein; and WHEREAS, in connection with this Agreement, (i) the Lenders and the Borrower are entering into an Amendment to Working Capital Loan Agreement, dated as of the date hereof, (ii) the Lenders and the Borrower are entering into an Assignment and Amendment to Security Agreement, dated as of the date hereof; and (iii) the Borrower is granting a mortgage and security interest in the Facilities (as defined in the Loan Agreement) and related property pursuant to a Second Mortgage, Assignment of Rents and Security Interest, dated as of the date hereof (the "Mortgage"). NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows: 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms have the following meanings: "$2,500,000 Amended and Restated Note" means the Amended and Restated Promissory Note executed by the Borrower payable to the order of Genesis in the principal amount of $2,500,000, in substantially the form attached hereto as Exhibit A. "$7,500,000 Amended and Restated Note" means the Amended and Restated Promissory Note executed by the Borrower payable to the order of ET Capital in the principal amount of $7,500,000, in substantially the form attached hereto as Exhibit B. "Amended and Restated Notes" means, collectively, the $2,500,000 Amended and Restated Note and the $7,500,000 Amended and Restated Note. "Collateral" means, collectively, the "Collateral" as defined in the Loan Agreement, the "Collateral" as defined in the Security Agreement and the "Property" as defined in the Mortgage. "Intercreditor Agreement" means that certain Intercreditor Agreement, dated as of the date hereof, among Genesis, in its capacity as senior lender, junior lender and agent, ET Capital and the Borrower. "Loan Documents" means the Loan Agreement, the Amended and Restated Notes, the Security Agreement, the Mortgage and all other agreements, instruments and documents executed in connection therewith, as such documents may be amended, renewed, modified, extended, assigned, refinanced or replaced from time to time. 2 Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Loan Agreement. 2. ASSIGNMENT AND ASSUMPTION. 2.1 At or before 12:00 noon on January 30, 1998, ET Capital shall pay to Genesis, in immediately available funds, an amount equal to Seven Million Five Hundred Thousand Dollars ($7,500,00.00) (the "Purchase Price"). Effective upon the date of receipt by Genesis of the Purchase Price (the "Transfer Effective Date"), Genesis hereby irrevocably sells, assigns and transfers to ET Capital, without recourse, and ET Capital hereby irrevocably purchases, takes and assumes from Genesis a portion of the outstanding principal amount under the Loan equal to seventy-five percent (75%). Genesis shall retain a twenty-five percent (25%) portion of such outstanding principal amount of the Loan. 2.2 From and after the Transfer Effective Date, ET Capital shall be a party to the Loan Agreement as a lender for all purposes thereof. 2.3 All principal payments that would otherwise be payable from and after the Transfer Effective Date to or for the account of Genesis pursuant to the Working Capital Loan Agreement or the Note shall instead be payable to Genesis and ET Capital, on a pari passu basis, in accordance with their respective interests as reflected in Section 2.1 hereof. 2.4 All interest, fees and other amounts that otherwise accrue for the account of Genesis from and after the Transfer Effective Date pursuant to the Loan Agreement and the Note shall, instead, accrue for the account of, and be payable to, Genesis and ET Capital, as the case may be, on a pari passu basis, in accordance with their respective interests as reflected in Section 2.1 hereof. 2.5 As a condition to the obligation to purchase, and on or prior to the Transfer Effective Date, the Borrower shall execute and deliver to the Agent the Amended and Restated Notes reflecting the interests set forth in Section 2.1 hereof, and shall have executed and delivered an amendment of the Loan Documents as contemplated hereby and an amendment of any and all management agreements pertaining to the Facilities in form satisfactory to the Lenders which provides for subordination of certain management fees in the event of default under the Loan Documents as agreed between the parties. Promptly after the Transfer Effective Date, the Agent will deliver to Genesis the $2,500,000 Amended and Restated Note and will deliver to ET Capital the $7,500,000 Amended and Restated Note, and Genesis will surrender the Note to the Borrower, marked "Canceled by Substitution." 2.6 Each of the Lenders shall be secured by the security interests granted under the Security Agreement, the Loan Agreement and the Mortgage to secure the obligations of the Borrower in connection with the Loan 3 on a pro rata basis in proportion to the portion of the outstanding principal amount of the Loan owed to each Lender. Each of the Lenders and the Agent acknowledges that in accordance with the terms of the Intercreditor Agreement, the security interests granted under the Loan Agreement, the Security Agreement and the Mortgage to secure the obligations of the Borrower in connection with the Loan are subordinated to the security interests granted by the Borrower to secure the obligations of the Borrower in connection with the Acquisition Loan (as defined in the Security Agreement). 2.7 Concurrently with the execution of this Agreement, Genesis will provide to ET Capital conformed copies of all of the Loan Documents. 2.8 By executing and delivering this Agreement, Genesis and ET Capital confirm and agree as follows: (a) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, Genesis makes no representation and warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Agreement or any other Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Agreement, the Note or any other Loan Document; (b) Genesis makes no representation and warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under any of the Loan Documents; (c) ET Capital has received a copy of each of the Loan Documents together with such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Agreement; and (d) ET Capital will, independently and without reliance upon Genesis, continue to make its own credit decisions in taking or not taking action under the Loan Documents. 3. AGENCY. 3.1 The Lenders hereby appoint and authorize the Agent to act as their agent under the Loan Agreement, the Security Agreement, the Mortgage and each of the other Loan Documents, and the Agent hereby accepts such appointment and authorization. Each of the Lenders and any subsequent holder of the Amended and Restated Notes by its acceptance thereof, irrevocably authorizes the Agent to execute and take such action on its behalf 4 under the provisions of the Loan Documents and to exercise such powers hereunder and thereunder as are specifically delegated to the Agent by the terms hereof and thereof and such powers as are reasonably incidental thereto. The Agent is hereby expressly authorized on behalf of the Lenders, without limiting any implied authority, (i) to execute any and all Loan Documents on behalf of the Lenders, except where Lenders are parties thereto, (ii) to distribute to each Lender copies of all notices, agreements and other material as provided for in the Loan Agreement, the Security Agreement or in the other Loan Documents, (iii) to hold and apply any and all Collateral, and the proceeds thereof, on behalf of the Lenders on a pari passu basis, subject to the terms of and rights set forth in the Intercreditor Agreement, (iv) to exercise any and all rights, powers and remedies of the Lenders under the Loan Documents, (v) to execute and deliver and file and possess instruments and documents, including without limitation financing statements, financing statement amendments and continuation statements, on behalf of any or all of the Lenders; and (vi) in the event of any acceleration of the Loan or any amounts due under the Amended and Restated Notes, to use its best efforts to sell or otherwise liquidate or dispose of the Collateral and otherwise exercise the rights of the Lenders under the Loan Agreement, the Security Agreement and the Mortgage. 3.2 Each Lender agrees (a) to reimburse the Agent in the amount of such Lender's pro rata share based on its percentage of the outstanding principal amount of the Loan for any expenses incurred by the Agent for the benefit of the Lenders, including counsel fees and compensation of agents and employees, and all other amounts paid by the Agent respectively, for services rendered on behalf of the Lenders and (b) to indemnify and hold harmless the Agent and any of its directors, officers, employees or agents, on demand, in the amount of its pro rata share, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against it in its capacity as the Agent or any of its directors, officers, employees or agents in any way relating to or arising out of the Loan Documents or any action taken or omitted by the Agent or any of its directors, officers, employees or agents under the Loan Documents, to the extent not reimbursed by the Borrower; provided, however, that no Lender shall be liable to the Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgment, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Agent, or any of its directors, officers, employees or agents. 3.3 Neither the Agent nor any of its officers, directors, employees or agents will be liable to the Lenders for any action taken or omitted hereunder or in connection herewith or in connection with any document or instrument now or hereafter executed in connection herewith unless caused by its gross negligence or willful misconduct. The Agent will not be responsible for any recitals, warranties or representations in the Loan Agreement, the Mortgage or any other Loan Document. The Lenders acknowledge that they have reviewed the Loan Agreement, the Amended and Restated Notes, the Security Agreement, the Mortgage and all of the other Loan Documents and 5 are fully aware of the terms hereof and thereof. The Agent may execute any of its duties by or through agents or employees and will be entitled to advice of counsel, accountants or other professionals of its selection concerning all matters pertaining to the Loan Documents and its duties hereunder and thereunder. The Agent will be entitled to rely upon any writing or other document, telegram or telephone conversation believed by it to have been signed, sent or made by the proper person or persons and, in respect of legal matters, upon the advice of counsel selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under the Loan Agreement and the other Loan Documents unless it shall first receive such advice or concurrence of all the Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action except for its own gross negligence or willful misconduct. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of all the Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Amended and Restated Notes. 3.4 Each Lender acknowledges that the Agent has not made any representation or warranty to it and that no act taken by the Agent will be deemed to constitute a representation or warranty by the Agent to any Lender. Each Lender further acknowledges that it has taken and will continue to take such action and to make such investigation as it deems necessary to inform itself of the affairs of the Borrower and that it has made and will continue to make its own independent investigation of the creditworthiness and the business and operations of the Borrower. In making an advance hereunder, each Lender represents that it has not relied and will not rely upon any information or representations furnished or given by the Agent. The Agent will be under no duty or responsibility to the Lenders to ascertain or to inquire into the performance or observance by the Borrower of any of the provisions of this Agreement or any document or instrument now or hereafter executed in connection herewith. The Agent will not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Borrower or any affiliate thereof which may come into the possession of the Agent. The Lenders understand and agree that the Agent will not be deemed to have knowledge of the existence, occurrence or continuance of any event of default under any of the Loan Documents, unless the officers of the Agent immediately responsible for matters concerning this Agreement will have actual knowledge of such occurrence or will have been notified in writing by any Lender or Borrower that the Lender or the Borrower, as applicable, considers that such event of default has occurred and is continuing and specifying the nature thereof. 6 3.5 Upon the occurrence and during the continuation of an Event of Default (as defined in the Loan Agreement), and following a declaration by a Lender that a Amended and Restated Note is due and payable, the Agent upon the request of the Lender, will proceed to enforce the rights of the Lender under the Amended and Restated Note by such proceedings as the Agent may deem appropriate, whether at law or in equity. The Agent, on behalf of all the Lenders, will hold in accordance with the Loan Agreement, the Security Agreement and the Mortgage, subject to the provisions of the Intercreditor Agreement, all items of Collateral received or held by the Agent. Subject to the Agent's rights to reimbursement for its costs and expenses hereunder and, subject to the provisions of the Intercreditor Agreement, each Lender will have an interest in any Collateral in the same proportions that the aggregate outstanding principal obligations owed such Lender pursuant to the Loan Agreement bear to the aggregate outstanding principal obligations owed to all the Lenders, without priority or preference among the Lenders. 3.6 The Agent, in all cases, will be fully protected in acting, or in refraining from acting, hereunder or in connection with any other documents or instruments now or hereafter executed in connection herewith in accordance with written instructions of the Lenders. 3.7 Subject to the appointment and acceptance of a successor Agent as provided below, the Agent may resign at any time by notifying the Lenders and the Borrower. Upon any such resignation, the Lenders will have the right to appoint a successor Agent. If no successor Agent will have been so appointed by the Lenders and will have accepted such appointment within thirty (30) days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent. Upon the acceptance of any appointment as Agent hereunder by a successor, such successor will thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent and the retiring Agent will be discharged from its duties and obligations hereunder and under the Loan Documents. After any Agent's resignation hereunder, the provisions of this Section 3 will continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. 4. PURCHASE OPTION At any time prior to the close of business on January 30, 1999, ET Capital shall have the right to purchase from Genesis all, but not part, of the outstanding principal amount of the Loan held by Genesis evidenced by the $2,500,000 Amended and Restated Note (the "Option Asset") by delivering to Genesis written notice (the "Exercise Notice") on or prior to said date. The Exercise Notice shall state ET Capital's intention to exercise the purchase option pursuant to this Section 4 and shall further specify the closing date of such purchase (the "Closing Date"); provided, however, that 7 such Closing Date shall not be sooner than five (5) business days nor later than twenty (20) business days after the date of delivery of the Exercise Notice. The purchase price for the Option Asset shall be an amount (the "Purchase Price") equal to the outstanding principal amount of the $2,500,000 Amended and Restated Note on the date of such purchase, together with any accrued and unpaid interest thereon. On the Closing Date, (i) ET Capital shall deliver the Purchase Price to Genesis in immediately available funds, (ii) Genesis shall deliver the $2,500,000 Amended and Restated Note to the Agent, the Borrower shall issue a new promissory note in favor of ET Capital in the amount of the outstanding principal amount of the Loan being purchased and the Agent shall surrender the $2,500,000 Amended and Restated Note to the Borrower marked "Canceled by Substitution," (iii) ET Capital, Genesis and the Borrower shall execute and deliver an Assignment and Assumption Agreement containing provisions substantially similar to the provisions contained in Section 2 hereof; and the agency relationship hereunder shall terminate. Notwithstanding any provision herein to the contrary, in the event an Exercise Notice is not delivered on or before January 30, 1999, the provisions of this Section 4 shall be of no further force and effect. 5. MISCELLANEOUS. 5.1 This Agreement shall be binding and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns. 5.2 If any of the provisions or terms of this Agreement shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any of the other terms hereof, and this Agreement shall be construed as if such unenforceable term had never been contained herein. 5.3 This Agreement may be executed in one or more counterparts, each of which shall constitute an original Agreement but all of which together shall constitute one and the same instrument. 5.4 The descriptive headings herein are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. Words used herein, regardless of the number and gender specifically used shall be deemed and construed to include any other number, singular, or plural, and any other gender, masculine, feminine or neuter, as the context requires. 8 5.5 All notices, requests, consents, demands, approvals and other communications hereunder shall be deemed to have been duly given, made or served if in writing and when delivered personally (including without limitation by means of telex, telecopies or telefax systems), or the day following delivery to a nationally recognized, reputable overnight courier service which guarantees delivery within twenty-four hours, charges prepaid, to the respective parties to this Agreement as follows: (a) If to the Borrower, to: Age Institute of Florida, Inc. Professional Arts Building 25 Penncraft Avenue Chambersburg, Pennsylvania 17201 Attention: Carol A. Tschop, President With a copy (which shall not constitute notice) to: Blank, Rome, Comisky & McCauley 1 Logan Square Philadelphia, Pennsylvania 19103 Attention: Harry A. Madonna, Esq. (b) If to Genesis, to: Genesis Health Ventures, Inc. 148 West State Street Kennett Square, Pennsylvania 19348 Attention: President With a copy (which shall not constitute notice) to: Hogan & Hartson, L.L.P. 555 Thirteenth Street, N.W. Washington, D.C. 20004 Attention: George P. Barsness, Esq. (c) If to the Agent or to ET Capital, to: ET Capital Corporation 415 McFarlan Road Suite 202 Kennett Square, Pennsylvania 19348 Attention: President 10 with a copy (which shall not constitute notice) to: Hogan & Hartson, L.L.P. 555 Thirteenth Street, N.W. Washington, D. C. 20004 Attention: George P. Barsness, Esq. The designation of the person to be so notified or the address of such person for the purposes of such notice may be changed from time to time by similar notice in writing, except that any communication with respect to a change of address shall be deemed to be given and made when received by the party to whom such communication was sent. 5.6 The validity, meaning and effect of this Agreement shall be determined in accordance with the laws of the State of Florida without regard to conflicts of laws principles thereof. 5.7 No provision of this Agreement may be amended, modified, terminated or waived except by a writing duly executed by each party sought to be bound by such amendment, modification, termination or waiver. [SIGNATURES APPEAR ON THE FOLLOWING PAGE] 11 IN WITNESS WHEREOF, each party hereto has duly executed or caused this Assignment and Assumption Agreement to be duly executed on such party's behalf as of the date first above written. GENESIS HEALTH VENTURES, INC., as a Lender By: /s/ Ira C. Gubernick ------------------------------------------------ Name: Ira C. Gubernick ------------------------------------------------ Title: General Counsel -Corporate and Secretary ------------------------------------------------ ET CAPITAL CORPORATION as a Lender and as Agent By: /s/ Edward B. Romanov, Jr. ------------------------------------------------ Name: Edward B. Romanov, Jr. ------------------------------------------------ Title: President & CEO ------------------------------------------------ AGE INSTITUTE OF FLORIDA Borrower By: /s/ Carol A. Tschop ------------------------------------------------ Name: Carol A. Tschop ------------------------------------------------ Title: President ------------------------------------------------ EX-10.19.2 10 EXHIBIT 10.19.2 AMENDMENT TO WORKING CAPITAL LOAN AND SECURITY AGREEMENT -------------------------------------------------------- This AMENDMENT TO WORKING CAPITAL LOAN AND SECURITY AGREEMENT (this "Amendment") is made and entered into as of this 30th day of January 1998, by and among AGE INSTITUTE OF FLORIDA, INC., a Florida non-profit corporation (together with its successors in interest and assigns, "Borrower"), GENESIS HEALTH VENTURES, INC., a Pennsylvania business corporation (together with its successors in interest and assigns, "Genesis"), and ET CAPITAL CORP., a Delaware corporation (together with its successors in interest and assigns, "ET Capital"; Genesis and ET Capital are sometimes collectively referred to herein as "Lenders"). BACKGROUND ---------- A. On August 31, 1996, Borrower acquired from Edgemont Partners, L.P. eleven (11) health care facilities located in the State of Florida (the "Facilities"). B. Borrower and Genesis entered into that certain Working Capital Loan and Security Agreement, dated as of August 31, 1996 (the "Agreement"), whereby Genesis agreed to provide Borrower with a loan in the maximum principal amount of $10,000,000 (the "Loan") for the working capital needs of the Facilities. C. The Loan was evidenced by a Promissory Note, dated as of August 31, 1995 (the "Note"), payable to the order of Genesis in the maximum principal amount of $10,000,000. D. Pursuant to that certain Assignment and Assumption Agreement, dated as of the date hereof (the "Assignment"), among Genesis, ET Capital and Borrower, Genesis sold and ET Capital purchased a portion of the principal amount of the Note equal to $7,500,000, and ET Capital assumed the rights and obligations of a lender under the Agreement. E. Contemporaneously with the execution and delivery hereof, Borrower is executing and delivering (i) the Amended and Restated Promissory Note, dated the date hereof, payable to the order of ET Capital in the principal amount of $7,500,000 (the "ET Capital Note") and (ii) the Amended and Restated Promissory Note, dated the date hereof, payable to the order of Genesis in the principal amount of $2,500,000 (the "Genesis Note"). F. Borrower and Lenders have agreed to amend certain provisions of the Agreement as set forth herein. G. As security for Borrower's obligations to Lenders, Borrower has agreed to execute and deliver a Second Mortgage, Assignment of Rents and Security Agreement in favor of Genesis, as agent on behalf of the Lenders. TERMS ----- NOW, THEREFORE, in consideration of the terms and conditions set forth herein, and of any loans, advances, or extensions of credit heretofore, now or hereafter made to or for the benefit of Borrower by Lenders, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Definitions. ------------ 1.1 All capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Agreement. 1.2 The Agreement is hereby amended such that all references in the Agreement to "Lender" shall be deemed to be references to "Lenders", as such term is defined in this Amendment. 1.3 The Agreement is hereby amended such that all references in the Agreement to "Note" shall be deemed to refer collectively to the ET Capital Note and the Genesis Note. 2. Amendment to Expiration Date. ----------------------------- Section 1.1 of the Agreement is hereby amended by deleting in the first sentence thereof "August 31, 2001" as the Expiration Date, and replacing it with "August 31, 2007." 3. Elimination of Revolving Nature of the Loan. -------------------------------------------- Section 1.1 of the Agreement is further amended by deleting the last sentence of such Section in its entirety and replacing it with the following sentence: "Borrower shall be permitted to repay amounts drawn hereunder, but shall not be permitted to draw again upon such amounts repaid." 4. Amendment to Security Interest Provisions. ------------------------------------------ 4.1 The parties hereto acknowledge that, pursuant to the Assignment, Lenders have appointed ET Capital to act as their agent under the Agreement, including, without limitation, with respect to the security interests granted thereunder. 2 4.2 Section 1.5(a) of the Agreement is hereby amended by deleting the first sentence of such sentence in its entirety and replacing it with the following: "Borrower hereby grants to ET Capital, as agent on behalf of Lenders, a second priority lien and security interest on all of Borrower's Gross Patient Accounts Receivable and other personal property utilized in the Facilities or in connection with the operation thereof, tangible or intangible, whether now owned or hereafter acquired, documents, contracts, guarantees, books and records, processing cards, tapes, tabulating runs, programs and similar material related thereto, together with all products and replacements thereof and all proceeds of any of the foregoing (collectively, "Personal Property" and the "Collateral"). Such lien and security interest shall be held by ET Capital for the benefit of the Lenders in accordance with the provisions of the Assignment." 5. Amendment to Notice Provision. ------------------------------ Section 9.1 of the Agreement is amended by adding the following to the end of subsection (B) of such Section: "and a copy to: ET Capital Corp. 415 McFarlan Rd., Suite 202 Kennett Square, Pennsylvania 19348 Attention: President" 6. Successors and Assigns. ----------------------- This Amendment shall be binding upon and inure to the benefit of Borrower and Lenders and their respective successors and assigns, except that Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of Lenders. 7. Ratification of Agreement. -------------------------- Other than as specifically amended hereby and pursuant to the Assignment, the Agreement is and shall continue to be in full force and effect and is hereby ratified and confirmed in all respects. 8. Counterparts. ------------- This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. 3 9. Governing Law. -------------- This Amendment and the rights and obligation of the parties hereunder shall be governed by, and construed and interpreted in accordance with, the laws of the State of Florida. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. ATTEST: AGE INSTITUTE OF FLORIDA, INC. /s/ Harry D. Madonna /s/ Carol A. Tschop - -------------------------------------- ------------------------------ Name: Harry D. Madonna Name: Carol A. Tschop Title: Secretary Title: President ATTEST: GENESIS HEALTH VENTURES, INC. /s/ Ira C. Gubernick /s/ Michael R. Walker - -------------------------------------- ------------------------------ Secretary Name: Michael R. Walker Title: Chairman & CEO WITNESS: ET CAPITAL CORP. /s/ Deborah Gianoulis /s/ Edward B. Romanov, Jr. - --------------------------------------- ------------------------------ Name: Deborah Gianoulis Name: Edward B. Romanov, Jr. Title: President & CEO 4 EX-10 11 EXHIBIT 10.19.3 [Governing rights between Senior Lender and Junior Lenders] Exhibit 10.19 INTERCREDITOR AGREEMENT ----------------------- THIS INTERCREDITOR AGREEMENT (this "Agreement") is made and entered into as of January 30, 1998, among (i) Genesis Health Ventures, Inc., a Pennsylvania corporation ("Genesis"), in its capacity as a senior lender (together with its successors and assigns, the "Senior Lender"), (ii) ET Capital Corp., a Delaware corporation ("ET Capital"), (iii) Genesis, in its capacity as a junior lender (together with ET Capital and their successors and assigns, the "Junior Lenders"), (iv) ET Capital, in its capacity as agent for the Junior Lenders (the "Junior Agent"), (v) Genesis, in its capacity as collateral agent for the Senior Lender and the Junior Lenders (the "Master Collateral Agent"), (vi) Age Institute of Florida, Inc., a Florida non-profit corporation (the "Borrower") and (vii) Genesis Eldercare Network Services, Inc., a Pennsylvania corporation (the "Manager") (with respect to Section 31 hereof). WHEREAS, Genesis, as Senior Lender, and the Borrower entered into that certain Acquisition Loan and Security Agreement, dated as of August 31, 1996, as amended (the "Acquisition Loan Agreement"), pursuant to which the Senior Lender agreed to make a loan to the Borrower in the original principal amount of $45,000,000 (the "Acquisition Loan") and the Borrower granted the Senior Lender a first priority security interest in the Facilities Collateral (as hereinafter defined) and a second priority security interest in the Accounts Receivable Collateral (as hereinafter defined) to secure its obligations in connection with the Acquisition Loan; WHEREAS, the Acquisition Loan was evidenced by a Promissory Note dated August 31, 1996 by Borrower payable to the order of the Senior Lender in the principal amount of $45,000,000; WHEREAS, Genesis, as Junior Lender, and the Borrower also entered into that certain Working Capital Loan and Security Agreement, dated as of August 31, 1996, as amended (the "Working Capital Loan Agreement"), pursuant to which Genesis agreed to make loans to the Borrower in the aggregate principal amount of $10,000,000 (the "Working Capital Loan") and the Borrower granted Genesis a first priority security interest in the Accounts Receivable Collateral to secure its obligations in connection with the Working Capital Loan; WHEREAS, the Working Capital Loan was evidenced by a Promissory Note, dated August 31, 1996, made by Borrower payable to the order of Genesis in the principal amount of $10,000,000 (the "Working Capital Note"); WHEREAS, simultaneously with the execution and delivery of the Acquisition Loan Agreement and the Working Capital Loan Agreement, the Borrower and Genesis also entered into a separate Security Agreement, dated as of August 31, 1996, as amended (the "Security Agreement"), whereby the Borrower granted Genesis a security interest in all of its accounts, inventory, equipment and general intangibles to secure the obligations of the Borrower under both the Acquisition Loan and the Working Capital Loan (collectively, the "Working Capital Loan Documents"); WHEREAS, the Borrower also entered into that certain Mortgage, Assignment of Rents and Security Agreement, dated as of August 31, 1996, as amended (the "Senior Mortgage"), whereby the Borrower granted the Senior Lender a mortgage and security interest in the Facilities (as hereinafter defined) and in certain other property to secure the obligations of the Borrower in connection with the Acquisition Loan; WHEREAS, the Manager performs management services to the Facilities (as hereinafter defined) pursuant to that certain Management Agreement, dated as of August 31, 1996 (as amended, modified, renewed, restated or substituted from time to time, the "Management Agreement"), among Genesis, the Borrower and the Manager; WHEREAS, pursuant to an Assignment and Assumption Agreement, dated as of the date hereof (the "Assignment"), among the Junior Lenders, the Junior Agent and the Borrower, ET Capital agreed to purchase, and Genesis agreed to sell, an interest in the Working Capital Note in the amount of $7,500,000, and ET Capital was appointed as agent for the Junior Lenders; WHEREAS, in connection with the Assignment, the Borrower is amending and restating the Working Capital Note so that it is evidenced by (i) an Amended and Restated Promissory Note payable to the order of Genesis in the principal amount of $2,500,000 (the "$2.5 Million Note") and (ii) an Amended and Restated Promissory Note payable to the order of ET Capital in the principal amount of $7,500,000 (the "$7.5 Million Note"), each of which continues to be secured as set forth in the Working Capital Loan Documents and in the Assignment; WHEREAS, the Borrower and the Junior Lenders have also entered into an Amendment to Working Capital Loan and Security Agreement, dated as of the date hereof, pursuant to which the Junior Lenders have agreed to extend the maturity date of the Working Capital Loan; WHEREAS, in consideration thereof and for other good and valuable consideration, the Borrower has entered into that certain Second Mortgage, Assignment of Rents and Security Agreement, dated as of the date hereof (the "Junior Mortgage"), whereby the Borrower granted the Junior Agent for the benefit of the Junior Lenders a second priority mortgage and security interest in the Facilities and certain other property to secure the obligations of the Borrower in connection with the Working Capital Loan; 2 WHEREAS, on the date hereof, the Borrower and the Senior Lender entered into an Amendment to Acquisition Loan and Security Agreement, which, among other things, reduced the principal amount of the Acquisition Loan to $40,000,000, and Borrower executed and delivered an Amended and Restated Promissory Note, dated the date hereof, payable to the order of the Senior Lender in the principal amount of $40,000,000 (the "Acquisition Note"); WHEREAS, Genesis, the Borrower and the Master Collateral Agent have entered into an Assignment and Amendment to the Security Agreement, dated as of the date hereof (the "Amendment to Security Agreement") pursuant to which Genesis has assigned all of its rights and obligations as a secured party under the Security Agreement to the Master Collateral Agent for the benefit of the Senior Lender and the Junior Lenders, subject to the terms and provisions of this Agreement; WHEREAS, the parties are entering into this Agreement in order to define the existing relative rights and security interest priorities between the Senior Lender and the Junior Lenders and to appoint Genesis as the Master Collateral Agent to act on behalf of the Senior Lender, the Junior Lenders, and the Junior Agent; and WHEREAS, in connection with all of the foregoing, the Manager has agreed to subordinate its rights to the payment of a portion of its management fees upon a default of any of the Borrowers' obligations under the Senior Note or the Subordinated Notes. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows: 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms have the following meanings: "Accounts Receivable Collateral" means all of Borrower's Gross Patients Accounts Receivable and other personal property utilized in the Facilities or in connection with the operation thereof, tangible or intangible, whether now or hereafter acquired, and all proceeds and products thereof, together with all documents, contracts, guarantees, books and records, processing cards, tapes, tabulating runs, programs and similar material related thereto. "Acquisition Loan Documents" means the Acquisition Loan Agreement, the Senior Note, the Security Agreement, the Senior Mortgage and all other agreements, instruments and documents executed and/or delivered in connection therewith, as such documents may be amended, renewed, modified, extended, assigned, refinanced or replaced from time to time. 3 "Affiliate" of any Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Collateral" means, collectively, the Accounts Receivable Collateral, the Facilities Collateral, the "Collateral" as defined in the Security Agreement, which includes all of the Borrower's existing or hereafter acquired Accounts, Inventory, Equipment and General Intangibles (all as defined in the Security Agreement) and proceeds thereof and all of the "Property" as defined in the Senior Mortgage and the Junior Mortgage, and any and all proceeds of the foregoing. "Facilities" means the eleven health care facilities located in the Counties of Pinellas, Polk, Volusia, Bay and Okaloosa in the State of Florida owned by Borrower and as described in the Acquisition Loan Agreement. "Facilities Collateral" means the Facilities and all proceeds and products thereof, together with all documents, contracts, guarantees, books and records, processing cards, tapes, tabulating runs, programs and similar material related thereto. "Gross Patients Accounts Receivable" means all accounts receivable of Borrower, including all rights of Borrower, if any, arising from the payment for goods sold or leased or for services rendered with respect to the Facilities, including, without limitation, (i) all accounts arising from the operation of the Facilities and (ii) all rights to payment from the Medicare program, Medicaid program or similar state or federal programs, boards, bureaus or agencies and rights to payments from patients or private insurers and others arising from the operation of their businesses, including rights to payment from Reimbursement Contracts. Gross Patients Accounts Receivable shall include the proceeds of the foregoing (whether cash or noncash, movable or immovable, tangible or intangible) received from the sale, exchange, transfer, collection or other disposition or substitution thereof but, shall not include, (i) gifts, grants, bequests, donations and/or contributions made to Borrower and (ii) with respect to reimbursements from Medicare or Medicaid or like programs, not those accounts receivable in excess of allowable reimbursement amounts. "Person" means any individual, corporation, association, partnership, limited liability company, joint venture, cooperative, foundation, trust or other organization, any individual, and any government, any political subdivision thereof, and any agency of any such government or political subdivision. 4 "Senior Indebtedness" means all present and future obligations, liabilities and indebtedness of the Borrower of every type and nature, currently or hereafter due, incurred or created, arising under or in connection with the Acquisition Loan Documents, including, without limitation, all principal and interest provided for in the Acquisition Loan Documents (including, without limitation, interest arising prior to and after the commencement of any bankruptcy or similar proceeding in which the Borrower is the debtor, whether or not such interest is an allowed claim in such proceeding) and all fees, premiums, charges, expenses, indemnities and other amounts payable under or incidental to the Acquisition Loan Documents, including as such obligations, liabilities and indebtedness may be amended, renewed, modified, extended, assigned, refinanced or replaced from time to time. "Senior Note" means the Acquisition Note and any amendments, renewals, replacements, extensions, modifications, refinancings or assignments thereof. "Senior Noteholder" means the Senior Lender, in its capacity as holder of the Senior Note and the Senior Indebtedness, and any other Person acquiring all or any part of the Senior Note or the Senior Indebtedness; provided, however, that neither the Borrower nor any Affiliate of the Borrower or their successors or assigns shall have any rights otherwise available to the Senior Noteholder under this Agreement in the event that any such party acquires all or any part of the Senior Note or the Senior Indebtedness. "Subordinated Indebtedness" means all present and future obligations, liabilities and indebtedness of the Borrower of every type and nature, currently or hereafter due, incurred or created, arising under or in connection with the Working Capital Loan Documents, including, without limitation, all principal and interest provided for in the Working Capital Loan Documents and all fees, premiums, charges, expenses, indemnities and other amounts arising under or incidental to the Working Capital Loan Documents, as such obligations, liabilities and indebtedness may be amended, renewed, modified, extended, assigned, refinanced or replaced from time to time, subject to the provisions of this Agreement. "Subordinated Noteholders" means the Junior Lenders, in their capacity as holders of the Subordinated Notes and the Subordinated Indebtedness, and any other Person acquiring all or any part of the Subordinated Notes or the Subordinated Indebtedness; provided, however, that neither the Borrower nor any Affiliate of the Borrower or their successors or assigns shall have any rights otherwise available to the Subordinated Noteholders under this Agreement in the event that any such party acquires all or any part of the Subordinated Notes or the Subordinated Indebtedness. 5 "Subordinated Notes" means, collectively, the $2.5 Million Note and the $7.5 Million Note, and any amendments, renewals, replacements, extensions, modifications or assignments thereof. "Working Capital Loan Documents" means the Working Capital Loan Agreement, the Subordinated Notes, the Security Agreement, the Junior Mortgage and all other agreements, instruments and documents executed in connection therewith, as such documents may be amended, renewed, modified, extended, assigned, refinanced or replaced from time to time. 2. CONSENTS OF HOLDERS. Notwithstanding any of the terms or provisions of the Working Capital Loan Documents, each Subordinated Noteholder, by its acceptance of a Subordinated Note, does hereby ratify and acknowledge the existence of the Senior Indebtedness and the liens securing the Senior Indebtedness and the obligations of the Borrower in connection with the Acquisition Loan Documents. Each Subordinated Noteholder further agrees that (i) such Subordinated Noteholder will not challenge the liens and security interests securing payment of the Senior Indebtedness, (ii) as between the Senior Noteholders and such Subordinated Noteholder, the terms of this Agreement shall govern, even if part or all of the Senior Indebtedness or any liens or security interest securing payment thereof are avoided, disallowed, set aside or otherwise invalidated, and (iii) to the extent that any of the terms and provisions of this Agreement may be inconsistent with any of the terms or provisions of the Acquisition Loan Documents or the Working Capital Loan Documents, such terms and provisions shall be deemed to be superseded, and the terms of this Agreement shall govern. 3. PRIORITY OF LIENS. As long as all or any portion of the Senior Indebtedness remains outstanding, unpaid, defeasible or unsatisfied, each of the Subordinated Noteholders agrees that, notwithstanding any provision to the contrary in any of the Acquisition Loan Documents or the Working Capital Loan Documents and irrespective of the time, order or method of perfection, creation or attachment of any security interests or liens in the Collateral, (i) the interests and liens of the Senior Noteholders in all of the Collateral are, and shall be deemed to be, prior and senior to any interests or liens the Subordinated Noteholders or the Junior Agent may have in the Collateral, (ii) the interests and liens of the Subordinated Noteholders and the Junior Agent in the Collateral are, and shall be deemed to be, junior, subject and subordinate in all respects to the interests and liens of the Senior Noteholders in the Senior Note and (iii) the Subordinated Noteholders shall refrain from exercising any remedy under the Working Capital Loan Documents, including acceleration of the indebtedness under said Notes, and shall refrain from taking any action to foreclose upon, acquire title to (by bidding at foreclosure or otherwise), take possession of, liquidate or proceed against any of the Collateral. 6 4. SUBORDINATION OF PAYMENT AND OTHER RIGHTS. Each of the Borrower and the Subordinated Noteholders covenants and agrees (and each such Subordinated Noteholder by its acceptance of a Subordinated Note confirms) that all rights of each present and future Subordinated Noteholder to payments or distributions of any kind or character under or in respect of the Subordinated Indebtedness are hereby expressly subordinated, to the extent and in the manner set forth in this Agreement, to the prior indefeasible payment in full in cash or cash equivalents of all Senior Indebtedness in accordance with the terms thereof. Each of the Borrower and Subordinated Noteholders confirm all of the Senior Noteholder's rights under the Acquisition Loan Documents, and specifically, the right to control the application of any insurance and condemnation proceeds as set forth more fully therein, and acknowledge that, to the extent Borrower is required to obtain Senior Lender's consent to any act under the Acquisition Loan Documents, the decision of the Senior Lender with respect thereto shall be binding on the Junior Lenders. 5. LIQUIDATION, ETC. (a) Upon any payment or distribution of any assets of the Borrower of any kind or character, whether in cash, property or securities (including, without limitation, payments or distributions payable to the Subordinated Noteholders by virtue of the terms of any indebtedness which is subordinated in right of payment to Subordinated Indebtedness (a "Junior Subordinated Payment")), by set-off or otherwise, to creditors upon any dissolution or winding up or total or partial liquidation or reorganization of the Borrower, as the case may be, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other similar proceedings or upon an assignment for the benefit of creditors, or any other marshaling of its assets and liabilities (referred to herein as a "Proceeding"), the holders of Senior Indebtedness shall first be entitled to receive payment in full in cash or cash equivalents, in accordance with the terms of the Senior Indebtedness, of all amounts payable under or in respect of the Senior Indebtedness, before any payment or distribution is made on, or in respect of, any Subordinated Indebtedness; and, upon any such Proceeding, any distribution or payment to which the Subordinated Noteholders would be entitled except for the provisions hereof, shall be paid by the Borrower, or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution directly to the Master Collateral Agent for the benefit of the Senior Noteholders to the extent necessary to pay all such Senior Indebtedness in full, after giving effect to any concurrent payment or distribution to the Senior Noteholders, and notwithstanding whether all or any portion of the Senior Indebtedness is deemed to be unsecured in any such proceeding. 7 (b) If, notwithstanding the foregoing, in any Proceeding any Junior Subordinated Payment or other payment or distribution of any assets of the Borrower, as the case may be, of any kind or character, whether in cash, property or securities, by set-off or otherwise, shall be received by any Subordinated Noteholder before all Senior Indebtedness is indefeasibly paid in full in cash or cash equivalents, such payment or distribution shall be received (whether or not such payment or distribution shall have been made in accordance with a plan of reorganization or arrangement approved in bankruptcy or other proceedings) in trust on behalf of the Senior Noteholders and shall be paid over to the Master Collateral Agent on behalf of the Senior Noteholders for application to the payment of all Senior Indebtedness remaining unpaid until such Senior Indebtedness shall have been indefeasibly paid in full in cash or cash equivalents, after giving effect to any concurrent payment or distribution to the Senior Noteholders. In the event of the failure of any Subordinated Noteholder to endorse or assign to the Master Collateral Agent any such payment or distribution, the Master Collateral Agent is hereby irrevocably authorized to endorse or assign the same on behalf of such holder. (c) For purposes of this Section 5 only, the words "any payment or distribution of any assets of the Borrower of any kind or character, whether in cash, property or securities" shall not be deemed to include a distribution of securities of the Borrower provided for by a plan of reorganization or readjustment authorized by an order or decree of a court of competent jurisdiction in a reorganization proceeding under any applicable bankruptcy law or of any other corporation provided for by such plan of reorganization or readjustment authorized by an order or decree of a court of competent jurisdiction which securities are subordinate in right of payment to all then outstanding Senior Indebtedness at least to the same extent as the Subordinated Indebtedness is so subordinate as provided in this Agreement. (d) Notwithstanding any statute, including, without limitation, the United States Bankruptcy Code and any state bankruptcy law, any rule of law or any bankruptcy procedure to the contrary, to the extent permitted by applicable usury limitations, the right of the holders of Senior Indebtedness to have all of the Senior Indebtedness indefeasibly paid and satisfied in full prior to the payment of any of the Subordinated Indebtedness shall include, without limitation, the right of Senior Noteholders to be paid in full all interest accruing (or that would have accrued in the absence of such statute, rule, law or procedure at any time) on such obligations prior to any payment or distribution to the Subordinated Noteholders by or out of the assets of the Borrower. To the extent that the Senior Noteholders would not be entitled to the interest referenced in the preceding sentence under such statute, rule or procedure, then the difference between the amount to which they are entitled under this paragraph and the amount to which they otherwise would be entitled under such statute, rule or procedure, shall be paid from amounts otherwise due to the Subordinated Noteholders, and the total amounts to be paid to the Subordinated Noteholders shall be reduced accordingly. 8 (e) To enable the Master Collateral Agent to enforce the rights of the Senior Noteholders hereunder in any Proceeding, the Master Collateral Agent is hereby irrevocably authorized and empowered, in its discretion (i) to make and present such proofs of claim against the Borrower on account of the Subordinated Indebtedness as it may deem expedient or proper, and (ii) to receive and collect on behalf of the Senior Noteholders any and all dividends and other payments or distributions made thereon in whatever form the same may be paid; and upon the request of the Master Collateral Agent, each Subordinated Noteholder shall execute and deliver to the Master Collateral Agent, Senior Noteholders or their authorized representatives such powers of attorney, assignments and other documents and instruments as such holders or representatives may request, consistent with this Agreement. Nothing contained in this Section 5(e) or elsewhere in this Agreement shall be construed to give the Master Collateral Agent or the Senior Noteholders any right to vote with respect to the treatment of the Subordinated Indebtedness or any claim thereunder, or any portion of such Subordinated Indebtedness or such claim, in any Proceeding, whether in connection with any resolution, arrangement, plan of reorganization, compromise, settlement, election of a trustee or otherwise. 6. DEFAULT. (a) In the event that any Senior Payment Default (as defined below) shall have occurred and shall be continuing, then, effective at such time as the Borrower first receives notice or acquires actual knowledge of the occurrence of such Senior Payment Default, no payment or distribution of any kind, whether in cash, property or securities (including, without limitation, any Junior Subordinated Payment), by set-off or otherwise, shall be made on, or in respect of, any Subordinated Indebtedness or for the acquisition, retirement, repurchase, redemption or defeasance thereof unless and until the Senior Noteholder provides written notice to the Junior Noteholders that such Senior Payment Default shall have been cured or waived in accordance with the terms of the Senior Indebtedness, or that all amounts then due and payable in respect of Senior Indebtedness shall have been paid in full, or provision shall have been made for such payment in cash or cash equivalents in a manner satisfactory to the Senior Noteholders. "Senior Payment Default" means any default in the payment when due of any Senior Indebtedness, whether at its stated maturity, upon acceleration or otherwise. (b) In the event that any Senior Nonmonetary Default (as defined below) shall have occurred and shall be continuing, then, upon receipt by the Borrower of written notice (a "Nonmonetary Default Notice") of such Senior Nonmonetary Default from any Senior Noteholder or any representative of such a holder, no Junior Subordinated Payment or other payment or distribution 9 of any kind, whether in cash, property or securities, by set-off or otherwise, shall be made on, or in respect of, any Subordinated Indebtedness or for the acquisition, retirement, repurchase, redemption or defeasance of any Subordinated Indebtedness during the period (the "Payment Blockage Period") commencing on the date such Nonmonetary Default Notice is given and ending on the earlier of (i) the date on which the Senior Noteholders that issued such Nonmonetary Default Notice provide written notice to the Borrower that such Senior Nonmonetary Default has been cured or waived in accordance with the terms of the Senior Indebtedness or has been rescinded or annulled or the Senior Indebtedness to which such Senior Nonmonetary Default relates has been fully discharged in a manner satisfactory to the Senior Noteholders (which notice shall be provided promptly by the applicable Senior Noteholders), or (ii) the 179th day after the date such Nonmonetary Default Notice is given, after which date ordinary, periodic payments to the Junior Noteholders as provided for in the Working Capital Loan Documents may resume in accordance with the terms thereof. "Senior Nonmonetary Default" means the occurrence or existence and continuance of any event of default, other than a Senior Payment Default, permitting one or more Senior Noteholder to declare such Senior Indebtedness due and payable prior to the date on which it would otherwise become due and payable. (c) If, notwithstanding the foregoing, any Subordinated Noteholder shall receive any payment or distribution of any assets of the Borrower of any kind or character, whether in cash, property or securities (including, without limitation, any Junior Subordinated Payment), by set-off or otherwise, in violation of this Section 6, then such cash, property or securities shall be held in trust by the recipient thereof on behalf of the Senior Noteholders and shall be paid over to the Master Collateral Agent acting for the benefit of the Senior Noteholders for application to the payment of all Senior Indebtedness until all Senior Indebtedness shall have been indefeasibly paid in full in cash or cash equivalents, after giving effect to any concurrent payment or distribution to the Senior Noteholders. In the event of the failure of any Subordinated Noteholders to endorse or assign to the Master Collateral Agent any such payment or distribution, the Master Collateral Agent is hereby irrevocably authorized to endorse or assign the same on behalf of any Subordinated Noteholder. (d) The provisions of this Section 6 shall not apply to any payment or distribution by the Borrower in any Proceeding (such amounts and distributions being subject to Section 5). 7. PERMITTED PAYMENTS; LIMITS ON RECOURSE FOR PAYMENT OF SUBORDINATED INDEBTEDNESS. Until and unless a Senior Payment Default has occurred or a Payment Blockage Period is in effect, the Borrower may make and the Subordinated Noteholders may receive Interest Payments (as hereinafter defined) as the same become due and payable. For purposes of this Section 7, 10 "Interest Payments" means the payments of interest which are due on the outstanding principal amount of the Working Capital Loan, and shall in no event be deemed to refer to any late charges or default interest or any other premium, fees, costs or other payments. Until such time as all Senior Indebtedness is indefeasibly paid in full in cash or cash equivalents, and regardless of whether all or any portion of the Subordinate Debt is due and payable by maturity, acceleration or otherwise, neither the Borrower nor any Affiliate of the Borrower shall pay, and no Subordinated Noteholder shall ask, demand, claim, take or receive from the Borrower, any Affiliate of the Borrower or any other Person, any payment of the principal of the Subordinated Indebtedness or any other payment of the Subordinated Indebtedness or any other premium, fee or cost other than Interest Payments as permitted by this Section 7. 8. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The provisions of this Agreement are and are intended solely for the purpose of defining the relative rights of the Subordinated Noteholders, on the one hand, and the Senior Noteholders, on the other hand. Nothing contained in this Agreement is intended to or shall (a) impair the obligation of the Borrower, which is absolute and unconditional, to pay to the Subordinated Noteholders the principal of and interest on the Subordinated Indebtedness and all other amounts payable thereunder as and with the terms hereof and of the Subordinated Indebtedness, (b) affect the relative rights against the Borrower of creditors of the Borrower other than the Senior Noteholders and the Subordinated Noteholders, or (c) increase the total obligations of the Borrower under the Senior Indebtedness or the Subordinated Indebtedness. 9. APPOINTMENT OF MASTER COLLATERAL AGENT. (a) Each of the Senior Noteholders, the Subordinated Noteholders and the Junior Agent hereby irrevocably appoints and authorizes Genesis as the Master Collateral Agent to act on behalf of such person hereunder and under the Acquisition Loan Documents and the Working Capital Loan Documents with respect to the Collateral and Genesis hereby accepts such appointment and authorization. The Master Collateral Agent is hereby specifically authorized to enter into the Amendment to Security Agreement as the secured party thereunder, it being understood and agreed that the security interests granted under the Security Agreement to the Master Collateral Agent are held by the Master Collateral Agent for the benefit of the Senior Noteholders and Subordinated Noteholders. It is further understood and agreed that, with respect to any Collateral as to which perfection is accomplished by possession, the Master Collateral Agent is holding such Collateral for the benefit of the Senior Noteholders and the Subordinated Noteholders, thereby perfecting the security interests in such Collateral on behalf of each of them. However, each of Subordinated Noteholders and the Junior Agent also 11 understand and agree that, so long as any Senior Indebtedness shall not have been fully and indefeasibly paid, the Master Collateral Agent shall accept directions only from the Senior Noteholders with respect to any matter relating to the Collateral and shall have no duty to the Subordinated Noteholders or the Junior Agent other than (i) the safekeeping of Collateral or (ii) the perfection of liens on behalf of the Subordinated Noteholder and the Junior Agent, and the Subordinated Noteholders and the Junior Agent shall not have any rights to require the Master Collateral Agent to take or omit to take any other action with respect to the Collateral. Upon the indefeasible payment in full of the Senior Indebtedness, if the Master Collateral Agent shall then be in possession of any Collateral at any time any Subordinated Indebtedness shall be outstanding, then the Master Collateral Agent's sole responsibility or obligation shall be, upon notice to the Junior Agent, to turn over same to the Junior Agent or to whomever a court of competent jurisdiction directs. (b) Each Senior Noteholder and each Subordinated Noteholder agrees (which agreement shall survive the termination of this Agreement) to indemnify the Master Collateral Agent, pro rata, according to such Senior Noteholder's or such Subordinated Noteholder's ratable percentage of the aggregate principal amount of the aggregate Senior Indebtedness and the Subordinated Indebtedness, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against it in its capacity as the Master Collateral Agent or any of its directors, officers, employees or agents in any way relating to or arising out of the Acquisition Loan Documents or the Working Capital Loan Documents or any action taken or omitted by the Master Collateral Agent or any of its directors, officers, employees or agents under the Acquisition Loan Documents or the Working Capital Loan Documents, to the extent not reimbursed by the Borrower; provided, however, that the Senior Noteholders and the Subordinated Noteholders shall not be liable to the Master Collateral Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgment, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Master Collateral Agent, or any of its directors, officers, employees or agents. (c) Neither the Master Collateral Agent nor any of its officers, directors, employees or agents will be liable to the Senior Noteholders or the Subordinated Noteholders for any action taken or omitted hereunder or in connection herewith or in connection with any document or instrument now or hereafter executed in connection herewith unless caused by its gross negligence or willful misconduct. The Master Collateral Agent will not be responsible for any recitals, warranties or representations in the Acquisition Loan Documents or the Working Capital Loan Documents. The Master Collateral Agent may execute any of its duties by or through agents or employees and will be entitled to advice of counsel, accountants or other professionals of its selection concerning all matters pertaining to its duties hereunder and thereunder. The Master Collateral Agent will be entitled to rely 12 upon any writing or other document, telegram or telephone conversation believed by it to have been signed, sent or made by the proper person or persons and, in respect of legal matters, upon the advice of counsel selected by the Master Collateral Agent. The Master Collateral Agent shall be fully justified in failing or refusing to take any action under the Acquisition Loan Documents or the Working Capital Loan Documents unless it shall first receive such advice or concurrence of all the Senior Noteholders or the Subordinated Noteholders, as it deems appropriate, or it shall first be indemnified to its satisfaction by the Senior Noteholders and the Subordinated Noteholders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action except for its own gross negligence or willful misconduct. (d) Each of the Senior Noteholders and the Subordinated Noteholders acknowledges that the Master Collateral Agent has not made any representation or warranty to it and that no act taken by the Master Collateral Agent will be deemed to constitute a representation or warranty by the Master Collateral Agent to any of the Senior Noteholders or the Subordinated Noteholders. Each Senior Noteholder and Subordinated Noteholder further acknowledges that it has taken and will continue to take such action and to make such investigation as it deems necessary to inform itself of the affairs of the Borrower and that it has made and will continue to make its own independent investigation of the creditworthiness and the business and operations of the Borrower. In making an advance hereunder, each Senior Noteholder and Subordinated Noteholder represents that it has not relied and will not rely upon any information or representations furnished or given by the Master Collateral Agent. The Master Collateral Agent will be under no duty or responsibility to any Senior Noteholder or Subordinated Noteholder to ascertain or to inquire into the performance or observance by the Borrower of any of the provisions of this Agreement or any document or instrument now or hereafter executed in connection herewith. The Master Collateral Agent will not have any duty or responsibility to provide any Senior Noteholder or Subordinated Noteholder with any credit or other information concerning the affairs, financial condition or business of the Borrower or any affiliate thereof which may come into the possession of the Master Collateral Agent. The Senior Noteholders and Subordinated Noteholders understand and agree that the Master Collateral Agent will not be deemed to have knowledge of the existence, occurrence or continuance of any event of default under any of the Acquisition Loan Documents or the Working Capital Loan Documents, unless the officers of the Master Collateral Agent immediately responsible for matters concerning this Agreement will have actual knowledge of such occurrence or will have been notified in writing by any Senior Noteholder or Subordinated Noteholder or Borrower that such person or the Borrower, as applicable, considers that such event of default has occurred and is continuing and specifying the nature thereof. 13 (e) Subject to the appointment and acceptance of a successor Master Collateral Agent as provided below, the Master Collateral Agent may resign at any time by notifying the Senior Noteholders, the Subordinated Noteholders and the Borrower. Upon any such resignation, the Senior Noteholders and the Subordinated Noteholders will have the right to appoint a successor Master Collateral Agent. If no successor Master Collateral Agent will have been so appointed by the Senior Noteholders and the Subordinated Noteholders and will have accepted such appointment within thirty (30) days after the retiring Master Collateral Agent gives notice of its resignation, then the retiring Master Collateral Agent may, on behalf of the Senior Noteholders and Subordinated Noteholders, appoint a successor Master Collateral Agent. Upon the acceptance of any appointment as Master Collateral Agent hereunder by a successor, such successor will thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Master Collateral Agent and the retiring Master Collateral Agent will be discharged from its duties and obligations hereunder and under the Acquisition Loan Documents and the Working Capital Loan Documents. After any Master Collateral Agent's resignation hereunder, the provisions of this Section 9 will continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. 10. SUPPLEMENTAL ASSIGNMENTS, POWER OF ATTORNEY. (a) Each Subordinated Noteholder agrees to execute and deliver to the Master Collateral Agent such assignments or other instruments as may be reasonably requested by the Master Collateral Agent in order to enable it to enforce their rights hereunder and to collect, to the extent entitled thereto under this Agreement, any and all dividends or other payments or disbursements which may be made at any time on account of all or any of the Subordinated Indebtedness so long as any Senior Indebtedness remains unpaid. (b) Each Subordinated Noteholder hereby irrevocably constitutes and appoints the Master Collateral Agent, and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in its place and stead, in its own name or otherwise, from time to time (i) to receive, endorse or assign payments and distributions made with respect to such Subordinated Noteholder's Subordinated Indebtedness to the extent that such payments and distributions are required to be made or turned over to the Senior Noteholders and (ii) to execute and deliver such documents and instruments necessary to enable the Senior Noteholders to enforce their rights under this Agreement. Each Subordinated Noteholder hereby ratifies any and all lawful actions taken pursuant to the foregoing power of attorney and confirms and agrees that such power of attorney is coupled with an interest and is irrevocable. 14 11. NO OBLIGATIONS OF SENIOR NOTEHOLDERS; BENEFIT OF SUBORDINATION PROVISIONS. (a) Each Subordinated Noteholder agrees that the Senior Noteholder shall not be liable for any action or failure to act under or in connection with any of the Acquisition Loan Documents, it being understood that the decisions as to whether or not to act and the manner of proceeding under such instruments and documents are within the sole discretion of the Senior Noteholder and shall not be affected in any manner by the existence of the Subordinated Indebtedness. It is further agreed that such obligations as may be imposed under the Acquisition Loan Documents shall run exclusively to the benefit of the Senior Noteholder and may be enforced or waived only by the Senior Noteholder. (b) The powers conferred on Genesis as Senior Lender and Senior Noteholder under this Agreement are solely to protect its interests under this Agreement and shall not impose any duty upon Genesis or any other holders to exercise any such powers. In particular, neither Genesis nor any other Senior Noteholder shall be required to make any demand or to make any inquiry as to the nature of sufficiency of any payment received by it. Genesis and such other holders shall be accountable only for amounts actually received as a result of the exercise of such powers, and neither Genesis nor any other Senior Noteholder, nor any of their respective officers, directors, employees, agents or participants shall be responsible to the Borrower or any Subordinated Noteholder, for any act or failure to act by it or them under this Agreement, except for its or their own gross negligence or willful misconduct. Genesis and each such other holder shall be entitled to rely upon any paper, instrument or document which it in good faith believes to be genuine and correct and to have been signed or sent by the proper person or persons. 12. NO PAYMENTS IN VIOLATION OF AGREEMENT. The Borrower agrees that no payments or distributions, by set-off or otherwise, will be made by or on behalf of the Borrower in violation of the terms of this Agreement; and each Subordinated Noteholder agrees that it will not receive or accept any such payment or distribution. 13. AVOIDED PAYMENTS. Without limiting any other provision of this Agreement, Senior Indebtedness shall not be deemed to have been paid for purposes of this Agreement if any payment in respect thereof (i) shall have been avoided or recovered by the payor or its trustee or other representative or successor in accordance with the order of any court of competent jurisdiction in any insolvency, bankruptcy, dissolution, liquidation or reorganization of the payor, or as required upon or as a result of the appointment of a custodian, receiver, trustee or other officer with respect to the payor or any substantial part of its property or otherwise, or (ii) is the subject of a pending or threatened proceeding in which such avoidance or recovery is (or would be) sought. For purposes of this Section 13, a payment in respect of Senior Indebtedness shall be deemed to be the subject of a "threatened proceeding" only if the payor or a trustee for or other authorized representative of the payor or its estate has expressly informed the Senior Noteholders that such payment will be sought to be avoided or recovered in whole or in part. 15 14. NOTICE OF DEFAULT. Each Subordinated Noteholder agrees to notify the Master Collateral Agent and the Senior Noteholder in writing promptly upon any default under any of the Working Capital Loan Documents and shall notify the Master Collateral Agent and the Senior Noteholder in writing at least two (2) business days prior to taking any action to accelerate such Subordinated Indebtedness, subject to the standstill and subordination provisions of this Agreement. 15. CERTAIN POWERS OF SENIOR NOTEHOLDERS. Each Subordinated Noteholder agrees that, without notice to or further consent by it, (a) the liability of the Borrower in respect of the Senior Indebtedness, the Acquisition Loan and the liens of the Senior Noteholders may, in whole or in part, be amended, supplemented, renewed, extended, modified, released, replaced, refinanced or refunded by the Senior Noteholders, as the Senior Noteholders may deem advisable, (b) any Collateral and/or security interests in respect of the Senior Indebtedness may, from time to time, in whole or in part, be exchanged, sold or surrendered by the Master Collateral Agent, (c) the amount of the Senior Indebtedness may, from time to time, be increased through further loans, or otherwise, (d) any deposit balance or balances to the credit of the Borrower may, from time to time, in whole or in part, be surrendered or released by the Master Collateral Agent or the Senior Noteholders to the Borrower and (e) any of the provisions hereof may be waived partially or entirely by the Master Collateral Agent or the Senior Noteholders as to some Subordinated Indebtedness but not other Subordinated Indebtedness, all without impairing or in any way affecting the subordination contained in this Agreement; nor shall the subordination herein contained be impaired or affected in any way by any other action, inaction or omission in respect of the Senior Indebtedness or the liens of the Senior Noteholder. 16. NO WAIVER OF SUBORDINATION PROVISIONS. No right of any present or future Master Collateral Agent or Senior Noteholder to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Borrower or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Borrower with the terms, provisions and covenants of this Agreement, regardless of any knowledge thereof any such holder may have or be otherwise charged with. 16 17. SUBROGATION TO RIGHTS OF THE SENIOR NOTEHOLDERS. If, in any Proceeding or otherwise, the Senior Noteholder receives distributions or payments which, but for this Agreement, would have been made to the Subordinated Noteholders, then, subject to the indefeasible payment in full of all amounts due or to become due on or in respect of Senior Indebtedness, or the provision for such payment in cash or cash equivalents in a manner satisfactory to the Senior Noteholder, the Subordinated Noteholders shall be subrogated to the rights of the Senior Noteholder to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of and any interest on the Subordinated Indebtedness and all other amounts payable in respect of Subordinated Indebtedness shall be paid in full. For purposes of such subrogation, no payments or distributions to the Senior Noteholder of any cash, property or securities to which the Subordinated Noteholders would be entitled except for the provisions of this Agreement, and no payment over pursuant to the provisions of this Agreement to the Senior Noteholder by the Subordinated Noteholders, shall, as among the Borrower and their creditors (other than Senior Noteholder and Subordinated Noteholders), be deemed to be a payment or distribution by the Borrower to or on account of the Senior Indebtedness. At such time as the Subordinated Noteholders become subrogated to the rights of the Senior Noteholder to receive payments and distributions of cash, property and securities applicable to Senior Indebtedness as set forth in this Section 17, the Senior Noteholder shall execute and deliver to the Subordinated Noteholders such assignments of the Acquisition Loan Documents (without recourse and without representation or warranty of any kind, other than the ability of such holders to execute and deliver such assignments) to the Subordinated Noteholders, as such Subordinated Noteholders may reasonably request. 18. RELIANCE BY MASTER COLLATERAL AGENT. Upon any payment or distribution of assets of the Borrower referred to in this Agreement (whether such payment or distribution is made in a Proceeding or otherwise), the Master Collateral Agent shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Subordinated Noteholders for the purpose of ascertaining the persons entitled to participate in such payment or distribution, the Senior Noteholder and holders of other indebtedness of the Borrower, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Agreement. 17 19. NO CHANGES TO SUBORDINATED INDEBTEDNESS. None of the Subordinated Noteholders shall, without the prior written consent of the Senior Noteholder, (a) make or agree to make any loans or any advances of money or property to the Borrower other than the Working Capital Loan, (b) amend, supplement, renew, extend, modify, replace or refinance in any respect any of the Working Capital Loan Documents or any documents or instruments creating, evidencing, securing or exchangeable for or convertible into the Subordinated Indebtedness, (c) sell, assign or transfer all or any portion of its interest in the Subordinated Indebtedness unless the buyer, assignee or transferee thereof shall agree in writing to become bound by the provisions of this Agreement and the Senior Noteholder shall have been furnished with original counterparts of such agreements, together with opinions of counsel or other appropriate confirmation of the validity and binding effect of such agreements, all in form and substance reasonably satisfactory to the Senior Noteholder, or (d) subordinate any Subordinated Indebtedness to any existing or future indebtedness other than the Senior Indebtedness. 20. NO OFFSET. Each Subordinated Noteholder hereby covenants and agrees that as long as any Senior Indebtedness remains outstanding, unpaid or unsatisfied, if such Subordinated Noteholder at any time incurs any obligation to pay money to the Borrower, such Subordinated Noteholder shall not set off or credit or otherwise apply such obligation against any amount owed (or claimed to be owed) to such Subordinated Noteholder with respect to Subordinated Indebtedness. 21. BINDING NATURE. This Agreement shall be binding and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns. 22. SEVERABILITY. If any of the provisions or terms of this Agreement shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any of the other terms hereof, and this Agreement shall be construed as if such unenforceable term has never been contained herein. 18 23. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall constitute an original Agreement but all of which together shall constitute one and the same instrument. 24. HEADINGS. The descriptive headings herein are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. Words used herein, regardless of the number and gender specifically used shall be deemed and construed to include any other number, singular, or plural, and any other gender, masculine, feminine or neuter, as the context requires. 25. NOTICES. All notices, requests, consents, demands, approvals and other communications hereunder shall be deemed to have been duly given, made or served if in writing and when delivered personally (including without limitation by means of telex, telecopies or telefax systems), or the day following delivery to a nationally recognized, reputable overnight courier service which guarantees delivery within twenty-four hours, charges prepaid, to the respective parties to this Agreement as follows: (a) If to the Borrower, to: Age Institute of Florida, Inc. Professional Arts Building 25 Penncraft Avenue Chambersburg, Pennsylvania 17201 Attention: Carol A. Tschop, President 19 With a copy (which shall not constitute notice) to: Blank, Rome, Comisky & McCauley 1 Logan Square Philadelphia, Pennsylvania 19103 Attention: Harry D. Madonna, Esq. (b) If to the Senior Noteholders, to: Genesis Health Ventures, Inc. 148 West State Street Kennett Square, Pennsylvania 19348 Attention: Chief Financial Officer With a copy (which shall not constitute notice) to: Hogan & Hartson, L.L.P. Columbia Square 555 Thirteenth Street, N.W. Washington, D.C. 20004-1109 Attention: (c) If to the Junior Agent or the Subordinated Noteholders, to: Genesis Health Ventures, Inc. 148 West State Street Kennett Square, Pennsylvania 19348 Attention: Chief Financial Officer and ET Capital Corporation 415 McFarlan Road Suite 202 Kennett Square, Pennsylvania 19348 Attention: Chief Financial Officer with a copy (which shall not constitute notice) to: Hogan & Hartson, L.L.P. Columbia Square 555 Thirteenth Street, N.W. Washington, D.C. 20004-1109 Attention: 20 (d) If to the Master Collateral Agent, to: Genesis Health Ventures, Inc. 148 West State Street Kennett Square, Pennsylvania 19348 Attention: with a copy (which shall not constitute notice) to: Hogan & Hartson, L.L.P. Columbia Square 555 Thirteenth Street, N.W. Washington, D.C. 20004-1109 Attention: The designation of the person to be so notified or the address of such person for the purposes of such notice may be changed from time to time by similar notice in writing, except that any communication with respect to a change of address shall be deemed to be given and made when received by the party to whom such communication was sent. 26. GOVERNING LAW. The validity, meaning and effect of this Agreement shall be determined in accordance with the substantive laws of the State of Florida without regard to conflicts of laws principles thereof. 27. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION, ETC. EACH OF THE PARTIES HERETO HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT OR THE VALIDITY, PROTECTION, INTERPRETATION, OR ENFORCEMENT HEREOF. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF FLORIDA AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, OF ANY FEDERAL COURT LOCATED IN THE STATE OF FLORIDA IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE VALIDITY, PROTECTION INTERPRETATION OR ENFORCEMENT HEREOF. Each Subordinated Noteholder irrevocably consents to the service of process on such Subordinated Noteholder in any such proceeding by certified mail or overnight courier, postage prepaid, to such Subordinated Noteholder at the address referred to in Section 25. Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent it may effectively do so, any objection to the venue of any such action or proceeding brought in any such court and any defense that any such court is an inconvenient forum for any such action or proceeding. 21 28. ENTIRE AGREEMENT. This Agreement represents the entire agreement among the parties hereto with respect to the subject matter hereof and, except as expressly provided herein, shall not be affected by reference to any other documents. 29. AMENDMENT. No provision of this Agreement may be amended, modified, terminated or waived except by a writing duly executed by each party sought to be bound by such amendment, modification, termination or waiver. 30. NO BENEFIT TO THE BORROWER. The Borrower is not a beneficiary of any portion of this Agreement and shall not have any rights arising under this Agreement or the right to enforce any provision hereof. 31. MANAGER'S AGREEMENTS. (a) The Manager hereby acknowledges the existence of the Senior Indebtedness, the Subordinated Indebtedness and the liens securing such obligations. The Manager agrees that, upon notice from the Master Collateral Agent, upon the occurrence and during the continuance of an Event of Default under any of the Subordinated Notes or the Senior Note, the Manager shall not accept or receive, or take any action to collect or enforce, the payment of 41.67% of the management fee owed to it under the Management Agreement, and hereby agrees that any amount received in excess of 58.33% of such fee subsequent to such notice shall be held in trust for the Senior and Subordinated Noteholders. The foregoing subordination shall not constitute a release of the obligations of the Borrower to the Manager under the Management Agreement and shall not affect the Manager's rights and remedies under the Management Agreement against Borrower for non-payment of fees at such times as such Event of Default has not occurred or is not continuing or at any time the Senior Indebtedness and Subordinated Indebtedness is indefeasbly paid in full; 22 provided, however, that, notwithstanding any provision to the contrary contained herein, the Manager shall not take any action which causes the filing of a petition in bankruptcy against Borrower unless and until the Senior Indebtedness and the Subordinated Indebtedness is indefeasibly paid in full. (b) The Manager agrees that for so long as at least 58.33% of its management fees is being paid on a current basis, the Manager shall not terminate the Management Agreement without the prior written consent of the Master Collateral Agent. In the event the Management Agreement is terminated, the Manager shall promptly assign and transfer all accounts, permits, licenses, approvals and consent (to the extent assignable) with respect to the Facilities to the Person designated by the Master Collateral Agent in its sole discretion, and shall use its best efforts to cooperate with the Master Collateral Agent. 23 IN WITNESS WHEREOF, each party hereto has duly executed or caused this Intercreditor Agreement to be duly executed on such party's behalf as of the date first above written. GENESIS HEALTH VENTURES, INC., as Senior Lender By: /s/ Ira C. Gubernick --------------------------------------------- Name: Ira C. Gubernick ------------------------------------------ Title: General Counsel - Corporate and Secretary ------------------------------------------ GENESIS HEALTH VENTURES, INC., as Junior Lender By: /s/ Ira C. Gubernick --------------------------------------------- Name: Ira C. Gubernick ------------------------------------------ Title: General Counsel - Corporate and Secretary ------------------------------------------ ET CAPITAL CORP., as Junior Lender and as Junior Agent By: /s/ Edward B. Romanov, Jr. --------------------------------------------- Name: Edward B. Romanov, Jr. ------------------------------------------ Title: President & CEO ------------------------------------------ AGE INSTITUTE OF FLORIDA, INC. as Borrower By: /s/ Carol A. Tschop --------------------------------------------- Name: Carol A. Tschop ------------------------------------------ Title: President ------------------------------------------ 24 GENESIS HEALTH VENTURES, INC., as Master Collateral Agent By: /s/ Ira C. Gubernick --------------------------------------------- Name: Ira C. Gubernick ------------------------------------------- Title: General Counsel - Corporate and Secretary ------------------------------------------ With respect to Section 31: GENESIS ELDERCARE NETWORK SERVICES, INC., as Manager By: /s/ Ira C. Gubernick --------------------------------------------- Name: Ira C. Gubernick ------------------------------------------- Title: General Counsel - Corporate and Secretary ------------------------------------------ 25 EX-10.20 12 EXHIBIT 10.20 RIGHT OF FIRST REFUSAL AGREEMENT This Right of First Refusal Agreement ("Agreement") is entered into and is effective as of the 30th day of January 1998, by and among Genesis Health Ventures, Inc. ("Genesis"), ElderTrust, a Maryland real estate investment trust (which expects to qualify as a real investment trust for federal income tax purposes) ("ElderTrust") and ElderTrust Operating Limited Partnership, a Delaware limited partnership ("ETOLP") (ElderTrust and ETOLP are sometimes collectively referred to in this Agreement as the "REIT"). BACKGROUND: A. The REIT has undertaken, or concurrently with the offering of shares in ElderTrust (the "Offering"), will undertake, a series of transactions involving the REIT, Genesis and certain properties, including certain assisted living facilities, one independent living facility and certain skilled nursing facilities owned or managed by Genesis or certain of its subsidiaries. B. The REIT and Genesis have determined that is in their mutual best interest to grant to each other certain rights of first refusal with respect to the sale, financing, leasing or management of assisted living facilities, independent living facilities and skilled nursing facilities now owned or to be acquired by Genesis or the REIT. NOW, THEREFORE, in consideration of the mutual covenants and promises of the parties, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following terms shall have the following meanings (applicable to both the singular and plural terms of the words defined): 1.1. "Affiliate" means: (i) any other Person (as defined below) directly or indirectly controlling, controlled by, or under common control with the Person to which such term applies; or (ii) as to any natural Person, such Person's spouse, child, grandchild, sibling, parent, aunt, uncle or cousin, as well as the spouse of any of the foregoing. In addition, (1) as to any corporation, real estate investment trust or business trust, any Person with any of the foregoing relationships to any Person in control of such corporation, real estate investment trust or business trust shall be deemed to be an Affiliate of such corporation, real estate investment trust or business trust, and (2) as to any partnership or limited liability company, any Person with any of the foregoing relationships to any Person in control of such partnership or limited liability company as a general partner or managing member or otherwise shall be deemed to be an Affiliate of such partnership or limited liability company. For purposes of this Agreement, "control" as applied to any Person means the possession either directly or indirectly, of the power to direct or cause the direction of the management, policies and decision-making of such Person whether through the ownership of voting interest, by contract or otherwise. "Control" also shall include, without limitation, the possession of direct or indirect equity or beneficial interest in more than fifty percent (50%) of the profits or voting control of any entity. 1.2. "Basic Business Terms" shall mean, at a minimum, the following terms: (i) the sales price and/or rent; (ii) the amount and terms of any assumable third party financing; (iii) the state of title to be transferred; (iv) the date of closing; (v) the proration of closing costs and the allocation between buyer and seller of any brokerage commissions; (vi) the lease term (if applicable); (vii) the form of consideration; (viii) the security deposit required, if any; (ix) the interest rates, if applicable; and (x) all other material business terms and conditions, including, without limitation, any rights of first refusal, options or renewal rights. 1.3. "Covered Facility" means an assisted living, an independent living (i.e., (in each case) a residential facility providing limited medical and daily living assistance to its elderly residents) or a skilled nursing facility. 1.4. "Developer" means any Person who or which is, at any time during the Term of this Agreement, developing an assisted living facility or an independent living facility. 1.5. "Finance" shall mean to provide or the providing of funds to finance the construction, acquisition or refinancing of one or more Covered Facilities (whether individually or together with one or more other Covered Facilities), including, without limitation, any off-balance sheet financing of a skilled nursing facility as described in Section 3.3 hereof, and "Financing" and "Financed" shall have meanings correlative to the foregoing. 1.6. "Financing Notice" shall mean a written notice delivered to the REIT by Genesis stating that Genesis, a Genesis Affiliate or a Developer desires to obtain Financing for one or more assisted living facilities or independent living facilities, which notice sets forth (i) the location and, if applicable, the name of each facility, (ii) the proposed use of the Financing (e.g., construction, acquisition or refinancing) and (iii) the estimated amount of such Financing. 1.7. "Genesis Market" shall mean the counties in which Genesis or one of its Affiliates, or The Multicare Companies, Inc. or one of its Affiliates, now or during the term of this Agreement owns or operates assisted living, independent living or skilled nursing facilities and any counties contiguous to such counties, but shall not include counties in the states of Illinois or Wisconsin unless Genesis acquires additional Covered Facilities in such states after the date hereof. -2- 1.8. "Lease Offer" shall mean a bona fide offer made to, or acceptance of an offer made by, the REIT by a Person who or which is not an Affiliate of Genesis to lease one or more Covered Facilities owned or to be acquired by the REIT (whether individually or together with one or more other Covered Facilities or any other properties or assets) which the REIT intends to accept. 1.9. "Lease Notice" means a written notice delivered to Genesis by the REIT stating that it has received or made a Lease Offer, which notice sets forth (i) the name of the proposed lessee and (ii) the Basic Business Terms of the proposed lease, and which is accompanied by a copy of the Lease Offer (if in writing) and a copy of the proposed lease, if available. 1.10. "Management Notice" shall mean a written notice delivered to Genesis by the REIT stating that an Owner of one or more Covered Facilities in the Genesis Market Financed by the REIT intends to enter into one or more management agreements with respect to such Covered Facilities and/or has received a Management Offer with respect to such Covered Facilities, which notice sets forth (i) the name of any proposed manager (if applicable) and (ii) the material terms of any proposed management agreement, and which is accompanied by a copy of any Management Offer (if in writing) and a copy of any proposed management agreement, if available. 1.11. "Management Offer" shall mean a bona fide offer made to, or by, an Owner by, or to, a Person who or which is not an Affiliate of such Owner proposing to manage one or more existing or proposed Covered Facilities in the Genesis Market which are Financed by the REIT (whether individually or together with one or more other Covered Facilities or any other properties or assets). 1.12. "Off-Balance Sheet Financing Notice" shall mean a written notice delivered to the REIT by Genesis stating that Genesis or a Genesis Affiliate desires to undertake a transaction involving off-balance sheet Financing of one or more skilled nursing facilities presently owned by Genesis or a Genesis Affiliate, which notice sets forth (i) the location and, if applicable, the name of each skilled nursing facility with respect to which Genesis or such Genesis Affiliate desires to obtain off-balance sheet Financing and (ii) the proposed financing structure to be used for such off-balance sheet Financing. 1.13. "Owner" shall mean the owner of one or more Covered Facilities in the Genesis Market Financed by the REIT. 1.14. "Person" shall mean a natural person or a corporation, real estate investment trust, business trust, partnership, trust, limited liability company or other entity. -3- 1.15. "Purchase Offer" shall mean a bona fide offer made to, or acceptance of an offer made by, Genesis or a Genesis Affiliate by a Person who or which is not an Affiliate of Genesis proposing to purchase from Genesis or a Genesis Affiliate and lease back to Genesis or a Genesis Affiliate one or more Covered Facilities, which Genesis or a Genesis Affiliate intends to accept. 1.16. "Transfer" means the sale, ground lease for a term of not less than 29 years, transfer of control or conveyance by deed, assignment, quitclaim or otherwise, whereby a Person or its Affiliate transfers its interest in a Covered Facility, but shall not include (i) a transfer by a Person to an Affiliate of such Person or (ii) any change in control of Genesis, and "Transferring" and "Transferred" shall have meanings correlative to the foregoing. 1.17. "Transfer Notice" means a written notice delivered to the REIT by Genesis stating that Genesis or a Genesis Affiliate intends to Transfer one or more Covered Facilities and/or has received a Purchase Offer with respect to one or more Covered Facilities, which notice sets forth (i) the name and identity of the proposed Transferee and (ii) the Basic Business Terms of the Purchase Offer, together with a copy of the Purchase Offer (if in writing) and any written notice of the Purchase Offer. 1.18. "Transferee" means any Person who or which has made a Purchase Offer to Genesis or a Genesis Affiliate. 2. Term. The term of this Agreement ("Term") shall commence as of the date first above written and shall continue for three years. Thereafter, this Agreement shall automatically renew for successive one-year renewal Terms unless Genesis or the REIT shall have given notice to the other, not less than six months prior to the end of the initial Term or any such renewal Term, that it has elected to terminate this Agreement as of the end of the then current Term. 3. First Refusal and Other Rights of the REIT. Genesis hereby grants to the REIT the following rights: 3.1. If, during the Term, Genesis or a Genesis Affiliate desires to Transfer one or more Covered Facilities owned by Genesis or a Genesis Affiliate in a transaction or transactions where Genesis or a Genesis Affiliate will lease back the Transferred Covered Facilities from the Transferee, Genesis shall first offer to the REIT (or at the election of the REIT, to an Affiliate of the REIT) the opportunity to purchase and lease back to Genesis or a Genesis Affiliate designated by Genesis the subject Covered Facilities on the same terms and conditions as contained in any Purchase Offer by giving a Transfer Notice to the REIT. Upon the written request of the REIT, Genesis shall deliver to the REIT copies of all material contracts affecting the subject Covered Facility which will survive any Transfer. The REIT shall have twenty (20) days after the receipt of the Transfer Notice to deliver to Genesis a written acceptance of the Purchase Offer on the terms and conditions set forth in the Transfer Notice. The parties shall enter into a definitive acquisition agreement within fifteen (15) business days after the acceptance of a Purchase Offer by the REIT. Notwithstanding anything set forth in this Section 3.1, the right of first refusal set forth herein shall not apply to any proposed Transfer and lease of a Covered Facility by Genesis or a Genesis Affiliate involving a commercial bank or an Affiliate of a commercial bank or any similar financial institution. -4- 3.2. If, during the Term, a Developer desires to enter into a real estate secured-Financing to Finance one or more assisted living facilities or independent living facilities to be operated by Genesis or a Genesis Affiliate, Genesis or its Affiliates shall use its reasonable business efforts to cause the Developer to provide a Financing Notice to the REIT and to grant to the REIT (or at the election of the REIT, to an Affiliate of the REIT) the opportunity to make a proposal to the Developer to Finance one or more of the subject assisted living facilities or independent living facilities. The Developer shall not be obligated to accept any such Financing proposal of the REIT, even if the terms and conditions of such Financing proposal are more favorable than the terms and conditions of other Financing proposals received by the Developer with respect to the Financing of the subject assisted living facilities or independent living facilities. 3.3. If, during the Term, Genesis or a Genesis Affiliate determines to Finance one or more skilled nursing facilities presently owned by Genesis or a Genesis Affiliate in a transaction where the liability resulting from such Financing would not be reflected on the balance sheet of Genesis, (i.e., an off-balance sheet Financing), Genesis or the Genesis Affiliate, as the case may be, shall provide an Off-Balance Sheet Financing Notice to the REIT and grant to the REIT (or at the election of the REIT, to an Affiliate of the REIT) the opportunity to make a proposal to Genesis or to such Genesis Affiliate to provide off-balance sheet Financing with respect to such skilled nursing facilities. Neither Genesis nor any Genesis Affiliate shall be obligated to accept any such off-balance sheet Financing proposal of the REIT, even if the terms and conditions of such off-balance sheet Financing proposal are more favorable than the terms and conditions of other off-balance sheet Financing proposals received by Genesis or any Genesis Affiliate. 4. First Refusal and Other Rights of Genesis. The REIT hereby grants to Genesis the following rights of first refusal: 4.1. If, during the Term, the REIT (or an Affiliate of the REIT) acquires a Covered Facility located in the Genesis Market from a third party, and desires to lease such Covered Facility (or if, due to the termination of any lease with respect to a Covered Facility between the REIT and any Person who or which is not an Affiliate of Genesis by reason of expiration, termination, default or otherwise, the REIT intends to enter into a new lease with respect to such Covered Facility) (whether, in any such case, such Covered Facility is to be leased individually or together with one or more other properties or assets, provided that at least thirty-three percent (33%) -5- of such properties are located in the Genesis Market), the REIT shall first offer to Genesis (or at Genesis' election an Affiliate of Genesis) the opportunity to lease the Covered Facilities from the REIT on the same terms and conditions as contained in any Lease Offer by giving a Lease Notice to Genesis. Genesis shall have twenty (20) days after the receipt of the Lease Notice to deliver to the REIT a written acceptance of the Lease Offer, which written acceptance shall set forth the agreement of Genesis to all of the terms and conditions set forth in the Lease Notice. The parties shall enter into a definitive lease agreement within fifteen (15) business days after the acceptance of the Lease Offer by Genesis. The foregoing right of first refusal shall not apply if the proposed lessee of the Covered Facilities is the Person who or which developed the Covered Facility or Transferred the Covered Facility to the REIT or an Affiliate of such Person. 4.2. If, during the Term, the REIT Finances one or more Covered Facilities located in the Genesis Market and a manager is to be engaged by the Owner (or if there is a default under an existing management agreement relating to one or more Covered Facilities and a new manager is to be engaged by the Owner) (whether, in any such case, any such Covered Facility is to be managed individually or together with one or more other Covered Facilities or any other properties or assets), the REIT shall deliver a Management Notice to Genesis. The REIT shall use reasonable business efforts to cause the Owner to enter into a management agreement with Genesis or a Genesis Affiliate, or, if applicable, to permit Genesis to manage the Covered Facility upon the same terms and conditions as set forth in any Management Offer. Genesis shall have twenty (20) days after receipt of a Management Notice to deliver to the REIT and the Owner a written management proposal, or, if applicable, an acceptance of the Management Offer, which acceptance shall set forth the agreement of Genesis to all of the terms of the Management Notice. The foregoing obligation shall not apply if the proposed manager of the Covered Facility is an Affiliate of the Owner or an Affiliate of the developer of the Covered Facility. 5. Failure to Exercise Right of First Refusal. If a party hereto does not elect to exercise a right of first refusal granted under this Agreement on the terms and conditions set forth herein, then, during the six-month period ("Six-Month Unrestricted Period") following the expiration of the right of first refusal, Genesis or the REIT, as applicable, may Transfer, Finance or lease the subject Covered Facility, free and clear of the terms and conditions contained in the most recently delivered Transfer Notice, Lease Notice or Management Notice, as the case may be. If, upon the expiration of the Six-Month Unrestricted Period, Genesis or the REIT, as applicable, has not consummated a Transfer or leasing of, or a management agreement with respect to, the subject Covered Facility, then such other party may not Transfer or lease, or enter into a management agreement with respect to a subject Covered Facility without giving a new Transfer Notice, Lease Notice or Management Notice, as the case may be, in accordance with the terms and conditions of this Agreement. -6- 6. Miscellaneous. 6.1. Complete Agreement; Construction. This Agreement, and the other agreements and documents referred to herein, shall constitute the entire agreement between the parties with respect to the subject matter thereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. 6.2. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the jurisdiction of the Commonwealth of Pennsylvania without regard to the principles of conflicts of laws thereof. 6.3. Notices. All notices and other communications required or permitted hereunder shall be in writing, shall be deemed to be duly given upon actual receipt, and shall be delivered (i) in person, (ii) by registered or certified mail, postage prepaid, (iii) by nationally recognized overnight delivery service or (iv) by facsimile or other generally accepted means of electronic transmission, provided that a copy of any notice delivered pursuant to this clause (iv) shall also be sent contemporaneously pursuant to clause (ii), addressed as follows (or to such other address(es) as may be specified by like notice to the other parties): To Genesis and any of its Affiliates: Genesis Health Ventures, Inc. 148 W. State Street Kennett Square, PA 19348 Attn.: Chief Executive Officer Attn.: Law Department To the REIT: ElderTrust 415 McFarlan Road Suite 202 Kennett Square, PA 19348 Attn.: President 6.4. Amendments. No amendment, modification or supplement to this Agreement shall be binding on any party hereto unless it is in writing and signed by the parties in interest. 6.5. Successors and Assigns. Neither this Agreement nor any rights or obligations hereunder shall be assignable by a party to this Agreement without the prior, express written consent of the other parties. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and permitted assigns. 6.6. No Third-Party Beneficiaries. This Agreement is solely for the benefit of the parties to this Agreement and shall not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claims or action or other right in excess of those existing without reference to this Agreement. -7- 6.7. Titles and Headings. Titles and headings to paragraphs and sections in this Agreement are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning of this Agreement. 6.8. Maximum Legal Enforceability; Time of Essence. The provisions hereof shall be considered severable such that if any provision or part hereof is ever held to be invalid, void or illegal under any law or ruling, all remaining provisions hereof shall remain in full force and effect to the maximum extent permitted by law. Any non-material provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating or rendering unenforceable any of the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without prejudice to any rights or remedies otherwise available to any party to this Agreement, each party hereto acknowledges that damages would not be an adequate remedy for any breach of the provisions of this Agreement and agrees that the obligations of the parties hereunder shall be specifically enforceable. Time shall be of the essence as to each and every provision of this Agreement. 6.9. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original and all of which shall be one and the same agreement. 6.10. Further Assurances. The parties to this Agreement will execute and deliver or cause the execution and delivery of such further instruments and documents, and will take such other actions, as any other party to the Agreement may reasonably request in order to effectuate the purpose of this Agreement and to carry out the terms hereof. -8- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first written above. GENESIS HEALTH VENTURES, INC. ELDERTRUST By: /s/ Ira C. Gubernick By: /s/ Edward B. Romanov, Jr. -------------------------------- --------------------------------- ELDERTRUST OPERATING LIMITED PARTNERSHIP By its General Partner, ElderTrust By: /s/ Edward B. Romanov, Jr. -------------------------------- -9- EX-10.21 13 EXHIBIT 10.21 OPTION AGREEMENT ---------------- THIS OPTION AGREEMENT (this "Agreement"), is made as of this ___ day of January, 1998, by and between MCKERLEY HEALTH FACILITIES, a New Hampshire limited partnership ("Optionor") and ELDERTRUST OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership or its permitted assignees or contributees (collectively, "Optionee"). BACKGROUND WHEREAS, Optionor owns and operates an assisted living facility known as Holton Point (the "Facility") which Facility consists of certain real property described in Exhibit A hereto (the "Real Property"), the improvements thereon and certain other real and personal property associated therewith, all as more particularly described below. WHEREAS, Optionor wishes to grant unto Optionee the option to purchase the Facility, including said real and personal property, and Optionee wishes to accept such option to purchase upon the terms and subject to the conditions contained herein. NOW, THEREFORE, Optionor, for and in consideration of the Option Payment (hereinafter defined) and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, hereby grants unto Optionee, its successors and assigns, the option to purchase the Property on the terms hereinafter set forth. ARTICLE I OPTION 1.1 Grant of Option. Optionor hereby irrevocably grants unto Optionee, its successors and assigns, and Optionee hereby accepts from Optionor, the exclusive and irrevocable right and option (the "Option") to purchase the Property (as hereinafter defined) upon the terms and conditions set forth herein (the "Transaction"). 1.2 Consideration for Option. In consideration for the Option granted herein, Optionee has, among other things, simultaneous with the execution hereof, paid to Optionor the sum of One Thousand Dollars ($1,000.00) (the "Option Payment"), receipt of which is hereby acknowledged by Optionor. 1.3 Term; Exercise of Option. Optionee, and its successors and assigns, shall have the right to exercise the Option by delivering written notice thereof (the "Exercise Notice") to Optionor at any time on or after the first anniversary of the date on which the Facility reaches Stabilized Occupancy (as defined in Section 1.6). In no event shall the Option be exercised after the later of (i) the date which is thirty-six (36) months after the date hereof, or (ii) if the Facility reaches Stabilized Occupancy between the twenty-fourth (24th) month and thirty-sixth (36th) month after the date hereof, the first anniversary of the date on which the Facility reaches Stabilized Occupancy (the "Expiration Date"). Optionor shall deliver written notice to Optionee within thirty (30) days after Optionor's determination that the Facility has reached Stabilized Occupancy. In the event that Optionee makes an earlier determination that the Facility has reached Stabilized Occupancy from review of the occupancy reports received pursuant to Section 4.10 hereinbelow, Optionee shall deliver written notice of the same to Optionor. In the event that any controversy shall arise between the parties hereto regarding the determination whether the Facility has reached Stabilized Occupancy, which controversy the parties are unable to settle by agreement, such controversy shall be determined by arbitration to be initiated and conducted as provided in Exhibit C hereto. It is hereby acknowledged and agreed that the Option hereby granted constitutes a present and absolute grant of option as of the date hereof notwithstanding the fact that it will not be exercised prior to the date set forth above. The Exercise Notice shall specify the date (the "Closing Date") on which settlement hereunder shall occur (the "Closing"); provided, however, that the Closing Date shall be at least ninety (90) days after the date of the Exercise Notice. The Closing shall be held at the offices of Hogan & Hartson, L.L.P., 8300 Greensboro Drive, Suite 1100, McLean, Virginia 22012, or at such other location as the parties may mutually agree upon. Upon Optionee's exercise of the Option as above provided, this Agreement will automatically become an agreement by Optionor to sell and convey the Property to Optionee and an agreement by Optionee (or its successor or assign) to purchase the Property from Optionor, in each case upon the terms and conditions set forth herein. 1.4 Assets Subject to Option. On the Closing Date, upon the terms and subject to the conditions set forth herein, Optionor shall transfer to Optionee, and Optionee shall acquire from Optionor, the following assets: (i) the Real Property, the buildings situated thereon and all of the other improvements, easements, covenants and other rights appurtenant thereto; (ii) all furniture, furnishings, fixtures, machinery, equipment, inventory and other tangible personal property, and replacements thereof, owned by Optionor and now or hereafter affixed to or located at the Facility or used or useful in connection with the operation, maintenance or repair of the Facility (the "Personal Property"); and (iii) the intangible property now or hereafter owned or held by Optionor in connection with the Facility, including, without limitation, (a) all licenses, permits, authorizations, approvals, certificates of occupancy and all other approvals necessary for the current use and operation of the Facility (to the extent assignable), and (b) all right, title and interest of Optionor in all books and records (including computer discs, software and similar data), trade names and development rights related to the Facility, or any part 2 thereof (collectively, the "Intangible Property") (items (i) through (iii) are hereinafter referred to collectively as the "Property"). Notwithstanding the foregoing, the term "Property" shall not be deemed to include, and Optionor shall not convey to Optionee hereunder, the assets of Optionor listed on Schedule 1.4 hereof (the assets listed on Schedule 1.4 shall be known as the "Excluded Assets"). 1.5 Purchase Price. The total consideration (the "Purchase Price") to be paid by Optionee to Optionor for the Property shall be equal to the Fair Market Value of the Property (as defined in Section 1.6) as of the date of Optionee's Exercise Notice. At Closing, Optionee shall pay to Optionor the Purchase Price by wire transfer of immediately available funds. The Purchase Price shall be allocated between real and personal property as Optionor and Optionee shall agree; provided that Optionor and Optionee hereby agree that not less than ninety percent (90%) of the Purchase Price shall be allocated to the Real Property and the improvements thereon. 1.6 Certain Defined Terms. For purposes of this Agreement, the following defined terms shall have the following meanings: "Facility Revenues" shall mean for any period all revenues (determined in accordance with generally accepted accounting principles applied on a consistent basis, except as provided below) whether or not directly or indirectly received or receivable from or by reason of the operation of the Facility, including, without limitation, all resident or client revenues received or receivable for the use of or otherwise by reason of all rooms, beds and other facilities provided, meals served, services performed or provided (including, without limitation, personal care, nursing or physical therapy services when provided by an employee of Optionor), space or facilities subleased or goods sold at or from the Facility, or any other use of the Property, including, without limitation, subleases, licenses or any other arrangements with third parties relating to the possession or use of any portion of the Facility; provided, however, that Facility Revenues shall not include: (a) revenues from professional fees or charges by physicians and unaffiliated providers of ancillary services, when and to the extent such charges are paid over to such physicians or unaffiliated providers of ancillary services, or are separately billed and not included in comprehensive fees paid by a resident or a client to Optionor; (b) non-operating revenues such as interest income or income from the sale of assets not sold in the ordinary course of business; (c) federal, state or local excise taxes imposed upon, and any tax based upon or measured by, such revenues which is added to or made a part of the amount billed to the resident, client or other recipient of such services or goods, whether included in the billing or stated separately; 3 (d) contractual allowances for billings not paid by or received from the appropriate governmental agencies or third party providers; and (e) all proper patient billing credits and adjustments (including, without limitation, allowances for uncollectable accounts) according to generally accepted accounting principles relating to health care accounting. "Fair Market Value" shall mean the fair market value of the Property as determined in accordance with the procedures set forth in Exhibit F hereto. "Net Operating Income" shall mean, for any period, Facility Revenues for such period less Operating Expenses for such period. "Operating Expenses" shall mean, for any period, the total of expenses, computed in accordance with generally accepted accounting principles applied on a consistent basis, of whatever kind relating to the operation, maintenance and management of the Facility that are incurred on a regular monthly or other periodic basis, including, without limitation, utilities, ordinary repairs and maintenance, insurance, license fees, property taxes and assessments, advertising expenses, management fees, payroll and related taxes, computer processing charges, operational equipment or other lease payments and other similar costs, but excluding depreciation, debt service, capital expenditures and required reserves. "Stabilized Occupancy" shall mean an average monthly occupancy for the Facility of at least ninety percent (90%) for three (3) consecutive months. 1.7 No Liabilities to be Assumed by Optionee. Optionee shall not assume any obligations of Optionor, except obligations arising out of Permitted Liens (as hereinafter defined), but not including the Mortgage Debt (as hereinafter defined). 1.8 Lease of Property to Optionor. At Closing, Optionee and Genesis Health Ventures, Inc. ("Genesis") or an affiliate of Genesis (the "Genesis Affiliate") shall enter into a lease agreement (the "Lease Agreement"), substantially in the form of Exhibit B attached hereto and incorporated herein, which shall provide for the lease of the Property by Optionee to Genesis or the Genesis Affiliate, as applicable, upon the terms and subject to the conditions set forth therein. ARTICLE II REPRESENTATIONS AND WARRANTIES OF OPTIONEE Optionee hereby represents and warrants to Optionor as follows: 2.1 Organization, Power and Authority, and Qualification. Optionee is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware. Optionee has the requisite 4 power and authority to carry on its business as it is now being conducted and to engage in the Transaction. Optionee has made available to Optionor complete and correct copies of the governing documents of Optionee, with all amendments as in effect on the date of this Agreement. Optionee is qualified to do business and is in good standing in each jurisdiction where the character of Optionee's property owned or leased or the nature of Optionee's activities makes such qualification necessary, except where the failure to be so qualified and in good standing would not have a material adverse effect on the business or financial condition of Optionee. 2.2 Authority Relative to this Agreement. All action of Optionee necessary to authorize the execution, delivery and performance of this Agreement by Optionee has been taken, and no other proceedings on the part of Optionee are necessary to authorize the execution and delivery of this Agreement by Optionee and the consummation by Optionee of the Transaction. None of the execution and delivery of this Agreement by Optionee, the consummation by Optionee of the Transaction or compliance by Optionee with any of the provisions hereof will (i) conflict with or result in any breach of any provisions of the partnership agreement of Optionee, (ii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which Optionee is a party or by which it or any of Optionee's properties or assets may be bound, or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Optionee or any of the properties or assets of Optionee. 2.3 Binding Obligation. This Agreement has been duly and validly executed and delivered by Optionee to Optionor and constitutes a valid and binding agreement of Optionee, enforceable against Optionee in accordance with its terms, except that such enforcement may be subject to bankruptcy, conservatorship, receivership, insolvency, moratorium or similar laws affecting creditors' rights generally or the rights of creditors of limited partnerships and to general principles of equity. 2.4 Brokers. Optionee has not employed any broker or finder, or incurred any liability therefor, in connection with the transactions contemplated by this Agreement. ARTICLE III REPRESENTATIONS AND WARRANTIES OF OPTIONOR Optionor hereby represents and warrants to Optionee as follows: 3.1 Organization and Qualification. Optionor is a limited partnership duly organized, validly existing and in good standing under the laws of the State of New Hampshire. Optionor has the requisite power and authority to carry on its business as it is now being conducted and to engage in the Transaction. Optionor has made available to Optionee complete and 5 correct copies of the governing documents of Optionor, with all amendments as in effect on the date of this Agreement. Optionor is qualified to do business and is in good standing in each jurisdiction where the character of Optionor's property owned or leased or the nature of Optionor's activities makes such qualification necessary, except where the failure to be so qualified and in good standing would not have a material adverse effect on the business or financial condition of Optionor or on the Transaction. Optionor is not a "foreign person" under Section 1445 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. 3.2 Authority Relative to this Agreement. All action necessary to authorize the execution, delivery and performance of this Agreement by Optionor has been taken, and no other proceedings are necessary to authorize the execution and delivery by Optionor of this Agreement and the consummation by Optionor of the Transaction. None of the execution and delivery of this Agreement by Optionor, the consummation by Optionor of the Transaction or compliance by Optionor with any of the provisions hereof will (i) conflict with or result in any breach of any provisions of the organizational documents of Optionor, (ii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, permit, contract, agreement, easement, restriction or other instrument or obligation to which Optionor is a party or by which Optionor or the Property may be bound, or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Optionor or the Property, except in the case of (ii) or (iii) for violations, breaches, or defaults (A) which would not in the aggregate have a material adverse effect on the business or financial condition of Optionor, the Transaction or the Property or (B) for which waivers or consents have been obtained or, as listed on Schedule 3.2, will be obtained prior to the Closing Date. 3.3 Binding Obligation. This Agreement has been duly and validly executed and delivered by Optionor to Optionee and constitutes a valid and binding agreement of Optionor, enforceable against Optionor in accordance with its terms, except that such enforcement may be subject to bankruptcy, conservatorship, receivership, insolvency, moratorium or similar laws affecting creditors' rights generally or the rights of creditors of Optionor and to general principles of equity. 3.4 Brokers. Optionor has not employed any broker or finder, or incurred any liability therefor, in connection with the transactions contemplated by this Agreement. 3.5 Title to Property. Optionor has good and valid title to the Personal Property. To Optionor's knowledge, the Property is not subject to any imperfections in title, easements, liens, mortgages, encumbrances, pledges, claims, charges, options, defects, preferential purchase rights or other encumbrances (collectively referred to herein as "Liens") except for the following ("Permitted Liens"): (i) Liens for real property taxes and assessments or for fire dues, library dues or similar assessments not yet delinquent; 6 (ii) Liens that are not material in character, amount, or extent and do not materially detract from the value, or interfere with the use of, the Optionor's assets subject thereto or affected thereby or otherwise materially impair the business operations being conducted or proposed to be conducted thereon; (iii) the Mortgage Debt (as hereinafter defined); and (iv) Liens shown on Schedule 3.5 hereto. 3.6 Debt. The Property is encumbered by the mortgage indebtedness described on Schedule 3.6 hereto (the "Mortgage Debt"). To Optionor's knowledge, there exists no default, or event which with the passage of time or notice or both would constitute a default, with respect to the Mortgage Debt or any other debt of Optionor that has not been cured or that would have a material adverse effect on the business or financial condition of Optionor, the Transaction or the Property. 3.7 [INTENTIONALLY DELETED] 3.8 [INTENTIONALLY DELETED] 3.9 Leases. Except as set forth on Schedule 3.9 hereto, Optionor has not entered into any leases, tenancies or other rights of occupancy in effect on the date hereof with respect to the Property. Each of the leases referenced in Schedule 3.9 (the "Leases") has been delivered to or made available to Optionee and is presently unamended (or with respect to each such lease that has been amended, all amendments thereto have been delivered or made available to Optionee) and, to Optionor's knowledge, are in full force and effect without material default. 3.10 Contracts. To the knowledge of Optionor, Schedule 3.10 hereto sets forth all of the contracts or other understandings, written or oral, to which Optionor is a party or by which Optionor is bound that relate to the Property excluding contracts which are terminable on thirty (30) days or less notice (collectively, the "Contracts", which term shall not be construed to include any Leases). Each of the Contracts is valid and binding on Optionor and is in full force and effect in all material respects. Except as set forth in Schedule 3.10, neither Optionor nor, to Optionor's knowledge, any other party thereto has breached or defaulted under the terms of any Contract, except for such breaches or defaults that would not have a material adverse effect on the business or operations of Optionor or the Property. 3.11 Permits. To the knowledge of Optionor, Optionor has all such franchises, certificates, licenses, permits and other authorizations from government political subdivisions, regulatory authorities or any other person or entity (collectively "Permits") as are necessary for the ownership, use, operation and licensing of the Property as it is currently being used, except where the failure to possess such Permits would not have a material adverse effect on the business or financial condition of Optionor or the Property, and, to Optionor's knowledge, Optionor is not in violation of any Permit and all Permits relating to the Property are valid and in full force and effect. 7 3.12. Litigation. Other than as set forth on Schedule 3.12 attached hereto, there are no claims, actions, suits, proceedings or investigations pending or, to Optionor's knowledge, threatened against Optionor or any properties or rights of Optionor, that would have a material adverse effect on the business or financial condition of Optionor, the Transaction or the Property before any court or administrative, governmental or regulatory authority or body, domestic or foreign, or any properties or rights of Optionor. Neither Optionor nor the Property is subject to any order, judgment, injunction or decree of any court, tribunal or other governmental authority (other than generally applicable laws, rules and regulations) that would have a material adverse effect on the business or financial condition of Optionor or the Property. 3.13 Compliance with Laws. Optionor has not received any written or other actual notice of any material violation of any applicable zoning regulation or ordinance, or of any employment, environmental, or other regulatory law, order, regulation or requirement, including applicable subdivision laws, relating to the Property or the business or operations thereon, which remains uncured and, to Optionor's knowledge, there are no such violations which, individually or in the aggregate, would have a material adverse effect on the business or financial condition of Optionor or the Property. 3.14 Taxes. Except for such matters as in the aggregate shall not result in a material adverse effect on the business or financial condition of Optionor, (i) all tax or information returns required to be filed on or before the date hereof by or on behalf of Optionor have been filed through the date hereof or will be filed on or before the Closing Date in accordance with all applicable laws, (ii) there is no action, suit or proceeding pending against, or with respect to, Optionor or the Property in respect of any tax nor is any claim for additional tax asserted by any such authority, and (iii) all taxes (including related penalties, interest and additional amounts) imposed upon Optionor and required to be reported on a return required to be filed (without regard to any applicable extensions) on or before the date hereof have been paid or will be paid prior to the delinquency thereof. 3.15 Insurance. Optionor currently has in place the public liability, casualty and other insurance coverage with respect to the Property as is set forth in Schedule 3.15 attached hereto. To the knowledge of Optionor, each of Optionor's insurance policies with respect to the Property is in full force and effect and all premiums due and payable thereunder have been fully paid when due. Optionor has not received from any insurance company notice of any material defects or deficiencies affecting the insurability of the Property or notices of cancellation or intent to cancel any such insurance. 3.16 Utilities. To the knowledge of Optionor, usable public sanitary and storm sewers, public water, and gas and electrical utilities (collectively, the "Public Utilities"), of adequate capacity for the operation of the Property, are installed in, and are duly connected to, the Property and can be used without any charge except the normal and usual metered charges imposed for such Public Utilities. No amounts due and owing with respect to the Property in connection with utilities, insurance, assessments or other charges customarily prorated in real estate transactions have been outstanding more than thirty (30) days. 8 3.17 Environmental. For the purpose of this Section 3.17, the term "Hazardous Substances" shall mean substances defined as a "hazardous waste," "hazardous substance," or "toxic substance" under any Environmental Laws, including, without limitation, oil, petroleum, or any petroleum-derived substance or waste, asbestos or asbestos-containing materials, PCBs, pesticides, explosives, radioactive materials, dioxins, urea formaldehyde insulation or any constituent of any such substance, pollutant or waste. As used herein, "Environmental Laws" shall include, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. ss. 9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901, et seq., the Clean Air Act, 42 U.S.C. ss. 7401, et seq., the Clean Water Act, 33 U.S.C. ss. 1251, et seq., the Toxic Substance Control Act, 15 U.S.C. ss. 2601, et seq. and the Occupational Safety and Health Act, 29 U.S.C. ss. 651, et seq., as any of the preceding have been amended prior to the date of the Closing, and any other federal, state or local law, ordinance, regulation, rule, order, decision or permit relating to the protection of human health from environmental effects of Hazardous Substances and which are applicable to the Property. To Optionor's knowledge and except as may be revealed in the Phase I Environmental Report prepared for the Property by Roy F. Weston, Inc., dated July, 1997, (i) no Hazardous Substances are present in, on or under the Property that require remediation under Environmental Law or would have a material adverse affect on the condition (financial or otherwise), earnings, assets, business affairs or business prospects of the Property, Optionor or the Transaction, (ii) no liability under or violation of any Environmental Laws or condition that could give rise to such liability or violation exists with respect to the Property, except for liabilities that would not have a material adverse effect on the business or financial condition of Optionor or the Property, and (iii) Optionor has not caused or allowed any discharge or disposal of any Hazardous Substances at the Property except in compliance with Environmental Laws. Optionor has not received any written notice from any governmental agency or instrumentality having jurisdiction thereof of any violation of any Environmental Laws which remains uncured or unremediated. 3.18 [INTENTIONALLY DELETED] 3.19 Pending Assessments and Eminent Domain. Optionor has no knowledge and has received no notice of any pending proceeding for the imposition of any special assessment, or the formation of a special assessment district, or for a condemnation proceeding which would materially affect in any manner any portion of the Property. 3.20 Compliance with Law; Approvals. Except as set forth on Schedule 3.20: (a) Optionor has operated the Property in compliance with all applicable laws and regulations, including, without limitation, all laws, regulations, orders and requirements promulgated by any governmental authority or relating to consumer protection, equal opportunity, health, health care industry regulation, third-party reimbursement (including, if applicable, Medicare, Medicaid, fraud and abuse and workers compensation), environmental 9 protection, fire, zoning and building and occupational safety matters, except for noncompliance that individually or in the aggregate would not, and in the future will not, have a material adverse effect on the business or operations of Optionor or the Property; (b) Optionor has not received notice of any material violation (or of any investigation, inspection, audit, or other proceeding by any governmental authority involving allegations of any violation) of any applicable law, or is in material default with respect to any applicable law and to the knowledge of Optionor, no investigation, inspection, audit, or other proceeding by any governmental authority involving allegations of violation of any applicable law is threatened or contemplated. 3.21 Governmental Proceedings. There is no governmental action or governmental proceeding (zoning or otherwise) or governmental investigation pending or, to Optionor's knowledge, threatened against or relating to the Property or the transactions contemplated by this Agreement. 3.22 No Agreements. Except as set forth in Optionor's organizational documents or as set forth on Schedule 3.22, other than the Leases, the Property is not subject to any outstanding agreement of sale or lease, option to purchase or other right of any third party to acquire any interest therein. ARTICLE IV COVENANTS AND AGREEMENTS OF OPTIONOR Optionor hereby covenants and agrees with Optionee that prior to the date of the Closing: 4.1 Actions Affecting Assets. Except in the ordinary course of business, Optionor shall not sell, assign, pledge, transfer or encumber the Property or any portion thereof, or enter into any other material consent, commitment, understanding or other agreement, or incur any material obligation or liability (contingent or absolute) with respect to the Property. Optionor shall not merge or consolidate with or into any other entity or enter into any agreements relating thereto without Optionee's prior consent. 4.2 Access to Property and Records. Upon reasonable notice and during regular business hours, Optionor shall give Optionee and Optionee's authorized representatives full access to the Property and Optionor's personnel and all properties, documents, contracts, facilities, books, equipment and records of Optionor relating to the Property to conduct Optionee's investigations, including, without limitation, surveys, site analyses, soil tests, engineering studies, and other investigations. 10 4.3 Permits. Optionor shall maintain all Permits in full force and effect, and will file timely all reports, statements, renewal applications and other filings, and will pay timely all fees and charges in connection therewith that are required to keep the Permits in full force and effect. 4.4 Contracts. Optionor will not enter into any new Contracts with respect to the Property except in the ordinary course of the business of the operation of the Facility. 4.5 Insurance. Optionor shall maintain in full force and effect substantially the same public liability and casualty insurance coverage now in effect with respect to the Property. 4.6 Taxes and Assessments. Optionor shall pay or discharge before delinquent all tax liabilities and obligations, including without limitation those for federal, state or local income, property, unemployment, withholding, sales, transfer, stamp, documentary, use and other taxes. 4.7 Binding Commitments. Optionor shall not make any commitments or representations to any applicable government authorities, any adjoining or surrounding property owners, any civic association, any utility or any other similar person or entity that would in any manner be binding upon Optionee or the Property without Optionee's prior consent, except such agreements that would not have a material adverse effect on the Property. 4.8 Compliance with Law. The operations of Optionor and the Property will be conducted in compliance with all applicable laws, including, without limitation, all such laws regulations, orders and requirements promulgated by any governmental authority or relating to consumer protection, equal opportunity, health, health care industry regulation, third party reimbursement (including, if applicable, Medicare, Medicaid, fraud and abuse and workers compensation), environmental protection, fire, zoning and building and occupational safety matters, except for noncompliance that individually or in the aggregate would not and, insofar as may reasonably be foreseen, in the future will not, have a material adverse effect on the business or operations of Optionor or the Property. 4.9 Operation of Facility. Optionor shall operate and maintain the Facility in the same manner as Optionor has heretofore operated the Facility and consistent with other assisted living facilities operated or managed by Genesis or affiliates thereof. 4.10 Occupancy Report; Financial Information. Between the date of this Agreement and the earlier of (i) the Closing Date and (ii) the Expiration Date, Optionor agrees to furnish Optionee with the following: (i) within twenty (20) days following the end of each calendar month, an occupancy report, in form and substance satisfactory to Optionee, with respect to the Facility for such period; said occupancy report shall be accompanied by a calculation of Net Operating Income for the twelve (12) month period that ended on the last day of said calendar month, together with supporting documentation. 11 (ii) within forty-five (45) days following the end of each calendar quarter, a balance sheet of Optionor as of the close of such calendar quarter and statements of income and expense, changes in stockholder's equity and changes in financial position of Optionor for such quarter-fiscal year, as certified by the chief financial officer of Optionor; and (iii) within one hundred twenty (120) days following the end of each calendar year of Optionor, an audited balance sheet of Optionor as of the close of such calendar year and audited statements of income and expense, changes in stockholder's equity and changes in financial position of Optionor for such calendar year, each accompanied by the related report of a nationally recognized independent accounting firm. ARTICLE V CONDITIONS TO CONSUMMATION OF TRANSACTION BY OPTIONEE The obligation of Optionee to consummate the Transaction shall be subject to fulfillment (or waiver) at or prior to the date of the Closing of the following conditions: 5.1 Representations, Warranties and Covenants. The representations, warranties and covenants made by Optionor in this Agreement or in any document delivered by Optionor pursuant to this Agreement shall be true and correct in all material respects when made and on and as of the Closing Date with the same force and effect as though such representations, warranties and covenants were made on and as of such date. No later than ten (10) days prior to the Closing Date, Optionor shall deliver to Optionee a certification that sets forth any changes to the representations and warranties made by Optionor in this Agreement or in any schedule hereto or in any document delivered by Optionee since the Closing Date, but the delivery of such Certification shall not be deemed to remedy any breach of a representation or warranty or covenant. 5.2 Performance of Covenants and Agreements. Optionor shall have performed all covenants and agreements contained in this Agreement to be performed or complied with by it on or before the Closing Date. 5.3 No Material Adverse Change. There shall have been no material adverse change in the value or condition of the Property since the date hereof, except for changes contemplated by this Agreement and changes in the ordinary course of business which do not have a material adverse effect on the business or financial condition of the Property. 5.4 Title Insurance. Commonwealth Land Title Insurance Company (the "Title Company") shall have issued to Optionee an ALTA owners title insurance policy effective as of the date of the Closing or an unconditional commitment therefor insuring fee simple title to the Property to be vested in Optionee in the full amount of the Purchase Price, subject to no exceptions other than Permitted Liens, with such endorsements and otherwise in a form acceptable to Optionee in its sole and absolute discretion. 12 5.5 No Order or Injunction. The consummation of the Transaction shall not have been restrained, enjoined or prohibited by any order or injunction of any court or governmental authority of competent jurisdiction nor shall there be any pending or threatened condemnation proceeding with respect to the Property or any portion thereof. 5.6 Optionor Deliverables. Optionee shall have received the instruments referred to in Section 7.1. 5.7 Consents. All consents listed on Schedule 3.2 or otherwise necessary for the consummation of the Transaction by Optionor shall have been obtained. ARTICLE VI CONDITIONS TO CONSUMMATION OF TRANSACTION BY OPTIONOR The obligation of Optionor to consummate the Transaction shall be subject to fulfillment (or waiver) at or prior to the date of the Closing of the following conditions: 6.1 Representations, Warranties and Covenants. The representations, warranties and covenants made by Optionee in this Agreement or in any document delivered by Optionee pursuant to this Agreement shall be true and correct in all material respects when made and on and as of the date of the Closing as though such representations, warranties and covenants were made on and as of such date. 6.2 Consents. All consents necessary for the consummation of the Transaction by Optionee shall have been obtained. 6.3 Optionee Deliverables. Optionor shall have received the instruments and other items referred to in Section 7.2. ARTICLE VII THE CLOSING Subject to the terms and conditions of this Agreement, the Closing shall take place promptly after satisfaction or waiver of the conditions set forth in Articles V and VI hereof. 7.1 Closing Deliveries by Optionor. At Closing, Optionor shall deliver or cause to be delivered the following items, each (if appropriate) properly executed by Optionor and dated as of the Closing Date: 13 (a) a special warranty deed conveying good and marketable fee simple title to the Property (subject only to the Permitted Liens); (b) a bill of sale pursuant to which Optionor shall convey to Optionee good title to all the Personal Property, free and clear of all liens and encumbrances (other than Permitted Liens); (c) a certification duly executed by Optionor under penalty of perjury, setting forth Optionor's address and Federal tax identification number and certifying that Optionor is not a "foreign person" under Section 1445 (as may be amended) of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder; (d) such assignment agreements as may be deemed necessary and appropriate by Optionee and Optionor pursuant to which Optionor shall assign to Optionee other assets (other than the Excluded Assets) owned by Optionor that comprise the Property, including, without limitation, the Permits (to the extent assignable) and the Intangible Property; (e) a certificate from a duly authorized agent of Optionor certifying that the representations and warranties of Optionor set forth herein are true and correct in all material respects as of the Closing Date; (f) the Lease Agreement duly executed by Genesis, or the Genesis Affiliate, as applicable; (g) a payoff letter or other instrument from the holder of the Mortgage Debt sufficient to enable the Title Company to issue the title insurance policy required by Section 5.4 hereof without any exception for the Mortgage Debt; (h) the indemnification agreement and, if applicable, the guaranty referenced in Section 10.13, duly executed by Genesis; and (i) such other documents and instruments as Optionee and Optionor agree are necessary or appropriate. 7.2 Closing Deliveries by Optionee. At Closing, Optionee shall deliver or cause to be delivered the following items, each (if appropriate) properly executed by Optionee and dated as of the Closing Date: (a) the Purchase Price; (b) a certificate, in form satisfactory to counsel for Optionee, from a duly authorized officer of Optionee certifying that the representations and warranties of Optionee set forth herein are true and correct in all material respects as of the Closing Date; (c) the assignment agreements referenced in Section 7.1(d) above; 14 (d) the Lease Agreement, duly executed by Optionee; and (e) such other documents and instruments as Optionor and Optionee agree are necessary or appropriate. 7.3 Closing Costs. Optionee and Optionor shall each pay one-half (1/2) of the documentary and transfer fees imposed on or in connection with the Transaction. Optionee agrees to pay all other costs associated with the Closing, including (i) survey costs, (ii) costs of obtaining a title insurance policy for the benefit of Optionee, and (iii) all recording fees and charges. Each party shall pay its own legal fees. 7.4 Adjustments. Optionor and Optionee agree that charges, credits and adjustments shall be made as of the Closing Date, and a statement setting forth such adjustments shall be initialed by the parties. The subject areas of such adjustments shall include: (a) Real estate, personal property and similar taxes and assessments (general and special, ordinary and extraordinary) that have become or may become a lien on the Property; (b) Charges for public utilities servicing the Property, payments under the Contracts, charges under easements and similar agreements affecting the Property; (c) Insurance premiums, if any, to the extent policies are assumed by Optionee; (d) All other charges and fees customarily prorated and adjusted in similar transactions. The parties shall prorate on the best available information; all adjustments that cannot be determined precisely as of the Closing Date shall be readjusted as soon as practicable. Optionor shall use its best efforts to have all utility meters read as of the Closing Date. To the extent practicable, as Optionor and Optionee agree as appropriate, such prorations may occur outside the Closing by arrangement with the vendor or supplier of services (e.g., utilities). Any prorations which are the obligation of Optionee will be assumed by the lessee under the Lease Agreement. 7.5 Possession. At Closing, Optionor shall deliver possession of the Property to Optionee (subject to the rights of tenants under the Leases), the Property to be in the same condition and repair as on the date hereof, reasonable wear and tear excepted. ARTICLE VIII REMEDIES ON DEFAULT 8.1 Optionor's Remedies. Except for any breaches waived in writing by Optionor, if Optionee fails to consummate the Transaction when 15 required to do so pursuant to the provisions hereof, then Optionor shall be entitled to terminate this Agreement whereupon this Agreement shall terminate and in addition thereto, Optionee shall reimburse Optionor for all reasonable costs incurred by Optionor in connection with the Transaction, provided that the amount to be reimbursed by Optionee shall not exceed One Hundred Thousand Dollars ($100,000.00). 8.2 Optionee's Remedies. Except for any breaches waived in writing by Optionee, if Optionor has breached any of Optionor's covenants or obligations under this Agreement or has failed, refused or is unable to consummate the Transaction by the date of the Closing when and as required to do so hereunder, then Optionee shall have the right to bring an action at law or in equity seeking the specific performance of the obligations of Optionor hereunder and in addition thereto or in lieu thereof, Optionee may avail itself of any other remedies available at law or in equity on account of such breach, provided, however, the amount of money damages that Optionee may recover from Optionor on account of such breach shall not exceed One Hundred Thousand Dollars ($100,000.00). ARTICLE IX INDEMNIFICATION 9.1 Indemnification by Optionor. Optionor hereby indemnifies and agrees to defend and hold harmless Optionee, and its officers, directors, employees, agents and successors and assigns, and its general partners and any officers, trustees, directors, employees, agents and successors and assigns of such general partners ("Optionee Indemnitees"), from and against any and all demands, claims, actions or causes of action, assessments, expenses, costs, damages, losses and liabilities (including attorneys' fees and other charges) which may at any time be asserted against or suffered by any Optionee Indemnitee, the Property, or any part thereof, whether before or after the date of the Closing, as a result of, on account of or arising from (a) the failure of Optionor to perform any of Optionor's obligations hereunder or, to the extent provided in Section 10.1, the breach by Optionor of any of Optionor's representations and warranties made herein, (b) events, contractual obligations, acts or omissions of Optionor that occurred in connection with the ownership or operation of the Property prior to the Closing, (c) damage to property or injury to or death of any person or any claims for any debts or obligations occurring on or about or in connection with the Property or any portion thereof or with respect to the operation of the Property at any time or times prior to the Closing, or (d) any obligation, claim, suit, liability, contract, agreement, debt or encumbrance (other than Permitted Liens) created, arising or accruing prior to the date of the Closing, regardless of when asserted, relating to the Property or its operation, including, without limitation, any and all liabilities for federal or state income taxes or other taxes, which shall not have been set forth or specifically described in this Agreement or the Schedules and the Exhibits hereto. The obligations of Optionor under this Section 9.1 shall survive the Closing. 9.2 Indemnification by Optionee. Optionee hereby indemnifies and agrees to defend and hold harmless Optionor, and its officers, directors, 16 employees, agents and successors and assigns ("Optionor Indemnitees"), from and against any and all demands, claims, actions or causes of action, assessments, expenses, costs, damages, losses and liabilities (including attorneys' fees and other charges) which may at any time be asserted against or suffered by any Optionor Indemnitee, whether before or after the date of the Closing, as a result of, on account of or arising from (a) the failure of Optionee to perform any of Optionee's obligations hereunder or, to the extent provided in Section 10.1, the breach by Optionee of any of Optionee's representations and warranties made herein, (b) events, contractual obligations, acts or omissions of Optionee that occurred in connection with the ownership or operation of the Property subsequent to the Closing, (c) damage to property or injury to or death of any person or any claims for any debts or obligations occurring on or about or in connection with the Property or any portion thereof or with respect to the operation of the Property at any time or times subsequent to the Closing, or (d) any damage to the Property caused by Optionee in connection with any studies, investigations or tests conducted by Optionee pursuant to Section 4.2 hereof. The obligations of Optionee under this Section 9.2 shall survive the Closing. ARTICLE X GENERAL PROVISIONS 10.1 Survival of Liability with Respect to Representations and Warranties. It is the express intention and agreement of the parties that the representations and warranties of Optionee and Optionor set forth in this Agreement shall survive the consummation of the Transaction for a period of one (1) year from the date of the Closing except in the case of the representations and warranties of Optionor set forth in Section 3.17 hereof which shall survive the consummation of the Transaction for a period of two (2) years from the date of the Closing. Such representations and warranties shall expire and be terminated and extinguished forever at the expiration of such period except where written notice of a claim for breach shall have been delivered prior to the expiration of such period. Any written notice given within such period setting forth a claim must set forth the nature and details of the claim with specificity. Optionor's liability for a breach of a representation and warranty shall not be subject to the limitation of liability set forth in Section 8.2 hereof; provided, however, the maximum amount that Optionee or its assigns may recover for a breach of a representation or warranty by Optionor hereunder shall not exceed twenty percent (20%) of the amount of the Purchase Price. 10.2 Notices. All notices, demands, requests or other communications which may be or are required to be given or made by either Optionor or Optionee to the other pursuant to this Agreement shall be in writing and shall be hand delivered or transmitted by certified mail, express overnight mail or delivery service, telegram, telex or facsimile transmission to the parties at the following addresses: If to Optionor: McKerley Health Facilities 148 West State Street Kennett Square, Pennsylvania 19348 Attention: Michael R. Walker Chairman and Chief Executive Officer 17 Attention: Law Department - Ira C. Gubernick, Esq. If to Optionee: ElderTrust Operating Limited Partnership c/o ElderTrust 415 McFarlan Road, Suite 202 Kennett Square, Pennsylvania 19348 Attention: Edward B. Romanov, Jr. President and Chief Executive Officer or such other address as the addressee may indicate by written notice to the other party. Each notice, demand, request or communication which shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes at such time as it is delivered to the addressee (with the delivery receipt, the affidavit of messenger or (with respect to a telex) the answerback being deemed conclusive but not exclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 10.3 Governing Law. This Agreement, the rights and obligations of the parties hereto and any claims or disputes relating thereto shall be governed by and construed under the laws of the State of New Hampshire (but not including the choice of law rules thereof). 10.4 Recording. At the option of Optionee, Optionor and Optionee shall execute a memorandum of this Agreement in recordable form (the "Memorandum of Option") and shall cause such Memorandum of Option to be recorded in the public records of Coos County, New Hampshire. In the event the Option is not exercised by Optionee by the Expiration Date, Optionee shall, at Optionor's request, execute a termination of option in recordable form. 10.5 Assignment. No party hereto shall assign this Agreement, in whole or in part, whether by operation of law or otherwise, without the prior written consent of Optionor (if the assignor is Optionee) or Optionee (if the assignor is Optionor), which consent shall not be unreasonably withheld, and any purported assignment contrary to the terms hereof shall be null, void and of no force and effect; provided, that Optionee may (i) assign this Agreement and Optionee's rights hereunder, to a corporation, partnership, limited liability company or other entity of which the entire ownership interest is owned directly or indirectly by Optionee or its affiliates without the consent of Optionor, or (ii) contribute the Property, or any portion thereof, to a partnership, limited liability company or other entity in exchange for 100% of the ownership interests in such entity, but no such assignment or contribution shall relieve Optionee of its obligations hereunder. 10.6 Parties in Interest. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns as permitted hereunder. No person or entity other than the parties hereto is or shall be entitled to bring any action to enforce any provision of this Agreement against any of the parties hereto, and the covenants and agreements set forth in this Agreement shall be solely for the 18 benefit of, and shall be enforceable only by, the parties hereto or their respective successors and assigns as permitted hereunder. 10.7 Severability. If any part of any provision of this Agreement or any other agreement, document or writing given pursuant to or in connection with this Agreement shall be invalid or unenforceable under applicable law, such part shall be ineffective to the extent of such invalidity or unenforceability only, without in any way affecting the remaining parts of such provisions or the remaining provisions of said agreement so long as the economic and legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. 10.8 Entire Agreement; Amendment. This Agreement and the Exhibits and Schedules attached hereto (each of which shall be deemed incorporated herein and made a part hereof) contain the final and entire agreement between the parties hereto with respect to the Transaction and are intended to be an integration of all prior negotiations and understandings. Optionor and Optionee shall not be bound by any terms, conditions, statements, warranties or representations, oral or written, not contained or referred to herein or therein. No amendment, change or modification of this Agreement shall be valid unless the same is in writing and signed by the parties hereto. 10.9 No Waiver. No delay or failure on the part of any party hereto in exercising any right, power or privilege under this Agreement or under any other instrument or document given in connection with or pursuant to this Agreement shall impair any such right, power or privilege or be construed as a waiver of any default or any acquiescence therein. No single or partial exercise of any such right, power or privilege shall preclude the further exercise of such right, power or privilege. No waiver shall be valid against any party hereto unless made in writing and signed by the party against whom enforcement of such waiver is sought and then only to the extent expressly specified therein. 10.10 Headings. Section and subsection headings contained in this Agreement have been inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof. 10.11 Risk of Loss. The risk of loss or damage to all or any part of the Property by fire or other casualty prior to the Closing shall be borne by Optionor. In the event of such damage to all or part of the Property, Optionee may, at Optionee's election, (i) terminate this Agreement whereupon neither party shall have any further liability to the other hereunder or (ii) consummate the Transaction, in which event Optionor shall assign to Optionee at Closing all of Optionor's right, title and interest in and to all of the proceeds of insurance payable by virtue of such casualty. 10.12 Counterparts. To facilitate execution, this Agreement may be executed in as many counterparts as may be required. It shall not be necessary that the signature of or on behalf of each party appears on each counterpart, but it shall be sufficient that the signature of or on behalf of 19 each party appears on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. It shall not be necessary in any proof of this Agreement to produce or account for more than a number of counterparts containing the respective signatures of or on behalf of all of the parties. 10.13 Guaranty. Genesis shall indemnify Optionee for any loss or damage due to a breach by Optionor of one or more of the representations and warranties made by Optionor herein on the terms set forth in a certain Indemnification Agreement to be executed and delivered by Genesis at Closing to and for the benefit of Optionee, which Indemnification Agreement shall be substantially in the form of Exhibit D attached hereto and made a part hereof. In addition thereto, provided that the Genesis Affiliate, and not Genesis, enters into the Lease Agreement, then at Closing Genesis shall execute and deliver for the benefit of Optionee a guaranty of the obligations of the Genesis Affiliate under the Lease Agreement, which guaranty shall be substantially in the form of Exhibit E attached hereto and made a part hereof. 20 IN WITNESS WHEREOF, Optionor and Optionee have caused this Option Agreement to be duly executed on their behalf as of the date first above written. OPTIONEE: ELDERTRUST OPERATING LIMITED PARTNERSHIP By: ElderTrust, general partner By: /s/ D. Lee McCreary -------------------------------------- Name: D. Lee McCreary Title: Vice President OPTIONOR: MCKERLEY HEALTH FACILITIES By: Meridian Health, Inc., general partner By: /s/ Ira C. Gubernick ------------------------------------- Name: Ira C. Gubernick Title: Secretary EXHIBITS AND SCHEDULES Exhibit A - Legal Description of Real Property Exhibit B - Form of Lease Exhibit C - Arbitration Procedures Exhibit D - Indemnification Agreement Exhibit E - Guaranty of Lease Exhibit F - Appraisal Procedure Schedule 1.4 - Excluded Assets Schedule 3.2 - Required Consents Schedule 3.5 - Liens Schedule 3.6 - Mortgage Debt Schedule 3.9 - Leases Schedule 3.10 - Contracts Schedule 3.12 - Litigation Schedule 3.15 - Insurance Schedule 3.20 - Non-Compliance Schedule 3.22 - Agreements EXHIBIT A DESCRIPTION OF THE REAL PROPERTY EXHIBIT B FORM OF LEASE AGREEMENT EXHIBIT C ARBITRATION Any controversy or dispute or claim relating to the calculation of Substantial Occupancy hereunder shall be settled exclusively by arbitration, in Philadelphia, Pennsylvania in accordance with the rules of the American Arbitration Association then in force (the "Rules"). The party requesting arbitration shall serve upon the other party to the controversy or dispute a written demand for arbitration stating the substance of the controversy or dispute and the contention of the party requesting arbitration and the name and address of the arbitrator appointed by it. The recipient of such demand shall within twenty (20) days after such receipt appoint an arbitrator, and the two arbitrators shall appoint a third. The decision of any two arbitrators shall be final and binding upon the parties. In the event that the two arbitrators fail to appoint a third arbitrator within twenty (20) days of the appointment of the second arbitrator, either arbitrator, or either party to the arbitration, may apply to a judge of the United States District Court for the Eastern District of Pennsylvania for the appointment of the third arbitrator, and the appointment of such arbitrator by such judge on such application shall have precisely the same force and effect as if such arbitrator had been appointed by the two arbitrators. If for any reason the third arbitrator cannot be appointed in the manner prescribed by the preceding sentence, either regularly appointed arbitrator, or either party to the arbitration, may apply to the American Arbitration Association for appointment of the third arbitrator in accordance with the Rules. Should the party upon whom the demand for arbitration has been served fail or refuse to appoint an arbitrator within twenty (20) days, the single arbitrator shall have the right to decide alone, and such arbitrator's decision or award shall be final and binding upon the parties. Each arbitrator chosen by a party shall be a fit person, and the third arbitrator however chosen shall be a fit and impartial person, in each case having at least ten (10) years experience in litigating, adjudicating or otherwise administering cases and controversies related to the subject matter of the controversy, dispute or claim being submitted to arbitration. The parties hereto agree to abide by all decisions rendered in an arbitration proceeding in accordance with the foregoing, and all such decisions may be filed by the prevailing party with any court having jurisdiction over the person or property of the other party as a basis for judgment and the issuance of execution thereon. The fees of each arbitrator and related expenses of arbitration shall be apportioned among the parties as determined by the arbitrators. The parties to the arbitration shall bear equally the fees of each arbitrator and related expenses of arbitration. Unless otherwise agreed by the parties to the arbitration, all hearings shall be held, and all submissions shall be made by the parties, within ten (10) days of the date of the selection of the third arbitrator, and the decisions of the arbitrators shall be made within thirty (30) days of the later of the date of the closing of the hearings or the date of the final submissions by the parties. The parties consent to the jurisdiction of the Supreme Court of the Commonwealth of Pennsylvania and of the United States District Court for the Eastern District of Pennsylvania for all purposes in connection with the arbitration. The parties consent that any process or notice of motion or other application to either of said courts, and any paper in connection with arbitration, may be served by certified mail, return receipt requested, or by personal service, or in such other manner as may be permissible under the rules of the applicable court or arbitration tribunal, provided a reasonable time for appearance is allowed. EXHIBIT D INDEMNIFICATION AGREEMENT EXHIBIT E GUARANTY OF LEASE EXHIBIT F APPRAISAL PROCESS If Optionor and Optionee are unable to agree upon the fair market value of the Property, each shall within ten (10) days after written demand by the other select one MAI Appraiser (as defined below) to participate in the determination of fair market value. Within ten (10) days of such selection, the MAI Appraisers so selected by Optionor and Optionee shall select a third MAI Appraiser ("Third MAI Appraiser"). The three (3) selected MAI Appraisers shall each determine the fair market value of the Property within thirty (30) days of the selection of the third appraiser. To the extent consistent with sound appraisal practices as then existing at the time of any such appraisal. The fees and expenses of any MAI Appraiser retained pursuant to this Exhibit F shall be borne by the party retaining such MAI Appraiser, with the exception of the Third MAI Appraiser whose fees and expenses shall be borne by the Optionor and Optionee equally. In the event either Optionor or Optionee fails to select an MAI Appraiser within the time period set forth in the foregoing paragraph, the MAI Appraiser selected by the other party shall alone determine the fair market value of the Property in accordance with the provisions of this Exhibit F and the fair market value so determined shall be binding upon Optionor and Optionee. In the event the MAI Appraisers selected by Optionor and Optionee are unable to agree upon a third MAI Appraiser within the time period set forth in the first paragraph of this Exhibit F, either Optionor or Optionee shall have the right to apply, at the parties' shared expense, to the presiding judge of the court of original trial jurisdiction in the jurisdiction in which the Property is located to name the third MAI Appraiser. Within five (5) days after completion of the third MAI Appraiser's appraisal, all three MAI Appraisers shall meet and a majority of the MAI Appraisers shall attempt to determine the fair market value of the Property. If a majority are unable to determine the fair market value at such meeting, the three appraisals shall be added together and their total divided by three. The resulting quotient shall be the fair market value of the Property. If, however, either or both of the low appraisal or the high appraisal are more than ten percent (10%) lower or higher than the middle appraisal, any such lower or higher appraisal shall be disregarded. If only one appraisal is disregarded, the remaining two appraisals shall be added together and their total divided by two, and the resulting quotient shall be such fair market value. If both the lower appraisal and higher appraisal are disregarded as provided herein, the middle appraisal shall be such fair market value. In any event, the result of the foregoing appraisal process shall be final and binding. For purposes hereof, "MAI Appraiser" shall mean an appraiser licensed or otherwise qualified to do business in the State where the Property is located and who has substantial experience in performing appraisals of facilities similar to the Property and is certified as a member of the American Institute of Real Estate Appraisers or certified as a SRPA by the Society of Real Estate Appraisers, or, if such organizations no longer exist or certify appraisers, such successor organization or such other organization as is approved by Optionee. EX-10.25 14 EXHIBIT 10.25 ================================================================================ CREDIT AGREEMENT among ELDERTRUST, ELDERTRUST OPERATING LIMITED PARTNERSHIP, VARIOUS BANKS, DEUTSCHE BANK AG, NEW YORK BRANCH, as ISSUING BANK and GERMAN AMERICAN CAPITAL CORPORATION, as ADMINISTRATIVE AGENT ---------------------------------- Dated as of January 30, 1998 ---------------------------------- $140,000,000 ================================================================================ TABLE OF CONTENTS
SECTION 1.1. Amount and Terms of Credit; Letters of Credit.......................................................1 1.01 The Commitments....................................................................................1 1.02 Minimum Amount of Each Borrowing...................................................................1 1.03 Notice of Borrowing................................................................................1 1.04 Disbursement of Funds..............................................................................2 1.05 Notes..............................................................................................3 1.06 Conversions........................................................................................3 1.07 Pro Rata Borrowings................................................................................4 1.08 Interest...........................................................................................4 1.09 Interest Periods...................................................................................5 1.10 Increased Costs, Illegality, etc. in Respect of Loans..............................................5 1.11 Compensation.......................................................................................7 1.12 Change of Lending Office...........................................................................8 1.13 Letters of Credit..................................................................................8 1.14 Maximum Letter of Credit Outstandings; Final Maturities............................................9 1.15 Letter of Credit Requests; Minimum Stated Amount...................................................9 1.16 Letter of Credit Participations...................................................................10 1.17 Agreement to Repay Letter of Credit Drawings......................................................12 1.18 Increased Costs in Respect of Letters of Credit...................................................12 SECTION 2. Fees; Reductions of Commitment.....................................................................13 2.01 Fees..............................................................................................13 2.02 Voluntary Termination of Unutilized Commitments...................................................14 2.03 Mandatory Termination of Commitments; Extension of Maturity Date..................................14 SECTION 3. Prepayments; Payments; Taxes......................................................................15 3.01 Voluntary Prepayments.............................................................................15 3.02 Mandatory Repayments..............................................................................16 3.03 Method and Place of Payment.......................................................................17 3.04 Net Payments; Taxes...............................................................................17 SECTION 4. Conditions Precedent to Effective Date............................................................20 4.01 Execution of Agreement, Notes ....................................................................20 4.02 Fees, etc.........................................................................................20 4.03 Opinions of Counsel...............................................................................20 4.04 Corporate and Partnership Documents; Proceedings; etc.............................................20 4.05 Debt Agreements...................................................................................21 4.06 Pledge Agreement..................................................................................21
4.07 Pledge and Security Agreement and Security Agreement..............................................21 4.08 Subsidiaries Guaranty.............................................................................22 4.09 Collateral Assignments; Mortgages; Title Insurance; Surveys; etc..................................22 4.10 IPO...............................................................................................24 4.11 Adverse Change, etc...............................................................................24 4.12 Litigation........................................................................................24 4.13 Initial Borrowing Base Properties, etc............................................................24 4.14 Solvency Certificate..............................................................................25 4.15 Pro Forma Balance Sheets..........................................................................25 4.16 Initial Borrowing Base Certificate................................................................26 4.17 No Default; Representations and Warranties........................................................26 4.18 REIT Equity Interests Widely Held.................................................................26 SECTION 5. Conditions Precedent to All Loans and Letters of Credit...........................................26 5.01 No Default; Representations and Warranties........................................................26 5.02 Notice of Borrowing...............................................................................27 5.03 Property Information; etc.........................................................................27 5.04 Certain Requirements with Respect to Loans and Letters of Credit..................................27 5.05 Subsequent Legal Opinions.........................................................................28 SECTION 6. Representations and Warranties....................................................................28 6.01 Status............................................................................................29 6.02 Power and Authority...............................................................................29 6.03 No Violation......................................................................................29 6.04 Governmental Approvals............................................................................30 6.05 Financial Statements; Financial Condition; Undisclosed Liabilities; Projections; etc..............30 6.06 Litigation........................................................................................32 6.07 True and Complete Disclosure......................................................................32 6.08 Use of Proceeds; Margin Regulations...............................................................32 6.09 Tax Returns and Payments..........................................................................32 6.10 Compliance with ERISA.............................................................................33 6.11 The Security Documents............................................................................34 6.12 Status as REIT....................................................................................36 6.13 Properties........................................................................................36 6.14 Healthcare Matters................................................................................36 6.15 Subsidiaries......................................................................................38 6.16 Compliance with Statutes, etc.....................................................................38 6.17 Investment Company Act............................................................................38 6.18 Public Utility Holding Company Act................................................................38 6.19 Environmental Matters.............................................................................38 6.20 Labor Relations...................................................................................39 6.21 Intellectual Property.............................................................................39 6.22 Indebtedness......................................................................................39
(ii)
6.23 Operating Leases; Management Agreements; Ground Leases............................................40 SECTION 7. Affirmative Covenants.............................................................................40 7.01 Information Covenants.............................................................................40 7.02 Books, Records and Inspections....................................................................44 7.03 Maintenance of Property; Insurance................................................................45 7.04 Corporate Franchises..............................................................................47 7.05 Compliance with Statutes, etc.....................................................................47 7.06 Compliance with Environmental Laws................................................................48 7.07 ERISA.............................................................................................48 7.08 End of Fiscal Years; Fiscal Quarters..............................................................50 7.09 Performance of Obligations........................................................................50 7.10 Payment of Taxes..................................................................................50 7.11 Certain Requirements with Respect to Acquisitions of Borrowing Base Properties and Provision or Purchase of Borrowing Base Pledged Mortgage Loans................................50 7.12 Certain Partnerships..............................................................................55 7.13 Operating Leases; Management Agreements and Pledged Mortgage Loan Documents.......................56 7.14 Lien Waivers; etc.................................................................................56 7.15 Appraisals........................................................................................56 7.16 Casualty and Condemnation; Restoration............................................................56 7.17 REIT Requirements.................................................................................64 7.18 Syndication Cooperation...........................................................................64 SECTION 8. Negative Covenants................................................................................64 8.01 Liens.............................................................................................65 8.02 Consolidation, Merger, Purchase or Sale of Assets, etc............................................67 8.03 Dividends.........................................................................................71 8.04 Indebtedness......................................................................................72 8.05 Advances, Investments and Loans...................................................................73 8.06 Transactions with Affiliates......................................................................74 8.07 Capital Expenditures..............................................................................74 8.08 Minimum Equity Value; Minimum Tangible Net Worth..................................................75 8.09 Total Leverage Ratio..............................................................................75 8.10 Minimum Interest Coverage Ratio...................................................................75 8.11 Public REIT Status................................................................................75 8.12 Limitation on Creation of Subsidiaries............................................................75 8.13 Limitation on Payments of Certain Indebtedness; Modifications of Certain Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Agreements; etc...................................................................................76 8.14 Limitation on Certain Restrictions on Subsidiaries................................................76 8.15 Limitation on Issuance of Capital Stock...........................................................77 8.16 Business..........................................................................................77
(iii)
8.17 Borrowing Base....................................................................................77 SECTION 9. Events of Default................................................................................77 9.01 Payments.........................................................................................77 9.02 Representations, etc.............................................................................78 9.03 Covenants........................................................................................78 9.04 Default Under Other Agreements...................................................................78 9.05 Bankruptcy, etc..................................................................................78 9.06 ERISA............................................................................................79 9.07 Security Documents...............................................................................79 9.08 Guaranty.........................................................................................80 9.09 Judgments........................................................................................80 9.10 Change of Control................................................................................80 9.11 Initial Borrowing Base Collateral................................................................80 SECTION 10. Definitions and Accounting Terms.................................................................81 10.01 Defined Terms.............................. .....................................................81 SECTION 11. The Administrative Agent........................................................................105 11.01 Appointment.....................................................................................105 11.02 Nature of Duties................................................................................105 11.03 Lack of Reliance on the Administrative Agent....................................................106 11.04 Certain Rights of the Administrative Agent......................................................106 11.05 Reliance........................................................................................106 11.06 Indemnification.................................................................................107 11.07 The Administrative Agent in its Individual Capacity.............................................107 11.08 Holders.........................................................................................107 11.09 Resignation by the Administrative Agent; Removal of the Administrative Agent....................107 SECTION 12. Miscellaneous...................................................................................108 12.01 Payment of Expenses, etc........................................................................108 12.02 Right of Setoff.................................................................................109 12.03 Notices.........................................................................................110 12.04 Benefit of Agreement............................................................................110 12.05 No Waiver; Remedies Cumulative..................................................................112 12.06 Payments Pro Rata...............................................................................112 12.07 Calculations; Computations......................................................................113 12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL..........................113 12.09 Counterparts....................................................................................114 12.10 Effectiveness...................................................................................114 12.11 Headings Descriptive............................................................................115 12.12 Amendments or Waiver, etc.......................................................................116 12.13 Survival........................................................................................116 12.14 Domicile of Loans...............................................................................116 12.15 Confidentiality.................................................................................116 12.16 Register........................................................................................117 12.17 Commercial Loan Transactions....................................................................117 12.18 Servicing of Loans..............................................................................117 (iv)
Section 13. Parent Guaranty.................................................................................118 13.01 The Guaranty....................................................................................118 13.02 Bankruptcy......................................................................................118 13.03 Nature of Liability.............................................................................118 13.04 Independent Obligation..........................................................................118 13.05 Authorization...................................................................................119 13.06 Reliance........................................................................................120 13.07 Subordination...................................................................................120 13.08 Waiver..........................................................................................120 13.09 Nature of Liability.............................................................................121 13.10 Interest Rate Protection Agreements and Other Agreements................................................................................121 (v)
Page ---- SCHEDULE I Commitments SCHEDULE II Bank Addresses SCHEDULE III Real Property; Initial Borrowing Base Properties SCHEDULE IV Subsidiaries SCHEDULE V Existing Indebtedness SCHEDULE VI Insurance SCHEDULE VII Existing Liens SCHEDULE VIII Existing Mortgage Loans; Initial Borrowing Base Pledged Mortgage Loans EXHIBIT A Notice of Borrowing EXHIBIT B-1 Note EXHIBIT B-2 Form of Letter of Credit Request EXHIBIT C Section 3.04(b)(ii) Certificate EXHIBIT D Opinion of Hogan & Hartson L.L.P. EXHIBIT E Officers' Certificate EXHIBIT F-1 Pledge Agreement EXHIBIT F-2 Pledge and Security Agreement EXHIBIT G Security Agreement EXHIBIT H Subsidiaries Guaranty EXHIBIT I Mortgage EXHIBIT J Officer's Solvency Certificate EXHIBIT K Collateral Assignment EXHIBIT L Borrowing Base Certificate EXHIBIT M-1 Quarterly Borrowing Base Property Financial Report EXHIBIT M-2 Quarterly Borrowing Base Pledged Mortgage Loan Financial Report EXHIBIT N Quarterly Cash Flow Report EXHIBIT O Subordination Provisions EXHIBIT P Assignment and Assumption Agreement EXHIBIT Q Intercompany Note EXHIBIT R Completion Certificate EXHIBIT S Notice of Renovation/Restoration
(vi) CREDIT AGREEMENT, dated as of January 30, 1998, among ELDERTRUST, a Maryland real estate investment trust (the "REIT"), ELDERTRUST OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership (the "Borrower"), the Banks party hereto from time to time, DEUTSCHE BANK AG, NEW YORK BRANCH, as Issuing Bank (the "Issuing Bank") and GERMAN AMERICAN CAPITAL CORPORATION, as Administrative Agent (all capitalized terms used herein and defined in Section 10 are used herein as therein defined). W I T N E S S E T H : WHEREAS, subject to and upon the terms and conditions set forth herein, the Banks and the Issuing Bank are willing to make available to the Borrower the respective credit facilities provided for herein; NOW, THEREFORE, IT IS AGREED: SECTION 1.1. Amount and Terms of Credit; Letters of Credit. 1.0 The Commitments. Subject to and upon the terms and conditions set forth herein, each Bank severally agrees, at any time and from time to time on and after the Effective Date and prior to the Maturity Date, to make a revolving loan or revolving loans (each, a "Loan" and, collectively, the "Loans") to the Borrower, which Loans (i) shall, at the option of the Borrower, be Base Rate Loans or Eurodollar Loans, provided that, except as otherwise specifically provided in Section 1.10(b), all Loans comprising the same Borrowing shall at all times be of the same Type, (ii) may be repaid and reborrowed at any time in accordance with the provisions hereof, (iii) shall not exceed for any Bank at any time outstanding that aggregate principal amount which, when added to the product of (x) such Bank's Loan Percentage and (y) the aggregate amount of all Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Loans) then outstanding, equals the Commitment of such Bank at such time and (iv) shall not exceed for all Banks at any time outstanding that aggregate principal amount which, when added to the sum of all Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Loans) at such time, equals the lesser of (x) the Total Commitment at such time and (y) the Borrowing Base at such time. 1.02 Minimum Amount of Each Borrowing. The aggregate principal amount of each Borrowing of Loans shall not be less than the Minimum Borrowing Amount. Not more than one Borrowing may occur on the same date and at no time shall there be outstanding more than ten Borrowings of Eurodollar Loans. 1.03 Notice of Borrowing. a) (a) Whenever the Borrower desires to incur a Borrowing of Loans, the Borrower shall give the Administrative Agent at the Notice Office at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of each Eurodollar Loan and at least one Business Day's prior written notice (or telephonic notice promptly confirmed in writing) of each Base Rate Loan to be made hereunder, provided that any such notice shall be deemed to have been given on a certain day only if given before 11:00 A.M. (New York time) on such day. Each such written notice or written confirmation of telephonic notice (each a "Notice of Borrowing"), except as otherwise expressly provided in Section 1.10, shall be irrevocable and shall be given by the Borrower in the form of Exhibit A, appropriately completed to specify (i) the aggregate principal amount of the Loans to be incurred pursuant to such Borrowing, (ii) the date of such Borrowing (which shall be a Business Day), (iii) the specific uses to be made of the proceeds of such Loans and (iv) whether the Loans being incurred pursuant to such Borrowing are to be initially maintained as Base Rate Loans or Eurodollar Loans. The Administrative Agent shall promptly give each Bank facsimile or other written notice of such proposed Borrowing, of such Bank's proportionate share thereof and of the other matters required by the immediately preceding sentence to be specified in the Notice of Borrowing. Notwithstanding anything to the contrary contained in this Agreement, unless the Administrative Agent otherwise agrees, no more than four Notices of Borrowing may be given in any 30 consecutive day period. (b) Without in any way limiting the obligation of the Borrower to confirm in writing any telephonic notice of any Borrowing of Loans, the Administrative Agent may act without liability upon the basis of telephonic notice of such Borrowing believed by the Administrative Agent in good faith to be from an Authorized Officer of the Borrower prior to receipt of written confirmation. In each such case, the Borrower hereby waives the right to dispute the Administrative Agent's record of the terms of such telephonic notice of such Borrowing. 1.04 Disbursement of Funds. No later than 2:00 P.M. (New York time) on the date specified in each Notice of Borrowing, each Bank which has received the notice referred to in the next to last sentence of Section 1.03(a) will disburse its pro rata portion of each Borrowing requested to be made on such date. All such amounts shall be disbursed in Dollars and in immediately available funds at the Payment Office, and the Administrative Agent will promptly disburse to the Borrower at the Payment Office, in Dollars and in immediately available funds, the aggregate of the amounts so made available by the Banks. Unless the Administrative Agent shall have been notified by any Bank prior to the date of Borrowing that such Bank does not intend to disburse to the Administrative Agent such Bank's portion of any Borrowing to be made on such date, the Administrative Agent may assume that such Bank has disbursed such amount to the Administrative Agent on such date of Borrowing and the Administrative Agent may, in reliance upon such assumption, disburse to the Borrower a corresponding amount. If such corresponding amount is not in fact disbursed to the Administrative Agent by such Bank, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Bank. If such Bank does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the Borrower and the Borrower shall within one Business Day thereafter pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover on demand from such Bank or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was disbursed by the Administrative Agent to the Borrower until the date such corresponding amount is recovered by the 2 Administrative Agent, at a rate per annum equal to (i) if recovered from such Bank, the overnight Federal Funds Rate and (ii) if recovered from the Borrower, the rate of interest applicable to the respective Borrowing, as determined pursuant to Section 1.08. Nothing in this Section 1.04 shall be deemed to relieve any Bank from its obligation to make Loans hereunder or to prejudice any rights which the Borrower may have against any Bank as a result of any failure by such Bank to make Loans hereunder. 1.05 Notes. (a) The Borrower's obligation to pay the principal of, and interest on, the Loans made by each Bank to the Borrower shall be evidenced by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-1 with blanks appropriately completed in conformity herewith (each, a "Note" and, collectively, the "Notes"). The Note issued by the Borrower to each Bank shall (i) be executed by the Borrower, (ii) be payable to such Bank or its registered assigns and be dated the Effective Date (or, if issued after the Effective Date, be dated the date of the issuance thereof), (iii) be in a stated principal amount equal to the Commitment of such Bank (or, if issued after the termination of such Commitment, be in a stated principal amount equal to the outstanding Loans of such Bank at such time) and be payable in the principal amount of the outstanding Loans evidenced thereby, (iv) mature on the Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to voluntary prepayment as provided in Section 3.01, or mandatory repayment as provided in Section 3.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (b) Each Bank will note on its internal records the amount of each Loan made by it and each payment in respect thereof and will prior to any transfer of its Note properly endorse on the reverse side thereof the outstanding principal amount of Loans evidenced thereby. Failure to make any such notation (or any error in such notation) shall not affect the Borrower's obligations to the holder from time to time of such Note in respect of such Loans. 1.06 Conversions. The Borrower shall have the option to convert, on any Business Day occurring after the Effective Date, all or a portion equal to at least the Minimum Borrowing Amount of the outstanding principal amount of Loans made to the Borrower into a Borrowing or Borrowings of another Type of Loan, provided that (i) except as otherwise provided in Section 1.10(b), Eurodollar Loans may be converted into Base Rate Loans only on the last day of an Interest Period applicable to the Loans being converted and no partial conversion of a Borrowing of Eurodollar Loans shall reduce the outstanding principal amount of such Eurodollar Loans made pursuant to a single Borrowing to less than the Minimum Borrowing Amount, (ii) Base Rate Loans may only be converted into Eurodollar Loans if no Default or Event of Default is in existence on the date of the conversion, and (iii) no conversion pursuant to this Section 1.06 shall result in a greater number of Borrowings 3 of Eurodollar Loans than is permitted under Section 1.02. Each such conversion shall be effected by the Borrower by giving the Administrative Agent at the Notice Office prior to 11:00 A.M. (New York time) at least three Business Days' prior written notice (or two Business Day's prior written notice in the case of a conversion of Eurodollar Loans into Base Rate Loans) (each a "Notice of Conversion") specifying the Loans to be so converted and the Borrowing(s) pursuant to which such Loans were made. The Administrative Agent shall give each Bank prompt notice of any such proposed conversion affecting any of its Loans. 1.07 Pro Rata Borrowings. All Borrowings of Loans shall be incurred from the Banks pro rata on the basis of their respective Commitments. It is understood that no Bank shall be responsible for any default by any other Bank of its obligation to make Loans hereunder and that each Bank shall be obligated to make the Loans provided to be made by it hereunder, regardless of the failure of any other Bank to make its Loans hereunder. 1.08 Interest. (a) The Borrower agrees to pay interest in respect of the unpaid principal amount of each Base Rate Loan from the date the proceeds thereof are made available to the Borrower until the earlier of (i) the maturity (whether by acceleration or otherwise) of such Base Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan pursuant to Section 1.06, at a rate per annum which shall be equal to the sum of the Applicable Margin plus the Base Rate in effect from time to time. (b) The Borrower agrees to pay interest in respect of the unpaid principal amount of each Eurodollar Loan from the date the proceeds thereof are made available to the Borrower until the earlier of (i) the maturity (whether by acceleration or otherwise) of such Eurodollar Loan and (ii) the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to Section 1.06, 1.09 or 1.10, as applicable, at a rate per annum which shall, during each Interest Period applicable thereto, be equal to the sum of the Applicable Margin plus the Eurodollar Rate for such Interest Period. (c) Overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan and any other overdue amount payable hereunder or under any of the other Credit Documents shall, in each case, bear interest at a rate per annum equal to the greater of (x) 5% per annum in excess of the rate otherwise applicable to Base Rate Loans from time to time and (y) the rate which is 5% in excess of the rate then borne by such Loans (without giving effect to any increase in the rate borne by such Loans as a result of the operation of this clause (c)), in each case with such interest to be payable on demand. Borrower shall pay an amount equal to 5% of any amount due hereunder or under any other Credit Document that is not paid prior to the fifth day after the date on which it is due, to defray the expenses incurred by the Administrative Agent and the Banks in handling and processing the delinquent payment and to compensate the Banks for the loss of the use of the delinquent payment, and the payment of such amount shall be secured by the Security Documents. (d) Accrued (and theretofore unpaid) interest shall be payable in respect of each Loan, (i) monthly in arrears through the last day of the calendar month on the first Business Day of each subsequent calendar month and (ii) on any repayment or prepayment thereof (on the amount repaid or prepaid), at maturity (whether by acceleration or otherwise) and, after such maturity, on demand. (e) Upon each Interest Determination Date, the Administrative Agent shall determine the Eurodollar Rate for each Interest 4 Period applicable to Eurodollar Loans and shall promptly notify the Borrower and the Banks thereof. Each such determination shall, absent manifest error, be final and conclusive and binding on all parties hereto. 1.09 Interest Periods. The interest period (each an "Interest Period") applicable to each Eurodollar Loan shall be a one-month period, provided that: (i) all Eurodollar Loans comprising a Borrowing shall at all times have the same Interest Period; (ii) the initial Interest Period for any Eurodollar Loan shall commence on the date of Borrowing of such Eurodollar Loan (including the date of any conversion thereto from a Loan of a different Type) and each Interest Period occurring thereafter in respect of such Eurodollar Loan shall commence on the day on which the next preceding Interest Period applicable thereto expires; (iii)if any Interest Period relating to a Eurodollar Loan begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last day of such calendar month; (iv) if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided, however, that if any Interest Period for a Eurodollar Loan would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; and (v) no Interest Period in respect of any Borrowing of Eurodollar Loans shall extend beyond the Maturity Date. 1.10 Increased Costs, Illegality, etc. in Respect of Loans. (a) In the event that any Bank shall have determined (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto but, with respect to clause (i) below, may be made only by the Administrative Agent): (i) on any Interest Determination Date that, by reason of any changes arising after the date of this Agreement affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurodollar Rate; or (ii) at any time, that such Bank shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Eurodollar Loan because of (x) any change since the date of this Agreement in any applicable law or governmental rule, regulation, order, guideline or request (whether or not having the force of law) or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, order, guideline or request, such as, for example, but not limited to: (A) a change in the basis of taxation of payment to any 5 Bank of the principal of or interest on such Eurodollar Loan or any other amounts payable hereunder (except for changes in the rate of tax on, or determined by reference to, the net income or net profits of such Bank, or any franchise tax based on the net income or net profits of a Bank, in either case pursuant to the laws of the jurisdiction in which such Bank is organized or in which such Bank's principal office or applicable lending office is located or any subdivision thereof or therein), or (B) a change in official reserve requirements, but, in all events, excluding reserves required under Regulation D to the extent included in the computation of the Eurodollar Rate and/or (y) other circumstances since the date of this Agreement affecting such Bank or the interbank Eurodollar market or the position of such Bank in such market; or (iii)at any time, that the making or continuance of any Eurodollar Loan has been made (x) unlawful by any law or governmental rule, regulation or order, (y) impossible by compliance by any Bank in good faith with any governmental request (whether or not having force of law) or (z) impracticable as a result of a contingency occurring after the date of this Agreement which materially and adversely affects the interbank Eurodollar market; then, and in any such event, such Bank (or the Administrative Agent, in the case of clause (i) above) shall promptly give notice (by telephone confirmed in writing) to the Borrower and, except in the case of clause (i) above, to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the other Banks). Thereafter (x) in the case of clause (i) above, Eurodollar Loans shall no longer be available until such time as the Administrative Agent notifies the Borrower and the Banks that the circumstances giving rise to such notice by the Administrative Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given by the Borrower with respect to Eurodollar Loans which have not yet been incurred (including by way of conversion) shall be deemed rescinded by the Borrower, (y) in the case of clause (ii) above, the Borrower shall pay to such Bank, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Bank in its sole discretion shall determine) as shall be required to compensate such Bank for such increased costs or reductions in amounts received or receivable hereunder (a written notice as to the additional amounts owed to such Bank, showing the basis for the calculation thereof, submitted to the Borrower by such Bank in good faith shall, absent manifest error, be final and conclusive and binding on all the parties hereto) and (z) in the case of clause (iii) above, the Borrower shall take one of the actions specified in Section 1.10(b) as promptly as possible and, in any event, within the time period required by law. Each of the Administrative Agent and each Bank agrees that if it gives notice to the Borrower of any of the events described in clause (i) or (iii) above, it shall promptly notify the Borrower and, in the case of any such Bank, the Administrative Agent, if such event ceases to exist. If any such event described in clause (iii) above ceases to exist as to a Bank, the obligations of such Bank to make Eurodollar Loans and to convert Base Rate Loans into Eurodollar Loans on the terms and conditions contained herein shall be reinstated. In addition, if the Administrative Agent gives notice to the Borrower that the events described in clause (i) above cease to exist, then 6 the obligations of the Banks to make Eurodollar Loans and to convert Base Rate Loans into Eurodollar Loans on the terms and conditions contained herein (but subject to clause (iii) above) shall also be reinstated. (b) At any time that any Eurodollar Loan is affected by the circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and in the case of a Eurodollar Loan affected by the circumstances described in Section 1.10(a)(iii) the Borrower shall) either (x) if the affected Eurodollar Loan is then being made initially or pursuant to a conversion, cancel the respective Borrowing by giving the Administrative Agent telephonic notice (confirmed in writing) on the same date that the Borrower was notified by the affected Bank or the Administrative Agent pursuant to Section 1.10(a)(ii) or (iii) or (y) if the affected Eurodollar Loan is then outstanding, upon at least three Business Days' written notice to the Administrative Agent, require the affected Bank to convert such Eurodollar Loan into a Base Rate Loan, provided that, if more than one Bank is affected at any time, then all affected Banks must be treated the same pursuant to this Section 1.10(b). (c) If at any time any Bank determines that, after the date of this Agreement, the introduction of or any change in any applicable law or governmental rule, regulation, order, guideline, directive or request (whether or not having the force of law and including, without limitation, those announced or published prior to the Effective Date) concerning capital adequacy, or any change in interpretation or administration thereof by any governmental authority, central bank or comparable agency, will have the effect of increasing the amount of capital required or expected to be maintained by such Bank or any corporation controlling such Bank based on the existence of such Bank's Commitment hereunder or its obligations hereunder, then the Borrower shall pay to such Bank, upon its written demand therefor, such additional amounts as shall be required to compensate such Bank or such other corporation for the increased cost to such Bank or such other corporation or the reduction in the rate of return to such Bank or such other corporation as a result of such increase of capital. In determining such additional amounts, each Bank will act reasonably and in good faith and will use averaging and attribution methods which are reasonable, provided that such Bank's reasonable good faith determination of compensation owing under this Section 1.10(c) shall, absent manifest error, be final and conclusive and binding on all the parties hereto. Each Bank, upon determining that any additional amounts will be payable pursuant to this Section 1.10(c), will give prompt written notice thereof to the Borrower and the Administrative Agent, which notice shall show the basis for calculation of such additional amounts. In addition, each such Bank, upon determining that the circumstances giving rise to the payment of additional amounts pursuant to this Section 1.10(c) cease to exist, will give prompt written notice thereof to the Borrower. 1.11 Compensation. The Borrower shall compensate each Bank, upon its written request (which request shall set forth the basis for requesting such compensation), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Bank to fund its Eurodollar Loans but excluding any loss of anticipated profit) which such Bank may sustain: (i) if for any reason (other than a default by such Bank) a Borrowing or continuation of, or 7 conversion from or into, Eurodollar Loans does not occur on a date specified therefor in a Notice of Borrowing or Notice of Conversion (whether or not withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.10(a)); (ii) if any repayment (including any repayment made pursuant to Section 3.01 or 3.02 or as a result of an acceleration of the Loans pursuant to Section 9) or conversion of any Eurodollar Loans occurs on a date which is not the last day of an Interest Period with respect thereto; (iii) if any prepayment of any Eurodollar Loans is not made on any date specified in a notice of prepayment given by the Borrower; or (iv) as a consequence of (x) any other default by the Borrower to repay the Loans when required by the terms of this Agreement or the Note held by such Bank or (y) any election made pursuant to Section 1.10(b). 1.12 Change of Lending Office. Each Bank agrees that on the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 1.18 or Section 3.04 with respect to such Bank, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Bank) to designate another lending office for any Loans or Letters of Credit affected by such event, provided that such designation is made on such terms that such Bank and its lending office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of such Section. Nothing in this Section 1.12 shall affect or postpone any of the obligations of the Borrower or the right of any Bank provided in Sections 1.10 and 3.04. 1.13 Letters of Credit (a) Subject to and upon the terms and conditions set forth herein, the Borrower may request that the Issuing Bank issue, at any time and from time to time on and after the Effective Date and prior to the 30th day prior to the Maturity Date, for the account of the Borrower and for the benefit of any holder (or any trustee, agent or other similar representative for any such holders) of L/C Supportable Obligations of the Borrower or any of its Subsidiaries, an irrevocable standby letter of credit, in a form customarily used by the Issuing Bank or in such other form as has been approved by the Issuing Bank (each such standby letter of credit, a "Letter of Credit"), in support of such L/C Supportable Obligations. All Letters of Credit shall be denominated in Dollars and shall be issued on a sight basis only. (b) Subject to and upon the terms and conditions set forth herein, the Issuing Bank agrees that it will, at any time and from time to time on and after the Effective Date and prior to the 30th day prior to the Maturity Date, following its receipt of the respective Letter of Credit Request, issue for the account of the Borrower, one or more Letters of Credit in support of such L/C Supportable Obligations of the Borrower or any of its Subsidiaries as are permitted to remain outstanding without giving rise to a Default or an Event of Default hereunder, provided that the Issuing Bank shall be under no obligation to issue any Letter of Credit of the types described above if at the time of such issuance: (i) any order, judgment or decree of any governmental authority or arbitrator shall purport by its terms to enjoin or restrain the Issuing Bank from issuing such Letter of Credit or any 8 requirement of law applicable to the Issuing Bank or any request or directive (whether or not having the force of law) from any governmental authority with jurisdiction over the Issuing Bank shall prohibit, or request that the Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Bank with respect to such Letter of Credit any restriction or reserve or capital requirement (for which the Issuing Bank is not otherwise compensated under Section 1.18 or otherwise) not in effect on the date hereof, or any unreimbursed loss, cost or expense which was not applicable or in effect with respect to the Issuing Bank as of the date hereof and which the Issuing Bank reasonably and in good faith deems material to it; or (ii) the Issuing Bank shall have received notice from the Borrower, any other Credit Party or the Required Banks prior to the issuance of such Letter of Credit of the type described in the second sentence of Section 1.15(b). 1.14 Maximum Letter of Credit Outstandings; Final Maturities. Notwithstanding anything to the contrary contained in this Agreement, (i) no Letter of Credit shall be issued the Stated Amount of which, when added to the Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and prior to the issuance of, the respective Letter of Credit) at such time would exceed either (x) $4,500,000 or (y) when added to the aggregate principal amount of all Loans then outstanding, an amount equal to the lesser of (A) the Borrowing Base at such time (based on the Borrowing Base Certificate last delivered) and (B) the Total Commitment at such time and (ii) each Letter of Credit shall by its terms terminate on or before the earlier of (x) the date which occurs 12 months after the date of the issuance thereof (although any such Letter of Credit may be extendible for successive periods of up to 12 months, but not beyond the third Business Day prior to the Maturity Date, on terms acceptable to the Issuing Bank) and (y) three Business Days prior to the Maturity Date. 1.15 Letter of Credit Requests; Minimum Stated Amount. (a) Whenever the Borrower desires that a Letter of Credit be issued for its account, the Borrower shall give the Administrative Agent and the Issuing Bank at least five Business Days' (or such shorter period as is acceptable to the Issuing Bank) written notice thereof. Each notice shall be in the form of Exhibit B-2 appropriately completed (each a "Letter of Credit Request"). (b) The making of each Letter of Credit Request shall be deemed to be a representation and warranty by the Borrower that such Letter of Credit may be issued in accordance with, and will not violate the requirements of, Section 1.14. Unless the Issuing Bank has received notice from the Borrower, any other Credit Party or the Required Banks before it issues a Letter of Credit that one or more of the conditions specified in Section 4 or 5 are not then satisfied, or that the issuance of such Letter of Credit would violate Section 1.14, then the Issuing Bank shall, subject to the terms and conditions of this Agreement, issue the requested Letter of Credit for the account of the Borrower in accordance with the Issuing Bank's usual and customary practices. Upon its issuance of or amendment or modification to any Letter of Credit, the Issuing Bank shall promptly notify the Borrower and the Administrative Agent of such issuance, amendment or modification and such notification shall be accompanied by a copy of the issued Letter of Credit or amendment or modification. Notwithstanding anything to the contrary contained in this Agreement, in the event that a Bank Default exists, the Issuing Bank 9 shall not be required to issue any Letter of Credit unless the Issuing Bank has entered into an arrangement satisfactory to it and the Borrower to eliminate the Issuing Bank's risk with respect to the participation in Letters of Credit by the Defaulting Bank or Banks, including by cash collateralizing such Defaulting Bank's or Banks' Loan Percentage of the Letter of Credit Outstandings. (c) The initial Stated Amount of each Letter of Credit shall not be less than $250,000 or such lesser amount as is reasonably acceptable to the Issuing Bank. 1.16 Letter of Credit Participations. (a) Immediately upon the issuance by the Issuing Bank of any Letter of Credit, the Issuing Bank shall be deemed to have sold and transferred to each Bank, other than the Issuing Bank (each such Bank, in its capacity under this Section 1.16, a "Participant"), and each such Participant shall be deemed irrevocably and unconditionally to have purchased and received from the Issuing Bank, without recourse or warranty, an undivided interest and participation, to the extent of such Participant's Loan Percentage, in such Letter of Credit, each drawing or payment made thereunder and the obligations of the Borrower under this Agreement with respect thereto, and any security therefor or guaranty pertaining thereto. Upon any change in the Commitments or Loan Percentages of the Banks pursuant to Section 12.04, it is hereby agreed that, with respect to all outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic adjustment to the participations pursuant to this Section 1.16 to reflect the new Loan Percentages of the assignor and assignee Bank, as the case may be. (b) In determining whether to pay under any Letter of Credit, the Issuing Bank shall not have an obligation relative to the other Banks other than to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to substantially comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by the Issuing Bank under or in connection with any Letter of Credit if taken or omitted in the absence of gross negligence or willful misconduct (as finally determined by a court of competent jurisdiction), shall not create for the Issuing Bank any resulting liability to the Borrower, any other Credit Party, any Bank or any other Person. (c) In the event that the Issuing Bank makes any payment under any Letter of Credit and the Borrower shall not have reimbursed such amount in full to the Issuing Bank pursuant to Section 1.17(a), the Issuing Bank shall promptly notify the Administrative Agent, which shall promptly notify each Participant of such failure, and each Participant shall promptly and unconditionally pay to the Issuing Bank the amount of such Participant's Loan Percentage of such unreimbursed payment in Dollars and in same day funds. If the Administrative Agent so notifies, prior to 11:00 A.M. (New York time) on any Business Day, any Participant required to fund a payment under a Letter of Credit, such Participant shall make available to the Issuing Bank in Dollars such Participant's Loan Percentage of the amount of such payment on such Business Day in same day funds. If and to the extent such Participant shall not have so made its Loan Percentage of the amount of such payment available to the Issuing Bank, such Participant agrees to pay to the Issuing Bank, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Issuing Bank at the overnight Federal Funds Rate for the first three days and at the interest rate applicable to Loans maintained as Base Rate Loans for each day 10 thereafter. The failure of any Participant to make available to the Issuing Bank its Loan Percentage of any payment under any Letter of Credit shall not relieve any other Participant of its obligation hereunder to make available to the Issuing Bank its Loan Percentage of any Letter of Credit on the date required, as specified above, but no Participant shall be responsible for the failure of any other Participant to make available to the Issuing Bank such other Participant's Loan Percentage of any such payment. (d) Whenever the Issuing Bank receives a payment of a reimbursement obligation as to which it has received any payments from the Participants pursuant to clause (c) above, the Issuing Bank shall pay to each Participant which has paid its Loan Percentage thereof, in Dollars and in same day funds, an amount equal to such Participant's share (based upon the proportionate aggregate amount originally funded by such Participant to the aggregate amount funded by all Participants) of the principal amount of such reimbursement obligation and interest thereon accruing after the purchase of the respective participations. (e) Upon the request of any Participant, the Issuing Bank shall furnish to such Participant copies of any Letter of Credit issued by it and such other documentation as may reasonably be requested by such Participant. (f) The obligations of the Participants to make payments to the Issuing Bank with respect to Letters of Credit issued by it shall be irrevocable and not subject to any qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Credit Documents; (ii) the existence of any claim, setoff, defense or other right which the Borrower or any of its Subsidiaries may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Administrative Agent, any Participant, or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Borrower or any Subsidiary of the Borrower and the beneficiary named in any such Letter of Credit); (iii) any draft, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Credit Documents; or (v) the occurrence of any Default or Event of Default. 11 1.17 Agreement to Repay Letter of Credit Drawings. (a) The Borrower agrees to reimburse the Issuing Bank, by making payment to the Administrative Agent in immediately available funds at the Payment Office, for any payment or disbursement made by the Issuing Bank under any Letter of Credit (each such amount, so paid until reimbursed, an "Unpaid Drawing"), not later than one Business Day following receipt by the Borrower of notice of such payment or disbursement (provided that no such notice shall be required to be given if a Default or an Event of Default under Section 9.05 shall have occurred and be continuing, in which case the Unpaid Drawing shall be due and payable immediately without presentment, demand, protest or notice of any kind (all of which are hereby waived by the Borrower)), with interest on the amount so paid or disbursed by the Issuing Bank, to the extent not reimbursed prior to 1:00 P.M. (New York time) on the date of such payment or disbursement, from and including the date paid or disbursed to but excluding the date the Issuing Bank was reimbursed by the Borrower therefor at a rate per annum which shall be the Base Rate in effect from time to time plus the Applicable Margin; provided, however, to the extent such amounts are not reimbursed prior to 1:00 P.M. (New York time) on the third Business Day following the receipt by the Borrower of notice of such payment or disbursement or following the occurrence of a Default or an Event of Default under Section 9.05, interest shall thereafter accrue on the amounts so paid or disbursed by the Issuing Bank (and until reimbursed by the Borrower) at a rate per annum which shall be the Base Rate in effect from time to time plus the Applicable Margin plus 5%, in each such case, with interest to be payable on demand. The Issuing Bank shall give the Borrower prompt written notice of each Drawing under any Letter of Credit, provided that the failure to give any such notice shall in no way affect, impair or diminish the Borrower's obligations hereunder. (b) The obligations of the Borrower under this Section 1.17 to reimburse the Issuing Bank with respect to Unpaid Drawings (including, in each case, interest thereon) shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against any Bank (including in its capacity as Participant), including, without limitation, any defense based upon the failure of any drawing under a Letter of Credit (each a "Drawing") to conform to the terms of the Letter of Credit or any nonapplication or misapplication by the beneficiary of the proceeds of such Drawing; provided, however, that the Borrower shall not be obligated to reimburse the Issuing Bank for any wrongful payment made by the Issuing Bank under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction). 1.18 Increased Costs in Respect of Letters of Credit. (a) If at any time after the date of this Agreement, the introduction of or any change in any applicable law, rule, regulation, order, guideline or request or in the interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof, or compliance by the Issuing Bank or any Participant with any request or directive by any such authority (whether or not having the force of law), shall either (i) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against letters of credit issued by the Issuing Bank or participated in by any Participant, or (ii) impose on the Issuing Bank or any 12 Participant any other conditions relating, directly or indirectly, to this Agreement; and the result of any of the foregoing is to increase the cost to the Issuing Bank or any Participant of issuing, maintaining or participating in any Letter of Credit, or reduce the amount of any sum received or receivable by the Issuing Bank or any Participant hereunder or reduce the rate of return on its capital with respect to Letters of Credit (except for changes in the rate of tax on, or determined by reference to, the net income or profits of the Issuing Bank or such Participant pursuant to the laws of the jurisdiction in which it is organized or in which its principal office or applicable lending office is located or any subdivision thereof or therein), then, within 30 days after the delivery of the certificate referred to below to the Borrower by the Issuing Bank or any Participant (a copy of which certificate shall be sent by the Issuing Bank or such Participant to the Administrative Agent), the Borrower shall pay to the Issuing Bank or such Participant such additional amount or amounts as will compensate such Bank for such increased cost or reduction in the amount receivable or reduction on the rate of return on its capital. The Issuing Bank or any Participant, upon determining that any additional amounts will be payable pursuant to this Section 1.18, will give prompt written notice thereof to the Borrower, which notice shall include a certificate submitted to the Borrower by the Issuing Bank or such Participant (a copy of which certificate shall be sent by the Issuing Bank or such Participant to the Administrative Agent), setting forth in reasonable detail the basis for the calculation of such additional amount or amounts necessary to compensate the Issuing Bank or such Participant. The certificate required to be delivered pursuant to this Section 1.18 shall, absent manifest error, be final and conclusive and binding on the Borrower. (b) Notwithstanding anything to the contrary contained in this Section 1.18, unless the Issuing Bank or a Participant gives notice to the Borrower that the Borrower is obligated to pay any amount under this Section 1.18 within 180 days after the later of (x) the date the Issuing Bank or such Participant incurs the respective increased costs or reduction in return the rate of return or (y) the date the Issuing Bank or such Participant has actual knowledge of its incurrence of the respective increased costs or reduction in the rate of return, then the Issuing Bank or such Participant shall only be entitled to be compensated for such amount by the Borrower pursuant to this Section 1.18 to the extent the respective increased costs or reduction in the rate of return are incurred or suffered on or after the date which occurs 180 days prior to the Issuing Bank or such Participant giving notice to the Borrower that the Borrower is obligated to pay the respective amounts pursuant to this Section 1.18. SECTION 2. Fees; Reductions of Commitment. 2.01 Fees. a) MERGEFORMAT (a) The Borrower agrees to pay to the Administrative Agent the "Draw Fee" under and as defined in a side agreement of even date herewith between the Borrower and the Administrative Agent in connection with each Borrowing, such Draw Fee to be payable on the date of each such Borrowing. (b) The Borrower agrees to pay to the Administrative Agent, for its own account, such other fees as have been agreed to in writing by the Borrower with the Administrative Agent. 13 2.02 Voluntary Termination of Unutilized Commitments. Upon at least two Business Days' prior written notice to the Administrative Agent at the Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Banks), the Borrower shall have the right, at any time or from time to time, without premium or penalty, to terminate or partially reduce the Total Unutilized Commitment, in integral multiples of $1,000,000; provided that each such reduction shall apply proportionately to permanently reduce the Commitment of each Bank. 2.03 Mandatory Termination of Commitments; Extension of Maturity Date. (a) The Total Commitment (and the Commitment of each Bank) shall terminate in its entirety on February 15, 1998, unless the Effective Date shall have occurred on or prior to such date. (b) At 9:00 A.M. (New York time) on January 29, 1999 (subject to extension as provided in this Section 2.03(b), the "Maturity Date"), the Total Commitment (and the Commitment of each Bank) shall terminate in its entirety. All Loans shall be due and payable in full on the Maturity Date, together with all accrued and unpaid interest, fees and other amounts due and payable hereunder. (i) Not less than 60 days and not more than 90 days prior to the Maturity Date then in effect, the Borrower may make a written request (each an "Extension Request") to the Administrative Agent, who shall forward a copy of each such request to each of the Banks, that the Maturity Date then in effect be extended to the date which occurs 364 days after the Requested Extension Effective Date specified by the Borrower in its Extension Request. Each Extension Request shall specify a date (the "Requested Extension Effective Date"), which shall be not earlier than 15 days after the giving of the respective notice and not later than 5 days prior to the Maturity Date then in effect, which would be the date of the effectiveness of the changes to the Maturity Date. Each Extension Request shall also be accompanied by a certificate of an Authorized Officer of the Borrower stating that no Default or Event of Default has occurred and is continuing. Each Bank, acting in its sole discretion and with no obligation to grant any extension pursuant to this Section 2.03(b)(i), shall, by written notice to the Borrower and the Administrative Agent, such notice to be given on or prior to the earlier of (x) the Requested Extension Effective Date and (y) the 30th day following receipt by such Bank of such Extension Request by the Borrower, advise the Borrower and the Administrative Agent whether or not such Bank agrees to such extension, provided that any Bank which fails to so notify the Borrower and the Administrative Agent as provided above shall be deemed to have elected not to grant such extension. In giving any extensions pursuant to the immediately preceding sentence, any Bank, at its option, may specify that its extension is conditioned upon each other Bank agreeing to the extension of the Maturity Date or, in lieu thereof, may specify that Banks with a certain minimum aggregate amount of Commitments (to be specified by such Bank) shall have agreed to such extension. The Administrative Agent shall notify the Borrower and each of the Banks as to which Banks have agreed to such extension and as to the new Maturity Date as a result thereof. (ii) If one or more Banks do not consent to the extension of the Maturity Date pursuant to subpart (i) of this Section 2.03(b), and the Borrower has been so informed by the Administrative Agent (it being understood 14 that any Bank that has not responded to an Extension Request shall be deemed to have elected not to extend its Commitment), then, on or prior to the tenth (10th) day prior to the then Maturity Date, the Borrower may, upon such failure to extend, (1)(A) request each Bank that is willing to extend the Maturity Date to assume all or a portion of each non-extending Bank's Commitment and (B) after first making the request pursuant to clause (A), as to any portion of any non-extending Bank's Commitment not assumed pursuant to such clause within ten (10) days after the date of such request (but in any event on or prior to the tenth (10th) day prior to the then Maturity Date), obtain a successor bank or banks, in each case approved in advance in writing by the Administrative Agent to assume such Bank's Commitment (it being understood that in such case the successor bank or banks shall be responsible for paying the Administrative Agent's assignment fee referred to in Section 12.04) or (2) so long as the aggregate pro rata share of all such non-extending Banks does not exceed fifty percent (50%) of the Total Commitment, terminate the Commitments of the non-extending Banks, and the Total Commitment, as so reduced by the pro rata share of such non-extending Banks, shall be extended pursuant to Section 2.03(b)(i). All Loans made by any non-extending Bank shall be due and payable in full on the Maturity Date then in effect, together with all accrued and unpaid interest, fees and other amounts due and payable hereunder. The Borrower, the extending Banks, the Administrative Agent and such successor bank or banks, if any, shall sign such documents and instruments as shall be appropriate to evidence the extension of the Maturity Date and such successor bank's or banks' assumption (without recourse to, or warranty by, such non-extending Bank, except as to the amount due thereon, its title to such Notes and its right to sell the same) of each non-extending Bank's Commitment (including, without limitation, any adjustment to all such pro rata shares). Upon the execution and delivery of such documents and instruments, the Maturity Date shall as of the date of such execution and delivery be extended as provided in Section 2.03(b)(i). Each such successor bank shall be deemed to be a "Bank" for all purposes hereunder, and the non-extending Banks shall have no further obligations hereunder but shall continue to be entitled to the benefit of Sections 1.10 and 12.01. If such successor bank or banks is or are not obtained, or the Borrower elects not to extend the Total Commitment as reduced in accordance with this Section 2.03(b)(ii) by the tenth (10th) day prior to the Maturity Date then in effect, or such documents and instruments are not signed by such date, the Maturity Date shall not be extended and all Loans made by the Banks shall be due and payable in full on the Maturity Date then in effect, together with all accrued and unpaid interest, fees and other amounts due and payable hereunder and under the other Credit Documents. SECTION 3. Prepayments; Payments; Taxes. 3.01 Voluntary Prepayments. The Borrower shall have the right to prepay the Loans, without premium or penalty, in whole or in part at any time and from time to time on the following terms and conditions: (i) the Borrower shall give the Administrative Agent prior to 12:00 Noon (New York time) at the Notice Office (x) at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of the Borrower's intent to prepay Base Rate Loans and (y) at least five Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of the Borrower's intent to prepay Eurodollar Loans, which notice shall specify the 15 amount of such prepayment and the Types of Loans to be prepaid and, in the case of Eurodollar Loans, the specific Borrowing or Borrowings pursuant to which made, and which notice the Administrative Agent shall promptly transmit to each of the Banks; (ii) each prepayment of Loans shall be in an aggregate principal amount of at least $1,000,000, provided that if any partial prepayment of Eurodollar Loans made pursuant to any Borrowing shall reduce the outstanding Eurodollar Loans made pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount applicable thereto, then such Borrowing may not be continued as a Borrowing of Eurodollar Loans; and (iii) each prepayment in respect of any Loans made pursuant to a Borrowing shall be applied pro rata among such Loans, provided that at the Borrower's election in connection with any prepayment of Loans pursuant to this Section 3.01, such prepayment shall not be applied to any Loans of a Defaulting Bank. 3.02 Mandatory Repayments. a) (i) On any day on which the aggregate outstanding principal amount of Loans and the Letter of Credit Outstandings exceeds the Total Commitment then in effect, the Borrower shall prepay on such day principal of Loans in an amount equal to such excess. If, after giving effect to the prepayment of all Loans, the aggregate amount of the Letter of Credit Outstandings exceeds the Total Commitment as then in effect, the Borrower shall pay to the Administrative Agent at the Payment Office on such day an amount of cash and/or Cash Equivalents equal to the amount of such excess (up to a maximum amount equal to the Letter of Credit Outstandings at such time), such cash and/or Cash Equivalents to be held as security for all obligations of the Borrower to the Issuing Bank and the Banks hereunder in a cash collateral account to be established by the Administrative Agent. (ii) On any day on which the aggregate outstanding principal amount of Loans and the Letter of Credit Outstandings exceeds the Borrowing Base then in effect, the Borrower shall prepay or repay on such day principal of Loans and thereafter cash collateralize Letters of Credit in the manner described above, in each case in an amount equal to such excess. (b) On any day on which any refinancing or any sale or other disposition of a Borrowing Base Property or a Borrowing Base Pledged Mortgage Loan occurs, an amount equal to the Release Price with respect thereto shall be applied as a mandatory repayment of principal of outstanding Loans. (c) If there shall occur a Casualty Event or a Taking with respect to any Borrowing Base Property (or any portion thereof), the Borrower shall be required to repay principal of outstanding Loans as and to the extent required by Section 7.16(e) or 7.16(g). (d) On any day on which any voluntary or mandatory prepayment or repayment (inclusive of scheduled amortization payments, if any) is made in respect of a Borrowing Base Pledged Mortgaged Loan, the Borrower shall prepay or repay on such day principal of Loans in an amount equal to such prepayment or repayment. (e) If an event of default under and as defined or described in the Pledged Mortgage Loan Documents for any Borrowing Base Pledged Mortgaged Loan occurs, an amount equal to the amount necessary to ensure that the sum of (i) the aggregate principal amount of Loans outstanding and (ii) the Letter of Credit Outstandings shall not exceed the Borrowing Base then in effect, after giving effect to the reduction in the Borrowing Base as a result of the release from the Borrowing Base of such Borrowing Base Pledged 16 Mortgage Loan, shall be applied as a mandatory repayment of principal of outstanding Loans. (f) If a Special Mandatory Repayment Event occurs, an amount equal to the amount necessary to ensure that the sum of (i) the aggregate principal amount of Loans outstanding and (ii) the Letter of Credit Outstandings shall not exceed the Borrowing Base then in effect, after giving effect to the reduction in the Borrowing Base as a result of the release from the Borrowing Base of such Borrowing Base Pledged Mortgage Loan, shall be applied as a mandatory repayment of principal of outstanding Loans. (g) If a Casualty Event or a Taking occurs with respect to any Mortgage Loan Property securing a Borrowing Base Pledged Mortgage Loan, an amount equal to the amount necessary to ensure that the sum of (i) the aggregate principal amount of Loans outstanding and (ii) the Letter of Credit Outstandings shall not exceed the Borrowing Base then in effect, after giving effect to the reduction in the Borrowing Base as a result of the release from the Borrowing Base of such Borrowing Base Pledged Mortgage Loan, shall be applied as a mandatory repayment of principal of outstanding Loans. (h) With respect to each repayment of Loans required by this Section 3.02, the Borrower may designate the Types of Loans which are to be repaid and, in the case of Eurodollar Loans, the specific Borrowing or Borrowings pursuant to which made, provided that: (i) repayments of Eurodollar Loans pursuant to this Section 3.02 may only be made on the last day of an Interest Period applicable thereto unless all Eurodollar Loans with Interest Periods ending on such date of required repayment and all Base Rate Loans have been paid in full; (ii) if any repayment of Eurodollar Loans made pursuant to a single Borrowing shall reduce the outstanding Eurodollar Loans made pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount applicable thereto, such Borrowing shall be converted at the end of the then current Interest Period into a Borrowing of Base Rate Loans; and (iii) each repayment of Loans made pursuant to the same Borrowing shall be applied pro rata among such Loans. In the absence of a designation by the Borrower as described in the preceding sentence, the Administrative Agent shall, subject to the above, make such designation in its sole discretion. 3.03 Method and Place of Payment. Except as otherwise specifically provided herein, all payments under this Agreement or any Note shall be made to the Administrative Agent for the account of the Bank or Banks entitled thereto or for the account of the Issuing Bank, as the case may be, not later than 12:00 Noon (New York time) on the date when due and shall be made in Dollars in immediately available funds at the Payment Office. Whenever any payment to be made hereunder or under any Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable at the applicable rate during such extension. 3.04 Net Payments; Taxes. (a) All payments made by the Borrower hereunder or under any Note will be made without setoff, 17 counterclaim or other defense. Except as provided in Section 3.04(b), all such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding, except as provided in the second succeeding sentence, any tax imposed on or measured by the net income or net profits of a Bank or the Issuing Bank, or any franchise tax based on the net income or net profits of a Bank or the Issuing Bank, in either case pursuant to the laws of the jurisdiction in which such Bank or the Issuing Bank, as the case may be, is organized or the jurisdiction in which the principal office or applicable lending office of such Bank or the Issuing Bank, as the case may be, is located or any subdivision thereof or therein) and all interest, penalties or similar liabilities with respect to such non-excluded taxes, levies, imposts, duties, fees or other charges (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as "Taxes"). If any Taxes are so levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement or under any Note, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Note. If any amounts are payable in respect of Taxes pursuant to the preceding sentence, the Borrower agrees to reimburse each Bank or the Issuing Bank, as the case may be, upon the written request of such Bank or the Issuing Bank, as the case may be, for taxes imposed on or measured by the net income or net profits of such Bank or the Issuing Bank, as the case may be, or any franchise tax based on the net income or net profits of such Bank or the Issuing Bank, as the case may be, in either case pursuant to the laws of the jurisdiction in which such Bank or the Issuing Bank, as the case may be, is organized or in which the principal office or applicable lending office of such Bank or the Issuing Bank, as the case may be, is located or under the laws of any political subdivision or taxing authority of any such jurisdiction in which such Bank or the Issuing Bank, as the case may be, is organized or in which the principal office or applicable lending office of such Bank or the Issuing Bank, as the case may be, is located and for any withholding of income or similar taxes imposed by the United States of America as such Bank or the Issuing Bank, as the case may be, shall reasonably determine are payable by, or withheld from, such Bank or the Issuing Bank in respect of such amounts so paid to or on behalf of such Bank or the Issuing Bank pursuant to the preceding sentence and in respect of any amounts paid to or on behalf of such Bank or the Issuing Bank pursuant to this sentence. The Borrower will furnish to the Administrative Agent within 45 days after the date the payment of any Taxes is due pursuant to applicable law certified copies of tax receipts or other documentation reasonably acceptable to the Administrative Agent, evidencing such payment by the Borrower. The Borrower agrees to indemnify and hold harmless each Bank and the Issuing Bank, and reimburse such Bank or the Issuing Bank, as the case may be, upon its written request, for the amount of any Taxes so levied or imposed and paid by such Bank or the Issuing Bank. (b) Each Bank that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code), and the Issuing Bank, if the Issuing Bank is not a United States person (as such term is defined in Section 7701(a)(30) of the Code), agrees to deliver to the Borrower and the Administrative Agent on or prior to the Effective Date, or in the case of a Bank that is an assignee or transferee of an interest under this Agreement pursuant to Section 12.04 (unless the respective Bank was already a Bank hereunder immediately prior to such assignment or transfer), on the date of 18 such assignment or transfer to such Bank, (i) two accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms) certifying to such Bank's or, as the case may be, the Issuing Bank's entitlement as of such date to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement and/or under any Note, or (ii) if such Bank or the Issuing Bank is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate substantially in the form of Exhibit C (any such certificate, a "Section 3.04(b)(ii) Certificate") and (y) two accurate and complete original signed copies of Internal Revenue Service Form W-8 (or successor form) certifying to such Bank's or, as the case may be, the Issuing Bank's entitlement to a complete exemption from United States withholding tax with respect to payments of interest to be made under this Agreement and/or under any Note. In addition, each Bank and the Issuing Bank agrees that from time to time after the Effective Date, when a lapse in time or change in circumstances renders the previous certification invalid or inaccurate in any material respect, such Bank or the Issuing Bank, as the case may be, will promptly deliver to the Borrower and the Administrative Agent two new accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms), or Form W-8 (or successor form) and a Section 3.04(b)(ii) Certificate, as the case may be, and such other forms as may be required in order to confirm or establish the entitlement of such Bank or the Issuing Bank, as the case may be, to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement and/or any Note, or it shall immediately notify the Borrower and the Administrative Agent of its inability to deliver any such Form or Certificate, in which case such Bank or the Issuing Bank, as the case may be, shall not be required to deliver any such Form or Certificate pursuant to this Section 3.04(b). Notwithstanding anything to the contrary contained in Section 3.04(a), but subject to Section 12.04(b) and the immediately succeeding sentence, (x) the Borrower shall be entitled, to the extent it is required to do so by law, to deduct or withhold income or similar taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from interest, Fees or other amounts payable hereunder for the account of any Bank which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) or for the account of the Issuing Bank, if the Issuing Bank is not a United States person (as such term is defined in Section 7701 (a)(30) of the Code), for U.S. Federal income tax purposes to the extent that such Bank or the Issuing Bank, as the case may be, has not provided to the Borrower U.S. Internal Revenue Service Forms that establish a complete exemption from such deduction or withholding and (y) the Borrower shall not be obligated pursuant to any provision of Section 3.04(a) to gross-up payments to be made to a Bank or the Issuing Bank, as the case may be, in respect of income or similar taxes imposed by the United States if (I) such Bank or the Issuing Bank, as the case may be, has not provided to the Borrower the Internal Revenue Service Forms required to be provided to the Borrower pursuant to this Section 3.04(b) or (II) in the case of a payment, other than interest, to a Bank or the Issuing Bank, as the case may be, described in clause (ii) above, to the extent that such Forms do not establish a complete exemption from withholding of such taxes. Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this Section 3.04 and except as set forth in Section 12.04(b), the Borrower agrees to pay additional amounts and to indemnify each Bank and the Issuing Bank in 19 the manner set forth in Section 3.04(a) (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any Taxes deducted or withheld by it as described in the immediately preceding sentence as a result of any changes that are effective after the Effective Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of such Taxes. SECTION 4. Conditions Precedent to Effective Date. The occurrence of the Effective Date pursuant to Section 12.10 is subject to the satisfaction of the following conditions: 4.01 Execution of Agreement; Notes. (i) This Agreement shall have been executed and delivered as provided in Section 12.10 and (ii) there shall have been delivered to the Administrative Agent for the account of each of the Banks the appropriate Note executed by the Borrower, in each case in the amount and maturity and with other terms as otherwise provided herein. 4.02 Fees, etc. The Borrower shall have paid to the Administrative Agent, the Banks and the Issuing Bank all costs, fees and expenses (including, without limitation, reasonable legal fees and expenses) payable to the Administrative Agent, the Banks and the Issuing Bank to the extent due on the Effective Date. 4.03 Opinions of Counsel. The Administrative Agent shall have received: (i) from Hogan & Hartson L.L.P., counsel to the REIT, the Borrower and the Subsidiary Guarantors, an opinion addressed to the Administrative Agent and each of the Banks and dated the Effective Date covering the matters set forth in Exhibit D and such other matters incident to the transactions contemplated herein as the Administrative Agent may reasonably request; (ii) from local counsel in all relevant jurisdictions reasonably satisfactory to the Administrative Agent, opinions addressed to the Administrative Agent and the Banks, dated the Effective Date, which shall be in form and substance reasonably satisfactory to the Administrative Agent and shall cover the security interests granted pursuant to the Security Agreement, the Collateral Assignments and the Mortgages and such other matters incident to the transactions contemplated herein as the Administrative Agent may reasonably request; and (iii) from Hogan & Hartson L.L.P., counsel to the REIT, the Borrower and the Subsidiary Guarantors, an opinion addressed to the REIT and dated the Effective Date stating that equity interests (as defined in DOL Regulation Section 2510.3-101(b)(1)) in the REIT are freely transferable within the meaning of DOL Regulation Section 2510.3-101(b)(4) and that the Administrative Agent and the Banks may rely upon such opinion. 4.04 Corporate and Partnership Documents; Proceedings; etc. (a) On the Effective Date, the Administrative Agent shall have received a certificate, dated the Effective Date, signed by the Secretary or an Assistant Secretary of the REIT on behalf of each Credit Party, in the form of Exhibit E with appropriate insertions, together with copies of the declaration of trust, the certificate of incorporation and by-laws or other organizational documents (including limited partnership agreements and certificates of limited partnership) of each Credit Party and the resolutions of each Credit Party referred to in such certificate, and the foregoing shall be reasonably acceptable to the Administrative Agent. 20 (b) All trust, corporate, partnership and legal proceedings and all instruments and agreements in connection with the transactions contemplated by this Agreement and the other Credit Documents shall be reasonably satisfactory in form and substance to the Administrative Agent and the Required Banks, and the Administrative Agent shall have received all information and copies of all documents and papers, including records of corporate and partnership proceedings, governmental approvals, good standing certificates and bring-down telegrams, if any, which the Administrative Agent may have reasonably requested in connection therewith, such documents and papers where appropriate to be certified by proper trust, corporate, partnership or governmental authorities. 4.05 Debt Agreements. On the Effective Date, there shall have been delivered to the Administrative Agent true and correct copies, certified as true and complete by an Authorized Officer of the Borrower, of all agreements evidencing or relating to all Existing Indebtedness of the REIT or of any of its Subsidiaries (collectively, "Debt Agreements"), all of which Debt Agreements shall be in full force and effect and shall be reasonably satisfactory to the Administrative Agent. 4.06 Pledge Agreement. On the Effective Date, each Credit Party shall have duly authorized, executed and delivered a Pledge Agreement in the form of Exhibit F-1 (as modified, supplemented or amended from time to time, the "Pledge Agreement") and shall have delivered to the Collateral Agent, as pledgee, all the certificated Pledged Securities, if any, referred to therein then owned by such Credit Party, (x) endorsed in blank in the case of promissory notes constituting Pledged Securities and (y) together with executed and undated stock powers in blank, in the case of capital stock constituting Pledged Securities. 4.07 Pledge and Security Agreement and Security Agreement. On the Effective Date, each Credit Party shall have duly authorized, executed and delivered (i) a Pledge and Security Agreement in the form of Exhibit F-2 (as modified, supplemented or amended from time to time, the "Pledge and Security Agreement") covering all of such Credit Party's present and future Pledge and Security Agreement Collateral and (ii) a Security Agreement in the form of Exhibit G (as modified, supplemented or amended from time to time, the "Security Agreement") covering all of the such Credit Party's present and future Security Agreement Collateral, in each case together with: (a) proper financing statements (Form UCC-1) fully executed for filing under the UCC or other appropriate filing offices of each jurisdiction as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect the security interests purported to be created by the Pledge and Security Agreement and the Security Agreement, as the case may be; (b) certified copies of requests for information or copies (Form UCC-11), or equivalent reports, listing all effective financing statements that name any such Credit Party existing prior to the Effective Date as debtor and that are filed in the jurisdictions referred to in clause (a) above, together with copies of such other financing statements that name any such Credit Party as debtor (none of which shall cover the Collateral except to 21 the extent evidencing Permitted Liens or in respect of which the Collateral Agent shall have received termination statements (Form UCC-3 or such other termination statements as shall be required by local law) fully executed for filing); (c) evidence of the completion of all other recordings and filings of, or with respect to, the Pledge and Security Agreement and the Security Agreement as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect the security interests intended to be created by the Pledge and Security Agreement and the Security Agreement; (d) executed copies of Pledged Entity Notices delivered to each Pledged Partnership Entity and Pledged Limited Liability Company and executed copies of Control Agreements executed by each Pledged Partnership Entity and Pledged Limited Liability Company, together with evidence that such other actions have been taken as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect the security interests purported to be created by the Pledge and Security Agreement; and (e) evidence that all other actions necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect and protect the security interests purported to be created by the Pledge and Security Agreement and the Security Agreement have been taken. Notwithstanding the foregoing provisions of this Section 4.07, the Pledge and Security Agreement shall not cover the partnership interests and limited liability company interests owned by the Borrower in the Excluded Subsidiaries. 4.08 Subsidiaries Guaranty. On the Effective Date, each Subsidiary Guarantor shall have duly authorized, executed and delivered a Subsidiaries Guaranty in the form of Exhibit H (as modified, amended or supplemented from time to time, the "Subsidiaries Guaranty"). 4.09 Collateral Assignments; Mortgages; Title Insurance; Surveys; etc. On the Effective Date, the Collateral Agent shall have received the following items, all of which shall be satisfactory to the Administrative Agent: (a) in respect of each Initial Borrowing Base Pledged Mortgage Loan, (i) the original Pledged Mortgage Loan Documents, including, without limitation, the mortgage note evidencing such Initial Borrowing Base Pledged Mortgage Loan duly endorsed in blank, and (ii) fully executed counterparts of a Collateral Assignment, together with evidence that a fully executed counterpart of such Collateral Assignment has been delivered to the title insurance company insuring the lien of such Initial Borrowing Base Pledged Mortgage Loan for recording in all places to the extent necessary, or in the reasonable judgment of the Administrative Agent, desirable, to create a valid and enforceable first priority lien on such Initial Borrowing Base Pledged Mortgage Loan in favor of the Collateral Agent (or such other trustee as may be required or desired under local law) for the benefit of the Secured Creditors; 22 (b) in respect of each Initial Borrowing Base Property, fully executed counterparts of a Mortgage, together with evidence that a fully executed counterpart of such Mortgage has been delivered to the title insurance company insuring the lien of such Mortgage for recording in all places to the extent necessary, or in the reasonable judgment of the Administrative Agent, desirable, to create a valid and enforceable first priority mortgage lien on such Initial Borrowing Base Property in favor of the Collateral Agent (or such other trustee as may be required or desired under local law) for the benefit of the Secured Creditors; (c) Mortgage Policies for each of the Initial Borrowing Base Properties issued by Commonwealth Land Title Insurance Company or other title insurers reasonably satisfactory to the Collateral Agent in amounts reasonably satisfactory to the Administrative Agent insuring the Collateral Agent that the Mortgage on each Initial Borrowing Base Property is a valid and enforceable first priority lien thereon, free and clear of all defects and encumbrances except Permitted Liens applicable thereto, and such Mortgage Policies shall otherwise be in form and substance reasonably satisfactory to the Administrative Agent and shall include, as appropriate, an endorsement for future advances under this Agreement and the Notes and covering any other matter that the Collateral Agent in its reasonable discretion may request, shall not include an exception for mechanics' liens or creditors' rights, and shall provide for affirmative insurance and such reinsurance as the Collateral Agent in its reasonable discretion may request; (d) an endorsement to each mortgagee title insurance policy insuring each Initial Borrowing Base Pledged Mortgage Loan, listing the Collateral Agent as collateral assignee of the related Initial Borrowing Base Pledged Mortgage Loan and an additional insured (as its interests may appear); (e) surveys, in form and substance reasonably satisfactory to the Administrative Agent, of the Initial Borrowing Base Properties and the Mortgage Loan Properties securing the Initial Borrowing Base Pledged Mortgage Loans, in each case, certified by a licensed professional surveyor reasonably satisfactory to the Administrative Agent and in form and substance reasonably satisfactory to the Administrative Agent; (f) properly executed financing statements under the UCC, in form and substance satisfactory to the Administrative Agent, for filing in each jurisdiction as the Administrative Agent has determined to be necessary or desirable to perfect the security interests created by the Collateral Assignments and the Mortgages in the Initial Borrowing Base Properties and the Initial Borrowing Base Pledged Mortgage Loans; and (g) evidence reasonably satisfactory to the Administrative Agent that all other filings, recordings and other actions the Administrative Agent deems necessary or desirable to establish, preserve and perfect the liens and security interests granted to the Collateral Agent on behalf of the Banks in the Initial Borrowing Base Properties and the Initial Borrowing Base Pledged Mortgage Loans have been made or taken, as applicable. 23 4.10 IPO. On or prior to the Effective Date, the IPO shall have been consummated in a manner reasonably satisfactory to the Administrative Agent and the net proceeds to the REIT and its Subsidiaries in connection with the IPO shall be an amount equal to or greater than $90,000,000. 4.11 Adverse Change, etc. (a) On the Effective Date, nothing shall have occurred (and none of the Banks shall have become aware of any facts, conditions or other information not previously known) which the Administrative Agent or the Required Banks believe could reasonably be expected to have a material adverse effect (i) on the rights or remedies of the Administrative Agent, the Banks or the Issuing Bank, or on the ability of any Credit Party to perform its respective obligations to the Administrative Agent, the Banks or the Issuing Bank or (ii) on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the REIT, the Borrower, the REIT and its Subsidiaries taken as a whole or the Borrower and its Subsidiaries taken as a whole. (b) On or prior to the Effective Date, all necessary governmental (domestic and foreign) and third party approvals in connection with the making of the Loans, the issuance of the Letters of Credit and the transactions contemplated by the Credit Documents and otherwise referred to herein or therein shall have been obtained and remain in effect, and all applicable waiting periods shall have expired without any action being taken by any competent authority which restrains, prevents or imposes materially adverse conditions upon the making of the Loans, the issuance of the Letters of Credit and the transactions contemplated by the Credit Documents. Additionally, there shall not exist any judgment, order, injunction or other restraint issued or filed or a hearing seeking injunctive relief or other restraint pending or notified prohibiting or imposing materially adverse conditions upon the making of the Loans or the transactions contemplated by the Credit Documents. 4.12 Litigation. On the Effective Date, no litigation by any entity (private or governmental) shall be pending or, to the best knowledge of the REIT and the Borrower, threatened (i) with respect to the making of the Loans, the issuance of the Letters of Credit or the Credit Documents or any documentation executed in connection therewith or the transactions contemplated thereby or (ii) which the Administrative Agent or the Required Banks believe could reasonably be expected to have a materially adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the REIT, the Borrower, the REIT and its Subsidiaries taken as a whole or the Borrower and its Subsidiaries taken as a whole. 4.13 Initial Borrowing Base Properties, etc. (a) To the extent not required by the other provisions of this Section 4 and except as provided in Section 4.13(c), the Borrower shall have delivered to the Administrative Agent all information and documentation (which shall be satisfactory to the Administrative Agent in its sole discretion) with respect to each Initial Borrowing Base Property which would be required pursuant to Section 7.11 if such Initial Borrowing Base Property was a subsequently acquired Borrowing Base Property. 24 (b) To the extent not required by the other provisions of this Section 4 and except as provided in Section 4.13(c), the Borrower shall have delivered to the Administrative Agent all information and documentation (which shall be satisfactory to the Administrative Agent in its sole discretion) with respect to each Initial Borrowing Base Pledged Mortgage Loan which would be required pursuant to Section 7.11 if such Initial Borrowing Base Pledged Mortgage Loan was a subsequently acquired Borrowing Base Pledged Mortgage Loan. (c) Notwithstanding the foregoing provisions of this Section 4.13, the Borrower acknowledges and agrees that it has not, as of the Effective Date, delivered satisfactory Environmental Reports and Engineering Reports for the Initial Borrowing Base Properties and the Mortgage Loan Properties securing the Initial Borrowing Base Pledged Mortgage Loans. The Administrative Agent will, at the expense of the Borrower, commission such Environmental Reports and Engineering Reports, and the REIT, the Borrower and the Subsidiary Guarantors will, promptly upon demand by the Administrative Agent, either (x) take all actions the Administrative Agent reasonably deems to be necessary or desirable to correct, cure or otherwise remediate any adverse matters disclosed in any of such Environmental Reports or Engineering Reports, including, without limitation, any deferred maintenance items identified in any of such Engineering Reports or the presence of any Hazardous Materials identified in any of such Environmental Reports or (y) remove from the Borrowing Base any affected Initial Borrowing Base Property or Initial Borrowing Base Pledged Mortgage Loan. In addition, the Administrative Agent shall have the right to remove from the Borrowing Base any Initial Borrowing Base Property or Initial Borrowing Base Pledged Mortgage Loan the Environmental Report or Engineering Report in respect of which discloses items which the Administrative Agent determines could reasonably be expected to materially and adversely affect the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the REIT, the REIT and its Subsidiaries taken as a whole, the Borrower or the Borrower and its Subsidiaries taken as a whole, or which the Administrative Agent determines to be materially adverse to the interests of the Banks or the Issuing Bank under any Credit Document or otherwise in respect of the Loans or the Letters of Credit. In the event of any removal from the Borrowing Base of an Initial Borrowing Base Property or an Initial Borrowing Base Pledged Mortgage Loan, the Administrative Agent shall adjust the Borrowing Base accordingly and shall notify the Borrower of such adjustment. Any failure by the REIT, the Borrower or any Subsidiary Guarantor to comply in any material respect with this Section 4.13(c) shall constitute an Event of Default. This Section 4.13(c) shall survive the Effective Date and the making of Loans and the issuance of Letters of Credit hereunder. 4.14 Solvency Certificate. On or prior to the Effective Date, there shall have been delivered to the Administrative Agent a solvency certificate in the form of Exhibit J, addressed to the Administrative Agent and each of the Banks and dated the Effective Date from an Authorized Financial Officer of the REIT providing the opinion of such Authorized Financial Officer as to the solvency of the REIT and its Subsidiaries taken as a whole and the Borrower on a stand-alone basis. 4.15 Pro Forma Balance Sheets. On or prior to the Effective Date, the Administrative Agent shall have received unaudited pro forma 25 consolidated balance sheets and projections of the REIT and of the Borrower and its Subsidiaries, in each case prepared on a basis consistent with the financial statements referred to in Section 6.05(a) and in accordance with GAAP except as specifically set forth in the notes to such balance sheets, after giving effect to the transactions contemplated hereby, which consolidated balance sheets and projections shall be in form and substance reasonably satisfactory to the Administrative Agent. 4.16 Initial Borrowing Base Certificate. On the Effective Date, the Borrower shall have delivered to the Administrative Agent the initial Borrowing Base Certificate in the form of Exhibit L. 4.17 No Default; Representations and Warranties. On the Effective Date, (i) there shall exist no Default or Event of Default and (ii) all representations and warranties contained herein and in the other Credit Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on the Effective Date (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date). 4.18 REIT Equity Interests Widely Held. On the Effective Date, the equity interests (as defined in DOL Regulation Section 2510.3-101(b)(1)) in the REIT shall be widely held within the meaning of DOL Regulation Section 2510.3-101(b)(3). The occurrence of the Effective Date shall constitute a representation and warranty by the REIT and the Borrower to the Administrative Agent, each of the Banks and the Issuing Bank that all the conditions specified in this Section 4 exist as of the Effective Date (except to the extent that any of the conditions specified in this Section 4 are required to be satisfactory to or determined by any Bank, the Required Banks, the Collateral Agent and/or the Administrative Agent or otherwise expressly calls for a subjective determination to be made by any Bank, the Required Banks, the Collateral Agent and/or the Administrative Agent). All of the Notes, certificates, legal opinions and other documents and papers referred to in this Section 4, unless otherwise specified, shall be delivered to the Administrative Agent at the Notice Office for the benefit of each of the Banks and shall be in form and substance reasonably satisfactory to the Banks. SECTION 5. Conditions Precedent to All Loans and Letters of Credit. The obligation of each Bank to make Loans (including any Loans made on the Effective Date), and the obligation of the Issuing Bank to issue Letters of Credit, is subject, at the time of the making of each such Loan or the issuance of each such Letter of Credit (except as hereinafter indicated), to the satisfaction of the following conditions: 5.01 No Default; Representations and Warranties. At the time of the making of each such Loan or the issuance of each such Letter of Credit and also after giving effect thereto (i) there shall exist no Default or Event of Default and (ii) all representations and warranties contained herein and in the other Credit Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on the date of the making of such Loan or the issuance of such Letter of Credit (it being understood and agreed that any representation or warranty 26 which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date). 5.02 Notice of Borrowing. (a) Prior to the making of each Loan, the Administrative Agent shall have received a Notice of Borrowing meeting the requirements of Section 1.03(a). (b) Prior to the issuance of each Letter of Credit, the Administrative Agent and the Issuing Bank shall have received a Letter of Credit Request meeting the requirements of Section 1.15. 5.03 Property Information; etc. Prior to the making of any Loan or the issuance of any Letter of Credit, neither the Administrative Agent nor the Required Banks shall have become aware of any negative facts, conditions or other information which would reasonably lead the Administrative Agent or the Required Banks to believe that the information provided in any Information Package or otherwise pursuant to Sections 7.11 and 8.02(viii) with respect to any Borrowing Base Property or any Borrowing Base Pledged Mortgage Loan is not true and accurate in all material respects (or was not true and accurate in all material respects at the time such Information Package was furnished pursuant to this Agreement) or is incomplete by omitting to state any fact necessary to make such information not misleading in any material respect (or was incomplete by omitting to state any fact necessary to make such information not misleading in any material respect at the time such Information Package was furnished pursuant to this Agreement). 5.04 Certain Requirements with Respect to Loans and Letters of Credit. (a) Prior to the making of any Loan or the issuance of any Letter of Credit, the Administrative Agent shall have received a certificate from an Authorized Financial Officer of the Borrower certifying as to the specific uses to be made of the proceeds of such Loan or Letter of Credit, which certificate shall be in form and detail reasonably satisfactory to the Administrative Agent. (b) Prior to or contemporaneously with (as applicable) the incurrence of any Loan or the issuance of any Letter of Credit the proceeds of which are to be used either (x) to acquire a Borrowing Base Property (including by purchasing the capital stock or other equity interests of the Person(s) owning such Borrowing Base Property) or (y) to purchase or provide a Borrowing Base Pledged Mortgage Loan, the Borrower shall have satisfied the relevant requirements of Sections 7.11 and 8.02(viii). (c) Prior to the incurrence of any Loan or the issuance of any Letter of Credit, the Borrower shall have delivered to the Administrative Agent a Borrowing Base Certificate from an Authorized Financial Officer of the Borrower, showing that, after giving effect to the incurrence of such Loan or the issuance of such Letter of Credit, the total outstanding principal amount of all Loans and Letter of Credit Outstandings will not exceed the Borrowing Base as then in effect. (d) Prior to or contemporaneously with the incurrence of any Loan or, to the extent applicable, the issuance of any Letter of Credit, the Borrower shall have delivered to the Administrative Agent (x) evidence, in 27 form and substance reasonably satisfactory to the Administrative Agent, demonstrating that all mortgage recording taxes and similar taxes and charges have been paid (or funds sufficient therefor have been deposited with the title insurance company insuring the lien of the respective Mortgages and Collateral Assignments for payment to the applicable taxing authorities) in all jurisdictions as may be necessary with respect to such Loan or Letter of Credit or that, in the reasonable opinion of the Administrative Agent, are desirable to maintain the priority and/or enforceability of the Mortgages and Collateral Assignments with respect to the Loans to be made or Letters of Credit to be issued and all Loans theretofore made and all Letters of Credit theretofore issued and (y) to the extent requested by the Administrative Agent, a title update and endorsement as necessary to increase, or confirm, the coverage (as applicable) of those Mortgage Policies for the respective Borrowing Base Properties as may be necessary under applicable law to maintain the priority of the mortgage lien as to the Loan to be made or the Letter of Credit to be issued. 5.05 Subsequent Legal Opinions. If, at the time of the making of any Loan or the issuance of any Letter of Credit subsequent to the Effective Date, the Administrative Agent or the Required Banks shall have reasonably determined that any facts, circumstances or conditions exist which could reasonably be expected to adversely affect either (x) the ability of counsel to issue at such time the legal opinions originally delivered pursuant to Section 4.03 or (y) the perfection of any of the security interests created pursuant to any Security Document, and the Administrative Agent or the Required Banks shall have requested the Borrower to deliver one or more opinions of counsel covering such of the matters set forth in the opinions of counsel theretofore delivered pursuant to Section 4.03 as the Administrative Agent or the Required Banks shall specify, then prior to the incurrence of such Loan or the issuance of such Letter of Credit the Administrative Agent shall have received from counsel (who shall be reasonably satisfactory to the Administrative Agent) an opinion in form and substance reasonably satisfactory to the Administrative Agent, addressed to the Administrative Agent and each of the Banks and dated the date of such Loan or Letter of Credit, covering the matters so specified. The acceptance of the proceeds of each Loan and the issuance of each Letter of Credit shall constitute a representation and warranty by the REIT and the Borrower to the Administrative Agent, each of the Banks and the Issuing Bank that all the conditions specified in this Section 5 and applicable to such Loan exist as of that time (except to the extent that any of the conditions specified in this Section 5 are required to be satisfactory to or determined by any Bank, the Required Banks, the Collateral Agent and/or the Administrative Agent or otherwise expressly calls for a subjective determination to be made by any Bank, the Required Banks, the Collateral Agent and/or the Administrative Agent). All of the certificates and other documents and papers referred to in this Section 5, unless otherwise specified, shall be delivered to the Administrative Agent at the Notice Office for the benefit of each of the Banks. SECTION 6. Representations and Warranties. In order to induce the Banks and the Issuing Bank to enter into this Agreement and in order to induce the Banks to make the Loans and participate in the Letters of Credit and the Issuing Bank to issue the Letters of Credit as provided herein, each of the REIT and the Borrower makes (as to itself and each of its Subsidiaries), the following representations, warranties and agreements, all of which shall survive the execution and delivery of this Agreement and the Notes and the making of the Loans and the issuance of the Letters of Credit, 28 with the occurrence of the Effective Date and the incurrence of each Loan and the issuance of each Letter of Credit on or after the Effective Date being deemed to constitute a representation and warranty that the matters specified in this Section 6 are true and correct in all material respects on and as of the Effective Date and on the date of the making of each such Loan and the issuance of each such Letter of Credit (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date). 6.01 Status. Each of the REIT and each of its Subsidiaries (i) is a duly organized and validly existing real estate investment trust, corporation, partnership or limited liability company, as the case may be, in good standing (if applicable) under the laws of the jurisdiction of its formation, (ii) has the trust, corporate, partnership or limited liability company power and authority, as the case may be, to own or lease its property and assets and to transact the business in which it is engaged and presently proposes to engage and (iii) is duly qualified and is authorized to do business and is in good standing in each jurisdiction where the conduct of its business requires such qualifications except for failures to be so qualified which, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the REIT and its Subsidiaries taken as a whole or the Borrower and its Subsidiaries taken as a whole. 6.02 Power and Authority. Each Credit Party has the trust, corporate, partnership or limited liability company power and authority, as the case may be, to execute, deliver and perform the terms and provisions of each of the Credit Documents to which it is a party and has taken all necessary trust, corporate, partnership or limited liability company action, as the case may be, to authorize the execution, delivery and performance by it of each of such Credit Documents. Each Credit Party has duly executed and delivered each of the Credit Documents to which it is a party, and each of such Credit Documents constitutes the legal, valid and binding obligation of such Credit Party enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or other similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). 6.03 No Violation. Neither the execution, delivery or performance by any Credit Party of the Credit Documents to which it is a party, nor compliance by it with the terms and provisions thereof, (i) will contravene any provision of any applicable law, statute, rule or regulation or any applicable order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict with or result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien (except pursuant to the Security Documents) upon any of the properties or assets of the REIT or any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust, credit agreement or loan agreement, or any other material agreement, contract or instrument, to which the REIT or any of its Subsidiaries is a party or by which it or any of its property or assets is bound or to which it may be subject or (iii) will 29 violate any provision of the declaration of trust, certificate of incorporation, partnership agreement, certificate of partnership, limited liability company agreement or by-laws, as the case may be, of the REIT or any of its Subsidiaries. 6.04 Governmental Approvals. No order, consent, approval, license, authorization or validation of, or filing, recording or registration with (except as have been obtained or made and which remain in full force and effect), or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with, (i) the execution, delivery and performance of any Credit Document or (ii) the legality, validity, binding effect or enforceability of any Credit Document. 6.05 Financial Statements; Financial Condition; Undisclosed Liabilities; Projections; etc. (a) (i) To the best knowledge of the REIT and the Borrower, the unaudited operating statements for each Initial Borrowing Base Property and each Mortgage Loan Property securing an Initial Borrowing Base Pledged Mortgage Loan for the year ended June 30, 1997 or September 30, 1997, as applicable, and (ii) the unaudited pro forma consolidated balance sheet of the REIT and its Subsidiaries as of September 30, 1997 and the unaudited pro forma consolidated statement of operations of the REIT for the year ended December 31, 1996 and the nine month period ended September 30, 1997 (which statements have been prepared based on the assumption that (x) in the case of the balance sheet, the Initial Borrowing Base Properties and Initial Borrowing Base Pledged Mortgage Loans were acquired by the Borrower or its Subsidiaries on September 30, 1997 and (y) in the case of the statements of operations for each of the year ended December 31, 1997 and the nine months ended September 30, 1997, the Initial Borrowing Base Properties and Initial Borrowing Base Pledged Mortgage Loans were acquired by the Borrower or its Subsidiaries on January 1, 1996 and January 1, 1997, respectively and each present fairly the pro forma historical financial results of the Initial Borrowing Base Properties and each Mortgage Loan Property securing an Initial Borrowing Base Pledged Mortgage Loan (and the combined results which would have applied on the basis of the assumptions provided above). All information contained in each Information Package furnished to the Banks pursuant to Section 4.13 (with respect to the Initial Borrowing Base Properties and Initial Borrowing Base Pledged Mortgage Loans) or Section 7.11 (with respect to subsequently acquired Borrowing Base Properties and Borrowing Base Pledged Mortgage Loans) is, to the best knowledge of the Borrower, true and accurate in all material respects and not incomplete by omitting to state any fact necessary to make such information not misleading in any material respect. Since September 30, 1997 (but assuming that the Initial Borrowing Base Properties and Initial Borrowing Base Pledged Mortgage Loans had been acquired by the Borrower or its Subsidiaries on such date), there has been no material adverse change in the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the REIT, the REIT and its Subsidiaries taken as a whole, the Borrower or the Borrower and its Subsidiaries taken as a whole. The pro forma financial statements described in this Section 6.05(a) are consistent with the financial information set forth in the Form S-11 Registration Statement filed with the SEC in connection with the IPO. (b) On and as of the Effective Date and on the date on which each Loan is made and each Letter of Credit is issued, on a Pro Forma Basis 30 after giving effect to all Indebtedness (including the Loans) being incurred or assumed and Liens created by each Credit Party in connection therewith, (x) the sum of the assets, at a fair valuation, of the REIT and its Subsidiaries (taken as a whole) and the Borrower (on a stand-alone basis) will exceed their respective debts (with contingent liabilities being valued with respect to each such entity at the estimated amount for which such entity is reasonably likely to be liable), (y) the REIT and its Subsidiaries (taken as a whole) and the Borrower (on a stand-alone basis) have not incurred and do not intend to incur, and do not believe that they will incur, debts beyond their ability to pay such debts as such debts mature and (z) the REIT and its Subsidiaries (taken as a whole) and the Borrower (on a stand-alone basis) have sufficient capital with which to conduct its business. For purposes of this Section 6.05(b) "debt" means any liability on a claim, and "claim" means (i) right to payment whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (ii) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. (c) Except as fully disclosed in the financial statements delivered pursuant to Section 6.05(a), there were as of the Effective Date no liabilities or obligations with respect to the REIT or any of its Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due) which, either individually or in aggregate, would be material to the REIT, the Borrower or the Borrower and its Subsidiaries taken as a whole. As of the Effective Date, neither the REIT nor the Borrower knows of any basis for the assertion against it or any of its Subsidiaries of any liability or obligation of any nature that is not fully disclosed in the financial statements delivered pursuant to Section 6.05(a) which, either individually or in the aggregate, could reasonably be expected to have a material adverse effect on the REIT, the REIT and its Subsidiaries taken as a whole, the Borrower or the Borrower and its Subsidiaries taken as a whole. (d) On and as of the Effective Date, the financial projections for the 12 month period commencing on the Effective Date, including those prepared on a combined basis and those prepared for the individual Initial Borrowing Base Properties and Initial Borrowing Base Pledged Mortgage Loans (the "Projections") previously delivered to the Administrative Agent and the Banks have been prepared on a basis consistent in all material respects with the financial statements referred to in Section 6.05(a) (other than as set forth or presented in such Projections), and there are no statements or conclusions in any of the Projections which are based upon or include information known to the REIT or the Borrower to be misleading in any material respect or which fail to take into account known material information regarding the matters reported therein. On the Effective Date, each of the REIT and the Borrower believed that the Projections were reasonable and attainable. On the date of the delivery of any projections contained in the Information Package with respect to each subsequently acquired Borrowing Base Property or Borrowing Base Pledged Mortgage Loan, there shall be no statements or conclusions in any of such projections which are based upon or include information known by the REIT or the Borrower to be misleading in any material respect or which fail to take into account known material information regarding the matters reported therein. On the date any 31 such projections are furnished pursuant to Section 7.11, each of the REIT and the Borrower shall believe that such projections are reasonable and attainable. 6.06 Litigation. There are no actions, suits or proceedings pending or, to the best knowledge of the REIT or the Borrower, threatened (i) with respect to any Credit Document, (ii) with respect to any material Indebtedness of the REIT or any of its Subsidiaries or (iii) that could reasonably be expected to materially and adversely affect the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the REIT and its Subsidiaries taken as a whole, or the Borrower and its Subsidiaries taken as a whole. 6.07 True and Complete Disclosure. All factual information (taken as a whole) furnished by or on behalf of the REIT or any of its Subsidiaries in writing to the Administrative Agent or any Bank, including, without limitation, all information contained in the Credit Documents and all information contained in each Information Package furnished to the Banks pursuant to Section 4.13 (with respect to the Initial Borrowing Base Properties and Initial Borrowing Base Pledged Mortgage Loans) or 7.11 (with respect to subsequently acquired Borrowing Base Properties and Borrowing Base Pledged Mortgage Loans), for purposes of or in connection with this Agreement, the other Credit Documents or any transaction contemplated herein or therein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of the REIT, or any of the its Subsidiaries in writing to the Administrative Agent or any Bank, for purposes of or in connection with this Agreement, will be, true and accurate in all material respects on the date as of which such information is dated or certified and, to the best of the REIT's and the Borrower's knowledge, not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time in light of the circumstances under which such information is or was provided. 6.08 Use of Proceeds; Margin Regulations. (a) The proceeds of all Loans shall be used by the Borrower and its Subsidiaries, subject to the other restrictions set forth in this Agreement, (i) to acquire Borrowing Base Properties and to provide or purchase Borrowing Base Pledged Mortgage Loans, (ii) for working capital in connection with the acquisition of Borrowing Base Properties, (iii) to pay fees and expenses incurred in connection with the acquisition of Borrowing Base Properties and the provision or purchase of Borrowing Base Pledged Mortgage Loans, (iv) to repay Indebtedness, (v) to make acquisitions pursuant to Section 8.02(ix) and/or Investments pursuant to Sections 8.05(vi) and (vi) for working capital and other general corporate purposes. (b) No part of the proceeds of any Loan or Letter of Credit will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock. Neither the making of any Loan nor the issuance of any Letter of Credit nor the use of the proceeds thereof will violate or be inconsistent with the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. 6.09 Tax Returns and Payments. Each of the REIT and each of its Subsidiaries has timely filed or caused to be timely filed, on the due 32 dates thereof or within applicable grace periods, with the appropriate taxing authority, all Federal, state and other material returns, statements, forms and reports for taxes (the "Returns") required to be filed by or with respect to the income, properties or operations of the REIT and/or its Subsidiaries. The Returns accurately reflect in all material respects all liability for taxes of the REIT and its Subsidiaries for the periods covered thereby. Each of the REIT and each of its Subsidiaries has paid all material taxes payable by them other than taxes which are not delinquent, and other than those contested in good faith and for which adequate reserves have been established in accordance with generally accepted accounting principles. There is no material action, suit, proceeding, investigation, audit, or claim now pending or, to the best knowledge of the REIT or the Borrower, threatened by any authority regarding any material taxes relating to the REIT or any of its Subsidiaries. As of the Effective Date, neither the REIT nor any of its Subsidiaries has entered into an agreement or waiver or been requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of taxes of the REIT or any of its Subsidiaries. 6.10 Compliance with ERISA. Each Plan that is a single employer plan as defined in Section 4001(a)(15) of ERISA (a "Single Employer Plan") is in substantial compliance with ERISA and the Code; no Reportable Event has occurred with respect to a Single Employer Plan; to the best knowledge of the REIT or the Borrower, no Multiemployer Plan is insolvent or in reorganization; no Single Employer Plan has an Unfunded Current Liability; no Single Employer Plan which is subject to Section 412 of the Code or Section 302 of ERISA has an accumulated funding deficiency, within the meaning of such Sections of the Code or ERISA, or has applied for or received an extension of any amortization period within the meaning of Section 412 of the Code or Section 303 or 304 of ERISA; all contributions required to be made by the REIT or any of its Subsidiaries or any ERISA Affiliate with respect to a Plan have been timely made; neither the REIT nor any of its Subsidiaries nor any ERISA Affiliate has incurred any material liability to or on account of a Plan pursuant to ERISA or the Code or reasonably expects to incur any material liability (including any indirect, contingent, or secondary liability) under ERISA or the Code with respect to any Plan except for contributions to such Plans and benefit payments from such Plans in the ordinary course of business; no proceedings have been instituted to terminate or appoint a trustee to administer any Single Employer Plan; to the best knowledge of the REIT or the Borrower, no proceedings have been instituted to terminate or appoint a trustee to administer any Multiemployer Plan; no action, suit, proceeding, hearing or regulatory agency investigation with respect to the administration, operation or the investment of assets of any Single Employer Plan (other than claims for benefits) is pending, expected or threatened; to the best knowledge of the REIT or the Borrower, no action, suit, proceeding, hearing or regulatory agency investigation with respect to the administration, operation or the investment of assets of any Multiemployer Plan (other than claims for benefits) is pending, expected or threatened; no condition exists which presents a substantial risk to the REIT or any of its Subsidiaries or any ERISA Affiliate of incurring a material liability to or on account of a Single Employer Plan pursuant to ERISA and the Code except for contributions to such Plans and benefit payments from such Plans in the ordinary course of business; to the best knowledge of the REIT or the Borrower, no condition exists which presents a substantial risk to the REIT or any of its Subsidiaries or any 33 ERISA Affiliate of incurring any material liability to or on account of a Multiemployer Plan pursuant to ERISA and the Code except for contributions to such Plans and benefit payments from such Plans in the ordinary course of business; the REIT and the Borrower believe that the aggregate liabilities of the REIT and its Subsidiaries and its ERISA Affiliates to all Multiemployer Plans in the event of a withdrawal therefrom, as of the close of the most recent fiscal year of each such plan ended prior to the date of the incurrence of any Loan or the issuance of any Letter of Credit, could not reasonably be expected to have a material adverse effect on the ability of the REIT or any of its Subsidiaries to perform its obligations under this Agreement or the other Credit Documents to which it is a party; each group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or has covered employees or former employees of the REIT or any of its Subsidiaries or any ERISA Affiliate has at all times been operated in substantial compliance with the provisions of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code; no lien imposed under the Code or ERISA on the assets of the REIT or any of its Subsidiaries or any ERISA Affiliate exists or, to the best knowledge of the REIT or the Borrower is likely to arise on account of any Plan; and the REIT and its Subsidiaries do not maintain or contribute to (A) any employee welfare benefit plan (as defined in Section 3(1) of ERISA) which provides benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or (B) any Plan, the obligations with respect to which could reasonably be expected to have a material adverse effect on the ability of the REIT or any of its Subsidiaries to perform its obligations under this Agreement or the other Credit Documents to which it is a party. 6.11 The Security Documents. (a) With respect to the Security Agreement Collateral that consists of cash, Cash Equivalents and property in which a security interest may be perfected by the filing of a financing statement under the UCC, upon (i) possession by the Collateral Agent or its designee in the case of cash, (ii) the taking of all action required under Article 8 or Article 9, as applicable, of the UCC in the case of Cash Equivalents and instruments and (iii) the filing of appropriate financing statements under the UCC in the case of such other Security Agreement Collateral (all of the foregoing actions described in preceding clauses (i), (ii) and (iii) having been done and being in full force and effect with respect to such Security Agreement Collateral owned by such Credit Party on any date on which this representation and warranty is made or deemed made or, (x) in the case of the Effective Date, will have been done within 10 days following the Effective Date or (y) in the case of any Security Agreement Collateral acquired on any Addition Date, within 10 days following such Addition Date), the Collateral Agent has been granted, for the benefit of the Secured Creditors and pursuant to the Security Agreement, a legal, valid and enforceable security interest in all right, title and interest of such Credit Party in such Security Agreement Collateral, which security interest is a fully perfected first lien on, and security interest in, all right, title and interest of such Credit Party in all of such Security Agreement Collateral, subject to no other Liens other than Permitted Liens. Each Credit Party has good and marketable title to all Security Agreement Collateral, free and clear of all Liens except those described above in this clause (a). (b) Upon delivery to the Collateral Agent of any certificated Pledged Securities referred to in the Pledge Agreement and upon the taking of all actions required by Article 8 or Article 9, as applicable, of the UCC (which delivery and/or such other actions have been done and remain in full force and effect as to all such Pledge Agreement Collateral owned by any Credit Party on any date on which this representation and warranty is made or deemed made), the security interests created in favor of the Collateral Agent, as Pledgee, for the benefit of the Secured Creditors under the Pledge Agreement constitute first priority perfected security interests in the 34 Pledged Securities described in the Pledge Agreement and owned by the Credit Parties party thereto on any date on which this representation and warranty is made or deemed made, subject to no security interests of any other Person. No filings or recordings (except as have been done in connection with any uncertificated Pledged Stock) are required in order to perfect (or maintain the perfection or priority of) the security interests created in the Pledged Securities and the proceeds thereof under the Pledge Agreement. (c) The Mortgages create (upon recordation in all relevant jurisdictions, which recordations have been made and remain in full force and effect as to all Borrowing Base Properties owned or leased by any Credit Party on any date on which this representation is made or deemed made (or, in the case of any Borrowing Base Property included in the Borrowing Base subsequent to the Effective Date, such recordation will have been made within 10 days following the related Addition Date)), as security for the obligations purported to be secured thereby, a valid and enforceable perfected first priority security interest in and mortgage lien on all of the Borrowing Base Properties owned by any Credit Party on any date on which this representation and warranty is made or deemed made and in favor of the Collateral Agent (or such other trustee as may be required or desired under local law) for the benefit of the Secured Creditors, superior to and prior to the rights of all third Persons (except that the security interest and mortgage lien created in each Borrowing Base Property may be subject to the Permitted Encumbrances related thereto) and subject to no other Liens (other than Permitted Liens). Schedule III contains a true and complete list of each parcel of Real Property owned or leased by the REIT and its Subsidiaries on the Effective Date, the type of interest therein held by the REIT or any such Subsidiary and indicates which of such Real Properties constitute Initial Borrowing Base Properties. Each of the Borrower or the respective Subsidiary Guarantor, as the case may be, has good and marketable title in fee, or a valid ground leasehold interest, in and to all Borrowing Base Properties owned or ground leased by it on any date on which this representation and warranty is made or deemed made, free and clear of all Liens except those described in the first sentence of this subsection (c). On and as of any date on which this representation and warranty is made or deemed made, each Borrowing Base Property is a Qualified Property. (d) The Pledge and Security Agreement creates (after all steps required under Article 8 or Article 9, as applicable, of the UCC have been taken) in favor of the Collateral Agent for the benefit of the Secured Creditors a legal, valid and enforceable security interest in all right, title and interest of each Credit Party in the Pledge and Security Agreement Collateral described therein and owned by such Credit Party on any date on which this representation and warranty is made or deemed made, which security interest shall, (i) upon delivery to the Collateral Agent of any certificates evidencing equity interests in a Pledged Partnership Entity or Pledged Limited Liability Company, (ii) upon the filing of appropriate financing statements under the UCC in respect of any Partnership Interest or Limited Liability Company Interest that is not represented by a certificate and (iii) upon the taking of all steps required under Article 8 or Article 9, as applicable, of the UCC (which delivery, filings and/or steps have been done and remain in full force and effect as to the Pledge and Security Agreement Collateral owned by any Credit Party on any date on which this representation and warranty is made or deemed made), constitute a fully perfected first lien on, and security interest in, all right, title and interest of such Credit Party in all of the 35 Pledge and Security Agreement Collateral described therein, subject to no security interests of any other Person. (e) The Collateral Assignments create (upon recordation in all relevant jurisdictions, which recordations have been made and remain in full force and effect as to all Borrowing Base Pledged Mortgage Loans owned by any Credit Party on any date on which this representation is made or deemed made (or, in the case of any Borrowing Base Pledged Mortgage Loan included in the Borrowing Base subsequent to the Effective Date, such recordation will have been made within 10 days following the related Addition Date)), as security for the obligations purported to be secured thereby, a valid and enforceable perfected first priority security interest in all of the Borrowing Base Pledged Mortgage Loans owned by the Borrower on any date on which this representation and warranty is made or deemed made and in favor of the Collateral Agent (or such other trustee as may be required or desired under local law) for the benefit of the Secured Creditors, superior to and prior to the rights of all third Persons and subject to no other Liens (other than Permitted Liens). Schedule VIII contains a true and complete list of each Mortgage Loan owned by the Borrower and its Subsidiaries on the Effective Date and indicates which of such Mortgage Loans constitute Initial Borrowing Base Pledged Mortgage Loans. The Borrower has good title to all Borrowing Base Pledged Mortgage Loans owned by it on any date on which this representation and warranty is made or deemed made, free and clear of all Liens except those described in the first sentence of this subsection (e). On and as of any date on which this representation and warranty is made or deemed made, each Borrowing Base Pledged Mortgage Loan is a Qualified Mortgage Loan. 6.12 Status as REIT. The REIT is organized in conformity with the requirements for qualification as a real estate investment trust under the Code. The REIT is in a position to qualify for its current Fiscal Year as a real estate investment trust under the Code and its proposed methods of operation will enable it to so qualify. 6.13 Properties. Each of the REIT and each of its Subsidiaries has good and marketable title to all material properties owned by them, including, in the case of the Borrower and its Subsidiaries, all material property reflected in the consolidated balance sheet of the Borrower and its Subsidiaries referred to in Section 6.05(a) and in the pro forma balance sheet referred to in Section 4.15 (except as sold or otherwise disposed of since the date of such balance sheet in the ordinary course of business, free and clear of all Liens, other than (i) as referred to in such balance sheet or in the notes thereto or in such pro forma balance sheet or (ii) Permitted Liens). Except as may be disclosed in the Engineering Reports, each Borrowing Base Property and each Mortgage Loan Property securing a Borrowing Base Pledged Mortgage Loan is free of material structural defects and is in good repair (ordinary wear and tear excepted) and all building systems contained therein are in good working order in all material respects subject to ordinary wear and tear, and is free and clear of any damage that could reasonably be expected to materially and adversely affect the value of such Borrowing Base Property or such Mortgage Loan Property as to the use thereof for its intended purposes. 6.14 Healthcare Matters. (a) To the best knowledge of the REIT and the Borrower after reasonable investigation, each Operating 36 Lessee (i) has, with respect to each of the Properties it leases, all licenses required under applicable law to operate each of such Properties and to conduct the business in which it is currently engaged, (ii) has, with respect to each Property it leases, received any certificate of need, determination of need or similar approval required under applicable law, and any amendments or supplements with respect thereto, and such approvals are in full force and effect, and (iii) with respect to Properties that are operated as nursing facilities (except where participation in Medicare or Medicaid is deemed undesirable in the reasonable business judgment of the Operating Lessee) is a party to provider agreements with respect to the participation of such Properties in Medicare and Medicaid, which provider agreements are in full force and effect, and are not, and for the past five calendar years have not been, the subject of any proceedings that have been initiated or notices issued by any Person to suspend, revoke, limit or otherwise modify any such provider agreement, except, with respect to foregoing clauses (i), (ii) and (iii), such licenses, approvals, certifications and provider agreements as to which any lack thereof could not reasonably be expected to materially and adversely affect the value of any Borrowing Base Property or Mortgage Loan Property or the aggregate value of any other Properties, and except such proceedings which could not, individually or in the aggregate, reasonably be expected to have a material adverse effect upon the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the REIT and its Subsidiaries, taken as a whole, or the Borrower and its Subsidiaries, taken as a whole. (b) To the best knowledge of the REIT and the Borrower after reasonable investigation, each Property (i) complies with all applicable federal, state and local laws, regulations, quality and safety standards, building and fire codes, accreditation standards and health care, nursing facility or other requirements of any state department of health or other federal, state or local governmental authorities, (ii) complies with all requirements for participation in, and is in conformity with, all insurance, reimbursement and cost reporting requirements imposed by law or regulation and has a current provider agreement which is in full force and effect under, Medicare and Medicaid, and (iii) is not, and for the past five calendar years has not been, the subject of any proceedings that have been initiated or notices issued by any Person to suspend, revoke, limit or otherwise modify any such provider agreement, except, with respect to foregoing clauses (i), (ii) and (iii), such failures to comply and failures to conform which could not reasonably be expected to materially and adversely affect the value of any Borrowing Base Property or Mortgage Loan Property or the aggregate value of any other Properties, and except such proceedings which could not, individually or in the aggregate, reasonably be expected to have a material adverse effect upon the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the REIT and its Subsidiaries taken as a whole, or the Borrower and its Subsidiaries taken as a whole. To the best knowledge of the REIT and the Borrower, in the event that the Collateral Agent or any purchaser at foreclosure or similar proceeding acquires any Property through foreclosure or similar proceeding or otherwise, or in the event that the Operating Lease relating to a Property is terminated, neither the Collateral Agent, such purchaser, any subsequent lessee, manager or operator, nor the Borrower or any of its Subsidiaries, would be required to obtain any certificate of need, determination of need, or other similar approval relating solely to operation of the Property as a health care facility (a "CON"), from any applicable health care regulator or authority or any other governmental authority prior to applying for, or receiving, applicable licenses and certifications to continue to operate such Property as 37 a health care facility except to the extent that (i) the facility has made any capital improvements or instituted any new institutional health services since the date of the Closing and has applied for, but not yet received, any applicable CON, or (ii) such health care regulator or authority or governmental authority requires the issuance or transfer of a CON in the event of a change of ownership or control of a health care facility. 6.15 Subsidiaries. The REIT has no Subsidiaries other than the Borrower and the Borrower's Subsidiaries. The Borrower has no Subsidiaries other than (i) those Subsidiaries listed on Schedule IV and (ii) new Subsidiaries created in compliance with Section 8.12. 6.16 Compliance with Statutes, etc. (a) Each of the REIT and each of its Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including applicable statutes, regulations, orders and restrictions relating to environmental standards and controls), except such noncompliances as could not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the REIT and its Subsidiaries taken as a whole, or the Borrower and its Subsidiaries taken as a whole. (b)(i) Each Borrowing Base Property and each Mortgage Loan Property securing a Borrowing Base Pledged Mortgage Loan complies in all material respects with all Legal Requirements, (ii) all material consents, licenses, certificates and permits required by all Legal Requirements for the construction or the operation, as applicable, of each Borrowing Base Property and each Mortgage Loan Property securing a Borrowing Base Pledged Mortgage Loan have been obtained and are in full force and effect and (iii) all utility services and facilities necessary for the operation of each Borrowing Base Property and each Mortgage Loan Property securing a Borrowing Base Pledged Mortgage Loan are available at such Borrowing Base Property or Mortgage Loan Property, as applicable. 6.17 Investment Company Act. Neither the REIT nor any of its Subsidiaries is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 6.18 Public Utility Holding Company Act. Neither the REIT nor any of its Subsidiaries is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. 6.19 Environmental Matters. (a) Each of the REIT and each of its Subsidiaries has complied with all applicable Environmental Laws and the requirements of any permits issued under such Environmental Laws. There are no pending or, to the best knowledge of the REIT and the Borrower, threatened Environmental Claims against the REIT or any of its Subsidiaries or any Real Property owned or operated by the REIT or any of its Subsidiaries. To the best knowledge of the REIT and the Borrower, there are no pending or 38 threatened Environmental Claims against any borrower under a Mortgage Loan or any Mortgage Loan Property. To the best knowledge of the REIT and the Borrower, there are no facts, circumstances, conditions or occurrences on any Real Property owned or operated by the REIT or any of its Subsidiaries or on any Mortgage Loan Property or on any property adjoining any such Real Property or Mortgage Loan Property that could reasonably be expected (i) to form the basis of an Environmental Claim against the REIT or any of its Subsidiaries or any such Real Property or any such Mortgage Loan Property or the borrower under any such Mortgage Loan or (ii) to cause any such Real Property or Mortgage Loan Property to be subject to any restrictions on the ownership, occupancy, use or transferability of such Real Property or Mortgage Loan Property under any applicable Environmental Law. (b) To the best knowledge of the REIT and the Borrower, except as otherwise set forth in the environmental reports delivered to the Administrative Agent prior to the Effective Date, Hazardous Materials have not at any time been generated, used, treated or stored on, or transported to or from, or Released on or from, any Real Property owned or operated by the REIT or any of its Subsidiaries or any Mortgage Loan Property except in compliance with all applicable Environmental Laws and reasonably required in connection with the operation, use and maintenance of any such Real Property or Mortgage Loan Property. 6.20 Labor Relations. To the best knowledge of the REIT and the Borrower, no Operating Lessee or Manager is engaged in any unfair labor practice with respect to any Property that could reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the REIT and its Subsidiaries taken as a whole, or the Borrower and its Subsidiaries taken as a whole. To the best knowledge of the REIT and the Borrower, there is (i) no unfair labor practice complaint pending or reasonably expected to arise against any Operating Lessee or Manager before the National Labor Relations Board and no significant grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement is so pending or reasonably expected to arise against any Operating Lessee or Manager, (ii) no strike, labor dispute, slowdown or stoppage is pending or reasonably expected to arise against any Operating Lessee or Manager and (iii) no union representation question exists with respect to the employees of any Operating Lessee or Manager, in each case with respect to the Properties operated by the Operating Lessees or Managers, except (with respect to any matter specified in clause (i), (ii) or (iii) above, either individually or in the aggregate) such as could not reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the REIT and its Subsidiaries taken as a whole, or the Borrower and its Subsidiaries taken as a whole. 6.21 Intellectual Property. Each of the REIT and each of its Subsidiaries, and, to the best knowledge of the REIT and the Borrower, each Operating Lessee, owns or has the right to use all material trademarks, permits, service marks, trade names, licenses and franchises necessary for the conduct of its respective businesses. 6.22 Indebtedness. Schedule V sets forth a true and complete list of all Indebtedness (excluding Indebtedness of the type described in 39 Section 8.04(iii)) of the REIT and its Subsidiaries as of the Effective Date (excluding the Loans and the Letters of Credit, the "Existing Indebtedness"), in each case showing the aggregate principal amount thereof and the name of the respective borrower and any other entity which directly or indirectly guaranteed such debt. 6.23 Operating Leases; Management Agreements; Ground Leases. (a) Each Operating Lease with respect to any Borrowing Base Property and each Management Agreement with respect to any Borrowing Base Property that is not leased to an Operating Lessee is in full force and effect and no party thereto has denied or disaffirmed any of its material obligations thereunder or has defaulted in the due performance or observance of any material term, covenant or agreement on its part to be performed or observed pursuant thereto. (b) Each ground lease with respect to any Borrowing Base Property which is a Leasehold and each ground lease with respect to any Mortgage Loan Property securing a Borrowing Base Pledged Mortgage Loan which is a Leasehold is in full force and effect and no party thereto has denied or disaffirmed any of its material obligations thereunder or has defaulted in the due performance or observance of any material term, covenant or agreement on its part to be performed or observed pursuant thereto. SECTION 7. Affirmative Covenants. Each of the REIT and the Borrower hereby covenants and agrees (as to itself and each of its Subsidiaries) that on and after the Effective Date and until the Total Commitment has terminated and all Letters of Credit have terminated and the Loans, Notes and Unpaid Drawings, together with interest, Fees and all other Obligations incurred hereunder and thereunder, are paid in full: 7.01 Information Covenants. The REIT and/or the Borrower will furnish to the Administrative Agent (with sufficient copies for each of the Banks, and the Administrative Agent will promptly forward to each of the Banks): (a) Quarterly Financial Statements and Reports. (A) Within 45 days after the close of each of the first three quarterly accounting periods in each fiscal year of the Borrower (i) the consolidated balance sheet of each of the REIT and its Subsidiaries and the Borrower and its Subsidiaries as at the end of such quarterly accounting period, (ii) the related consolidated statements of income for such quarterly accounting period and for the elapsed portion of the fiscal year ended with the last day of such quarterly accounting period and (iii) the related consolidated statements of cash flows for the elapsed portion of the fiscal year ended with the last day of such quarterly accounting period, in each case setting forth comparative figures for the corresponding fiscal periods in the prior fiscal year, as applicable, all of which shall be in reasonable detail and certified by an Authorized Financial Officer of the Borrower that, to the best of such officer's knowledge, they fairly present the financial condition of each of the REIT and its Subsidiaries and the Borrower and its Subsidiaries as of the dates indicated and the results of their operations and changes in their cash flows for the periods indicated, subject to normal year-end audit adjustments. 40 (B)(i)i) Within 45 days after the end of each of the first three quarterly accounting periods, and within 90 days after the end of the fourth quarterly accounting period, in each fiscal year of the Borrower, certificates in the forms of (x) Exhibit M-1 (with such changes thereto as are reasonably acceptable to the Administrative Agent) for each Borrowing Base Property on an individual basis, and, at any time that the Borrower or any of its Subsidiaries owns or leases any non-Borrowing Base Properties, for all such Properties on a combined basis, and (y) Exhibit M-2 (with such changes thereto as are reasonably acceptable to the Administrative Agent) for each Borrowing Base Pledged Mortgage Loan on an individual basis, and, at any time that the Borrower or any of its Subsidiaries owns any non-Borrowing Base Mortgage Loans, for all such Mortgage Loans on a combined basis, in each case signed by an Authorized Financial Officer of the Borrower setting forth the required financial and other information for such quarterly accounting period as set forth in such Exhibits and for the elapsed portion of the fiscal year ended with the last day of such quarterly accounting period, and setting forth comparative figures for the corresponding quarterly accounting period in the prior fiscal year and the budgeted figures for such quarterly accounting period. (ii) Within 45 days after the end of each of the first three quarterly accounting periods, and within 90 days after the end of the fourth quarterly accounting period, in each fiscal year of the Borrower, a certificate in the form of Exhibit N (with such changes thereto as are reasonably acceptable to the Administrative Agent) for the Borrower and its Subsidiaries on a consolidated basis, in each case signed by an Authorized Financial Officer of the Borrower setting forth the required financial and other information for the elapsed portion of the fiscal year ended with the last day of such quarterly accounting period. (b) Annual Financial Statements. Within 90 days after the close of each fiscal year of the Borrower, the consolidated balance sheet of each of the REIT and its Subsidiaries and the Borrower and its Subsidiaries, as of the end of such fiscal year and the related consolidated statements of income and shareholders' equity and of cash flows for such fiscal year setting forth comparative figures for the preceding fiscal year and certified by independent certified public accountants of recognized national standing reasonably acceptable to the Administrative Agent, together with a report of such accounting firm stating that in the course of its regular audit of the financial statements of each of the REIT and its Subsidiaries and the Borrower and its Subsidiaries, which audit was conducted in accordance with generally accepted auditing standards, such accounting firm obtained no knowledge of any Default or Event of Default which has occurred and is continuing under any of Sections 8.08 through 8.10, inclusive, or, if in the opinion of such accounting firm such a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof. (c) Borrowing Base Certificate. (i) Within 45 days after the close of each quarterly accounting period in each fiscal year of the Borrower, a Borrowing Base Certificate, signed by an Authorized Financial Officer of the Borrower, calculating (in reasonable detail) the Borrowing Base as of the last day of such quarterly accounting period, (ii) at the time of the delivery of any Notice of Borrowing or 41 Letter of Credit Request or any notice pursuant to Section 7.01(j), a revised Borrowing Base Certificate signed by an Authorized Financial Officer of the Borrower calculating (in reasonable detail) the Borrowing Base as of the date of such Notice of Borrowing or Letter of Credit Request (and after giving effect thereto) or such other notice and (iii) on any Addition Date or Release Date, a revised Borrowing Base Certificate signed by an Authorized Financial Officer of the Borrower calculating (in reasonable detail) the Borrowing Base as of such Addition Date or Release Date, as the case may be (in each case after giving effect thereto). (d) Budgets. No later than 30 days prior to the first day of each fiscal year of the Borrower, budgets in form reasonably satisfactory to the Administrative Agent (including, in any event, budgeted statements of cash flow and Capital Expenditures and budgeted debt and cash balances) for such fiscal year prepared in detail, with respect to (x) the Borrower and its Subsidiaries, (y) each Borrowing Base Property and (z) all the Borrowing Base Properties, in each case accompanied by a statement of an Authorized Financial Officer of the Borrower to the effect that, to the best of such officer's knowledge, the budget is a reasonable estimate of the period covered thereby. (e) Officer's Certificates. At the time of the delivery of the financial statements provided for in Sections 7.01(a) and (b), a certificate of an Authorized Financial Officer of the Borrower to the effect that, to the best of such officer's knowledge, no Default or Event of Default has occurred and is continuing or, if any Default or Event of Default has occurred and is continuing, specifying the nature and extent thereof, which certificate shall set forth the calculations required to establish whether the REIT and its Subsidiaries were in compliance with the provisions of Sections 8.03, 8.04, 8.05 and 8.07 through 8.10, inclusive, at the end of such fiscal quarter or year, as the case may be. (f) Notice of Default or Litigation. Promptly, and in any event within three Business Days after the President, the Chief Executive Officer, any Vice President or any Authorized Financial Officer of the REIT or any of its Subsidiaries obtains knowledge thereof, notice of (i) the occurrence of any event which constitutes a Default or an Event of Default and (ii) any litigation or governmental investigation or proceeding pending or threatened (x) against the REIT or any of its Subsidiaries which could reasonably be expected to materially and adversely affect the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the REIT and its Subsidiaries taken as a whole, or the Borrower and its Subsidiaries taken as a whole, (y) with respect to any material Indebtedness of the REIT or any of its Subsidiaries or (z) with respect to any Credit Document. (g) Management Letters. Promptly after the receipt thereof by any Credit Party, a copy of any "management letter" received by such Credit Party from its certified public accountants and management's responses thereto. 42 (h) Other Reports and Filings. Promptly, and without duplication of any documents or information delivered pursuant to another clause of this Section 7.01, copies of all financial information, proxy materials and other information and reports, if any, which the REIT or any of its Subsidiaries shall file with the Securities and Exchange Commission or any successor thereto (the "SEC") (it being understood, however, that with respect to any preliminary filings made with the SEC, the REIT need only deliver a certificate describing such filing) and copies of all notices and reports which the REIT or any of its Subsidiaries shall deliver to holders of its material Indebtedness pursuant to the terms of the documentation governing such Indebtedness (or any trustee, agent or other representative therefor). (i) Environmental Matters. Promptly upon, and in any event within ten Business Days after the President, the Chief Executive Officer, any Vice President or any Authorized Financial Officer of the REIT or any of its Subsidiaries obtains knowledge thereof, notice of one or more of the following environmental matters: (i) any pending or threatened Environmental Claim against the REIT or any of its Subsidiaries or any borrower under a Mortgage Loan or any Real Property owned or operated by the REIT or any of its Subsidiaries or any Mortgage Loan Property; (ii) any condition or occurrence on or arising from any Real Property owned or operated by the REIT or any of its Subsidiaries or any Mortgage Loan Property that (a) results in non-compliance by the REIT or any of its Subsidiaries or any borrower under a Mortgage Loan with any applicable Environmental Law or (b) could reasonably be expected to form the basis of an Environmental Claim against the REIT or any of its Subsidiaries or any borrower under a Mortgage Loan or any Real Property owned or operated by the REIT or any of its Subsidiaries or any Mortgage Loan Property; (iii) any condition or occurrence on any Real Property owned or operated by the REIT or any of its Subsidiaries or any Mortgage Loan Property that could reasonably be expected to cause such Real Property to be subject to any restrictions on the ownership, occupancy, use or transferability thereof under any Environmental Law; and (iv) the taking of any removal or remedial action in response to the actual or alleged presence of any Hazardous Material on any Real Property owned or operated by the REIT or any of its Subsidiaries or any Mortgage Loan Property as required by any Environmental Law or any governmental or other administrative agency. All such notices shall describe in reasonable detail the nature of the claim, investigation, condition, occurrence or removal or remedial action and the response or proposed response thereto. 43 (j) Reduction of Borrowing Base Amounts. Promptly and in any event within five Business Days after the President, the Chief Executive Officer, any Vice President or any Authorized Financial Officer of the REIT or any of its Subsidiaries obtains knowledge thereof, notice of the occurrence or effectiveness of any event or condition that has caused, or could reasonably be expected to cause, the Borrowing Base Amount of any Borrowing Base Property or Borrowing Base Pledged Mortgage Loan to be reduced by more than the lesser of (x) $1,000,000 and (y) 5% of such Borrowing Base Amount, in each case together with a certificate of an Authorized Financial Officer of the Borrower setting forth (in reasonable detail) the nature of the respective event and/or condition. (k) Annual Meetings with Banks. At the request of the Administrative Agent or the Required Banks, the Borrower shall, at least once during each fiscal year of the Borrower, hold a meeting (at a mutually agreeable location and time) with all of the Banks at which meeting the financial results of the previous fiscal year and the financial condition of the REIT and its Subsidiaries and the budgets presented for the current fiscal year of the REIT and its Subsidiaries shall be reviewed, with each Bank bearing its own travel, lodging, food and other costs associated with attending any such meeting. (l) Mortgage Loan Defaults. Promptly and in any event within three Business Days after the President, the Chief Executive Officer, any Vice President or any Authorized Financial Officer of the REIT or any of its Subsidiaries obtains knowledge thereof, notice of the occurrence of any default or event of default under and as defined or described in any of the Pledged Mortgage Loan Documents. (m) Borrowing Base Pledged Mortgage Loans. Promptly, and in any event within five Business Days of receipt of any financial information, including budgets, relating to any Mortgage Loan securing a Borrowing Base Pledged Mortgage Loan, copies of such financial information. (n) Other Information. From time to time, such other information or documents (financial or otherwise) with respect to the REIT and/or any of its Subsidiaries as the Administrative Agent or any Bank (through the Administrative Agent) may reasonably request. 7.02 Books, Records and Inspections. The REIT will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries in conformity with generally accepted accounting principles and all requirements of law shall be made of all dealings and transactions in relation to its business and activities. The REIT will, and will cause each of its Subsidiaries to, permit officers and designated representatives of the Administrative Agent or any Bank to visit and inspect, upon reasonable advance notice, during regular business hours and under guidance of officers of the REIT or such Subsidiary, any of the properties of the REIT or any of its Subsidiaries, and to examine the books of account of the REIT and any of its Subsidiaries and discuss the affairs, finances and accounts of the REIT and any of its Subsidiaries with, and be advised as to the same by, its and their respective Presidents, Chief Executive Officers, Vice Presidents, Authorized Financial Officers and 44 independent accountants, all at such reasonable times and intervals and to such reasonable extent as the Administrative Agent or any Bank may reasonably request, provided that any Bank's rights under this Section 7.02 may not be exercised more than once in any fiscal quarter of the Borrower. 7.03 Maintenance of Property; Insurance. (a) Schedule VI sets forth a true and complete listing of all insurance maintained by, or on behalf of, the REIT and its Subsidiaries as of the Effective Date. The REIT will, and will cause each of its Subsidiaries and the Operating Lessees and Managers to, (i) keep all property necessary in its business (including, in any event, each Borrowing Base Property) in good working order and condition and (ii) furnish to the Administrative Agent, upon written request, information evidencing the insurance carried. In addition to the requirements of the immediately preceding sentence, the REIT will, and will cause each of its Subsidiaries and the Operating Lessees and Managers to, at all times cause (I) insurance coverage to be issued by an insurer (x) authorized to issue such insurance in all applicable jurisdictions and (y) having an "A-" or better rating as established by A.M. Best Company and with a financial size rating of VII or larger as established by A.M. Best Company (or another financial size rating reasonably acceptable to the Administrative Agent considering market conditions) and (II) insurance with at least the coverages set forth below to be continuously maintained: (i) Property insurance including coverage for business interruption and/or rental income covering all Borrowing Base Properties including, but not limited to, any alterations, Improvements or additions thereto. All such insurance coverage shall be written on the so-called "All Risk of Physical Loss" basis and include the perils of fire, lightning, windstorm, sprinkler leakage, hail, explosion, riot, riot attending a strike, civil commotion, vandalism, malicious mischief, terrorist acts, aircraft, vehicle, smoke, sinkhole (which in the case of a Borrowing Base Property located in the State of California, is covered by earthquake insurance) and collapse in an amount equal to at least 100% of the full replacement cost of the respective property (other than in respect of the foundation and excavation); (ii) Boiler and machinery insurance covering all boilers, boiler tanks, pressure vessels, auxiliary piping, heating and air conditioning equipment and similar apparatus located in or about the Borrowing Base Properties in such amounts as are generally carried by risks of the nature of the respective property; (iii) Flood insurance to the extent available under the National Flood Insurance Program, against damage or loss by flood if any Borrowing Base Property is located in an area now or in the future designated "A" or "V" FIRM Zones as defined in the National Flood Insurance Act of 1968, or the Flood Disaster Protection Act of 1973, or the National Flood Insurance Reform Act of 1994 and any modifications of such acts to the full amount available under such acts or programs; (iv) Earthquake insurance against the peril of earthquake and earth movement if any Borrowing Base Property is located in 45 California or any other area at high risk of earthquake on such basis and amounts as shall be reasonably determined by the Administrative Agent; (v) Liability insurance on a Comprehensive General Liability Occurrence format in an amount of at least $1,000,000 combined bodily injury and property damage per occurrence and $3,000,000 in the annual aggregate amount per Borrowing Base Property. Such insurance coverage shall protect both the REIT and its Subsidiaries and the Collateral Agent against claims for bodily injury including death, property damage, personal injury, advertising injury, contractual liability, products and completed operations liability arising out of or connected with the possession, use, operation, leasing, maintenance, construction, alteration or renovation of each Borrowing Base Property. If any of the coverages referred to in this clause (v) are obtained under a so-called "blanket" policy with more than one property covered, the policy shall contain a so-called "individual aggregate per location or project" endorsement; (vi) Umbrella or excess liability insurance on an occurrence basis in the amount of at least $100,000,000 per occurrence covering both the REIT and its Subsidiaries and the Collateral Agent against claims for damages in excess of all primary liability policies; (vii) Statutory workers' compensation insurance or a qualified self insurer (to the extent the risks to be covered thereby are not already covered by other policies of insurance maintained by, or on behalf of, the REIT and its Subsidiaries), in statutory amounts as required by law (including employer's liability insurance); and (viii) Such other insurance against loss or damage of the kinds from time to time customarily insured against and in such amounts as are generally available and required by institutional lenders for properties comparable to the respective Borrowing Base Property. With respect to insurance of the types described above in this Section 7.03(a) for non-Borrowing Base Properties and Mortgage Loan Properties (including Mortgage Loan Properties securing Borrowing Base Pledged Mortgage Loans), such insurance shall be in at least such amounts and insure against at least such risks as are consistent with industry practice for similarly situated properties. (b) The REIT and the Borrower will, and will cause each of the Subsidiary Guarantors and/or each Operating Lessee or Manager to, at all times keep the respective Borrowing Base Properties (and all equipment, fixtures, improvements and other personalty relating thereto) insured in favor of the Collateral Agent, and all policies or certificates with respect to such insurance (and any other insurance maintained by, or on behalf of, the REIT, the Borrower or any Subsidiary Guarantor) (i) shall name the Collateral Agent as loss payee or as an additional insured, as its respective interest may appear, (ii) shall state that such insurance policies shall not be canceled or materially changed without at least 30 days' prior written notice thereof (or at least 10 days' prior written notice thereof in the case of non-payment of premium) by the respective insurer to the Collateral Agent, (iii) shall 46 provide that the respective insurers irrevocably waive any and all rights of subrogation with respect to the Collateral Agent and the Secured Creditors, (iv) shall contain the standard non-contributory mortgagee clause endorsement in favor of the Collateral Agent with respect to hazard insurance coverage, (v) shall, with respect to first party property insurance and business interruption insurance, provide that any losses shall be payable to the Collateral Agent notwithstanding (A) any act or neglect of the REIT, the Borrower, any Subsidiary Guarantor or any Operating Lessee or Manager, (B) the occupation or use of the properties for purposes more hazardous than those permitted by the terms of the respective policy if such coverage is obtainable at commercially reasonable rates and is of the kind from time to time customarily insured against by Persons owning or using similar property and in such amounts as are customary, (C) any foreclosure or other proceeding relating to the insured properties or (D) any change in the title to or ownership or possession of the insured properties and (vi) shall be deposited with the Collateral Agent. (c) If the REIT, the Borrower, any of the Subsidiary Guarantors or any Operating Lessee or Manager shall fail to maintain all insurance in accordance with this Section 7.03, or if the REIT, the Borrower, any of the Subsidiary Guarantors or any Operating Lessee or Manager shall fail to so name the Collateral Agent as an additional insured or as a loss payee or so deposit all certificates with respect thereto, the Administrative Agent and/or the Collateral Agent shall have the right (but shall be under no obligation), upon at least 10 days' notice to the Borrower, to procure such insurance, and the REIT and the Borrower agree to reimburse the Administrative Agent or the Collateral Agent, as the case may be, for all costs and expenses of procuring such insurance. 7.04 Corporate Franchises. The REIT will, and will cause each of its Subsidiaries to, do or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its material rights, franchises, licenses and patents; provided, however, that nothing in this Section 7.04 shall prevent (i) any of the transactions permitted in accordance with Section 8.02 or (ii) the withdrawal by the REIT or any of its Subsidiaries of its qualification as a foreign corporation, partnership or limited liability company, as the case may be, in any jurisdiction where such withdrawal could not reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the REIT, the REIT and its Subsidiaries taken as a whole, the Borrower or the Borrower and its Subsidiaries taken as a whole. 7.05 Compliance with Statutes, etc. The REIT will, and will cause each of its Subsidiaries and each Operating Lessee and each Manager to, comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property, including, without limitation, any requirements of any federal, state or local department of health, except such noncompliances as could not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the REIT, the REIT and its Subsidiaries taken as a whole, the Borrower or the Borrower and its Subsidiaries taken as a whole. The REIT will, and will cause each of its Subsidiaries and each Operating Lessee and each Manager to, (x) maintain in good standing all licenses, certifications, accreditations and other approvals applicable to it or to any Property which it owns, leases, manages or operates 47 and (y) maintain a standard of care for the patients or residents of each such Property at all times at the level necessary to ensure quality care for such patients or residents. 7.06 Compliance with Environmental Laws. (a) The REIT will comply, and will cause each of its Subsidiaries and each Operating Lessee and each Manager to comply, with all Environmental Laws applicable to the ownership or use of its Real Property now or hereafter owned or operated by the REIT or any of its Subsidiaries, except such noncompliances as could not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the REIT, the REIT and its Subsidiaries taken as a whole, the Borrower or the Borrower and its Subsidiaries taken as a whole, and will promptly pay or cause to be paid all costs and expenses incurred in connection with such compliance, and will keep or cause to be kept all such Real Property free and clear of any Liens imposed pursuant to such Environmental Laws. (b) At the written request of the Administrative Agent or the Required Banks, which request shall specify in reasonable detail the basis therefor, at any time and from time to time after (i) the Obligations have been declared due and payable pursuant to Section 9, (ii) the Administrative Agent receives notice under Section 7.01(i) of any event for which notice is required to be delivered for any Real Property or (iii) the REIT or any of its Subsidiaries are not in compliance with Section 7.06(a) with respect to any Real Property, the REIT and the Borrower will provide, at their sole cost and expense, an environmental site assessment report concerning any such Real Property now or hereafter owned or operated by the REIT or any of its Subsidiaries, prepared by an environmental consulting firm reasonably approved by the Administrative Agent, indicating the presence or absence of Hazardous Materials and the potential cost of any removal or remedial action in connection with any Hazardous Materials on such Real Property. If the REIT or the Borrower fails to provide the same within 90 days after such request was made, the Administrative Agent may order the same, and the REIT and the Borrower shall grant and hereby grant to the Administrative Agent and the Banks and their agents access to such Real Property and specifically grant the Administrative Agent and the Banks an irrevocable non-exclusive license, subject to the rights of tenants, to undertake such an assessment, all at the Borrower's expense. 7.07 ERISA. Except to the extent that a different reporting obligation is set forth elsewhere in this Agreement in connection with the events described in this Section 7.07, within 15 Business Days after the REIT, any Subsidiary of the REIT or any ERISA Affiliate knows or has reason to know of the occurrence of any of the following events, the REIT will deliver to the Administrative Agent a certificate of an Authorized Financial Officer of the REIT setting forth the material details as to such occurrence and the action, if any, that the REIT, such Subsidiary or such ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by the REIT, the Borrower, such Subsidiary, such ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator with respect thereto: (i) except as would not be material, that a Reportable Event has occurred (except to the extent that the REIT has previously delivered to the Administrative Agent a certificate and notices (if any) concerning such event pursuant to the next clause hereof); (ii) that a contributing sponsor (as 48 defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA is subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof), and a material event described in subsection .62,.63,.64,.65,.66,.67 or .68 of PBGC Regulation Section 4043 is reasonably expected to occur with respect to such Plan within the following 30 days, provided, however, that with respect to the obligation to report under this clause 7.07(ii), the REIT is not required to report to the Administrative Agent earlier than the REIT, Subsidiary or ERISA Affiliate is required to report to the PBGC; (iii) that an accumulated funding deficiency, within the meaning of Section 412 of the Code or Section 302 of ERISA, has been incurred or an application may reasonably be expected to be or has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code or Section 303 or 304 of ERISA with respect to a Single Employer Plan; (iv) except as would not be material, that any contribution required to be made by the REIT, any Subsidiary of the REIT or any ERISA Affiliate to a Plan has not been timely made; (v) that a Plan or, to the best knowledge of the REIT or the Borrower, Multiemployer Plan has been or may reasonably be expected to be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA; (vi) except as would not be material, that a Plan has an Unfunded Current Liability; (vii) that proceedings may reasonably be expected to be or have been instituted by the PBGC to terminate or appoint a trustee to administer a Plan or to the best knowledge of the REIT or the Borrower, a Multiemployer Plan; (viii) except as would not be material, that a proceeding has been instituted against the REIT, the Borrower, any Subsidiary of the REIT or the Borrower or any ERISA Affiliate pursuant to Section 515 of ERISA to collect a delinquent contribution to a Plan; (ix) that the REIT, any Subsidiary of the REIT or any ERISA Affiliate will or will reasonably be expected to incur or has incurred any material liability (including any indirect, contingent, or secondary liability) to or on account of the termination of or withdrawal from a Plan or Multiemployer Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA, or with respect to a Plan or Multiemployer Plan under Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i) or 502(l) of ERISA, or with respect to a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code under Section 4980B of the Code; or (x) that the REIT, the Borrower, or any Subsidiary of the REIT or the Borrower may incur any material liability pursuant to any employee welfare benefit plan (as defined in Section 3(1) of ERISA) that provides benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or any employee pension benefit plan (as defined in Section 3(2) of ERISA) of the REIT or any of its Subsidiaries that is not tax-qualified under Section 401(a) of the Code. The REIT will deliver to the Administrative Agent (with sufficient copies for each Bank) (i) a complete copy of the annual report (Form 5500) of each Single Employer Plan (including, to the extent required, the related financial and actuarial statements and opinions and other supporting statements, certifications, schedules and information) required to be filed by the REIT or any of its Subsidiaries with the Internal Revenue Service and (ii) copies of any records, documents or other information that must be furnished to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA. In addition to any certificates or notices delivered to the Administrative Agent pursuant to the first sentence hereof, copies of annual reports and any material notices received by the REIT, the Borrower, any Subsidiary of the REIT or the Borrower 49 or any ERISA Affiliate with respect to any Plan or Multiemployer Plan shall be delivered to the Administrative Agent (with sufficient copies for each Bank) no later than 15 Business Days after the date such report has been filed with the Internal Revenue Service or such notice has been received by the REIT, the Borrower, such Subsidiary or such ERISA Affiliate, as applicable. 7.08 End of Fiscal Years; Fiscal Quarters. The REIT and the Borrower will cause (i) the fiscal year of each Credit Party to end on December 31 and (ii) the fiscal quarter of each Credit Party to end on March 31, June 30, September 30 and December 31. 7.09 Performance of Obligations. The REIT will, and will cause each of its Subsidiaries to, perform all of its obligations under the terms of each Operating Lease, Management Agreement, Pledged Mortgage Loan Document, ground lease, mortgage, deed of trust, indenture, loan agreement or credit agreement and each other material agreement, contract or instrument by which it or any Real Property owned or leased by the REIT or any of its Subsidiaries is bound, except such non-performances as could not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the REIT, the REIT and its Subsidiaries taken as a whole, the Borrower or the Borrower and its Subsidiaries taken as a whole. 7.10 Payment of Taxes. The REIT will, and will cause each of its Subsidiaries to, pay and discharge all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, prior to the date on which any penalties attach thereto, and all lawful claims for sums that have become due and payable which, if unpaid, might become a lien or charge upon any properties of the REIT or any such Subsidiary; provided that neither the REIT nor any such Subsidiary shall be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings as long as it maintains adequate reserves with respect thereto in accordance with generally accepted accounting principles. 7.11 Certain Requirements with Respect to Acquisitions of Borrowing Base Properties and Provision or Purchase of Borrowing Base Pledged Mortgage Loans. Unless the Required Banks otherwise agree in writing with respect to any Borrowing Base Property acquired after the Effective Date or any Borrowing Base Pledged Mortgage Loan provided or purchased after the Effective Date, prior to or, if specified below, concurrently with the Addition Date for any (x) Property which shall constitute a Borrowing Base Property or (y) Mortgage Loan which shall constitute a Borrowing Base Pledged Mortgage Loan, and in any event within the time periods specified below, the Borrower shall furnish to the Administrative Agent (with sufficient copies for each of the Banks, which the Administrative Agent will promptly forward to each of the Banks): (i) at least 15 days prior to the Addition Date for such Borrowing Base Property or such Borrowing Base Pledged Mortgage Loan, an Information Package relating to such Borrowing Base Property or such Borrowing Base Pledged Mortgage Loan, together with an Appraisal dated not more than 90 days prior to the Addition Date of such 50 Borrowing Base Property or the Mortgage Loan Property securing such Borrowing Base Pledged Mortgage Loan, as applicable; (ii) on the Addition Date for such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan, (x) with respect to a Borrowing Base Property, fully executed counterparts of a Mortgage, in form and substance satisfactory to the Administrative Agent, encumbering such Borrowing Base Property and securing the full amount of the Total Commitment (or, after the termination thereof, all outstanding Loans and Letter of Credit Outstandings at such time) (provided, that in any jurisdiction in which there is a mortgage recording tax, such Mortgage shall secure the Loans and Letter of Credit Outstandings in an amount equal to 125% of the Appraised Value of such Borrowing Base Property), together with evidence that counterparts of such Mortgage have been delivered to the title insurance company insuring the Lien thereof on such Borrowing Base Property for recording in all places to the extent necessary to effectively create a valid and enforceable first priority mortgage lien on such Borrowing Base Property in favor of the Collateral Agent (or such other trustee as may be required or desired under local law) for the benefit of the Secured Creditors, or (y) with respect to a Borrowing Base Pledged Mortgage Loan, fully executed counterparts of a Collateral Assignment, in form and substance satisfactory to the Administrative Agent, encumbering such Borrowing Base Pledged Mortgage Loan and securing the full amount of the Total Commitment (or, after termination thereof, all outstanding Loans and Letter of Credit Outstandings at such time) (provided, that in any jurisdiction in which there is a recording tax imposed on the Collateral Assignment, such Collateral Assignment shall secure the Loans and Letter of Credit Outstandings in an amount equal to at least the original principal amount of such Borrowing Base Pledged Mortgage Loan), together with evidence that counterparts of such Collateral Assignment have been delivered to the title insurance company insuring the Lien of the related Pledged Mortgage Loan Documents for recording in all places to the extent necessary to effectively create a valid and enforceable first priority lien on such Borrowing Base Pledged Mortgage Loan in favor of the Collateral Agent (or such other trustee as may be required or desired under local law) for the benefit of the Secured Creditors; (iii) on the Addition Date for (x) such Borrowing Base Property, a Mortgage Policy on such Borrowing Base Property issued by title insurers (and with such endorsements, reinsurance and co-insurance as is) satisfactory to the Administrative Agent, in amounts satisfactory to the Administrative Agent, insuring to the Collateral Agent that the Mortgage on such Borrowing Base Property is a valid and enforceable first priority mortgage lien on such Borrowing Base Property, free and clear of all defects and encumbrances except Permitted Encumbrances and such Mortgage Policy shall otherwise be in form and substance satisfactory to the Administrative Agent, or (y) any such Borrowing Base Pledged Mortgage Loan, an endorsement to the mortgagee title insurance policy covering such Borrowing Base Pledged Mortgage Loan, in form and substance satisfactory to the Administrative Agent, showing the Collateral Agent as first priority collateral assignee of such Borrowing Base Pledged Mortgage Loan and an additional insured under such policy (as its interests may appear); 51 (iv) on the Addition Date for such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan, a recent survey of such Borrowing Base Property or the Mortgage Loan Property securing such Borrowing Base Pledged Mortgage Loan, as applicable, certified by a licensed professional surveyor, which survey, certification and surveyor shall be satisfactory to the Administrative Agent; (v) in the case of any Borrowing Base Property that is a Leasehold or any Mortgage Loan Property securing a Borrowing Base Pledged Mortgage Loan that is a Leasehold, at least 15 days prior to the Addition Date for such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan, as the case may be, a true and correct copy of such ground lease, which shall be satisfactory to the Administrative Agent, and on the Addition Date for such Borrowing Base Property or Borrowing Pledged Mortgage Loan, an estoppel certificate and, to the extent required by the Administrative Agent, a landlord waiver, in each case from the fee owner/ground lessor, which ground lease, estoppel certificate and landlord waiver shall be in form and substance satisfactory to the Administrative Agent; (vi) at least 15 days prior to the Addition Date for such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan (other than a construction loan), a certificate of occupancy (together with such other proof of compliance with Legal Requirements as the Administrative Agent shall reasonably require) in form and substance satisfactory to the Administrative Agent with respect to such Borrowing Base Property or the Mortgage Loan Property securing such Borrowing Base Pledged Mortgage Loan, as applicable; (vii) at least 15 days prior to the Addition Date for such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan, Phase I (and to the extent reasonably determined to be necessary by the Administrative Agent, Phase II) environmental assessments dated no more than ninety days prior to the Addition Date on such Borrowing Base Property or the Mortgage Loan Property securing such Borrowing Base Pledged Mortgage Loan, as applicable, from an independent environmental firm, certified to and in form, scope and substance satisfactory to the Administrative Agent (each, an "Environmental Report"); (viii) at least 15 days prior to the Addition Date for such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan (other than a construction loan), engineering reports dated no more than ninety days prior to the Addition Date on such Borrowing Base Property or the Mortgage Loan Property securing such Borrowing Base Pledged Mortgage Loan, as applicable, prepared by an independent engineering firm, certified to and in form, scope and substance satisfactory to the Administrative Agent (each, an "Engineering Report"); (ix) at least 15 days prior to the Addition Date for such Borrowing Base Property, (A) if such Borrowing Base Property is not a medical 52 office building, a true and correct copy of the Operating Lease for such Borrowing Base Property and (B) the Management Agreement, if any, for such Borrowing Base Property, which Operating Lease and/or Management Agreement shall be in form and substance satisfactory to the Administrative Agent (it being understood and agreed by the parties hereto that each Borrowing Base Property that is not a medical office building shall be leased to an Operating Lessee pursuant to an Operating Lease); (x) in the case of a Borrowing Base Pledged Mortgage Loan, (A) at least 15 days prior to the Addition Date for such Borrowing Base Pledged Mortgage Loan, copies of the Pledged Mortgage Loan Documents relating thereto, which shall be satisfactory to the Administrative Agent, and (B) on the Addition Date for such Borrowing Base Pledged Mortgage Loan, the original Pledged Mortgage Loan Documents, including, without limitation, the mortgage note evidencing such Borrowing Base Pledged Mortgage Loan duly endorsed in blank; (xi) on the Addition Date for such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan, an opinion of local counsel reasonably satisfactory to the Administrative Agent, which shall cover the enforceability and perfection of the security interests granted pursuant to the related Mortgage or Collateral Assignment, as applicable, and such other matters incident to the transactions contemplated thereby as the Administrative Agent may reasonably request; (xii) on the Addition Date for such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan, true and correct copies of all material contracts, licenses and permits for such Borrowing Base Property or for the Mortgage Loan Property securing such Borrowing Base Pledged Mortgage Loan, as applicable; (xiii) on the Addition Date (A) with respect to a Borrowing Base Property, a certificate of an Authorized Officer of the Borrower certifying (x) the cost to acquire the respective Borrowing Base Property, (y) the purchase of related working capital in connection with the acquisition of such Borrowing Base Property, and (z) the amount expected to be used to pay fees and expenses in connection with the acquisition of such Borrowing Base Property, and (B) with respect to a Borrowing Base Pledged Mortgage Loan, a certificate of an Authorized Officer of the Borrower certifying (w) the identity of the borrower under and the guarantor of such Borrowing Base Pledged Mortgage Loan, (x) the original principal balance and, if different, the maximum principal balance of such Borrowing Base Pledged Mortgage Loan, (y) the maturity date, the interest rate and amortization schedule, if any, applicable to such Borrowing Base Pledged Mortgage Loan and (z) the amount expected to be used to pay fees and expenses in connection with the provision or purchase of such Borrowing Base Pledged Mortgage Loan; (xiv) with respect to a Borrowing Base Property or a Mortgage Loan Property securing a Borrowing Base Pledged Mortgage Loan that, in either case, is a medical office building or otherwise contains space tenants, not less than 15 days prior to the Addition Date for such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan, a rent roll for such Borrowing Base Property or the Mortgage Loan Property securing such Borrowing Base Pledged Mortgage Loan, as applicable, certified by an Authorized Officer of the Borrower to be true, complete and correct, together with true and correct copies of all leases or other occupancy agreements listed thereon, which rent roll and leases shall be satisfactory to the Administrative Agent; 53 (xv) either (1) evidence reasonably satisfactory to the Administrative Agent (which may be included as part of the survey delivered pursuant to clause (iv) of this Section 7.11) indicating that such Borrowing Base Property or the Mortgage Loan Property securing such Borrowing Base Pledged Mortgage Loan is not located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable agency, or (2) if any such Borrowing Base Property or the Mortgage Loan Property securing such Borrowing Base Pledged Mortgage Loan is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable agency, then a copy of the certificate of insurance evidencing the underlying flood insurance policy, which underlying policy shall be in accordance with Section 7.03 and in accordance with the National Flood Insurance Act of 1968, as amended; (xvi) a certificate of insurance evidencing that there has been obtained insurance coverage for such Borrowing Base Property or the Mortgage Loan Property securing such Borrowing Base Pledged Mortgage Loan which satisfies the requirements of Section 7.03 and all of such coverage is in full force and effect; (xvii) in the case of any Borrowing Base Property that is not wholly-owned by the Borrower or by any wholly-owned Subsidiary of the Borrower, a consent, in form and substance satisfactory to the Administrative Agent, from each of the minority owners of such Borrowing Base Property (or in the Subsidiary of the Borrower that owns such Borrowing Base Property) consenting to the granting of a Mortgage on such Borrowing Base Property and in the related personal property and, to the extent that such Borrowing Base Property is owned by a Subsidiary of the Borrower, to the entering into by such Subsidiary of the Security Agreement, the Pledge Agreement, the Pledge and Security Agreement, the Subsidiaries Guaranty and any documents related to the foregoing; (xviii) not less than 15 days prior to the Addition Date for any Borrowing Base Pledged Mortgage Loan that is a construction loan, (i) all construction budgets, plans and specifications, construction contracts, As-Built Appraisals, Pro forma cash flows, architects agreements, construction management agreements and other material construction-related documents and materials relating thereto as the Administrative Agent or any Bank (through the Administrative Agent) may reasonably request, all of which materials shall be satisfactory to the Administrative Agent and (ii) evidence satisfactory to the Administrative Agent that a construction consultant satisfactory to the Administrative Agent has been engaged by the Borrower to manage the construction of the related Mortgage Loan Property through completion thereof; 54 (xix) not less than 15 days prior to the Addition Date for such Borrowing Base Pledged Mortgage Loan, an estoppel certificate from the borrower under such Borrowing Base Pledged Mortgage Loan (i) identifying each of the related Pledged Mortgage Loan Documents and any amendments thereto, and stating that such Pledged Mortgage Loan Documents have not been modified or amended, (ii) stating that the Pledged Mortgage Loan Documents are in full force and effect in accordance with their terms, and that no default exists thereunder, (iii) setting forth the outstanding principal balance of such Borrowing Base Pledged Mortgage Loan and the date through which interest has been paid thereon, and (iv) addressing such other matters with respect to such Borrowing Base Pledged Mortgage Loan as the Administrative Agent may reasonably request; (xx) not less than 15 days prior to the Addition Date for such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan, all of such other documents, instruments and information relating thereto as the Administrative Agent or any Bank (acting through the Administrative Agent) may reasonably request in order to complete its credit underwriting and due diligence review of such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan to its satisfaction in its sole discretion, all of which documents, instruments and information shall be satisfactory to the Administrative Agent and the Banks; (xxi) on the Addition Date for such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan, (A) a certificate of an Authorized Officer of the Borrower certifying that, as of the Addition Date and after giving effect to (x) the acquisition of such Borrowing Base Property or the provision or purchase of such Borrowing Base Pledged Mortgage Loan, as applicable, (y) the inclusion of such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan in the Borrowing Base and (z) the incurrence of Loans or the issuance of Letters of Credit, if any, on the Addition Date, the representations and warranties of the REIT and its Subsidiaries set forth in Section 6 and elsewhere in the Credit Documents are true, complete and correct in all material respects, and (B) a Borrowing Base Certificate from an Authorized Financial Officer of the Borrower certifying that, as of the Addition Date and after giving effect to (x) the acquisition of such Borrowing Base Property or the provision or purchase of such Borrowing Base Pledged Mortgage Loan, as applicable, (y) the inclusion of such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan in the Borrowing Base and (z) the incurrence of Loans or the issuance of Letters of Credit, if any, on the Addition Date, the total outstanding principal amount of all Loans and Letter of Credit Outstandings will not exceed the Borrowing Base then in effect; and (xxii) the Required Banks and the Administrative Agent shall have approved the inclusion of such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan in the Borrowing Base. 7.12 Certain Partnerships. The REIT and the Borrower will ensure that at all times either the Borrower or a wholly-owned Subsidiary of the Borrower that is a Subsidiary Guarantor is the sole general partner of any Subsidiary Guarantor that is a partnership. 55 7.13 Operating Leases; Management Agreements and Pledged Mortgage Loan Documents. The REIT will take, and will cause each of its Subsidiaries to take, all action necessary to ensure that all Operating Leases, Management Agreements and Pledged Mortgage Loan Documents remain in full force and effect in accordance with their terms. The REIT will not, and will cause each of its Subsidiaries not to, suffer or permit any modification, amendment or termination of any Operating Lease, Management Agreement or Pledged Mortgage Loan Document without obtaining the prior consent of the Administrative Agent (which consent will not be unreasonably withheld or delayed), except in the case of a termination of an Operating Lease or a Management Agreement in accordance with its terms following a default by the Operating Lessee or Manager thereunder. In the event of a termination of an Operating Lease or a Management Agreement in accordance with the preceding sentence, the REIT will take, and will cause each of its Subsidiaries to take, all action necessary to obtain, prior to the effective date of such termination, a replacement Operating Lessee or Manager, as the case may be, satisfactory to the Administrative Agent, who shall be engaged pursuant to an Operating Lease or Management Agreement, as the case may be, satisfactory to the Administrative Agent. The REIT will, and will cause each of its Subsidiaries to, enforce all material terms and provisions of the Operating Leases, the Management Agreements and the Pledged Mortgage Loan Documents. Any breach by the REIT or any of its Subsidiaries of the provisions of this Section 7.13 constitutes a Special Mandatory Repayment Event. 7.14 Lien Waivers; etc. Within 60 days after the making of any Loan or the issuance of any Letter of Credit the proceeds of which were used to pay contractors for renovations or improvements theretofore made on any Borrowing Base Property, the Borrower shall deliver to the Administrative Agent (x) lien waivers in form and substance reasonably satisfactory to the Administrative Agent from the contractor or contractors that have made such renovations or improvements and (y) at the reasonable request of the Administrative Agent, an endorsement to such Mortgage Policy insuring that the priority of the Mortgage on such Borrowing Base Property is not affected by such renovations or improvements. 7.15 Appraisals. If the Administrative Agent or the Required Banks shall advise the Borrower by written notice that the Administrative Agent or the Required Banks reasonably believe that the value of one or more Borrowing Base Properties or Mortgage Loan Properties securing Borrowing Base Pledged Mortgage Loans has been materially and adversely affected, for any reason, since the date of the most recent Appraisal thereof, promptly thereafter the Borrower will cause the preparation and delivery to the Administrative Agent of a new Appraisal of each such Borrowing Base Property or Mortgage Loan Property dated not more than 30 days prior to the date of such delivery. 7.16 Casualty and Condemnation; Restoration. (a) Upon the occurrence of any Casualty Event affecting all or any portion of any Borrowing Base Property, whether or not covered by insurance, which will cost (or may reasonably be expected to cost) 25% or more of the Borrowing Base Amount for such Borrowing Base Property to Restore, as reasonably determined by the Borrower and so certified by an Authorized Officer of the Borrower in a certificate delivered to the Administrative Agent, (i) the Borrower shall promptly deliver to the Administrative Agent written notice of the same which shall, among other things, describe such Casualty Event, and (ii) to the 56 extent that the respective Credit Party elects to Restore such Borrowing Base Property, as soon as practicable but in any event prior to the commencement of Restoration of such Borrowing Base Property, the Borrower shall deliver to the Administrative Agent a Notice of Renovation/Restoration in the form of Exhibit S. (b) The Administrative Agent, on behalf of the Secured Creditors, is hereby authorized, at its option, to collect and receive all Insurance Proceeds in respect of a Borrowing Base Property (other than Insurance Proceeds attributable to workers' compensation and liability insurance) and to give proper receipts and acquittances therefor; provided, however, that (x) if no Event of Default shall have occurred and be continuing, the Borrower shall have the right to direct the Administrative Agent to apply Insurance Proceeds in accordance with Sections 7.16(e) and (f) and (y) if no Event of Default shall have occurred and be continuing, to the extent not inconsistent with the requirements of Sections 7.16 (e) and (f), the Borrower shall have the right to direct the Administrative Agent (1) to pay to the Borrower or the other applicable Credit Party all Insurance Proceeds with respect to any Casualty Event affecting a Borrowing Base Property which will cost (or may reasonably be expected to cost) less than 25% of the Borrowing Base Amount for such Borrowing Base Property to Restore and (2) to pay to the Borrower or the other applicable Credit Party all proceeds of any related business interruption insurance as, and to the extent, requested by the Borrower. If, prior to the receipt by the Administrative Agent of such Insurance Proceeds, any Borrowing Base Property shall have been transferred upon foreclosure of the applicable Mortgage (or by deed in lieu thereof) or other Security Document, the Administrative Agent shall have the right to receive such Insurance Proceeds to the extent (x) such Insurance Proceeds are attributable to a Casualty Event occurring prior to foreclosure or delivery of any deed in lieu thereof and (y) of any deficiency attributable to such Borrowing Base Property found to be due upon such sale, with legal interest thereon, and reasonable counsel fees, costs and disbursements incurred by the Administrative Agent in connection with the collection of such Insurance Proceeds. The Administrative Agent may, but shall not be obligated to, make proof of loss if not made promptly by the applicable Credit Party. During the continuance of any Event of Default, the Administrative Agent is hereby authorized and empowered by the Borrower and each other Credit Party to settle, adjust or compromise any claims for damage, destruction or loss thereunder in good faith, with or without the consent of any Credit Party (and each of the Borrower and each other Credit Party hereby irrevocably appoints and constitutes the Administrative Agent as its lawful attorney-in-fact, coupled with an interest and with full power of substitution, for the purpose of settling, adjusting or compromising any such claims with respect to any Borrowing Base Property). In no event shall any Credit Party settle, adjust or compromise any claim for Insurance Proceeds in respect of any Borrowing Base Property of 25% or more of the Borrowing Base Amount for such Borrowing Base Property without the prior written consent of the Administrative Agent, which shall not be unreasonably withheld, conditioned or delayed; provided, that this provision shall not restrict the right of the lessor under any ground lease applicable to such Borrowing Base Property (1) to settle, adjust or compromise any claim for Insurance Proceeds to the extent such lessor is granted the power to do so under such ground lease or (2) to approve any settlement, adjustment or compromise of any claim for Insurance Proceeds to the extent the approval of such lessor is required under such ground lease. Subject to the requirements of any ground lease affecting any Borrowing Base 57 Property, each insurance company concerned is hereby authorized and directed to make payment of all Insurance Proceeds in respect of each of the Borrowing Base Properties payable by it directly to the Administrative Agent. If any Credit Party receives any Insurance Proceeds resulting from such Casualty Event in respect of any Borrowing Base Property, such Credit Party shall (subject to the requirements of any ground lease affecting such Borrowing Base Property) promptly endorse and transfer such Insurance Proceeds to the Administrative Agent and each Credit Party covenants that until so paid over to the Administrative Agent, such Credit Party shall hold such Insurance Proceeds in trust for the benefit of the Administrative Agent and shall not commingle such Insurance Proceeds with any other funds or assets of such Credit Party or any other Person. (c) The Borrower will promptly deliver written notice to the Administrative Agent upon obtaining knowledge of the institution, or the proposed institution, of any bona fide action or proceeding for the Taking of all or any portion of any Borrowing Base Property. The Administrative Agent shall have the right to participate in any negotiation, action or proceeding relating to any such action or proceeding affecting any Borrowing Base Property, and no settlement or compromise of any claim of 25% or more of the Borrowing Base Amount for such Borrowing Base Property in connection with any such action or proceeding shall be made without the consent of the Administrative Agent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, that this provision shall not restrict the right of the lessor under any ground lease applicable to such Borrowing Base Property (1) to settle or compromise any such claim to the extent such lessor is granted the power to do so under such ground lease or (2) to approve any settlement or compromise of any such claim to the extent the approval of such lessor is required under such ground lease. Upon the occurrence of any partial Taking with respect to a Borrowing Base Property which will cost (or may reasonably be expected to cost) 25% or more of the Borrowing Base Amount for such Borrowing Base Property to Restore, as reasonably determined by the Borrower and so certified by an Authorized Officer of the Borrower in a certificate delivered to the Administrative Agent, as soon as practicable thereafter but in any event prior to the commencement of any Restoration of such Borrowing Base Property, the Borrower shall deliver to the Administrative Agent a Notice of Renovation/Restoration in the form attached hereto as Exhibit S. (d) The Administrative Agent, on behalf of the Secured Creditors, is hereby authorized, at its option, to collect and receive all Condemnation Proceeds in respect of each of the Borrowing Base Properties and to give proper receipts and acquittances therefor; provided that, (x) if no Event of Default shall have occurred and be continuing, the Borrower shall have the right to direct the Administrative Agent to apply Condemnation Proceeds in accordance with Sections 7.16(e) and (f), and (y) if no Event of Default shall have occurred and be continuing, to the extent not inconsistent with the requirements of Sections 7.16(e) and (f), the Borrower shall have the right to direct the Administrative Agent to pay to the Borrower or the other applicable Credit Party all Condemnation Proceeds with respect to a Taking affecting a Borrowing Base Property which will cost (or may reasonably be expected to cost) less than 25% of the Borrowing Base Amount for such Borrowing Base Property to Restore. If, prior to the receipt by the Administrative Agent of such Condemnation Proceeds, the portion of the Borrowing Base Property subject to such action or proceeding shall have been sold upon foreclosure of the applicable Mortgage (or by deed in lieu thereof) or other Security Document, the Administrative Agent shall have the right to receive such Condemnation Proceeds to the extent (x) such Condemnation 58 Proceeds are attributable to a Taking occurring prior to foreclosure or delivery of any deed in lieu thereof and (y) of any deficiency attributable to such Borrowing Base Property found to be due upon such sale, with legal interest thereon, and reasonable counsel fees, costs and disbursements incurred by the Administrative Agent in connection with the collection of such Condemnation Proceeds. The Administrative Agent may, but shall not be obligated to, make proof of loss if not made promptly by the applicable Credit Party. During the continuance of any Event of Default, the Administrative Agent is hereby authorized and empowered by the Borrower and each other Credit Party to settle, adjust or compromise any claims for Condemnation Proceeds with or without the consent of any Credit Party (and each of the Borrower and each other Credit Party hereby irrevocably appoints and constitutes the Administrative Agent as its lawful attorney-in-fact, coupled with an interest and with full power of substitution, for the purpose of settling, adjusting or compromising any such claims with respect to any Borrowing Base Property). In no event shall any Credit Party settle, adjust or compromise any claim for Condemnation Proceeds in respect of any Borrowing Base Property of 25% or more of the Borrowing Base Amount for such Borrowing Base Property or more without the prior written consent of the Administrative Agent, which shall not be unreasonably withheld, conditioned or delayed; provided, that this provision shall not restrict the right of the lessor under any ground lease applicable to such Borrowing Base Property (1) to settle or compromise any claim for Condemnation Proceeds to the extent such lessor is granted the power to do so under such ground lease or (2) to approve any settlement or compromise of any claim for Condemnation Proceeds to the extent the approval of such lessor is required under such ground lease. Subject to the requirements of any ground lease affecting any Borrowing Base Property, each condemnor concerned is hereby authorized and directed to make payment of all Condemnation Proceeds in respect of each of the Borrowing Base Properties payable by it directly to the Administrative Agent. If any Credit Party receives any Condemnation Proceeds resulting from such condemnation in respect of any Borrowing Base Property, such Credit Party shall (subject to the requirements of any ground lease affecting such Borrowing Base Property) promptly endorse and transfer such Condemnation Proceeds to the Administrative Agent and each Credit Party covenants that until so paid over to the Administrative Agent, such Credit Party shall hold such Condemnation Proceeds in trust for the benefit of the Administrative Agent and shall not commingle such Condemnation Proceeds with any other funds or assets of such Credit Party or any other Person. (e) In the event of any Casualty Event or Taking with respect to a Borrowing Base Property which will cost (or may reasonably be expected to cost) 25% or more of the Borrowing Base Amount for such Borrowing Base Property to Restore, as reasonably determined by the Borrower and so certified by an Authorized Officer of the Borrower in a certificate delivered to the Administrative Agent, the Borrower shall elect by written notice delivered to the Administrative Agent as soon as practicable thereafter, but in any event before the earlier of (x) 30 days after the occurrence of such Casualty Event or Taking and (y) the commencement of the Restoration of such Borrowing Base Property, either: (i) to remove such Borrowing Base Property from the calculation of the Borrowing Base, prepay the Loans in an amount equal to the Release Price with respect to such Borrowing Base Property pursuant to Section 3.02(d) in the manner set forth in Sections 59 3.02(e) and (f) (which prepayment may be made with the respective Net Insurance/Condemnation Proceeds to the extent same are available to the Borrower or any of its Subsidiaries or the Collateral Agent) and not Restore such Borrowing Base Property (or Restore such Borrowing Base Property to the extent then permitted by Section 8.07 in respect of non-Borrowing Base Properties); or (ii) if all the following conditions shall be satisfied, to Restore such Borrowing Base Property pursuant to subsection 7.16(f): (A) the Maturity Date shall not have occurred; (B) no Default or Event of Default shall have occurred and be continuing or would be caused by such Restoration; (C) the Borrower is in compliance in all respects with the provisions of Section 7.16(f); (D) the Administrative Agent shall have determined, in its reasonable discretion and after considering such written opinions of architects and engineers and other written information as the Borrower shall timely deliver to the Administrative Agent, that Restoration of such Borrowing Base Property is, under the circumstances then existing, physically and economically feasible and can be completed in accordance with Section 7.16(f) on or before a date not later than six months prior to the Maturity Date; (E) the Credit Parties shall have business interruption insurance complying with Section 7.03 in an amount at least equal to the reduction in revenues of such Borrowing Base Property, if any, which the Borrower reasonably expects to suffer during the period of Restoration; (F) the Credit Parties shall have complied with all notices and other requirements under any Operating Lease or ground lease affecting such Borrowing Base Property that must be satisfied in respect of such Restoration, such Restoration is permitted under the terms of such Operating Lease or ground lease and such Operating Lease or ground lease remains in full force and effect; and (G) either (1) the Net Insurance/Condemnation Proceeds shall be sufficient to complete the costs of such Restoration, as determined by the Administrative Agent in its reasonable discretion, or (2) in the event that the Administrative Agent determines that such Net Insurance/Condemnation Proceeds are insufficient to complete the costs of such Restoration, the Credit Parties shall have provided a cash deposit for the amount of any shortfall in the amount of Net Insurance/Condemnation Proceeds necessary to cover the costs to complete such Restoration. 60 If the Credit Parties shall fail to satisfy the conditions set forth in clause (ii) of the preceding sentence or in Section 7.16(f) with respect to the related Borrowing Base Property, or shall fail to diligently and continuously prosecute the Work to completion (other than as a result of Excusable Delay), as determined by the Administrative Agent, in its reasonable discretion, then such Borrowing Base Property shall be removed from the calculation of the Borrowing Base, the Borrower shall prepay the Loans in an amount equal to the Release Price with respect to such Borrowing Base Property and, subject to the terms of any ground lease, the Administrative Agent shall apply any or all remaining Insurance Proceeds or Condemnation Proceeds, as applicable, towards such prepayment. (f) In the event of any Casualty Event or Taking with respect to a Borrowing Base Property which will cost (or may reasonably be expected to cost) 25% or more of the Borrowing Base Amount for such Borrowing Base Property to Restore, as reasonably determined by the Borrower and so certified by an Authorized Officer of the Borrower in a certificate delivered to the Administrative Agent, if any of the Credit Parties elects to Restore a Borrowing Base Property pursuant to this Section 7.16(f) and the conditions set forth in clause (ii) of the first sentence of Section 7.16(e) are satisfied, all Net Insurance/Condemnation Proceeds shall be held by the Administrative Agent (subject to the requirements of any ground lease affecting such Borrowing Base Property) in an interest-bearing account with the Administrative Agent, with all interest to be held therein until completion and final inspection of the Work, and shall be applied by the Administrative Agent to the payment of the cost of Restoring such Borrowing Base Property so damaged or destroyed or of the portion or portions of such Borrowing Base Property not so Taken (the "Work") and shall be paid out from time to time to the Borrower as the Work progresses, subject to retainage as reasonably determined by the Administrative Agent in accordance with customary construction lending practices and otherwise in accordance with any conditions reasonably imposed by the Administrative Agent but subject to each of the following conditions: (i) Subject to Excusable Delays, the Borrower shall promptly (and in any event within 60 days after the applicable Casualty Event or Taking) commence, or cause the commencement of, Restoration of such Borrowing Base Property. (ii) If the Work is structural or if the cost of the Work, as estimated by the Borrower, shall exceed 10% of the Borrowing Base Amount with respect to such Borrowing Base Property, the Work shall be in the charge of an architect or engineer reasonably acceptable to the Administrative Agent, and before any Credit Party commences any Work, other than temporary work to protect property or prevent interference with business, the Administrative Agent shall have approved the plans and specifications and the general contract for the Work to be submitted by such Credit Party, which approval shall not be unreasonably withheld. Such plans and specifications shall provide for such Work that, upon completion thereof, the Improvements shall (x) be in compliance in all material respects with all Legal Requirements 61 such that all representations or warranties of the Credit Parties relating to the compliance of such Borrowing Base Property with applicable laws as set forth in this Agreement and in the other Credit Documents would then be true and correct in all material respects, and (y) be reasonably equivalent in value and general utility to the Improvements which were on such Borrowing Base Property prior to the Casualty Event or Taking. Such plans and specifications shall be accompanied by (1) a signed estimate of the Borrower, or, if an architect or engineer is required to supervise the Work, such architect or engineer, stating the estimated cost of completing the Work, which estimate shall bear the architect's or engineer's seal if not made by the Borrower and (2) to the extent necessary at such stage of the Work, certified copies of all authorizations required in connection with the commencement and performance of the Work. (iii) Each request for payment shall be made on five days' prior notice to the Administrative Agent and shall be accompanied by invoices and by (a) a certificate to be made by such architect or engineer, if one be required under clause (ii) above, otherwise by a certificate of an Authorized Officer of the Borrower, stating that (1) all of the Work completed has been done in substantial compliance with the approved plans and specifications, if any be required under said clause (ii) above, and (2) the sum requested is required to reimburse any of the Credit Parties for payments made by the applicable Credit Party to, or is due to, the contractor, subcontractors, materialmen, laborers, engineers, architects or other Persons rendering services or materials for the Work (giving a brief description of such services and materials), and that when added to all sums previously paid out by the Administrative Agent does not exceed the cost of the Work done to the date of such certificate, and (b) a certificate of an Authorized Officer of the Borrower stating either that (x) the amount of such proceeds remaining in the hands of the Administrative Agent, or (y) the amount of such funds, in the hands of the applicable Credit Party from other sources irrevocably committed to the completion of the Work in a manner reasonably satisfactory to the Administrative Agent (including delivery of such funds to the Administrative Agent for application to pay the costs of the Restoration), will be sufficient on completion of the Work to pay for the same in full (giving in such reasonable detail as the Administrative Agent may require an estimate of the cost of such completion). The Administrative Agent may require that any such statements be independently verified by an inspector approved by the Administrative Agent to the extent that any such costs for the Work equal or exceed 10% of the Borrowing Base Amount for such Borrowing Base Property. (iv) Each request shall be accompanied by lien waivers satisfactory to the Administrative Agent covering that part of the Work for which payment or reimbursement has been made (or other evidence as shall be satisfactory to the Administrative Agent in its sole discretion confirming that no rights of mechanics, contractors, subcontractors, materialmen or suppliers are outstanding in respect of such Work) and by a search prepared by a title company reasonably satisfactory to the Administrative Agent establishing that there has not been filed with respect to such Borrowing Base Property any mechanics' or other lien or instrument for the retention of title in respect of any part of the Work not discharged of record or bonded to the reasonable satisfaction of the Administrative Agent and evidencing the continued priority of the Mortgage on such Borrowing Base Property. 62 (v) The available property Insurance Proceeds or Condemnation Proceeds which are paid or will be payable by the insurance company, together with other cash proceeds available to the Borrower and held in a reserve by the Administrative Agent are, in the reasonable judgment of the Administrative Agent, sufficient to pay in full costs of the Restoration. (vi) There shall be no Default or Event of Default. (vii) The request for any payment after the Work has been completed shall be accompanied by (a) a copy of any certificate or certificates required by law to render occupancy of the improvements being rebuilt, repaired or restored legal and (b) final lien waivers for all labor, materials and supplies from all contractors, subcontractors and materialmen, except with respect to claims or rights being contested or bonded in accordance with the provisions of Section 8.01(ii). (viii) After commencing the Work, the Borrower or its applicable Subsidiary shall, subject to Excusable Delays, cause such Work to be performed diligently and in good faith in a good and workmanlike manner to completion in accordance with the approved plans and specifications, if any. (ix) The Administrative Agent shall have received "agreements to complete" of the general contractor and any independent architects or engineers, which agreements to complete shall be in form and substance reasonably satisfactory to the Administrative Agent. (x) The Borrower shall have obtained and maintained, or shall have caused the applicable Credit Party to obtain and maintain, "all risks" insurance in accordance with Section 7.03. All costs and expenses of any Restoration, including, without limitation, any Work, engineer's fees, architect's fees or contractor's fees and the cost and expense of complying with this Section 7.16(f), shall be for the account of the Borrower and/or its applicable Subsidiary. Upon completion of the Work and payment in full therefor, the Borrower shall promptly deliver to the Administrative Agent a Completion Certificate with respect thereto, and the Administrative Agent shall return to the Borrower the amount of any unspent Insurance Proceeds or Condemnation Proceeds then or thereafter in the hands of the Administrative Agent on account of the Casualty Event or Taking that created the need for such Work, together with all undisbursed accrued interest thereon. Subject to the terms of any ground lease, nothing in this Section 7.16 shall prevent the Administrative Agent from applying at any time all or any part of the Insurance Proceeds or Condemnation Proceeds to the curing of any Event of Default. (g) In the event of any Casualty Event or Taking with respect to a Borrowing Base Property which will cost (or may reasonably be expected to cost) 25% or more of the Borrowing Base Amount for such Borrowing Base Property to Restore (as reasonably determined by the Borrower and so certified in a certificate delivered to the Administrative Agent) which a Credit Party has elected to Restore, upon completion of the 63 Restoration and delivery to the Administrative Agent of a Completion Certificate, (i) the Administrative Agent may hire an independent engineer to inspect the applicable Borrowing Base Property and the Administrative Agent may deem any related Restoration not complete unless the engineer determines that the Restoration was completed in accordance with this Agreement and (ii) to the extent that the remaining Net Insurance/Condemnation Proceeds from such Casualty Event or Taking equals or exceeds 25% of the Borrowing Base Amount for such Borrowing Base Property, such remaining Net Insurance/Condemnation Proceeds shall be applied at such time to prepay the Loans pursuant to Section 3.02(d) in the manner set forth in Section 3.02(e) and (f). The cost of such inspection shall be for the account of the Borrower or the applicable Subsidiary. 7.17 REIT Requirements. The REIT shall operate its business at all times so as to satisfy all requirements necessary to qualify as a real estate investment trust under Section 856 through 860 of the Code. The REIT will maintain adequate records so as to comply with all record-keeping requirements relating to the qualification of the REIT as a real estate investment trust as required by the Code and applicable regulations of the Department of the Treasury promulgated thereunder and will properly prepare and timely file with the IRS all returns and reports required thereby. The REIT will request from its shareholders all shareholder information required by the Code and applicable regulations of the Department of Treasury promulgated thereunder. 7.18 Syndication Cooperation. GACC and its Affiliates (collectively, the "Original Lender") reserve the right, after the Effective Date, to syndicate all or part of the Total Commitment, from time to time, to one or more Banks, as more particularly provided in Section 12.04. Such syndication will be accomplished by a variety of means, including direct contact during the syndication between senior management and advisors of the REIT and its Subsidiaries and the proposed syndicate members. To assist the Original Lender in its syndication efforts, the REIT and its Subsidiaries hereby agree (a) to provide to the Original Lender and the other syndicate members upon request with all reasonable information reasonably deemed necessary by the Original Lender to complete syndication, including, but not limited to, information and evaluations prepared by the REIT and its Subsidiaries or on their behalf relating to the transactions contemplated hereby and (b) to assist the Original Lender upon request in the preparation of an Information Memorandum to be used in connection with the syndication of the credit facilities contemplated herein, including making available, upon reasonable advance notice, the officers of the REIT and its Subsidiaries from time to time and to attend and make presentations regarding the business and prospects of the REIT and its Subsidiaries, as appropriate, at a meeting or meetings of Banks or prospective Banks. The Original Lender will provide the REIT with a copy of the Information Memorandum for review prior to the distribution thereof to prospective Banks. SECTION 8. Negative Covenants. Each of the REIT and the Borrower hereby covenants and agrees (as to itself and each of its Subsidiaries) that on and after the Effective Date and until the Total Commitment has terminated and all Letters of Credit have terminated and the Loans, Notes and Unpaid Drawings, together with interest, Fees and all other Obligations incurred hereunder and thereunder, are paid in full: 64 8.01 Liens. The REIT will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets (real or personal, tangible or intangible) of the REIT or any of its Subsidiaries, whether now owned or hereafter acquired, or sell any such property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable with recourse to the REIT or any of its Subsidiaries), or assign any right to receive income or permit the filing of any financing statement under the UCC or any other similar notice of Lien under any similar recording or notice statute, provided that the provisions of this Section 8.01 shall not prevent the creation, incurrence, assumption or existence of the following Liens (collectively, "Permitted Liens"): (i) inchoate Liens (other than Liens created or imposed under ERISA) for taxes, assessments or governmental charges or levies not yet due and payable or Liens for taxes, assessments or governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves have been established in accordance with generally accepted accounting principles; (ii) Liens in respect of property or assets of the Borrower or any of its Subsidiaries imposed by law, which were incurred in the ordinary course of business and do not secure Indebtedness for borrowed money, such as carriers', warehousemen's, materialmen's and mechanics' liens and other similar Liens arising in the ordinary course of business, and (x) which do not in the aggregate materially detract from the value of the Borrower's or such Subsidiary's property or assets or materially impair the use thereof in the operation of the business of the Borrower or such Subsidiary or (y) which are being contested in good faith by appropriate proceedings and for which adequate reserves have been established, which proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien; (iii) Liens in existence on the Effective Date which are listed, and the property subject thereto described, in Schedule VII (which Schedule VII need not set forth Permitted Encumbrances and the Liens created pursuant to the Security Documents), but only to the respective date, if any, set forth in such Schedule VII for the removal and termination of any such Liens, but no renewals or extensions of such Liens shall be permitted; (iv) Permitted Encumbrances; (v) Liens created pursuant to the Security Documents; (vi) Operating Leases and leases or subleases to tenants (including merchants, vendors or other providers of services) to be located in the respective Property or granted by the Borrower or any of its Subsidiaries to other Persons in the ordinary course of business not materially interfering with the conduct of business at the respective Property; 65 (vii) (A) Liens upon equipment or machinery subject to Capitalized Lease Obligations, provided that (x) such Liens only serve to secure the payment of Indebtedness arising under such Capitalized Lease Obligations and (y) the Lien encumbering the asset giving rise to such Capitalized Lease Obligation does not encumber any other asset of the REIT or any of its Subsidiaries and (B) Liens placed upon equipment or machinery used in the ordinary course of business of the Borrower or any of its Subsidiaries at the time of acquisition thereof by the Borrower or any such Subsidiary or within 60 days thereafter to secure Indebtedness incurred to pay all or a portion of the purchase price thereof, provided further that the Lien encumbering the asset giving rise to the purchase money Indebtedness does not encumber any other asset of the REIT or any of its Subsidiaries, provided further that the aggregate outstanding principal amount of all Indebtedness secured by Liens permitted by this clause (vii) shall not at any time exceed $5,000,000; (viii) Liens securing Permitted Non-Recourse Indebtedness of Specified Subsidiaries permitted under Section 8.04(viii) so long as such Liens only encumber the Property (including the furniture, fixtures and equipment related thereto) of the Specified Subsidiary that has assumed or incurred such Permitted Non-Recourse Indebtedness; (ix) easements, rights-of-way, restrictions, encroachments and other similar charges or encumbrances, and minor title deficiencies, in each case not securing Indebtedness and not materially interfering with the conduct of the business of the Borrower or any of its Subsidiaries; (x) Liens arising from precautionary UCC financing statement filings in respect of Operating Leases; (xi) statutory and common law landlords' liens under leases to which the Borrower or any of its Subsidiaries is a party; (xii) Liens (other than Liens created or imposed under ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety bonds, bids, government contracts, performance and return-of-money bonds and other similar obligations incurred in the ordinary course of business (exclusive of obligations in respect of the payment for borrowed money); (xiii) Liens arising out of judgments or awards in respect of which the REIT or any of its Subsidiaries shall in good faith be prosecuting an appeal or proceedings for review in respect of which there shall have been secured a subsisting stay of execution pending such appeal or proceedings, provided that the aggregate amount of all such judgments or awards (and the aggregate amount of any cash and the fair market value of any property pledged by the REIT or any of its Subsidiaries in connection therewith) does not exceed $2,000,000 at any time outstanding; and 66 (xiv) Liens evidenced by the documentation for the Existing Indebtedness. 8.02 Consolidation, Merger, Purchase or Sale of Assets, etc. The REIT will not, and will not permit any of its Subsidiaries to, wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation, or convey, sell, lease or otherwise dispose of all or any part of its property or assets, or enter into any sale-leaseback transactions, or purchase or otherwise acquire (in one or a series of related transactions) any part of the property or assets (other than purchases or other acquisitions of inventory, materials and equipment in the ordinary course of business) of any Person (or agree to do any of the foregoing at any future time), except that: (i) Capital Expenditures (including payments in respect of Capitalized Lease Obligations) by the Borrower and its Subsidiaries shall be permitted to the extent not in violation of Sections 8.01(vii)(B) and 8.07; (ii) the Borrower and each of its Subsidiaries may in the ordinary course of business, (x) sell or otherwise dispose of equipment and materials which, in the reasonable opinion of such Person, are obsolete, uneconomic or no longer useful in the conduct of such Person's business and (y) sell or exchange other items of equipment and materials so long as the purpose of each such sale or exchange is to acquire (and results within 30 days of such sale or exchange in the acquisition of) replacement items of equipment or materials which are the functional equivalent of the item of equipment or material so sold or exchanged and is at least of equivalent value and quality; (iii) Investments may be made to the extent permitted by Section 8.05; (iv) the Borrower and each of its Subsidiaries may lease (as lessee) real or personal property in the ordinary course of business (so long as any such lease does not create a Capitalized Lease Obligation unless permitted by Section 8.01(vii)); provided that Leaseholds of Borrowing Base Properties which do not constitute Capitalized Lease Obligations shall be permitted (x) with respect to the Initial Borrowing Base Properties and Mortgage Loan Properties securing the Initial Borrowing Base Pledged Mortgage Loans that are Leaseholds and (y) with respect to subsequently acquired Borrowing Base Properties and the Mortgage Loan Properties securing subsequently acquired Borrowing Base Pledged Mortgage Loans, to the extent provided in Section 8.02(viii); (v) the Borrower and each of its Subsidiaries may make sales of inventory in the ordinary course of business; (vi) the Borrower and each of its Subsidiaries may sell Borrowing Base Pledged Mortgage Loans and Borrowing Base Properties (or in the case of a Borrowing Base Property owned or leased by a Subsidiary of the Borrower, all of the capital stock or other equity interests of the respective Subsidiary which owns such Borrowing Base Property) so long as (i) no Default or Event of Default then exists or would result therefrom, (ii) each such sale is at fair market value (as determined in good faith by the general partner of the Borrower or such Subsidiary), (iii) the total cash consideration received by the 67 Borrower or such Subsidiary for any such sale (x) equals at least the Release Price for such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan and (y) is received at the time of the consummation of any such sale, and with the balance of such consideration to be in the form of promissory notes which shall be pledged to the Collateral Agent pursuant to the Pledge Agreement (although in no event shall more than 20% of the total consideration be in the form of promissory notes), (iv) the Borrowing Base shall be reduced in accordance with the definition thereof at the time of the consummation of such sale, (v) the Borrower shall have delivered to the Administrative Agent a new Borrowing Base Certificate signed by an Authorized Financial Officer of the Borrower, calculating (in reasonable detail) the Borrowing Base after giving effect to such sale, and the aggregate outstanding principal amount of Loans and Letter of Credit Outstandings after giving effect to such sale (and any repayment required under Section 3.02) shall not exceed the revised Borrowing Base, (vi) the Borrower or such Subsidiary concurrently makes any payments required under Section 3.02 as a result of such sale, (vii) at least 10 Business Days prior written notice of such sale is given by the Borrower to the Administrative Agent (or such shorter notice as may be acceptable to the Administrative Agent), and (viii) the aggregate amount of all sales made pursuant to this Section 8.02(vi) shall not, when added to the aggregate amount of all sales made pursuant to Section 8.02(vii), exceed 25% of the Book Value in any fiscal year of the REIT; (vii) the Borrower and each of its Subsidiaries may sell other assets (other than the capital stock or other equity interests of any Subsidiary Guarantor) so long as (i) no Default or Event of Default then exists or would result therefrom, (ii) each such sale is at fair market value (as determined in good faith by the Borrower), (iii) the consideration received by the Borrower or such Subsidiary is at least 80% cash and is received at the time of the consummation of such sale, and with the balance of such consideration to be in the form of promissory notes which shall be pledged to the Collateral Agent pursuant to the Pledge Agreement to the extent such promissory notes are held by a Credit Party and (iv) the aggregate amount of all sales made pursuant to this Section 8.02(vii) shall not, when added to the aggregate amount of all sales made pursuant to Section 8.02(vi), exceed 25% of the Book Value in any fiscal year of the REIT; (viii) the Borrower and each of its Subsidiaries may acquire Borrowing Base Properties (including by purchasing the capital stock or other equity interests of the Person or Persons that own such Borrowing Base Properties), and may provide or purchase Borrowing Base Pledged Mortgage Loans, so long as (i) such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan constitutes a Qualified Property or Qualified Mortgage Loan, as applicable (it being understood that to the extent the Property or Mortgage Loan in question is not a Qualified Property or a Qualified Mortgage Loan, as applicable, and the Borrower desires to have such Property or Mortgage Loan constitute Borrowing Base Collateral, the Required Banks shall use their reasonable efforts to vote on whether such Property or Mortgage Loan shall constitute Borrowing Base Collateral within 15 Business Days after receiving the Information Package and other materials to be delivered pursuant to Section 7.11 in respect of such Property or Mortgage Loan (although the Required Banks' decision as to whether or not to treat such Property or Mortgage Loan as a Borrowing Base Property or a Borrowing Base Pledged Mortgage Loan, as applicable, shall be made in their sole discretion)), (ii) (A) each Borrowing Base Pledged Mortgage Loan is 100% owned by the Borrower, and (B) each Borrowing Base Property (or the capital stock or other equity 68 interests of the Person owning such Borrowing Base Property) is at least 51% owned by the Borrower or a wholly-owned Subsidiary thereof, provided that not more than 30% of the Borrowing Base may be comprised of Borrowing Base Properties owned by non-wholly-owned Subsidiaries of the Borrower, (iii) such Borrowing Base Properties and the Mortgage Loan Properties securing such Borrowing Base Pledged Mortgage Loans are located in the United States, (iv) the Collateral Agent is able to obtain a first priority mortgage lien on such Borrowing Base Property or a first priority collateral assignment of such Borrowing Base Pledged Mortgage Loan, as the case may be, subject only to Permitted Liens, and all of the actions specified in Section 7.11, in Section 8.12 and in the respective Security Documents with respect to such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan shall have been taken by the Borrower and/or its respective Subsidiary, (v) with respect to the acquisition of any Borrowing Base Property subject to a Leasehold or the provision or purchase of any Borrowing Base Pledged Mortgage Loan to be secured by a Mortgage Loan Property that is subject to a Leasehold, (A) the respective Leasehold shall be mortgageable with appropriate mortgagee protections (as reasonably determined by the Administrative Agent, including but not limited to, notice of defaults, cure rights, successor rights and transfer rights upon foreclosure), (B) the respective Leasehold shall have a remaining term of at least 25 years, and (C) the respective Leasehold shall otherwise be reasonably satisfactory to the Administrative Agent, (vi) in the case of a Borrowing Base Pledged Mortgage Loan, (A) if such Borrowing Base Pledged Mortgage Loan is a construction loan, all of the payment and performance obligations of the borrower thereunder shall be guaranteed by an Eligible Guarantor pursuant to a Borrowing Base Guaranty (except with respect to the Specified Mortgage Loan), (B) such Borrowing Base Pledged Mortgage Loan shall be provided pursuant to Pledged Mortgage Loan Documents which expressly permit the collateral assignment thereof to the Collateral Agent as security for the Obligations and obligate the borrower thereunder to recognize the Collateral Agent or its successor as the "lender" thereunder following realization on the security interest granted pursuant to the related Collateral Assignment, and which Pledged Mortgage Loan Documents shall otherwise be satisfactory to the Administrative Agent, (C) such Borrowing Base Pledged Mortgage Loan shall be on market rates and terms, as determined by the Administrative Agent or the Required Banks, and shall have a maturity that exceeds the Maturity Date by at least two years, (D) such Borrowing Base Pledged Mortgage Loan shall be a term loan secured by a Mortgage Loan Property that (x) is not under construction or material renovation, (y) has a valid, permanent certificate of occupancy (or, if approved by the Administrative Agent, a valid, temporary certificate of occupancy), and (z) is an operating senior living care facility or medical office building generating stabilized revenues; provided, that not more than 30% of the Borrowing Base may be comprised of Borrowing Base Pledged Mortgage Loans which are construction loans provided to borrowers approved by the Administrative Agent for the purpose of constructing senior living care facilities and medical office buildings (so long as such construction loans satisfy all of the other requirements contained in this Section 8.02(viii) and Section 7.11 for Borrowing Base Pledged Mortgage Loans), (vii) based on calculations made by the Borrower on a 69 Pro Forma Basis after giving effect to the respective acquisition of a Borrowing Base Property or provision or purchase of a Borrowing Base Pledged Mortgage Loan, no Default or Event of Default will exist under, or would have existed during the Test Period last reported (or required to be reported pursuant to Section 7.01(a) or (b), as the case may be) prior to the date of the respective acquisition of such Borrowing Base Property or provision or purchase of such Borrowing Base Pledged Mortgage Loan under, the financial covenants contained in Sections 8.08 through 8.10, inclusive, (viii) based on good faith projections prepared by the Borrower for the period from the date of the consummation of the respective acquisition of such Borrowing Base Property or provision or purchase of such Borrowing Base Pledged Mortgage Loan to the date which is one year thereafter (calculated after giving effect to the respective acquisition, provision or purchase), the level of financial performance measured by the covenants set forth in Sections 8.08 through 8.10, inclusive, shall be better than or equal to such level as would be required to provide that no Default or Event of Default will exist under the financial covenants contained in Sections 8.08 through 8.10, inclusive, as compliance with such covenants will be required through the date which is one year from the date of the consummation of the respective acquisition of such Borrowing Base Property or provision or purchase of such Borrowing Base Pledged Mortgage Loan, (ix) the proposed acquisition could not reasonably be expected to result in materially increased tax and ERISA liabilities with respect to the REIT and its Subsidiaries taken as a whole, and (x) the Borrower shall have delivered to the Administrative Agent an officer's certificate executed by an Authorized Financial Officer of the Borrower, certifying, to the best of such officer's knowledge, compliance with the requirements of the preceding clauses (i) through (xi) (and containing all calculations required to demonstrate such compliance); (ix) the Borrower and its Subsidiaries may acquire Properties and may provide or purchase Mortgage Loans which do not constitute Borrowing Base Collateral (or may acquire the capital stock or other equity interests of the Person or Persons owning such Properties and/or Mortgage Loans) so long as (i) no Default or Event of Default then exists or would result therefrom, (ii) based on calculations made by the Borrower on a Pro Forma Basis after giving effect to such acquisition, no Default or Event of Default will exist under, or would have existed during the Test Period last reported (or required to be reported pursuant to Section 7.01(a) or (b), as the case may be) prior to the date of the respective acquisition of a Property or purchase or provision of a Mortgage Loan under, the financial covenants contained in Sections 8.08 through 8.10, inclusive, (iii) based on good faith projections prepared by the Borrower for the period from the date of the consummation of such acquisition of a Property or purchase or provision of a Mortgage Loan to the date which is one year thereafter calculated after giving effect to the respective acquisition of a Property or purchase or provision of a Mortgage Loan, the level of financial performance measured by the covenants set forth in Sections 8.08 through 8.10, inclusive, shall be better than or equal to such level as would be required to provide that no Default or Event of Default will exist under the financial covenants contained in Sections 8.08 through 8.10, inclusive, as compliance with such covenants will be required through the date which is one year from the date of the consummation of the respective acquisition of a Property or purchase or provision of a Mortgage Loan, and (iv) the Borrower shall have delivered to the 70 Administrative Agent an officer's certificate executed by an Authorized Financial Officer of the Borrower, certifying to the best of such officer's knowledge, compliance with the requirements of preceding clauses (i) through (iii) (and containing all calculations required to demonstrate such compliance); (x) any Subsidiary Guarantor may be merged with and into the Borrower or any other Subsidiary Guarantor so long as (i) in the case of any merger involving the Borrower, the Borrower is the surviving corporation, (ii) in the case of any merger between two Subsidiary Guarantors one of which is a wholly-owned Subsidiary, such wholly-owned Subsidiary is the surviving corporation, (iii) in the case of any merger involving a non-wholly-owned Subsidiary, the only consideration paid to third parties in connection therewith is cash, provided that any such cash payment shall be treated as an Investment made (and shall reduce the aggregate amount of Investments permitted to be made) under Section 8.05(vi) and such payment may only be made to the extent that an Investment may be made at such time under such Section 8.05(vi), (iv) all Liens granted pursuant to the Security Documents on any property or assets of any Subsidiary Guarantor shall remain in full force and effect and with at least the same priority as such Lien would have had if such merger had not occurred and (v) at least 10 Business Days prior written notice of any such merger is given by the Borrower to the Administrative Agent; and (xi) any Subsidiary of the Borrower (other than a Specified Subsidiary) that is not a Subsidiary Guarantor may be merged with and into any other Subsidiary of the Borrower (other than a Specified Subsidiary) that is not a Subsidiary Guarantor so long as in the case of any merger involving a non-wholly-owned Subsidiary of the Borrower, the only consideration paid to third parties in connection therewith is cash, provided that any such cash payment shall be treated as an Investment made (and shall reduce the aggregate amount of Investments permitted to be made) under Section 8.05(vi) and such cash payment may only be made to the extent that an Investment may be made at such time under such Section 8.05(vi). 8.03 Dividends. Except to the extent required in order for the REIT to maintain its status as an entity taxed as a real estate investment trust in accordance with the written advice of counsel, the REIT will not, and will not permit any of its Subsidiaries to, authorize, declare or pay any Dividends with respect to the REIT or any of its Subsidiaries, except that (i) any Subsidiary of the Borrower may pay cash Dividends to the Borrower or to a wholly-owned Subsidiary of the Borrower, (ii) any non-wholly-owned Subsidiary of the Borrower may pay cash Dividends to its shareholders, partners or other equity holders generally so long as (x) the Borrower or its respective Subsidiary which owns the equity interest or interests in the Subsidiary paying such Dividends receives at least its proportionate share thereof (based upon its relative holdings of equity interests in the Subsidiary paying such Dividends and taking into account the relative preferences, if any, of the various classes of equity interests in such Subsidiary) and (y) no Dividends may be paid by any non wholly-owned Subsidiary of the Borrower (other than ET Capital Corp.) at any time that any intercompany loans are outstanding to such Subsidiary, and (iii) so long as no Default or Event of Default then exists or would result therefrom, the Borrower may pay cash Dividends to the REIT, which in turn may pay cash Dividends to its shareholders to the extent of any Dividends received by the REIT from the Borrower, provided that the aggregate 71 amount of cash Dividends paid by the REIT pursuant to this clause (iii) in any fiscal quarter of the REIT shall not exceed 89% of the REIT's estimated funds from operations for such fiscal quarter, and provided further that no Dividends shall be paid by the REIT pursuant to this clause (iii) in any fiscal quarter of the REIT prior to the release by the REIT of its quarterly earnings report. 8.04 Indebtedness. The REIT will not, and will not permit any of its Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness, except: (i) Indebtedness incurred pursuant to this Agreement and the other Credit Documents; (ii) Existing Indebtedness to the extent the same is listed on Schedule V (although any Existing Indebtedness of the type described in clause (iii) of this Section 8.04 does not have to be listed on such Schedule V), but no refinancings or renewals thereof; (iii) accrued expenses and trade accounts payable incurred in the ordinary course of business; (iv) Indebtedness of the Borrower and its Subsidiaries evidenced by Capitalized Lease Obligations and/or purchase money Indebtedness to the extent permitted under Section 8.01(vii); (v) intercompany Indebtedness among the Borrower and the Subsidiary Guarantors to the extent permitted by Section 8.05(iv); (vi) intercompany Indebtedness owed by Subsidiaries of the Borrower which are not Subsidiary Guarantors to the Borrower or any Subsidiary Guarantor to the extent permitted by Section 8.05(vi); (vii) unsecured short-term trade Indebtedness of the Borrower or any of its Subsidiaries incurred in the ordinary course of business; and (viii) Permitted Non-Recourse Indebtedness of a Specified Subsidiary incurred to finance the provision or purchase of a Mortgage Loan or the purchase of (or assumed at the time of the purchase of), or to finance the renovation of, a Property, so long as (i) no Default or Event of Default then exists or would result therefrom, (ii) based on calculations made by the Borrower on a Pro Forma Basis as if the incurrence of such Indebtedness had occurred on the first day of the respective Calculation Period relating to such incurrence, no Default or Event of Default will exist under, or would have existed during the period beginning on the first day of the respective Calculation Period and ended on the Determination Date under, the financial covenants 72 contained in Sections 8.08 through 8.10, inclusive, (iii) based on good faith projections prepared by the Borrower for the period from the date that such Indebtedness is incurred to the date which is one year thereafter, the level of financial performance measured by the covenants set forth in Sections 8.08 through 8.10, inclusive, shall be better than or equal to such level as would be required to provide that no Default or Event of Default will exist under the financial covenants contained in Sections 8.08 through 8.10, inclusive, as compliance with such covenants will be required through the date which is one year from the date of the incurrence of such Indebtedness, (iv) the amount of any such Permitted Non-Recourse Indebtedness does not exceed 75% of the Market Value of the Property or Mortgage Loan, as the case may be, at such time, (v) the aggregate principal amount of all Permitted Non-Recourse Indebtedness outstanding at any one time shall not exceed $25,000,000, (vi) the Borrower shall have delivered to the Administrative Agent an officer's certificate executed by an Authorized Financial Officer of the Borrower, certifying to the best of such officer's knowledge, compliance with the requirements of this Section 8.04(viii) and containing the calculations required by the preceding clauses (ii), (iii), (iv) and (v), and (vii) if the asset to be financed with such Permitted Non-Recourse Indebtedness is a Borrowing Base Property or a Borrowing Base Pledged Mortgage Loan, (A) the net refinancing proceeds received by the Borrower or such Subsidiary from any such financing (x) equal at least the Release Price for such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan and (y) are received at the time of the consummation of any such financing, (B) the Borrowing Base shall be reduced in accordance with the definition thereof at the time of the consummation of such financing, (C) the Borrower shall have delivered to the Administrative Agent a new Borrowing Base Certificate signed by an Authorized Financial Officer of the Borrower, calculating (in reasonable detail) the Borrowing Base after giving effect to such financing, and the aggregate outstanding principal amount of Loans and Letter of Credit Outstandings after giving effect to such financing (and any repayment required under Section 3.02) shall not exceed the revised Borrowing Base, (D) the Borrower or such Subsidiary concurrently makes any payments required under Sections 2.01 and 3.02 as a result of such financing, and (E) at least 10 Business Days prior written notice of such financing is given by the Borrower to the Administrative Agent (or such shorter notice as may be acceptable to the Administrative Agent). 8.05 Advances, Investments and Loans. The REIT will not, and will not permit any of its Subsidiaries to, directly or indirectly, lend money or credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any other Person, or purchase or own a futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract, or hold any cash or Cash Equivalents (each of the foregoing an "Investment" and, collectively, "Investments"), except that the following shall be permitted: (i) the Borrower and its Subsidiaries may acquire and hold accounts receivables owing to any of them, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary terms; (ii) the Borrower and its Subsidiaries may acquire and hold cash and Cash Equivalents; 73 (iii) the Borrower and the Subsidiary Guarantors may purchase or provide Borrowing Base Pledged Mortgage Loans in accordance with Section 8.02(viii) and Subsidiaries of the Borrower that are not Subsidiary Guarantors may purchase or provide Mortgage Loans that are not Borrowing Base Pledged Mortgage Loans in accordance with Section 8.02(ix); (iv) the Borrower and the Subsidiary Guarantors may make intercompany loans to one another so long as (i) each such intercompany loan is evidenced by an Intercompany Note which shall be pledged to the Collateral Agent pursuant to the Pledge Agreement, and (ii) any intercompany loan made by any Subsidiary Guarantor that is not a wholly-owned Subsidiary of the Borrower shall contain the subordination provisions set forth in Exhibit O; (v) The REIT may make cash equity contributions to the Borrower; (vi) subject to the restrictions set forth in Section 8.16, the Borrower and its Subsidiaries may make additional Investments so long as (i) no Default or Event of Default then exists or would result therefrom, (ii) after giving effect to any such Investment, the aggregate principal amount of Loans then outstanding and Letter of Credit Outstandings shall not exceed the Borrowing Base then in effect and (iii) any Investments that are made by the Borrower or a Subsidiary Guarantor pursuant to this Section 8.05(vi) in the form of a loan shall be evidenced by a promissory note and shall be pledged to the Collateral Agent pursuant to the Pledge Agreement; (vii) the REIT and its Subsidiaries may hold the stock or other interests in their respective Subsidiaries; and (viii) the REIT may make the Specified Loans. 8.06 Transactions with Affiliates. The REIT will not, and will not permit any of its Subsidiaries to, enter into any transaction or series of related transactions with any Affiliate of the REIT or any of its Subsidiaries, other than in the ordinary course of business and on terms and conditions substantially as favorable to the REIT or such Subsidiary as would reasonably be obtained by the REIT or such Subsidiary at that time in a comparable arm's-length transaction with a Person other than an Affiliate, except that: (i) Dividends may be paid to the extent provided in Section 8.03; and (ii) loans may be made and other transactions may be entered into by the REIT and its Subsidiaries to the extent permitted by Section 8.04 or 8.05. 8.07 Capital Expenditures. The REIT will not, and will not permit any of its Subsidiaries to, make any Capital Expenditures if after giving effect thereto a Default or an Event of Default would exist. 74 8.08 Minimum Equity Value; Minimum Tangible Net Worth. The REIT will not permit its Equity Value to be less than $70,000,000 at any time and the REIT will not permit the Tangible Net Worth of the REIT and its Subsidiaries to be less than $100,000,000 at any time. 8.09 Total Leverage Ratio. The REIT will not permit the ratio of Consolidated Indebtedness to Book Value to exceed 70.0% at any time. 8.10 Minimum Interest Coverage Ratio. The REIT will not permit the ratio of Consolidated EBITDA to Consolidated Interest Expense for the Test Period then ended to be less than 2.0:1.0 at any time. 8.11 Public REIT Status. The REIT will not cease, for any reason, to maintain (i) its qualification as a real estate investment trust under Sections 856 through 860 of the Code or (ii) its status as a publicly traded, stock exchange listed company. 8.12 Limitation on Creation of Subsidiaries. The REIT will not, and will not permit any of its Subsidiaries to, establish, create or acquire any additional Subsidiaries, except that the Borrower and its wholly-owned Subsidiaries shall be permitted to establish, create or acquire wholly-owned Subsidiaries and, to the extent permitted by Section 8.02(viii), Section 8.02(ix) and Section 8.05(vi), non-wholly-owned Subsidiaries, in each case in connection with the acquisition of new Properties and the provision or purchase of Mortgage Loans that are not Borrowing Base Pledged Mortgage Loans permitted by Section 8.02(viii) and Section 8.02 (ix) and Investments permitted by Section 8.05(vi), as the case may be, so long as (i) the capital stock of such new Subsidiary (to the extent that same is a corporation and is owned by a Credit Party) is pledged pursuant to the Pledge Agreement and any certificates representing such stock, together with undated stock powers duly executed in blank, are delivered to the Collateral Agent, (ii) the partnership or limited liability company interests of such new Subsidiary (to the extent that same is a partnership or limited liability company and is owned by a Credit Party) are pledged and assigned pursuant to the Pledge and Security Agreement and (iii) any such new Subsidiary which owns a Borrowing Base Property or a Borrowing Base Pledged Mortgage Loan and/or an equity interest (both directly and indirectly) in any other Subsidiary which owns a Borrowing Base Property or a Borrowing Base Pledged Mortgage Loan executes a counterpart of the Subsidiaries Guaranty, the Pledge Agreement, the Pledge and Security Agreement and the Security Agreement, and (iv) any such new Subsidiary which owns a Borrowing Base Property or a Borrowing Base Pledged Mortgage Loan and/or an equity interest in any other Subsidiary which owns a Borrowing Base Property or a Borrowing Base Pledged Mortgage Loan shall take all actions required pursuant to Section 7.11. In addition, each such new Subsidiary which owns a Borrowing Base Property or a Borrowing Base Pledged Mortgage Loan 75 and/or an equity interest in any other Subsidiary which owns a Borrowing Base Property or a Borrowing Base Pledged Mortgage Loan shall execute and deliver, or cause to be executed and delivered, all other relevant documentation of the type described in Section 4 as such new Subsidiary would have had to deliver if such new Subsidiary were a Credit Party on the Effective Date. Notwithstanding the foregoing provisions of this Section 8.12, the Credit Parties shall not be required to pledge their shareholder, partnership or limited liability company interests in a new Subsidiary which does not own a Borrowing Base Property or a Borrowing Base Pledged Mortgage Loan and/or an equity interest in any other Subsidiary which owns a Borrowing Base Property or a Borrowing Base Pledged Mortgage Loan if each of the following conditions are satisfied: (i) such Subsidiary is formed for the purpose of acquiring a Property or providing or purchasing a Mortgage Loan, which transaction is to be financed with Permitted Non-Recourse Indebtedness, (ii) the lender providing such Permitted Non-Recourse Indebtedness has not agreed (after commercially reasonable request made by the relevant Credit Party) to permit the pledge of equity in such Subsidiary, and (iii) each Credit Party owning a shareholder, partnership or limited liability company interest in such Subsidiary agrees that it will not cause, suffer or permit the encumbrance of such shareholder, partnership or limited liability company interest by any Lien (other than Permitted Liens), whether voluntarily, by operation of law or otherwise. 8.13 Limitation on Payments of Certain Indebtedness; Modifications of Certain Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Agreements; etc. The REIT will not, and will not permit any of its Subsidiaries to, (i) make (or give any notice in respect of) any voluntary or optional payment or prepayment on or redemption or acquisition for value of, or any prepayment or redemption as a result of any change of control or similar event of, including, in each case without limitation, by way of depositing with the trustee with respect thereto money or securities before due for the purpose of paying when due, any Permitted Non-Recourse Indebtedness, (ii) make (or give any notice in respect of) any payment or prepayment on or redemption or acquisition for value of, including, in each case without limitation, by way of depositing with any trustee with respect thereto money or securities before due for the purpose of paying when due, any principal, premium, interest or other amounts on the Existing Indebtedness, provided that, so long as no Default or Event of Default then exists, the Borrower may make the scheduled principal and interest payments on the Existing Indebtedness, (iii) amend or modify, or permit the amendment or modification of, any provision of any Permitted Non-Recourse Indebtedness or any agreement (including, without limitation, any purchase agreement, indenture or loan agreement) related thereto (other than any amendment or modification thereto which would not violate or be inconsistent with any of the terms or provisions of this Agreement and could not reasonably be expected to be adverse to the interests of the Banks in any material respect), (iv) amend or modify, or permit the amendment or modification of, any provision of the Debt Agreements, or (v) amend, modify or change its declaration of trust, certificate of incorporation (including, without limitation, by the filing or modification of any certificate of designation), by-laws, certificate of partnership, partnership agreement or any equivalent organizational document, or any agreement entered into by it, with respect to its capital stock or other equity interests, or enter into any new agreement with respect to its capital stock or other equity interests, other than any amendments, modifications or changes pursuant to this clause (v) or any such new agreements which are not adverse in any material respect to the interests of the Banks, provided that in no event shall any amendments, modifications or changes to the terms of the capital stock of the REIT, or any Subsidiary of the REIT be permitted, other than any amendments which change the number of authorized shares of capital stock. 8.14 Limitation on Certain Restrictions on Subsidiaries. The REIT will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective 76 any encumbrance or restriction on the ability of any Subsidiary of the Borrower to (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by the Borrower or any of its Subsidiaries, or pay any Indebtedness owed to the Borrower or any Subsidiary of the Borrower, (b) make loans or advances to the Borrower or any Subsidiary of the Borrower or (c) transfer any of its properties or assets to the Borrower or any Subsidiary of the Borrower, except in each case for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) this Agreement and the other Credit Documents, (iii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or any Subsidiary of the Borrower, (iv) customary provisions restricting assignment of any licensing agreement entered into by the Borrower or any Subsidiary of the Borrower in the ordinary course of business, (v) customary provisions restricting the transfer of assets subject to Liens permitted under Section 8.01(vii) and (vi) restrictions existing in any document executed in connection with any Permitted Non-Recourse Indebtedness so long as such restrictions only apply to the Specified Subsidiary that has incurred such Permitted Non-Recourse Indebtedness. 8.15 Limitation on Issuance of Capital Stock. The REIT will not permit any of its Subsidiaries other than the Borrower to issue any capital stock (including by way of sales of treasury stock) or other equity interests or any options or warrants to purchase, or securities convertible into, capital stock or other equity interests, except (i) for transfers and replacements of then outstanding shares of capital stock or other equity interests, (ii) for stock splits, stock dividends and similar or additional issuances which do not decrease the percentage ownership of the REIT or any of its Subsidiaries in any class of the capital stock or other equity interests of such Subsidiary and (iii) to qualify directors to the extent required by applicable law. 8.16 Business. The REIT will not, and will not permit any of its Subsidiaries to, engage (directly or indirectly) in any business other than the business of the REIT and its Subsidiaries described in the Registration Statement. 8.17 Borrowing Base. The Borrower will not permit the outstanding balance of Loans and Letter of Credit Outstandings at any time to exceed the Borrowing Base. The Administrative Agent may, at any time and from time to time in its sole discretion, recalculate the Borrowing Base (by recalculating the Borrowing Base amounts attributable to any or all of the Borrowing Base Collateral), and shall notify the Borrower in writing if, following any such recalculation, the outstanding principal balance of Loans and Letter of Credit Outstandings exceeds the Borrowing Base. The Borrower shall repay Loans and Letter of Credit Outstandings in accordance with Section 3.02 upon receipt of any such notice from the Administrative Agent. SECTION 9. Events of Default. Upon the occurrence of any of the following specified events (each an "Event of Default"): 9.01 Payments. The Borrower shall (i) default in the payment when due of any principal of any Loan or any Note or (ii) default, and such default shall continue unremedied for five or more Business Days, in the payment when due of any interest on any Loan or Note, any Unpaid Drawing or any Fees or any other amounts owing hereunder or under any other Credit Document; or 77 9.02 Representations, etc. Any representation, warranty or statement made or deemed made by any Credit Party herein or in any other Credit Document or in any certificate delivered pursuant hereto or thereto shall prove to be untrue in any material respect on the date as of which made or deemed made; or 9.03 Covenants. Any Credit Party shall (i) default in the due performance or observance by it of any term, covenant or agreement contained in Section 7.01(f)(i), 7.03 or 7.08 or Section 8 or (ii) default in the due performance or observance by it of any other term, covenant or agreement contained in this Agreement (other than as provided in Section 9.01) and such default shall continue unremedied for a period of 30 days after written notice to the Borrower by the Administrative Agent or the Required Banks, except that any default under Section 7.13 shall constitute a Special Mandatory Repayment Event and shall not constitute an Event of Default unless there is also a default under Section 3.02(f); or 9.04 Default Under Other Agreements. (i) The REIT or any of its Subsidiaries shall (x) default in any payment of any Indebtedness (other than the Obligations) beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created or (y) default in the observance or performance of any agreement or condition relating to any Indebtedness (other than the Obligations) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause (determined without regard to whether any notice is required), any such Indebtedness to become due prior to its stated maturity, or (ii) any Indebtedness (other than the Obligations) of the REIT or any of its Subsidiaries shall be declared to be due and payable, or required to be prepaid other than by a regularly scheduled required prepayment, prior to the stated maturity thereof, provided that it shall not be a Default or an Event of Default under clauses (i) or (ii) of this Section 9.04 unless the aggregate outstanding principal amount of all Indebtedness as described in such clauses (i) and (ii) is at least $10,000,000; or 9.05 Bankruptcy, etc. The REIT or any of its Subsidiaries shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced against the REIT or any of its Subsidiaries and the petition is not controverted within 30 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of the REIT or any of its Subsidiaries or the REIT or any of its Subsidiaries commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the REIT or any of its Subsidiaries, or there is commenced against the REIT or any of its Subsidiaries any such proceeding which remains undismissed for a period of 60 days, or the REIT or any of its Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered and is not vacated or stayed within 60 days; or the REIT or any of its Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to 78 continue undischarged or unstayed for a period of 60 days; or the REIT or any of its Subsidiaries makes a general assignment for the benefit of creditors; or any partnership and/or corporate action is taken by the REIT or any of its Subsidiaries for the purpose of effecting any of the foregoing; provided, however, that the occurrence of any of the events described in this Section 9.05 with respect to a Subsidiary of the REIT that is not the Borrower or a Subsidiary Guarantor and is not a Subsidiary of the REIT to which more than $25,000,000 of Book Value is attributable shall not be a Default or an Event of Default; or 9.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding standard required for any plan year or part thereof under Section 412 of the Code or Section 302 of ERISA or a waiver of such standard or extension of any amortization period is sought or granted under Section 412 of the Code or Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA shall be subject to the advance reporting requirement of PBGC Regulation 4043.61 (without regard to subparagraph (b)(1) thereof) and an event described in subsection .62, .63, .64., .65, .66, .67 or .68 or PBGC Regulation Section 4043 shall be reasonably expected to occur with respect to such Plan within the following 30 days, any Plan or Multiemployer Plan shall have had or is likely to have the PBGC seek to appoint a trustee to administer such Plan, any Plan or Multiemployer Plan is, shall have been or is likely to be terminated or to be the subject of termination proceedings under ERISA, any Plan shall have an Unfunded Current Liability, a contribution required to be made by the REIT, any Subsidiary of the REIT or any ERISA Affiliate to a Plan has not been timely made, the REIT or any of its Subsidiaries or ERISA Affiliates has incurred or is likely to incur a liability to or on account of a Plan or Multiemployer Plan under ERISA or the Code, or on account of a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code, or the REIT or any of its Subsidiaries or ERISA Affiliates has incurred or is likely to incur liabilities pursuant to one or more employee welfare benefit plans (as defined in Section 3(1) of ERISA) that provide benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or employee pension benefit plans (as defined in Section 3(2) of ERISA) of the REIT or any of its Subsidiaries that is not tax-qualified under Section 401(a) of the Code or Plans; and (b) there shall result from any such event or events the imposition of a lien, the granting of a security interest, or a liability or a material risk of incurring a liability; and (c) such lien, security interest or liability, individually and/or in the aggregate, in the reasonable opinion of the Required Banks, has had, or could reasonably be expected to have, a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the REIT, the REIT and its Subsidiaries taken as a whole, the Borrower or the Borrower and its Subsidiaries taken as a whole; or 9.07 Security Documents. At any time after the execution and delivery thereof, any of the Security Documents shall cease to be in full force and effect, or shall cease to give the Collateral Agent for the benefit of the Secured Creditors the Liens, rights, powers and privileges purported to be created thereby (including, without limitation, a perfected security interest in, and Lien on, all of the Collateral), in favor of the Collateral Agent, superior to and prior to the rights of all third Persons (except as 79 permitted by Section 8.01), and subject to no other Liens (except as permitted by Section 8.01), or any Credit Party shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to any of the Security Documents and such default shall continue beyond any grace period specifically applicable thereto pursuant to the terms of such Security Document; or 9.08 Guaranty. Any Guaranty shall cease to be in full force or effect as to the relevant Guarantor, or any Guarantor or Person acting by or on behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations under the relevant Guaranty, or any Guarantor shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to the relevant Guaranty and such default shall continue beyond any grace period specifically applicable thereto pursuant to the terms of such Guaranty; or 9.09 Judgments. One or more judgments or decrees shall be entered against the REIT or any of its Subsidiaries involving in the aggregate for the REIT and its Subsidiaries a liability (not paid or not fully covered by a reputable and solvent insurance company) and such judgments and decrees either shall be final and non-appealable or shall not be vacated, discharged or stayed or bonded pending appeal for any period of 30 consecutive days, and the aggregate amount of all such judgments equals or exceeds $10,000,000; or 9.10 Change of Control. A Change of Control shall occur; or 9.11 Initial Borrowing Base Collateral. An Event of Default shall occur under Section 4.13(c); then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Administrative Agent, upon the written request of the Required Banks, shall by written notice to the Borrower, take any or all of the following actions, without prejudice to the rights of the Administrative Agent, any Bank, the Issuing Bank or the holder of any Note to enforce its claims against any Credit Party (provided, that, if an Event of Default specified in Section 9.05 shall occur with respect to the Borrower, the result which would occur upon the giving of written notice by the Administrative Agent to the Borrower as specified in clauses (i) and (ii) below shall occur automatically without the giving of any such notice): (i) declare the Total Commitment terminated, whereupon the Commitment of each Bank shall forthwith terminate immediately; (ii) declare the principal of and any accrued interest in respect of all Loans and the Notes and all other Obligations owing hereunder and thereunder to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Credit Party; (iii) terminate any Letter of Credit which may be terminated in accordance with its terms; (iv) enforce, as Collateral Agent, all of the Liens and security interests created pursuant to the Security Documents; and (v) direct the Borrower to pay (and the Borrower hereby agrees upon receipt of such notice, or upon the occurrence of any Event of Default specified in Section 9.05, to pay) to the Collateral Agent at the Payment Office such additional amounts of cash, to be held as security for the Borrower's reimbursement obligations in respect of Letters of Credit then outstanding, equal to the aggregate Stated Amount of all Letters of Credit then outstanding. 80 SECTION 10. Definitions and Accounting Terms. 10.01 Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Addition Date" shall mean the date upon which a Qualified Property or a Qualified Mortgage Loan is added to the Borrowing Base, which date shall be the later to occur of (i) the date on which such Qualified Property is acquired or such Qualified Mortgage Loan is provided or purchased, as applicable, and (ii) the date on which all the conditions set forth in Sections 7.11 and 8.02(viii) shall have been satisfied with respect to such Qualified Property or Qualified Mortgage Loan. "Administrative Agent" shall mean German American Capital Corporation, in its capacity as Administrative Agent for the Banks hereunder, and shall include any successor to the Administrative Agent appointed pursuant to Section 11.01 or 11.09. "Affiliate" shall mean, with respect to any Person, any other Person (i) directly or indirectly controlling (including, but not limited to, all directors, officers and general partners of such Person) controlled by, or under direct or indirect common control with, such Person or (ii) that directly or indirectly owns more than 10% of any class of the voting securities or capital stock of or equity interests in such Person. A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise. "Agreement" shall mean this Credit Agreement, as modified, supplemented, amended, restated, extended, renewed, refinanced or replaced from time to time. "Applicable Margin" shall mean: (a) with respect to a Eurodollar Loan, (i) 1.80%, if the Borrowing Base LTV is greater than 60.0% at the commencement of the applicable Interest Period; (ii) 1.65%, if the Borrowing Base LTV is equal to or less than 60.0% and greater than 50.0% at the commencement of the applicable Interest Period; and (iii) 1.50%, if the Borrowing Base LTV is equal to or less than 50.0% at the commencement of the applicable Interest Period; and (b) with respect to a Base Rate Loan, 1.0%. "Appraisal" shall mean a written appraisal prepared by an independent MAI appraiser engaged by and acceptable to the Administrative Agent, prepared in accordance with the Administrative Agent's customary independent appraisal requirements and in compliance with all applicable regulatory requirements, including 12 C.F.R. Part 34-Subpart C, and otherwise in form, scope and substance satisfactory to the Administrative Agent. "Appraised Value" shall mean, as to any Borrowing Base Property, the as-is fair market value of such Borrowing Base Property as reflected in the then most recent Appraisal of such Borrowing Base Property delivered pursuant to Section 7.11(i) or Section 7.15, as the case may be. 81 "Approved Bank" shall have the meaning provided in the definition of "Cash Equivalents." "Assignment and Assumption Agreement" shall mean the Assignment and Assumption Agreement substantially in the form of Exhibit P (appropriately completed). "Authorized Financial Officer" of any Credit Party shall mean any of the President, the Chief Financial Officer, the Treasurer or the Chief Accounting Officer of such Credit Party or any other officer of such Credit Party designated in writing to the Administrative Agent by any of the foregoing officers of such Credit Party as being authorized to act in such capacity so long as the other officer is a financial person who works in such Credit Party's controller's or accounting office. "Authorized Officer" of any Credit Party shall mean any of the President, any Authorized Financial Officer or any Vice-President of such Credit Party or any other officer of such Credit Party which is designated in writing to the Administrative Agent by any of the foregoing officers of such Credit Party as being authorized to give such notices under this Agreement. "Bank" shall mean each financial institution listed on Schedule I, as well as any Person which becomes a "Bank" hereunder pursuant to 12.04(b). "Bank Debt" shall mean, at any time, the aggregate outstanding principal amount of all Loans at such time. "Bank Default" shall mean (i) the refusal (which has not been retracted) of a Bank to make available its portion of any Borrowing or to fund its portion of any unreimbursed payment under Section 1.16(c) in violation of this Agreement or (ii) a Bank having notified in writing the Borrower and/or the Administrative Agent that it does not intend to comply with its obligations under Section 1.01(a), 1.16 or 1.18, including, without limitation, as a result of any takeover of such Bank by any regulatory authority or agency. "Bankruptcy Code" shall have the meaning provided in Section 9.05. "Base Rate" shall mean, as determined by DB on a daily basis, the higher of (a) the Prime Lending Rate or (b) the sum of the Federal Funds Rate plus 1/2 of 1% per annum. With reference to clause (a) above, the Borrower acknowledges that the rate thereunder is a reference rate only and does not necessarily represent DB's lowest or best rate actually charged to any customer, and DB may make commercial loans or other loans at rates of interest at, above or below such rate. "Base Rate Loan" shall mean each Loan designated or deemed designated as such by the Borrower at the time of the incurrence thereof or conversion thereto. 82 "Book Value" shall mean, at any time, the aggregate value of all assets of the REIT and its Subsidiaries, as reflected on the consolidated balance sheet of the REIT and its Subsidiaries in accordance with GAAP. "Borrower" shall have the meaning provided in the first paragraph of this Agreement. "Borrowing" shall mean the borrowing of one Type of Loan from all the Banks on a given date (or resulting from a conversion or conversions on such date) having in the case of Eurodollar Loans the same Interest Period, provided that Base Rate Loans incurred pursuant to Section 1.10(b) shall be considered part of the related Borrowing of Eurodollar Loans. "Borrowing Base" shall mean, as of any date of determination, the amount determined by the Administrative Agent to be equal to the sum of the Borrowing Base Amounts in respect of all Borrowing Base Properties and all Borrowing Base Pledged Mortgage Loans as of such date of determination. "Borrowing Base Amount" shall mean, as of any date of determination, (i) with respect to any Borrowing Base Property, (x) 60% of the Market Value of such Borrowing Base Property if the lessee's obligations under the Operating Lease encumbering such Borrowing Base Property have not been fully guaranteed by an Eligible Guarantor or (y) 80% of the Market Value of such Borrowing Base Property if the lessee's obligations under the Operating Lease encumbering such Borrowing Base Property have been fully guaranteed by an Eligible Guarantor, (ii) with respect to any Borrowing Base Pledged Mortgage Loan that is not a construction loan, (x) 60% of the Market Value of such Borrowing Base Pledged Mortgaged Loan if the obligations of the borrower under such Mortgage Loan have not been fully guaranteed by an Eligible Guarantor or (y) 80% of the Market Value of such Borrowing Base Pledged Mortgage Loan if the obligations of the borrower under such Mortgage Loan have been fully guaranteed by an Eligible Guarantor, and (iii) with respect to any Borrowing Base Pledged Mortgaged Loan that is a construction loan, 60% of the maximum principal balance of such Borrowing Base Pledged Mortgaged Loan, provided that, except for the Specified Mortgage Loan, no Mortgage Loan that is a construction loan shall be a Qualified Mortgage Loan unless all of the obligations of the borrower under such Mortgage Loan have been guaranteed by an Eligible Guarantor. "Borrowing Base Certificate" shall mean a certificate signed by an Authorized Financial Officer of the Borrower in the form of Exhibit L. "Borrowing Base Collateral" shall mean and include, as of any date, all Borrowing Base Properties and all Borrowing Base Pledged Mortgage Loans. "Borrowing Base Guaranty" shall mean either (x) a guaranty in form and substance satisfactory to the Administrative Agent of the obligations of an Operating Lessee under an Operating Lease or (y) a guaranty in form and substance satisfactory to the Administrative Agent of the obligations of a borrower under a Borrowing Base Pledged Mortgage Loan, in either case, provided by an Eligible Guarantor. 83 "Borrowing Base LTV" shall mean, as of any date, the ratio of the outstanding principal balance of Loans and Letter of Credit Outstandings to the aggregate Market Value of all Borrowing Base Collateral. "Borrowing Base Pledged Mortgage Loan" shall mean each Qualified Mortgage Loan that is included in the Borrowing Base. "Borrowing Base Property" shall mean each Qualified Property that is included in the Borrowing Base. "Business Day" shall mean (i) for all purposes other than as covered by clause (ii) below, any day except Saturday, Sunday and any day which shall be in New York City a legal holiday or a day on which banking institutions are authorized or required by law or other government action to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day described in clause (i) above and which is also a day for trading by and between banks in the New York interbank Eurodollar market. "Calculation Period" shall mean the period of four consecutive fiscal quarters last ended before the date of the respective event or incurrence which requires calculations to be made on a Pro Forma Basis. "Capital Expenditures" shall mean, with respect to any Person, all expenditures by such Person which should be capitalized in accordance with generally accepted accounting principles and, without duplication, the amount of Capitalized Lease Obligations incurred by such Person. "Capitalized Lease Obligations" shall mean, with respect to any Person, all rental obligations of such Person which, under generally accepted accounting principles, are or will be required to be capitalized on the books of such Person, in each case taken at the amount thereof accounted for as indebtedness in accordance with such principles. "Cash Equivalents" shall mean (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than six months from the date of acquisition, (ii) U.S. dollar denominated time deposits, certificates of deposit and bankers acceptances of (x) any Bank or (y) any bank whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank or Bank, an "Approved Bank"), in each case with maturities of not more than six months from the date of acquisition, (iii) commercial paper issued by any Approved Bank or by the parent company of any Approved Bank and commercial paper issued by, or guaranteed by, any industrial or financial company with a short-term commercial paper rating of at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's, or guaranteed by any industrial company with a long term unsecured debt rating of at least A or A2, 84 or the equivalent of each thereof, from S&P or Moody's, as the case may be, and in each case maturing within six months after the date of acquisition, (iv) marketable direct obligations issued by the District of Columbia or any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within six months from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody's and (v) investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (i) through (iv) above. "Casualty Event" shall mean any loss, physical destruction, damage or similar event with respect to any Borrowing Base Property or any Mortgage Loan Property securing a Borrowing Base Pledged Mortgage Loan (or, in either case, any portion thereof). "CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as the same may be amended from time to time, 42 U.S.CA. ss. 9601 et seq. "Change of Control" shall mean (i) any Person or "group" (within the meaning of rules 13d-3 or 13d-5 under the Exchange Act (as in effect on the Effective Date)) shall (A) have acquired beneficial ownership of 25% or more on a fully diluted basis of the voting and/or economic interest in the capital stock of the REIT or (B) have obtained power (whether or not exercised) to elect a majority of the trustees of the REIT, (ii) the Board of Trustees of the REIT shall cease to consist of a majority of Continuing Trustees or (iii) the failure of the REIT or a wholly-owned Subsidiary of the REIT to be the sole general partner of the Borrower. "Claims" shall have the meaning provided in the definition of "Environmental Claims." "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated thereunder. Section references to the Code are to the Code, as in effect at the date of this Agreement, and to any subsequent provision of the Code, amendatory thereof, supplemental thereto or substituted therefor. "Collateral" shall mean all property (whether real or personal) with respect to which any security interests have been granted (or purported to be granted) pursuant to any Security Document, including, without limitation, all Pledge Agreement Collateral, all Pledge and Security Agreement Collateral, all Security Agreement Collateral and all Borrowing Base Collateral. "Collateral Agent" shall mean the Administrative Agent acting as collateral agent for the Secured Creditors pursuant to the Security Documents. "Collateral Assignment" shall mean each Assignment of Mortgage and Pledge Agreement required to be delivered pursuant to the terms of this Agreement, substantially in the form of Exhibit K annexed hereto. 85 "Commitment" shall mean, for each Bank, the amount set forth opposite such Bank's name in Schedule I directly below the column entitled "Commitment," as same may be (x) reduced from time to time pursuant to Sections 2.02, 2.03 and/or 9 or (y) adjusted from time to time as a result of assignments to or from such Bank pursuant to Section 12.04(b). "Completion Certificate" shall mean a certificate of an architect or engineer substantially in the form of Exhibit R, delivered to the Administrative Agent pursuant to Section 7.16(f). "CON" shall have the meaning set forth in Section 6.14(b). "Condemnation Proceeds" shall mean all compensation, awards, damages, rights of action and proceeds awarded to any Credit Party or any of its Subsidiaries by reason of any Taking at a Borrowing Base Property. "Consolidated EBIT" shall mean, for any period, Consolidated Net Income for such period before Consolidated Interest Expense and provision for taxes for such period and without giving effect (x) to any extraordinary gains or losses and (y) to any gains or losses from sales of assets other than from sales of inventory sold in the ordinary course of business. "Consolidated EBITDA" shall mean, for any period, Consolidated EBIT for such period, adjusted by adding thereto the amount of all amortization of intangibles and depreciation that were deducted in arriving at Consolidated EBIT for such period. "Consolidated Indebtedness" shall mean, at any time, the principal amount of all Indebtedness of the REIT and its Subsidiaries at such time as determined on a consolidated basis. "Consolidated Interest Expense" shall mean, for any period, the total consolidated interest expense of the REIT and its Subsidiaries for such period (calculated without regard to any limitations on the payment thereof) plus, without duplication, that portion of Capitalized Lease Obligations of the REIT and its Subsidiaries representing the interest factor for such period, provided that the amortization of deferred financing, legal and accounting costs with respect to the IPO shall be excluded from Consolidated Interest Expense to the extent same would otherwise have been included therein. "Consolidated Net Income" shall mean, for any period, the net income (or loss) of the REIT and its Subsidiaries for such period, determined on a consolidated basis (after any deduction for minority interests), provided that in determining Consolidated Net Income, (i) the net income of any other Person which is not a Subsidiary of the REIT or is accounted for by the REIT by the equity method of accounting shall be included only to the extent of the payment of cash dividends or distributions by such other Person to the REIT or a Subsidiary thereof during such period, (ii) the net income (or loss) of any other Person acquired by such specified Person or a Subsidiary of such Person in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iii) the net income of any Subsidiary of the Borrower shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that 86 Subsidiary of its income is not at the time permitted by operation of the terms of its charter or any agreement, instrument or law applicable to such Subsidiary. "Contingent Obligation" shall mean, as to any Person, any obligation of such Person as a result of such Person being a general partner of the other Person, unless the underlying obligation is expressly made non-recourse as to such general partner, and any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (x) for the purchase or payment of any such primary obligation or (y) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Continuing Trustees" shall mean the Trustees of the REIT on the Effective Date and each other Trustee, if such other Trustee's nomination for election to the Board of Trustees of the REIT is recommended by a majority of the then Continuing Trustees or is recommended by a committee of the Board of Trustees a majority of which is composed of the then Continuing Trustees. "Control Agreements" shall mean Control Agreements in the form of Annex D to the Pledge and Security Agreement. "Credit Documents" shall mean this Agreement and, after the execution and delivery thereof pursuant to the terms of this Agreement, each Note, each Security Document and each Guaranty. "Credit Parties" shall mean the REIT, the Borrower and each Subsidiary Guarantor. "Creditors" shall mean and include the Administrative Agent, the Collateral Agent, the Issuing Bank, each Bank and each Person (other than any Credit Party) party to an Interest Rate Protection Agreement or Other Hedging Agreement to the extent such Person constitutes a Secured Creditor under the Security Documents. "DB" shall mean Deutsche Bank AG, New York Branch. 87 "Debt Agreements" shall have the meaning provided in Section 4.05. "Default" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Defaulting Bank" shall mean any Bank with respect to which a Bank Default is in effect. "Determination Date" shall have the meaning provided in the definition of "Pro Forma Basis." "Dividends" with respect to any Person shall mean that such Person has declared or paid a dividend or returned any equity capital to its shareholders, partners or members or authorized or made any other distribution, payment or delivery of property (other than common stock, common shares of beneficial interest or other common equity interests of such Person) or cash to its shareholders, partners or members as such, or redeemed, retired, purchased or otherwise acquired, directly or indirectly, for a consideration any shares of any class of its capital stock, shares of beneficial interest or any other equity interests outstanding on or after the Effective Date (or any options or warrants issued by such Person with respect to its capital stock, shares of beneficial interest or other equity interest), or set aside any funds for any of the foregoing purposes, or shall have permitted any of its Subsidiaries to purchase or otherwise acquire for consideration any shares of any class of the capital stock, shares of beneficial interest or any partnership or member interests of such Person outstanding on or after the Effective Date (or any options or warrants issued by such Person with respect to its capital stock, shares of beneficial interest or other equity interest). Without limiting the foregoing, "Dividends" with respect to any Person shall also include all payments made or required to be made by such Person with respect to any share appreciation rights, plans, equity incentive or achievement plans or any similar plans or setting aside of any funds for the foregoing purposes. "DOL" shall mean the U.S. Department of Labor. "Dollars" and the sign "$" shall each mean freely transferable lawful money of the United States. "Draw Fee" shall have the meaning provided in Section 2.01. "Drawing" shall have the meaning provided under Section 1.17(b). "Effective Date" shall have the meaning provided in Section 12.10. "Eligible Guarantor" shall mean Genesis, Multicare, Senior LifeChoice or another Person approved as such by the Required Banks. "Eligible Transferee" shall mean and include a commercial bank, financial institution, any fund that invests in bank loans or any other "accredited investor" (as defined in Regulation D under the Securities Act). 88 "Engineering Report" shall have the meaning provided in Section 7.11(viii). "Environmental Claims" shall mean any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of non-compliance or violation, investigations or proceedings relating in any way to any Environmental Law (hereafter "Claims") or any permit issued under any such law, including, without limitation, (a) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and (b) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury to health, safety or the environment. "Environmental Law" shall mean any applicable Federal, state, foreign or local statute, law, rule, regulation, ordinance, code, binding and enforceable guideline, binding and enforceable written policy and rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment relating to the environment, Hazardous Materials or employee health or safety relating to Hazardous Materials, including, without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33 U.S.CA. ss. 2601 et seq.; the Clean Air Act, 42 U.S.CA. ss. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.CA. ss. 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.CA. ss. 2701 et seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42 U.S.CA. ss. 11001 et seq.; the Hazardous Material Transportation Act, 49 U.S.CA. ss. 1801 et seq.; the Occupational Safety and Health Act, 29 U.S.CA. ss. 651 et seq. (to the extent it regulates occupational exposure to Hazardous Materials); and any state and local or foreign counterparts or equivalents, in each case as amended from time to time. "Environmental Report" shall have the meaning provided in Section 7.11(vii). "Equity Value" shall mean, as of any calculation date, (x) the current share price of common stock in the REIT, multiplied by (y) the number of shares of common stock in the REIT then outstanding. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. "ERISA Affiliate" shall mean each person (as defined in Section 3(9) of ERISA) which together with the REIT or any Subsidiary of the REIT would be deemed to be a "single employer" within the meaning of Section 414(b),(c), (m) or (o) of the Code. "Eurodollar Loan" shall mean each Loan designated as such by the Borrower at the time of the incurrence thereof or conversion thereto. 89 "Eurodollar Rate" shall mean (i) the rate determined by the Administrative Agent to be the arithmetic mean (rounded to the nearest 1/100 of 1%) of the offered rates for deposits in Dollars for the applicable Interest Period (or the period closest to such applicable Interest Period) which appear on Telerate Screen 3740 or 3750 with maturities comparable to such Interest Period, determined as of 10:00 A.M. (London time) on the date which is two Business Days prior to the commencement of such Interest Period divided (and rounded upward to the next whole multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D). "Event of Default" shall have the meaning provided in Section 9. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Excluded Subsidiaries" shall mean (i) ET Sub-Riverview Ridge Limited Partnership, L.L.P., (ii) ET Sub-Highgate, L.P., (iii) ET Sub-Woodbridge, L.P., (iv) ET Sub-Belvedere Limited Partnership, L.L.P., (v) ET Sub-Lacey I, L.L.C., (vi) ET Sub-Willowbrook Limited Partnership, L.L.P., and (vii) ET Sub-Phillipsburg I Limited Partnership, L.L.P. "Excusable Delay" shall mean a delay due to acts of God, governmental restrictions, enemy actions, war, civil commotion, fire, casualty, strikes, shortages of supplies or labor, work stoppages or other causes beyond the reasonable control of the REIT, any of its Subsidiaries or any Operating Lessee or Manager, but lack of funds shall not be deemed a cause beyond such reasonable control. "Existing Indebtedness" shall have the meaning provided in Section 6.22. "Extension Request" shall have the meaning provided in Section 2.03(b). "Federal Funds Rate" shall mean, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Administrative Agent on such day on such transactions as determined by the Administrative Agent. "Fees" shall mean all amounts payable pursuant to or referred to in Section 2.01. 90 "FF&E" shall mean, with respect to any Property, any furniture, fixtures and equipment, including any beds, lamps, bedding, tables, chairs, sofas, curtains, carpeting, smoke detectors, mini bars, paintings, decorations, televisions, telephones, radios, desks, dressers, towels, bathroom equipment, heating, cooling, lighting, laundry, incinerating, loading, swimming pool, landscaping, garage and power equipment, machinery, engines, vehicles, fire prevention, refrigerating, ventilating and communications apparatus, carts, dollies, elevators, escalators, kitchen appliances, restaurant equipment, computers, reservation systems, software, cash registers, switchboards, cleaning equipment or other items of furniture, fixtures and equipment typically used in senior living care facilities (including furniture, fixtures and equipment used in patient rooms, lobbies and common areas (other than those items of furniture, fixtures and equipment owned by the occupant or tenant in any such room)). "GAAP" shall have the meaning provided in Section 12.07(a). "GACC" shall mean German American Capital Corporation in its individual capacity. "Genesis" shall mean Genesis Health Ventures, Inc. "Governmental Authority" shall mean any court, board, agency, commission, office or authority of any nature whatsoever for any governmental unit (federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence. "Guaranteed Obligations" shall mean the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of the principal of, and interest on each Note issued by, and all Loans made to, the Borrower under this Agreement and all reimbursement obligations and Unpaid Drawings with respect to Letters of Credit, together with all the other obligations and liabilities (including, without limitation, indemnities, expenses, fees and interest thereon) of the Borrower to the Creditors now existing or hereafter incurred under, arising out of or in connection with this Agreement or any other Credit Document and the due performance and compliance with all the terms, conditions and agreements contained in the Credit Documents by the Borrower. "Guarantor" shall mean the REIT and each Subsidiary Guarantor. "Guaranty" shall mean the Parent Guaranty and the Subsidiaries Guaranty. "Hazardous Materials" shall mean (a) any petrochemical or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; and (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "restricted hazardous materials," "extremely hazardous wastes," "restrictive hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or "pollutants," or words of similar meaning and regulatory effect under any applicable Environmental Law. 91 "Improvements" shall mean all buildings, structures, fixtures, tenant improvements and other improvements of every kind and description now or hereafter located in or on or attached to any Real Property, including all building materials, water, sanitary and storm sewers, drainage, electricity, steam, gas, telephone and other utility facilities, parking areas, roads, driveways, walks and other site improvements; and all additions and betterments thereto and all renewals, substitutions and replacements thereof. "Indebtedness" shall mean, as to any Person, without duplication, (i) all indebtedness (including principal, interest, fees and charges) of such Person for borrowed money or for the deferred purchase price of property or services, (ii) the maximum amount available to be drawn under all letters of credit issued for the account of such Person and all unpaid drawings in respect of such letters of credit, (iii) all Indebtedness of the types described in clause (i), (ii), (iv), (v), (vi) or (vii) of this definition secured by any Lien on any property owned by such Person, whether or not such Indebtedness has been assumed by such Person (but if not assumed, then the amount of such Indebtedness shall be deemed to be the lesser of (x) the fair market value of the property of such Person subject to such Lien and (y) the amount of such Indebtedness (including principal, interest, fees and charges)) (iv) the aggregate amount required to be capitalized under leases under which such Person is the lessee, (v) all obligations of such Person to pay a specified purchase price for goods or services, whether or not delivered or accepted, i.e., take-or-pay and similar obligations, (vi) all Contingent Obligations of such Person, and (vii) all obligations under any Interest Rate Protection Agreement or Other Hedging Agreement or under any similar type of agreement or arrangement. "Information Package" shall mean, with respect to each Borrowing Base Property and each Borrowing Base Pledged Mortgage Loan (and the related Mortgage Loan Property), an information package consisting of (i) a description of such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan (and the related Mortgage Loan Property), (ii) if available, management's discussion and analysis of such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan (and the related Mortgage Loan Property), and discussing any improvements or changes to be made with respect thereto, (iii) if and to the extent the relevant Borrowing Base Property or Mortgage Loan Property securing a Borrowing Base Pledged Mortgage Loan has been operational, historical financial information (which may be unaudited) for such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan (and the related Mortgage Loan Property) for at least the two full fiscal years most recently ended and the latest 12-month period ended with the last day of the fiscal quarter last ended (or such shorter period during which the related Property or Mortgage Loan Property has been operational), (iv) projections for such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan (and the related Mortgage Loan Property) for the succeeding four years, (v) any investment memorandum prepared or used in connection with the acquisition of such Borrowing Base Property or the provision or purchase of such Borrowing Base Pledged Mortgage Loan and (vi) any other information which the Borrower determines should be furnished so that the Information Package for such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan is true and correct in all material respects and is not incomplete by omitting to state any fact necessary to make the information (taken as a whole) contained therein not misleading in any material respect. 92 "Initial Borrowing Base Pledged Mortgage Loan" shall mean each Borrowing Base Pledged Mortgage Loan added to the Borrowing Base on the Effective Date and identified as such on Schedule VIII. "Initial Borrowing Base Property" shall mean each Borrowing Base Property added to the Borrowing Base on the Effective Date and identified as such on Schedule III. "Insurance Proceeds" shall mean all insurance proceeds, damages, claims and rights of action and the right thereto under any insurance policies relating to any portion of any Borrowing Base Property. "Intercompany Note" shall mean a promissory note in the form of Exhibit Q (appropriately completed). "Interest Determination Date" shall mean, with respect to any Eurodollar Loan, the second Business Day prior to the commencement of any Interest Period relating to such Eurodollar Loan. "Interest Period" shall have the meaning provided in Section 1.09. "Interest Rate Protection Agreement" shall mean any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedging agreement, interest rate floor agreement or other similar agreement or arrangement provided by a Bank. "Investment" shall have the meaning provided in Section 8.05. "IPO" shall mean the initial public offering of ElderTrust, to be consummated substantially on the terms described in the Registration Statement, and otherwise in a manner reasonably satisfactory to the Administrative Agent. "Issuing Bank" shall have the meaning provided in the first paragraph of this Agreement. "L/C Supportable Obligations" shall mean (i) obligations of the REIT, the Borrower or any Subsidiary incurred in the ordinary course of business with respect to insurance obligations and workers' compensation, surety bonds and other similar statutory obligations, (ii) earnest money or performance obligations in respect of acquisitions permitted pursuant to the terms of this Agreement and (iii) such other obligations of the REIT, the Borrower or any Subsidiary as are permitted to exist pursuant to the terms of this Agreement. "Leasehold" of any Person shall mean all of the right, title and interest of such Person as lessee or licensee in, to and under any lease or license of land, improvements and/or fixtures. "Legal Requirements" shall mean, with respect to each Property and each Mortgage Loan Property, all federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, 93 ordinances, judgments, decrees and injunctions of Governmental Authorities (including, without limitation, Environmental Laws) affecting such Property or Mortgage Loan Property (or any part thereof) or the construction, use, alteration or operation thereof, whether now or hereafter enacted and in force, and all permits, licenses, authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or known to the REIT or the Borrower, affecting such Property or Mortgage Loan Property (or any part thereof), including, without limitation, any such covenants, agreements, restrictions and encumbrances which may (i) require repairs, modifications or alterations in or to such Property or Mortgage Loan Property (or any part thereof), or (ii) in any material way limit the existing use and enjoyment thereof. "Letter of Credit" shall have the meaning provided in Section 1.13. "Letter of Credit Outstandings" shall mean, at any time, the sum of the Stated Amount of all Outstanding Letters of Credit and the amount of all Unpaid Drawings. "Letter of Credit Request" shall have the meaning provided in Section 1.15. "Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other) or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the UCC or any other similar recording or notice statute, and any lease having substantially the same effect as any of the foregoing). "Limited Liability Company Interest" shall have the meaning provided in the Pledge and Security Agreement. "Loan" shall have the meaning provided in Section 1.01. "Loan Percentage" of any Bank at any time shall mean a fraction (expressed as a percentage) the numerator of which is the Commitment of such Bank or such time and the denominator of which is the Total Commitment at such time, provided that if the Loan Percentage of any Bank is to be determined after the Total Commitment has been terminated, then the Loan Percentages of the Banks shall be determined immediately prior (and without giving effect to) such termination. "Management Agreement" shall mean (i) in the case of a Borrowing Base Property that is subject to an Operating Lease, the management agreement (if any) between the Operating Lessee and a property manager, which management agreement and manager shall be satisfactory to the Administrative Agent, or (ii) in the case of a Borrowing Base Property that is not subject to an Operating Lease, the management agreement between the Borrower or the Subsidiary Guarantor owning such Borrowing Base Property and a property manager, which management agreement and manager shall be satisfactory to the Administrative Agent. Except for the Specified Management Agreements, each Management Agreement in the nature of that described in clause (i) of the preceding sentence shall by its terms terminate upon any termination or 94 expiration of the related Operating Lease, and each Management Agreement in the nature of that described in clause (ii) of the preceding sentence shall be expressly subordinate to the Mortgage encumbering the related Borrowing Base Property. "Manager" shall mean a property manager under a Management Agreement. "Margin Stock" shall have the meaning provided in Regulation U. "Market Value" shall mean, with respect to any Borrowing Base Collateral at any time, the Administrative Agent's estimate of the current market value of such Borrowing Base Collateral based upon such method of analysis as the Administrative Agent shall determine to be reasonable in its sole discretion; provided, however, that (i) with respect to a Borrowing Base Property, the Market Value thereof shall not be deemed at any time to exceed the lesser of (x) the Appraised Value of such Borrowing Base Property and (y) the purchase price (valued in Dollars) paid by the applicable Credit Party to acquire such Borrowing Base Property, (ii) with respect to a Borrowing Base Pledged Mortgage Loan that is not a construction loan, the Market Value thereof shall not at any time be deemed to exceed the lesser of (x) the Appraised Value of the Mortgage Loan Property securing such Borrowing Base Pledged Mortgage Loan and (y) the outstanding principal balance of such Borrowing Base Pledged Mortgage Loan, and (iii) with respect to a Borrowing Base Pledged Mortgage Loan that is a construction loan, the Market Value thereof shall not at any time be deemed to exceed the maximum principal balance of such Borrowing Base Pledged Mortgage Loan. Whenever a Market Value determination is required hereunder, the Borrower and its Subsidiaries shall cooperate with the Administrative Agent in connection with its determination of such Market Value, including providing all information and documentation relating thereto reasonably requested by the Administrative Agent. "Maturity Date" shall have the meaning provided in Section 2.03(b). "Minimum Borrowing Amount" shall mean $2,000,000. "Moody's" shall mean Moody's Investors Service, Inc. "Mortgage" shall mean each mortgage, deed of trust or deed to secure debt required to be delivered pursuant to the terms of this Agreement, together with any assignment of leases and rents to be executed in connection therewith, substantially in the form of Exhibit I annexed hereto. "Mortgage Loan" shall mean each loan provided or purchased by the Borrower or one of its Subsidiaries that is secured by a senior living care property or medical office building (including the furniture, fixtures and equipment thereon, except for any furniture, fixtures and equipment which are owned by individual tenants). "Mortgage Loan Property" shall mean the senior living care property or medical office building (including the furniture, fixtures and equipment thereon, except for any furniture, fixtures and equipment which are owned by individual tenants) securing a Mortgage Loan. 95 "Mortgage Policy" shall mean each mortgage title insurance policy (and all endorsements thereto) required to be delivered pursuant to this Agreement. "Multicare" shall mean The Multicare Companies, Inc. "Multiemployer Plan" shall mean a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA subject to Title IV of ERISA. "Net Insurance/Condemnation Proceeds" shall mean all Insurance proceeds on account of any Casualty Event at any Borrowing Base Property or all Condemnation Proceeds in respect of any Taking of any Borrowing Base Property, minus the reasonable cost, if any, of recovering such proceeds and of paying out such proceeds, including reasonable attorneys' fees and costs allocable to inspecting the Work and the plans and specifications therefor. "Non-Defaulting Bank" shall mean and include each Bank other than a Defaulting Bank. "Note" shall have the meaning provided in Section 1.05(a). "Notice of Borrowing" shall have the meaning provided in Section 1.03(a). "Notice of Conversion" shall have the meaning provided in Section 1.06. "Notice of Renovation/Restoration" shall mean a notice, substantially in the form of Exhibit S, delivered to the Administrative Agent pursuant to Sections 7.16(a) and (c). "Notice Office" shall mean the office of the Administrative Agent located at 31 West 52nd Street, New York, New York 10019, Attention: Allison Michaels, or such other office as the Administrative Agent may hereafter designate in writing as such to the other parties hereto. "Obligations" shall mean all amounts owing to the Administrative Agent, the Collateral Agent, the Issuing Bank or any Bank pursuant to the terms of this Agreement or any other Credit Document. "Operating Lease" shall mean a lease or sublease relating to all or substantially all of any Borrowing Base Property between the Borrower or any Subsidiary Guarantor, as lessor, and an Operating Lessee, as lessee, which Operating Lease shall be substantially in the form approved by, or otherwise satisfactory to, the Administrative Agent. "Operating Lessee" shall mean a lessee under an Operating Lease satisfactory to the Administrative Agent. "Original Lender" shall have the meaning provided in Section 7.18. 96 "Other Hedging Agreements" shall mean any foreign exchange contracts, currency swap agreements, commodity agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values and that are provided by a Bank. "Parent Guarantor" shall mean the REIT. "Parent Guaranty" shall mean the guaranty of the Parent Guarantor pursuant to Section 13. "Participant" shall have the meaning provided in Section 1.16(a). "Partnership Interest" shall have the meaning provided in the Pledge and Security Agreement. "Payment Office" shall mean the office of the Administrative Agent located at 31 West 52nd Street, New York, New York 10019, or such other office as the Administrative Agent may hereafter designate in writing as such to the other parties hereto. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto. "Permitted Encumbrances" shall mean, with respect to any Borrowing Base Property, such exceptions to title as are set forth in the Mortgage Policy or title commitment delivered with respect thereto, all of which exceptions must be acceptable to the Administrative Agent in its reasonable discretion. "Permitted Liens" shall have the meaning provided in Section 8.01. "Permitted Non-Recourse Indebtedness" shall mean, with respect to any Specified Subsidiary, Indebtedness incurred by such Specified Subsidiary pursuant to Section 8.04(viii) to (x) finance the purchase of (or assumed at the time of the purchase of) or to finance the renovation of a Property acquired pursuant to Section 8.02(ix) or (y) to finance the provision or purchase of a Mortgage Loan pursuant to Section 8.02(ix), which Indebtedness (i) shall be secured only by such Property or Mortgage Loan, as the case may be, (ii) shall be made expressly non-recourse to the REIT, the Borrower and its other Subsidiaries and (iii) shall have (A) a maturity date of at least two years beyond the Maturity Date, (B) an amortization schedule, if any, based upon a schedule of no less than 20 years and (C) a market rate of interest. "Person" shall mean any individual, partnership, limited liability company, joint venture, firm, corporation, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" shall mean any pension plan as defined in Section 3(2) of ERISA, which is maintained or contributed to by (or to which there is an obligation to contribute of) the REIT or any of its Subsidiaries or ERISA Affiliates, and each such plan for the five-year period immediately following the latest date on which the REIT or any of its Subsidiaries or ERISA Affiliates maintained, contributed to or had an obligation to contribute to such plan. 97 "Pledge Agreement" shall have the meaning provided in Section 4.06. "Pledge Agreement Collateral" shall mean all "Collateral" as defined in the Pledge Agreement. "Pledge and Security Agreement" shall have the meaning provided in Section 4.07. "Pledge and Security Agreement Collateral" shall mean all "Collateral" as defined in the Pledge and Security Agreement. "Pledged Entity Notices" shall mean Partnership/Limited Liability Company Notices in the form of Annex C to the Pledge and Security Agreement. "Pledged Limited Liability Company" shall have the meaning provided in the Pledge and Security Agreement. "Pledged Mortgage Loan Documents" shall mean and include all documents evidencing and securing a Borrowing Base Pledged Mortgage Loan, including, without limitation, (i) the mortgage note, (ii) the mortgage, deed of trust, deed to secure debt or other similar instrument, (iii) the assignment of leases, if any, (iv) the loan agreement, if any, (v) the mortgagee title insurance policy relating thereto, and (v) the related Borrowing Base Guaranty. "Pledged Partnership Entity" shall have the meaning provided in the Pledge and Security Agreement. "Pledged Securities" shall have the meaning provided in the Pledge Agreement. "Pledged Stock" shall have the meaning provided in the Pledge Agreement. "Prime Lending Rate" shall mean the rate which DB announces from time to time as its prime lending rate, the Prime Lending Rate to change when and as such prime lending rate changes. The Prime Lending Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. DB may make commercial loans or other loans at rates of interest at, above or below the Prime Lending Rate. "Pro Forma Basis" shall mean, with respect to any incurrence of Indebtedness or acquisition of a Property or a Mortgage Loan (or the equity interest of the Person or Persons owning such Property or Mortgage Loan), the calculation of the consolidated results of the Borrower and its Subsidiaries otherwise determined in accordance with this Agreement as if the respective Indebtedness or acquisition (and all other Indebtedness incurred or other such acquisition effected during the respective Calculation Period or thereafter and on or prior to the date of determination) (each such date, a "Determination Date") had been effected on the first day of the respective Calculation Period; provided that all such calculations shall take into account the following assumptions: 98 (i) pro forma effect shall be given to (1) any Indebtedness incurred subsequent to the end of the Calculation Period and prior to the date of determination, (2) any Indebtedness incurred during such period to the extent such Indebtedness is outstanding at the date of determination and (3) any Indebtedness to be incurred on the date of determination, in each case as if such Indebtedness had been incurred on the first day of such Calculation Period and after giving effect to the application of the proceeds thereof; (ii) with respect to each Property or Mortgage Loan acquired within one year before the respective Determination Date, and in addition to any Indebtedness actually incurred and required to be included pursuant to the other clauses of this definition, it shall be assumed (unless the respective Property or Mortgage Loan has been sold) either (A) that Loans in an amount equal to the remainder of (x) the aggregate amount of costs specified with respect to such Property or Mortgage Loan in the respective officer's certificate delivered pursuant to Section 7.11(xiii) (including as said Section is incorporated by reference in Section 4.13) less (y) the amount of Loans theretofore actually incurred for such purposes on and after the date of the respective acquisition of such Property or Mortgage Loan, had also been incurred and were outstanding from the first day of the respective Calculation Period or (ii) that Capital Expenditures had been made under Section 8.07 in the amount of Loans referred to in the preceding clause (i) during such period (and that such Capital Expenditures were not funded with Indebtedness), with the Borrower to indicate which assumption it has used in making such calculations; (iii) interest expense attributable to interest on any Indebtedness (whether existing or being incurred) bearing a floating interest rate shall be computed as if the rate in effect on the date of computation (taking into account any Interest Rate Protection Agreement applicable to such Indebtedness if such Interest Rate Protection Agreement has a remaining term in excess of 12 months) had been the applicable rate for the entire period; (iv) except as provided in the preceding clause (ii), there shall be excluded from interest expense any interest expense related to any amount of Indebtedness that was outstanding during such Calculation Period or thereafter but that is not outstanding or is to be permanently repaid on the date of determination; and (v) pro forma effect shall be given to all sales and acquisitions of Properties and Mortgage Loans, including the capitalization of the Borrower with the initial Properties and Mortgage Loans (by excluding or including, as the case may be, the historical financial results for the respective Properties and Mortgage Loans) that occur during such Calculation Period or thereafter and on or prior to the Determination Date (including any Indebtedness assumed or acquired in connection therewith) as if they had occurred on the first day of such Calculation Period. 99 "Projections" shall have the meaning provided in Section 6.05(d). "Property" shall mean each senior living care property or medical office building owned or ground leased by the Borrower or any of its Subsidiaries (including the furniture, fixtures and equipment thereon, except for any furniture, fixtures and equipment which are owned by individual tenants). "Qualified Mortgage Loan" shall mean any Mortgage Loan with respect to which all of the requirements set forth in Sections 7.11 and 8.02(viii) have been satisfied (or waived by the Required Banks) in accordance with the provisions of such Sections. "Qualified Property" shall mean any Property with respect to which all of the requirements set forth in Sections 7.11 and 8.02(viii) have been satisfied (or waived by the Required Banks) in accordance with the provisions of such Sections. "RCRA" shall mean the Resource Conservation and Recovery Act, as the same may be amended from time to time, 42 U.S.C.ss. 6901 et seq. "Real Property" of any Person shall mean all the right, title and interest of such Person in and to land, improvements and fixtures, including Leaseholds. "Register" shall have the meaning provided in Section 12.16. "Registration Statement" shall mean the Form S-11 Registration Statement for the IPO filed with the SEC on October 8, 1997, as amended. "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements. "Regulation G" shall mean Regulation G of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Regulation T" shall mean Regulation T of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Regulation U" shall mean Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Regulation X" shall mean Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "REIT" shall have the meaning provided in the first paragraph of this Agreement. 100 "Release" shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing or migration into the environment. "Release Date" shall mean (i) with respect to a Borrowing Base Property, (w) the date of any Special Mandatory Repayment Event with respect thereto, (x) the date of any refinancing thereof or the date of any sale or other disposition thereof, or (y) the date of any Casualty Event or Taking with respect thereto if Restoration thereof is not permitted pursuant to the Credit Documents, and (ii) with respect to a Borrowing Base Pledged Mortgage Loan, (w) the date of any Special Mandatory Repayment Event with respect thereto, (x) the date of any refinancing thereof or the date of any sale or other disposition thereof, (y) the date of the occurrence of any event of default under and as defined or described in the Pledged Mortgage Loan Documents relating thereto, or (z) the date of any Casualty Event or Taking with respect to the related Mortgage Loan Property. "Release Price" shall mean, with respect to any Borrowing Base Property or any Borrowing Base Pledged Mortgage Loan, as of the related Release Date, the amount that is the greater of: (i) an amount equal to the Borrowing Base Amount with respect to such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan; and (ii) the amount necessary to ensure that the aggregate principal amount of Loans outstanding shall not exceed the Borrowing Base then in effect, after giving effect to the reduction in the Borrowing Base as a result of the release from the Borrowing Base of such Borrowing Base Property or Borrowing Base Pledged Mortgage Loan. "Reportable Event" shall mean an event described in Section 4043(c) of ERISA with respect to a Single Employer Plan other than those events as to which the 30-day notice period is waived under subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043. "Requested Extension Effective Date" shall have the meaning provided in Section 2.03(b)(i). "Required Banks" shall mean Non-Defaulting Banks the sum of whose Commitments (or after the termination thereof, outstanding Loans and Letter of Credit Outstandings) represent an amount greater than 50% of the Total Commitment (less the Commitments of Defaulting Banks) (or after the termination thereof, the then total outstanding Loans of Non-Defaulting Banks and the aggregate Loan Percentages of all Non-Defaulting Banks of the total Letter of Credit Outstandings at such time). "Restoration" shall mean the repair, restoration (including demolition), replacement and rebuilding of all or any portion of a Property (or the Improvement thereof) following the destruction, damage, loss or Taking thereof. The term "Restore" used as a verb has a corresponding meaning. "Returns" shall have the meaning provided in Section 6.09. 101 "S&P" shall mean Standard & Poor's Ratings Services. "SEC" shall have the meaning provided in Section 7.01(h). "Section 3.04(b)(ii) Certificate" shall have the meaning provided in Section 3.04(b). "Secured Creditors" shall have the meaning provided in the respective Security Documents. "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Security Agreement" shall have the meaning provided in Section 4.07. "Security Agreement Collateral" shall mean all "Collateral" as defined in the Security Agreement. "Security Documents" shall mean the Pledge Agreement, the Pledge and Security Agreement, the Security Agreement, each of the Collateral Assignments and each of the Mortgages. "Senior LifeChoice" shall mean Senior LifeChoice, L.L.C. "Single Employer Plan" shall have the meaning set forth in Section 6.10. "Special Mandatory Repayment Event" shall mean the occurrence of any of the following in respect of a Borrowing Base Property or a Borrowing Base Pledged Mortgage Loan (or the Mortgaged Property securing a Borrowing Base Pledged Mortgage Loan): (i) except as otherwise permitted pursuant to Section 7.13, any Management Agreement or any material provision thereof shall cease to be in full force and effect or any party thereto shall deny or disaffirm its material obligations thereunder or shall default in the due performance or observance of any material term, covenant or agreement on its part to be performed or observed pursuant thereto after the expiration of any applicable cure period; (ii) except as otherwise permitted pursuant to Section 7.13, any Operating Lease or any material provision thereof shall cease to be in full force and effect or any party thereto shall deny or disaffirm its material obligations thereunder or shall default in the due performance or observance of any material term, covenant or agreement on its part to be performed or observed pursuant thereto after the expiration of any applicable cure period; (iii) any ground lease with respect to (x) any Borrowing Base Property which is a Leasehold or (y) any Mortgage Loan Property which is a Leasehold and which secures a Borrowing Base Pledged Mortgage Loan, shall cease to be in full force and effect or any party thereto shall deny or disaffirm any of its material obligations thereunder or shall default in the due performance or observance of any material term, covenant or agreement on its part to be performed or observed pursuant thereto after the expiration of any applicable cure period; (iv) any Borrowing Base Guaranty that existed on the Addition Date of, and related to, a Borrowing Base Property or a Borrowing Base Pledged Mortgage Loan shall cease to be in full force or effect as to the 102 Eligible Guarantor thereunder, or any Eligible Guarantor or Person acting by or on behalf of such Eligible Guarantor shall deny or disaffirm such Eligible Guarantor's obligations under the relevant Borrowing Base Guaranty, or any Eligible Guarantor shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to the relevant Borrowing Base Guaranty and such default shall continue beyond any grace period specifically applicable thereto pursuant to the terms of such Borrowing Base Guaranty; or (v) any breach by the REIT or any of its Subsidiaries of the provisions of Section .7.13. "Specified Loans" shall mean (i) an unsecured loan made by the REIT to Edward B. Romanov, Jr. in the amount of the full purchase price of 200,000 shares of beneficial interest in the REIT at a purchase price per share equal to the IPO purchase price for the purpose of purchasing such shares; and (ii) a personal unsecured loan made by the REIT to D. Lee McCreary, Jr. in the amount of not more than $25,000. "Specified Management Agreements" shall mean the Management Agreements relating to the Properties known as (i) Professional Office Building I, (ii) the DCMH Building, (iii) Pennsburg Manor, and (iv) Harston Hall. "Specified Mortgage Loan" shall mean the Initial Borrowing Base Pledged Mortgage Loan encumbering the Mortgaged Property known as Sanatoga. "Specified Subsidiary" shall mean any Subsidiary of the Borrower (other than any Subsidiary Guarantor) so long as such Subsidiary has no material assets other than the Property or Mortgage Loan to be financed with Permitted Non-Recourse Indebtedness incurred (or assumed) pursuant to Section 8.04(viii). "Stated Amount" of each Letter of Credit shall mean, at any time, the maximum amount available to be drawn thereunder (in each case determined without regard to whether any conditions to drawing can then be met). "Subsidiary" shall mean, as to any Person, (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person and/or one or more Subsidiaries of such Person and (ii) any partnership, limited liability company, association, joint venture or other entity in which such Person and/or one or more Subsidiaries of such Person has more than a 50% equity interest at the time. "Subsidiary Guarantor" shall mean each Subsidiary of the Borrower that owns or leases a Borrowing Base Property and/or owns directly or indirectly an equity interest in a Subsidiary that owns or leases a Borrowing Base Property. "Subsidiaries Guaranty" shall have the meaning provided in Section 4.08. 103 "Supermajority Banks" shall mean those Non-Defaulting Banks which would constitute the Required Banks under, and as defined in, this Agreement if the percentage "50%" contained therein were changed to "66-2/3%." "Taking" shall mean the taking or appropriation (including by deed in lieu of condemnation or by voluntary sale or transfer under threat of condemnation or while legal proceedings for condemnation are pending) of any Borrowing Base Property or any Mortgage Loan Property securing a Borrowing Base Pledged Mortgage Loan, or, in either case, any part thereof or interest therein, for public or quasi-public use under the power of eminent domain, by reason of any public improvement or condemnation proceeding, or in any other manner or any damage or injury or diminution in value through condemnation, inverse condemnation or other exercise of the power of eminent domain. The term "Taken" used as a verb has a correlative meaning. "Tangible Net Worth" shall mean, as of any date of determination, the consolidated net worth of the REIT and its Subsidiaries at such time, determined in accordance with GAAP, less the amount of all intangible items, including, without limitation, goodwill, franchises, licenses, patents, trade marks, trade names, copyrights, service marks, brand names, write-ups of assets and any unallocated excess costs of investments in subsidiaries over equity in underlying net assets at dates of acquisition. "Taxes" shall have the meaning provided in Section 3.04(a). "Test Period" shall mean the four consecutive fiscal quarters of the REIT then last ended, in each case taken as one accounting period, provided that for purposes of making any financial covenant calculation which includes periods prior to the Effective Date, such calculation shall be done on a Pro Forma Basis, even though such period (or portion thereof) had occurred prior to the Effective Date. "Total Commitment" shall mean, at any time, the sum of the Commitments of each of the Banks. "Total Unutilized Commitment" shall mean, at any time, an amount equal to the remainder of (x) the Total Commitment then in effect less (y) the aggregate principal amount of Loans outstanding plus the then aggregate amount of all Letter of Credit Outstandings. "Treasury Regulation" shall mean regulations promulgated under the Code. "Type" shall mean the type of Loan determined with regard to the interest option applicable thereto, i.e., whether a Base Rate Loan or a Eurodollar Loan. "UCC" shall mean the Uniform Commercial Code as from time to time in effect in the relevant jurisdiction. "Unfunded Current Liability" of any Plan shall mean the amount, if any, by which the actuarial present value of the accumulated plan benefits under such Plan as of the close of its most recent plan year exceeds the fair market value of the assets allocable thereto, each determined in accordance with Statement of Financial Accounting Standards No. 87, based upon the actuarial assumptions used by such Plan's actuary in the most recent annual valuation of such Plan. 104 "United States" and "U.S." shall each mean the United States of America. "Unpaid Drawing" shall have the meaning provided in Section 1.17. "Unutilized Commitment" with respect to any Bank at any time shall mean such Bank's Commitment at such time, if any, less the sum of (i) the aggregate outstanding principal amount of all Loans made by such Bank at such time and (ii) such Bank's Loan Percentage of the Letter of Credit Outstandings at such time. "Work" shall have the meaning provided in Section 7.16(f). SECTION 11. The Administrative Agent. 11.01 Appointment. The Banks hereby designate GACC as Administrative Agent (for purposes of this Section 11, the term "Administrative Agent" shall include GACC in its capacity as Collateral Agent pursuant to the Security Documents) to act as specified herein and in the other Credit Documents, and the Issuing Bank hereby designates GACC as Administrative Agent to act as specified herein with respect to the issuance of Letters of Credit and such other matters in connection with such Letters of Credit as are provided for herein. Each Bank and the Issuing Bank hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note shall be deemed irrevocably to authorize, the Administrative Agent to take such action on its behalf under the provisions of this Agreement, the other Credit Documents and any other instruments and agreements referred to herein or therein and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Administrative Agent may perform any of its duties hereunder by or through its respective officers, directors, agents, employees or affiliates. Without limiting the generality of the preceding sentence and notwithstanding the provisions of Section 11.09, GACC, in its capacity as Administrative Agent and Collateral Agent, shall have the right upon notice to the Borrower, the Banks and the Issuing Bank, to transfer and assign all of its rights, duties and obligations as Administrative Agent and Collateral Agent hereunder and under the other Credit Documents to any of its Affiliates. 11.02 Nature of Duties. The Administrative Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and in the other Credit Documents. Neither the Administrative Agent nor any of its respective officers, directors, agents, employees or affiliates shall be liable for any action taken or omitted by it or them hereunder or under any other Credit Document or in connection herewith or therewith, unless caused by its or their gross negligence or willful misconduct. The duties of the Administrative Agent shall be mechanical and administrative in nature; the 105 Administrative Agent shall not have by reason of this Agreement or any other Credit Document a fiduciary relationship in respect of any Bank, the Issuing Bank or the holder of any Note; and nothing in this Agreement or any other Credit Document, expressed or implied, is intended to or shall be so construed as to impose upon the Administrative Agent any obligations in respect of this Agreement or any other Credit Document except as expressly set forth herein or therein. 11.03 Lack of Reliance on the Administrative Agent. Independently and without reliance upon the Administrative Agent, each Bank, the Issuing Bank and the holder of each Note, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of each Credit Party and each of their Subsidiaries in connection with the making and the continuance of the Loans, the issuance of or participation in the Letters of Credit and the taking or not taking of any action in connection herewith and (ii) its own appraisal of the creditworthiness of each Credit Party and each of its Subsidiaries and, except as expressly provided in this Agreement, the Administrative Agent shall not have any duty or responsibility, either initially or on a continuing basis, to provide any Bank, the Issuing Bank or the holder of any Note with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or the issuance of the Letters of Credit at any time or times thereafter. The Administrative Agent shall not be responsible to any Bank, the Issuing Bank or the holder of any Note for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of this Agreement or any other Credit Document or the financial condition of any Credit Party or any of its Subsidiaries or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any other Credit Document, or the financial condition of any Credit Party or any of its Subsidiaries or the existence or possible existence of any Default or Event of Default. 11.04 Certain Rights of the Administrative Agent. If the Administrative Agent shall request instructions from the Required Banks with respect to any act or action (including failure to act) in connection with this Agreement or any other Credit Document, the Administrative Agent shall be entitled to refrain from such act or taking such action unless and until the Administrative Agent shall have received instructions from the Required Banks or, if required by Section 12.12, the Supermajority Banks or all of the Banks, as the case may be; and the Administrative Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Bank or the holder of any Note shall have any right of action whatsoever against the Administrative Agent as a result of the Administrative Agent acting or refraining from acting hereunder or under any other Credit Document in accordance with the instructions of the Required Banks or, if required by Section 12.12, the Supermajority Banks or all of the Banks, as the case may be. 11.05 Reliance. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message signed, sent or made by any Person that the Administrative Agent believed to be the proper Person, and, with respect to all legal matters pertaining to this Agreement and any other Credit Document and its duties hereunder and thereunder, upon advice of counsel selected by the Administrative Agent. 106 11.06 Indemnification. To the extent the Administrative Agent is not reimbursed and indemnified by the Borrower, the Banks will reimburse and indemnify the Administrative Agent, in proportion to their respective "percentages" as used in determining the Required Banks, for and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, costs, expenses or disbursements of whatsoever kind or nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its respective duties hereunder or under any other Credit Document, in any way relating to or arising out of this Agreement or any other Credit Document; provided that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's gross negligence or willful misconduct. 11.07 The Administrative Agent in its Individual Capacity. With respect to its obligation to make Loans under this Agreement or participate in Letters of Credit, the Administrative Agent shall have the rights and powers specified herein for a "Bank" and may exercise the same rights and powers as though it were not performing the duties specified herein; and the term "Banks," "Required Banks," "holders of Notes" or any similar terms shall, unless the context clearly otherwise indicates, include the Administrative Agent in its individual capacity. The Administrative Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with any Credit Party or any Affiliate of any Credit Party as if it were not performing the duties specified herein, and may accept fees and other consideration from the Borrower or any other Credit Party for services in connection with this Agreement and otherwise without having to account for the same to the Banks or the Issuing Bank. 11.08 Holders. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Administrative Agent. Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee, assignee or endorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor. 11.09 Resignation by the Administrative Agent; Removal of the Administrative Agent. (a) The Administrative Agent may resign from the performance of all its functions and duties hereunder and/or under the other Credit Documents at any time by giving 30 Business Days' prior written notice to the Borrower, the Banks and the Issuing Bank. Such resignation shall take effect upon the appointment of a successor Administrative Agent pursuant to clauses (b) and (c) below or as otherwise provided below. 107 (b) Upon any such notice of resignation by the Administrative Agent, the Required Banks shall appoint a successor Administrative Agent hereunder or thereunder who shall be a commercial bank or trust company reasonably acceptable to the Borrower. (c) If a successor Administrative Agent shall not have been so appointed within such 30 Business Day period, the Administrative Agent, with the consent of the Borrower, shall then appoint a successor Administrative Agent who shall serve as Administrative Agent hereunder or thereunder until such time, if any, as the Required Banks appoint a successor Administrative Agent as provided above. (d) If no successor Administrative Agent has been appointed pursuant to clause (b) or (c) above by the 35th Business Day after the date such notice of resignation was given by the Administrative Agent, the Administrative Agent's resignation shall become effective and the Banks shall thereafter perform all the duties of the Administrative Agent hereunder and/or under any other Credit Document until such time, if any, as the Required Banks appoint a successor Administrative Agent as provided above. (e) In addition, the Required Banks shall have the right to remove the Administrative Agent and appoint a successor Administrative Agent who shall be a commercial bank or trust company reasonably acceptable to the Borrower in the event that the Administrative Agent has been grossly negligent or has willfully misconducted itself in performing its functions and duties under this Agreement or any other Credit Document. SECTION 12. Miscellaneous. 12.01 Payment of Expenses, etc. The Borrower agrees that it shall: (i) whether or not the transactions contemplated herein are consummated, pay all reasonable out-of-pocket costs and expenses of the Administrative Agent (including, without limitation, the reasonable fees and disbursements of White & Case, LLP, local counsel and due diligence, environmental, engineering, real estate and insurance independent consultants retained by the Administrative Agent) in connection with the preparation, execution, delivery and performance of this Agreement and the other Credit Documents and the documents and instruments referred to herein and therein, any amendment, waiver or consent relating hereto or thereto, of the Administrative Agent in connection with its syndication efforts with respect to this Agreement and, upon the occurrence and during the continuance of an Event of Default, the reasonable costs and expenses of each of the Banks and the Issuing Bank in connection with the enforcement of this Agreement and the other Credit Documents and the documents and instruments referred to herein and therein (including, without limitation, the reasonable fees and disbursements of counsel for the Administrative Agent and, following an Event of Default, for each of the Banks and the Issuing Bank); (ii) pay and hold each of the Banks and the Issuing Bank harmless from and against any and all present and future stamp, excise and other similar taxes with respect to the foregoing matters and save each of the Banks and the Issuing Bank harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Bank or the Issuing Bank) to pay such taxes; and (iii) indemnify the Administrative Agent, 108 each Bank and the Issuing Bank, and each of their respective officers, directors, employees, representatives and agents from and hold each of them harmless against any and all liabilities, obligations (including removal or remedial actions), losses, damages, penalties, claims, actions, judgments, suits, costs, expenses and disbursements (including reasonable attorneys' and consultants' fees and disbursements) incurred by, imposed on or assessed against any of them as a result of, or arising out of, or in any way related to, or by reason of, (a) any investigation, litigation or other proceeding (whether or not such Agent, any Bank or the Issuing Bank is a party thereto) related to the entering into and/or performance of this Agreement or any other Credit Document or the use of any Letter of Credit or the proceeds of any Loans hereunder or the consummation of any transactions contemplated herein or in any other Credit Document or the exercise of any of their rights or remedies provided herein or in the other Credit Documents, or (b) the actual or alleged presence of Hazardous Materials in the air, surface water or groundwater or on the surface or subsurface of any Real Property owned or at any time operated by the REIT or any of its Subsidiaries, the Release, generation, storage, transportation, handling or disposal of Hazardous Materials at any location, whether or not owned or operated by the REIT or any of its Subsidiaries, the non-compliance of any Real Property with foreign, federal, state and local laws, regulations, and ordinances (including applicable permits thereunder) applicable to any Real Property, or any Environmental Claim asserted against the REIT, any of its Subsidiaries or any Real Property owned or at any time operated by the REIT or any of its Subsidiaries, including, in each case, without limitation, the reasonable fees and disbursements of counsel and other consultants incurred in connection with any such investigation, litigation or other proceeding (but excluding any losses, liabilities, claims, damages or expenses to the extent incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified). To the extent that the undertaking to indemnify, pay or hold harmless the Administrative Agent, any Bank or the Issuing Bank set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Borrower shall make the maximum contribution to the payment and satisfaction of each of the indemnified liabilities which is permissible under applicable law. 12.02 Right of Setoff. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence and during the continuance of an Event of Default, each Bank and the Issuing Bank is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to any Credit Party or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by such Bank or the Issuing Bank, as the case may be (including, without limitation, by branches and agencies of such Bank or the Issuing Bank, as the case may be, wherever located) to or for the credit or the account of any Credit Party against and on account of the Obligations and liabilities of such Credit Party to such Bank or the Issuing Bank, as the case may be, under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations purchased by such Bank pursuant to Section 12.06(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not such Bank or the Issuing Bank, as the case may be, shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. Notwithstanding anything to the contrary contained in this Section 12.02, 109 neither any Bank nor the Issuing Bank shall exercise any such right of set-off without the prior consent of the Administrative Agent or the Required Banks so long as the Obligations shall be secured by any Real Property located in the State of California, it being understood and agreed, however, that this sentence is for the sole benefit of the Banks and the Issuing Bank and may be amended, modified or waived in any respect by the Required Banks without the requirement of prior notice to or consent by any Credit Party and does not constitute a waiver of any rights against any Credit Party or against any Collateral. 12.03 Notices. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, telecopier or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered: if to the Borrower, at the Borrower's address specified opposite its signature below; if to the REIT, at the REIT's address specified opposite its signature below; if to any Bank, at its address specified opposite its name on Schedule II; if to the Issuing Bank, at its address specified opposite its signature below; and if to the Administrative Agent, at the Notice Office; or, as to the Borrower or the Administrative Agent, at such other address as shall be designated by such party in a written notice to the other parties hereto and, as to each Bank or the Issuing Bank, at such other address as shall be designated by such Bank or the Issuing Bank in a written notice to the Borrower and the Administrative Agent. All such notices and communications shall, when mailed, telegraphed, telexed, telecopied, or cabled or sent by overnight courier, be effective when deposited in the mails, delivered to the telegraph company, cable company or overnight courier, as the case may be, or sent by telex or telecopier, except that notices and communications to the Administrative Agent and the Borrower shall not be effective until received by the Administrative Agent or the Borrower, as the case may be. 12.04 Benefit of Agreement. (a) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided, however, the Borrower may not assign or transfer any of its rights, obligations or interest hereunder or under any other Credit Document without the prior written consent of the Banks and, provided further, that, although any Bank may transfer, assign or grant participations in its rights hereunder, such Bank shall remain a "Bank" for all purposes hereunder (and may not transfer or assign all or any portion of its Commitment hereunder except as provided in Section 12.04(b)) and the transferee, assignee or participant, as the case may be, shall not constitute a "Bank" hereunder and, provided further, that no Bank shall transfer or grant any participation under which the participant shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would (i) extend the final scheduled maturity of any Loan, Note or Letter of Credit (unless such Letter of Credit is not extended beyond the Maturity Date) in which such participant is participating, or reduce the rate or extend the time of payment of interest or Fees thereon (except in connection with a waiver of applicability of any post-default increase in interest rates) or reduce the principal amount thereof, or increase the amount of the participant's participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Total Commitment shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without the consent of any participant if the participant's 110 participation is not increased as a result thereof), (ii) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement or (iii) release all or substantially all of the Collateral under all of the Security Documents (except as expressly provided in the Credit Documents) supporting the Loans hereunder in which such participant is participating. In the case of any such participation, the participant shall not have any rights under this Agreement or any of the other Credit Documents (the participant's rights against such Bank in respect of such participation to be those set forth in the agreement executed by such Bank in favor of the participant relating thereto) and all amounts payable by the Borrower hereunder shall be determined as if such Bank had not sold such participation. (b) Notwithstanding the foregoing, any Bank (or any Bank together with one or more other Banks) may (x) assign all or a portion of its Commitment (and related outstanding Obligations hereunder) to (i) its parent company and/or any affiliate of such Bank which is at least 50% owned by such Bank or its parent company or to one or more Banks or (ii) in the case of any Bank that is a fund that invests in bank loans, any other fund that invests in bank loans and is managed by the same investment advisor of such Bank or by an Affiliate of such investment advisor or (y) assign all, or if less than all, a portion equal to at least $5,000,000 in the aggregate for the assigning Bank or assigning Banks, of such Commitment (and related outstanding Obligations hereunder) to one or more Eligible Transferees (treating any fund that invests in bank loans and any other fund that invests in bank loans and is managed by the same investment advisor of such fund or by an Affiliate of such investment advisor as a single Eligible Transferee), each of which assignees shall become a party to this Agreement as a Bank by execution of an Assignment and Assumption Agreement, provided that (i) at such time Schedule I shall be deemed modified to reflect the Commitments (and/or outstanding Loans, as the case may be) of such new Bank and of the existing Banks, (ii) upon surrender of the old Notes, new Notes will be issued to such new Bank and to the assigning Bank, such new Notes to be in conformity with the requirements of Section 1.05 (with appropriate modifications) to the extent needed to reflect the revised Commitments (and/or outstanding Loans, as the case may be), (iii) the consent of the Administrative Agent shall be required in connection with any such assignment pursuant to clause (y) above (which consent shall not be unreasonably withheld) and (iv) the Administrative Agent shall receive at the time of each such assignment, from the assigning or assignee Bank, the payment of a non-refundable assignment fee of $3,500 and, provided further, that such transfer or assignment will not be effective until recorded by the Administrative Agent on the Register pursuant to Section 12.16. The Administrative Agent will promptly give the Borrower notice of any assignment to an Eligible Transferee pursuant to clause (y) of the first sentence of this Section 12.04(b), although the failure to give any such notice shall not affect such assignment or result in any liability by the Administrative Agent. To the extent of any assignment pursuant to this Section 12.04(b), the assigning Bank shall be relieved of its obligations hereunder with respect to its assigned Commitments. At the time of each assignment pursuant to this Section 12.04(b) to a Person which is not already a Bank hereunder and which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes, the respective assignee Bank shall provide to the Borrower and the Administrative Agent the appropriate Internal Revenue Service Forms (and, if applicable a Section 3.04(b)(ii) Certificate) described in Section 3.04(b). To the extent that an assignment of all or any portion of a Bank's Commitment and related 111 outstanding Obligations pursuant to this Section 12.04(b) would, at the time of such assignment, result in increased costs under Section 1.10, 1.11 or 3.04 from those being charged by the respective assigning Bank prior to such assignment, then the Borrower shall not be obligated to pay or reimburse such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective assignment). (c) Nothing in this Agreement shall prevent or prohibit any Bank from pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of borrowings made by such Bank from such Federal Reserve Bank and, with the consent of the Administrative Agent, any Bank which is a fund may pledge all or any portion of its Loans and Notes to its trustee in support of its obligations to its trustee. No pledge pursuant to this clause (c) shall release the transferor Bank from any of its obligations hereunder. 12.05 No Waiver; Remedies Cumulative. No failure or delay on the part of the Administrative Agent, the Issuing Bank or any Bank or any holder of any Note in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Borrower or any other Credit Party and the Administrative Agent, the Issuing Bank or any Bank or the holder of any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights, powers and remedies herein or in any other Credit Document expressly provided are cumulative and not exclusive of any rights, powers or remedies which the Administrative Agent, the Issuing Bank or any Bank or the holder of any Note would otherwise have. No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent, the Issuing Bank or any Bank or the holder of any Note to any other or further action in any circumstances without notice or demand. 12.06 Payments Pro Rata. (a) Except as otherwise provided in this Agreement, the Administrative Agent agrees that promptly after its receipt of each payment from or on behalf of the Borrower in respect of any Obligations hereunder, it shall distribute such payment to the Banks (other than any Bank that has consented in writing to waive its pro rata share of any such payment) pro rata based upon their respective shares, if any, of the Obligations with respect to which such payment was received. (b) Each of the Banks agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise), which is applicable to the payment of the principal of, or interest on, the Loans, Unpaid Drawings, Commitment Commission or Letter of Credit Fees, of a sum which with respect to the related sum or sums received by other Banks is in a greater proportion than the total of such Obligation then owed and due to such Bank bears to the total of such Obligation then owed and due to all of the Banks immediately prior to such receipt, then such Bank receiving such excess payment shall purchase for cash without recourse or warranty from the other Banks an interest in the Obligations of the respective Credit Party to such Banks in such amount as shall result in a proportional 112 participation by all the Banks in such amount; provided that if all or any portion of such excess amount is thereafter recovered from such Bank, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. (c) Notwithstanding anything to the contrary contained herein, the provisions of the preceding Sections 12.06(a) and (b) shall be subject to the express provisions of this Agreement which require, or permit, differing payments to be made to Non-Defaulting Banks as opposed to Defaulting Banks. 12.07 Calculations; Computations. (a) The financial statements to be furnished to the Banks pursuant hereto shall be made and prepared in accordance with generally accepted accounting principles in the United States consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Banks) ("GAAP"). (b) All computations of interest and other fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or other fees are payable. 12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL, EXCEPT AS OTHERWISE PROVIDED IN CERTAIN OF THE MORTGAGES, BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE REIT AND THE BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH OF THE REIT AND THE BORROWER HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK JURISDICTION OVER SUCH CREDIT PARTY, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN ANY OF THE AFORESAID COURTS, THAT ANY SUCH COURT LACKS JURISDICTION OVER SUCH CREDIT PARTY. EACH OF THE REIT AND THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH CREDIT PARTY AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH OF THE REIT AND THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF 113 PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER CREDIT DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT, ANY BANK OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER JURISDICTION. (b) EACH OF THE REIT AND THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. (c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 12.09 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Administrative Agent. 12.10 Effectiveness. This Agreement shall become effective on the date (the "Effective Date") on which (i) the REIT, the Borrower, the Administrative Agent, the Issuing Bank and each of the Banks set forth on Schedule I shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered the same to the Administrative Agent at the Notice Office or, in the case of the Banks, shall have given to the Administrative Agent telephonic (confirmed in writing) or written notice at such office that the same has been signed and mailed to it and (ii) the conditions contained in Section 4 are met to the satisfaction of the Administrative Agent, the Issuing Bank and the Required Banks. Unless the Administrative Agent has received actual notice from the Issuing Bank or any Bank that the conditions described in clause (ii) of the preceding sentence have not been met to its satisfaction, upon the satisfaction of the condition described in clause (i) of the immediately preceding sentence and upon the Administrative Agent's good faith determination that the conditions described in clause (ii) of the immediately preceding sentence have been met, then the Effective Date shall be deemed to have occurred, regardless of any subsequent 114 determination that one or more of the conditions thereto had not been met (although the occurrence of the Effective Date shall not release the Borrower from any liability for failure to satisfy one or more of the applicable conditions contained in Section 4). The Administrative Agent will give the REIT, the Borrower, the Issuing Bank and each Bank prompt written notice of the occurrence of the Effective Date. 12.11 Headings Descriptive. The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 12.12 Amendment or Waiver; etc. (a) Neither this Agreement nor any other Credit Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the respective Credit Parties party thereto and the Required Banks, provided that no such change, waiver, discharge or termination shall, without the consent of each Bank (other than a Defaulting Bank) (with the term "Bank" meaning each Bank having Obligations being directly affected thereby in the case of following clause (i)), (i) extend the final scheduled maturity of any Loan or Note or extend the stated expiration date of any Letter of Credit beyond the Maturity Date, or reduce the rate or extend the time of payment of interest or Fees thereon, or reduce the principal amount thereof (except to the extent repaid in cash), (ii) release all or substantially all of the Collateral (except as expressly provided in the Credit Documents), (iii) release the REIT from its obligations under the Parent Guaranty, (iv) amend, modify or waive any provision of this Section 12.12, (v) reduce the percentage specified in the definition of Required Banks (it being understood that, with the consent of the Required Banks, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Banks on substantially the same basis as the extensions of Loans are included on the Effective Date) or (vi) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement; provided further, that no such change, waiver, discharge or termination shall (A) increase the Commitment of any Bank over the amount thereof then in effect without the consent of such Bank (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default or of a mandatory reduction in the Total Commitment shall not constitute an increase of the Commitment of any Bank, and that an increase in the available portion of the Commitment of any Bank shall not constitute an increase in the Commitment of such Bank), (B) without the consent of the Issuing Bank, modify or waive any provision of Section 1.13 through Section 1.18 or alter its rights or obligations with respect to the Letters of Credit, (C) without the consent of the Administrative Agent, amend, modify or waive any provision of Section 11 or any other provision as same relates to the rights or obligations of the Administrative Agent, (D) without the consent of the Collateral Agent, amend, modify or waive any provision relating to the rights or obligations of the Collateral Agent or (E) without the consent of the Supermajority Banks, (i) amend or modify the definition of Supermajority Banks, (ii) amend or modify any provision of the Agreement which would permit the REIT or any of its Subsidiaries to pay additional Dividends to, or make additional Investments in or to, any of its other Subsidiaries, (iii) release any Subsidiary Guarantor from its obligations under the Subsidiaries Guaranty (in each case, except as expressly provided in the Credit Documents) or (iv) release any Borrowing Base 115 Property or Borrowing Base Pledged Mortgage Loan from the Liens created by the respective Mortgage or Collateral Assignment (except as expressly provided in the Credit Documents). 12.13 Survival. All indemnities set forth herein including, without limitation, in Sections 1.10, 1.11, 3.04, 12.01 and 12.06 shall survive the execution, delivery and termination of this Agreement and the Notes and the making and repayment of the Loans. 12.14 Domicile of Loans. Each Bank may transfer and carry its Loans at, to or for the account of any office, Subsidiary or Affiliate of such Bank. Notwithstanding anything to the contrary contained herein, to the extent that a transfer of Loans pursuant to this Section 12.14 would, at the time of such transfer, result in increased costs under Section 1.10, 1.11, or 3.04 from those being charged by the respective Bank prior to such transfer, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective transfer). 12.15 Confidentiality. (a) Subject to the provisions of clause (b) of this Section 12.15, each Bank agrees that it will use its reasonable efforts not to disclose without the prior consent of the Borrower (other than to its employees, auditors, advisors or counsel or to another Bank if such Bank or such Bank's holding or parent company in its reasonable good faith discretion determines that any such party should have access to such information, provided such Persons shall be subject to the provisions of this Section 12.15 to the same extent as such Bank) any information with respect to any Credit Party or any of its Subsidiaries which has been, is now or in the future furnished pursuant to this Agreement or any other Credit Document and which is designated by any Credit Party to the Banks in writing as confidential, provided that any Bank may disclose any such information (a) as has become generally available to the public, (b) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such Bank or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (c) as may be required or appropriate in respect to any summons or subpoena or in connection with any litigation, (d) in order to comply with any law, order, regulation or ruling applicable to such Bank, (e) to the Administrative Agent or the Collateral Agent and (f) to any prospective or actual transferee or participant in connection with any contemplated transfer or participation of any of the Notes or Commitments or any interest therein by such Bank, provided, that such prospective transferee agrees with such Bank to be subject to the provisions of this Section 12.15(a). (b) The REIT and the Borrower hereby acknowledge and agree that each Bank may share with any of its affiliates any information related to Credit Parties or any of their respective Subsidiaries (including, without limitation, any nonpublic customer information regarding the creditworthiness of the Credit Parties and their respective Subsidiaries, provided such Persons shall be subject to the provisions of this Section 12.15 to the same extent as such Bank), it being understood that for purposes of this Section 12.15(b) the term "affiliate" shall mean any direct or indirect holding company of a Bank as well as any direct or indirect Subsidiary of such holding company. 116 12.16 Register. The Borrower hereby designates the Administrative Agent to serve as the Borrower's agent, solely for purposes of this Section 12.16, to maintain a register (the "Register") on which it will record the Commitments from time to time of each of the Banks, the Loans made by each of the Banks and each repayment in respect of the principal amount of the Loans of each Bank. Failure to make any such recordation, or any error in such recordation, shall not affect the Borrower's obligations in respect of such Loans. With respect to any Bank, the transfer of the Commitment of such Bank and the rights to the principal of, and interest on, any Loan made pursuant to such Commitment shall not be effective until such transfer is recorded on the Register maintained by the Administrative Agent with respect to ownership of such Commitment and Loans and prior to such recordation all amounts owing to the transferor with respect to such Commitment and Loans shall remain owing to the transferor. The registration of assignment or transfer of all or part of any Commitments and Loans shall be recorded by the Administrative Agent on the Register only upon the acceptance by the Administrative Agent of a properly executed and delivered Assignment and Assumption Agreement pursuant to Section 12.04(b). Coincident with the delivery of such an Assignment and Assumption Agreement to the Administrative Agent for acceptance and registration of assignment or transfer of all or part of a Loan, or as soon thereafter as practicable, the assigning or transferor Bank shall surrender the Note evidencing such Loan, and thereupon one or more new Notes in the same aggregate principal amount shall be issued to the assigning or transferor Bank and/or the new Bank. The Borrower agrees to indemnify the Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this Section 12.16, provided that the Borrower shall have no obligation to indemnify the Administrative Agent for any loss, claim, damage, liability or expense which resulted solely from the gross negligence or willful misconduct of the Administrative Agent. 12.17 Commercial Loan Transactions. Each of the Banks acknowledges that the making of its Loans and the issuance by the Borrower of a Note to such Bank are in the nature of a commercial loan transaction, and that no such Bank shall assert that such actions are a securities transaction regulated under the Exchange Act, the Securities Act or any other Federal or state securities laws, it being understood that nothing in this Section 12.17 shall limit the rights of the Banks pursuant to Section 12.04. 12.18 Servicing of Loans. The Administrative Agent may, in its sole discretion, determine to designate and appoint a servicer to service the Loans pursuant to a loan servicing agreement in form and substance satisfactory to Administrative Agent. In connection with such designation and appointment, the Administrative Agent may, in its sole discretion, delegate some or all of its rights and obligations under the Credit Documents to such servicer pursuant to the loan servicing agreement. The Borrower hereby irrevocably consents to such designation and appointment of a servicer and any such delegation to such servicer of some or all of the Administrative Agent's rights and obligations under the Credit Documents. 117 SECTION 13. Parent Guaranty. 13.01 The Guaranty. In order to induce the Administrative Agent, the Issuing Bank and the Banks to enter into this Agreement and to extend credit hereunder and in recognition of the direct benefits to be received by the Parent Guarantor from the proceeds of the Loans, the issuance of the Letters of Credit and the entering into by the Borrower of Interest Rate Protection Agreements or Other Hedging Agreements, the Parent Guarantor hereby agrees with the Administrative Agent and the Banks as follows: the Parent Guarantor hereby absolutely, unconditionally and irrevocably, guarantees as primary obligor and not merely as surety all of the Guaranteed Obligations of the Borrower to each Creditor. If any or all of the Guaranteed Obligations becomes due and payable hereunder, the Parent Guarantor absolutely, unconditionally and irrevocably promises to pay such indebtedness to the Creditors or order, on demand, together with any and all reasonable expenses which may be incurred by the Creditors in collecting any of the Guaranteed Obligations. This Parent Guaranty shall constitute a guaranty of payment, and not of collection. 13.02 Bankruptcy. Additionally, the Parent Guarantor, absolutely, unconditionally and irrevocably guarantees the payment of any and all of the Guaranteed Obligations of the Borrower to the Creditors whether or not then due or payable by the Borrower upon the occurrence in respect of the Borrower of any of the events specified in Section 9.05, and unconditionally and irrevocably promises to pay such Guaranteed Obligations to the Creditors, or order, on demand, in lawful money of the United States. 13.03 Nature of Liability. The liability of the Parent Guarantor hereunder is exclusive and independent of any security for or other guaranty of the Guaranteed Obligations of the Borrower whether executed by the Parent Guarantor, any other guarantor or by any other party, and the liability of the Parent Guarantor hereunder shall not be affected or impaired by (a) any direction as to application of payment by the Borrower or by any other party, or (b) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other party as to the Guaranteed Obligations of the Borrower, or (c) any payment on or in reduction of any such other guaranty or undertaking except to the extent that such payment actually results in a permanent reduction of the Guaranteed Obligations, or (d) any dissolution, termination or increase, decrease or change in personnel by the Borrower, or (e) any payment made to any Creditor on the indebtedness which such Creditor repays the Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and each Parent Guarantor waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding. 13.04 Independent Obligation. The obligations of the Parent Guarantor hereunder are independent of the obligations of any other guarantor or the Borrower, and a separate action or actions may be brought and prosecuted against the Parent Guarantor whether or not action is brought against any other guarantor or the Borrower and whether or not any other guarantor or the Borrower be joined in any such action or actions. The Parent Guarantor waives, to the fullest extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement 118 thereof. Any payment by the Borrower or other circumstance which operates to toll any statute of limitations as to the Borrower shall operate to toll the statute of limitations as to the Parent Guarantor. 13.05 Authorization. The Parent Guarantor authorizes the Administrative Agent and the other Creditors without notice or demand or consent (except as shall be required by applicable statute and cannot be waived), and without affecting or impairing its liability hereunder, from time to time to: (a) change the manner, place or terms of payment of, and/or change or extend the time of payment of, renew, increase, accelerate or alter, any of the Guaranteed Obligations (including any increase or decrease in the rate of interest thereon), any security therefor, or any liability incurred directly or indirectly in respect thereof, and the Guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered; (b) take and hold security for the payment of the Guaranteed Obligations and sell, exchange, release, surrender, impair, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or any offset there against; (c) exercise or refrain from exercising any rights against the Borrower, any other Credit Party or any other Person or otherwise act or refrain from acting; (d) release or substitute any one or more endorsers, guarantors, the Borrower or other obligors; (e) settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of the Borrower to its creditors other than the Creditors, provided that the Creditors will not, without the prior written consent of the Parent Guarantor, contractually subordinate the payment of all or any part of the Guaranteed Obligations to any other creditor or creditors of the Borrower, provided further that if any consent required by the immediately preceding proviso is not obtained and contractual subordination as described therein is agreed to, then (x) any part of the Guaranteed Obligations not so subordinated will continue to be entitled to the full benefits of this Parent Guaranty and (y) with respect to any part of the Guaranteed Obligations so contractually subordinated, the Parent Guarantor will be relieved of its obligations hereunder only to the extent each establishes that it has been actually damaged by such contractual subordination; (f) apply any sums by whomsoever paid or howsoever realized to any liability or liabilities of the Borrower to the Creditors regardless of what liability or liabilities of the Borrower remain unpaid; 119 (g) consent to or waive any breach of, or any act, omission or default under, this Agreement or any of the instruments or agreements referred to herein, or otherwise amend, modify or supplement this Agreement or any of such other instruments or agreements; and/or (h) take any other action which would, under otherwise applicable principles of common law, give rise to a legal or equitable discharge of the Parent Guarantor from its liabilities under this Section 13. 13.06 Reliance. It is not necessary for the Administrative Agent or the other Creditors to inquire into the capacity or powers of the Borrower or any other Credit Party or the officers, directors, partners or agents acting or purporting to act on its behalf, and any Guaranteed Obligations made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. 13.07 Subordination. Any of the indebtedness of the Borrower now or hereafter owing to the Parent Guarantor is hereby subordinated to the Guaranteed Obligations of the Borrower owing to the Administrative Agent and the other Creditors; and if the Administrative Agent so requests at a time when an Event of Default exists, all such indebtedness of the Borrower to the Parent Guarantor shall be collected, enforced and received by the Parent Guarantor for the benefit of the Creditors and be paid over to the Administrative Agent on behalf of the Creditors on account of the Guaranteed Obligations of the Borrower to the Creditors, but without affecting or impairing in any manner the liability of the Parent Guarantor under the other provisions of this Parent Guaranty. Prior to the transfer by the Parent Guarantor of any note or negotiable instrument evidencing any of the indebtedness relating to the Guaranteed Obligations of the Borrower to the Parent Guarantor, the Parent Guarantor shall mark such note or negotiable instrument with a legend that the same is subject to this subordination. Without limiting the generality of the foregoing, the Parent Guarantor hereby agrees with the Creditors that it will not exercise any right of subrogation which it may at any time otherwise have as a result of this Parent Guaranty (whether contractual, under Section 509 of the Bankruptcy Code, or otherwise) until all Guaranteed Obligations have been paid in full in cash (it being understood that the Parent Guarantor is not waiving any right of subrogation that it may otherwise have but is only waiving the exercise thereof as provided above). 13.08 Waiver. (a) The Parent Guarantor waives any right (except as shall be required by applicable statute and cannot be waived) to require the Administrative Agent or the other Creditors to (i) proceed against the Borrower, any other guarantor or any other party, (ii) proceed against or exhaust any security held from the Borrower, any other guarantor or any other party or (iii) pursue any other remedy in the Administrative Agent's or the other Creditors' power whatsoever. The Parent Guarantor waives any defense based on or arising out of any defense of the Borrower, the Parent Guarantor, any other guarantor or any other party, other than payment in full of the Guaranteed Obligations, based on or arising out of the disability of the Borrower, any other guarantor or any other party, or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower other than payment in full of the Guaranteed Obligations. The Administrative Agent and the other 120 Creditors may, at their election, foreclose on any security held by the Administrative Agent, the Collateral Agent or the other Creditors by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Administrative Agent and the other Creditors may have against the Borrower or any other party, or any security, without affecting or impairing in any way the liability of the Parent Guarantor hereunder except to the extent the Guaranteed Obligations have been paid. The Parent Guarantor waives any defense arising out of any such election by the Administrative Agent and the other Creditors, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of the Parent Guarantor against the Borrower or any other party or any security. (b) The Parent Guarantor waives all presentments, demands for performance, protests and notices, including, without limitation, notices of nonperformance, notices of protest, notices of dishonor, notices of acceptance of this Parent Guaranty, and notices of the existence, creation or incurring of new or additional Guaranteed Obligations. The Parent Guarantor assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks which the Parent Guarantor assumes and incurs hereunder, and agrees that the Administrative Agent and the other Creditors shall have no duty to advise the Parent Guarantor of information known to them regarding such circumstances or risks. The Parent Guarantor warrants and agrees that each of the waivers set forth above is made with full knowledge of its significance and consequences and that if any of such waivers is determined to be contrary to any applicable law or public policy, such waivers shall be effective only to the maximum extent permitted by law. 13.09 Nature of Liability. It is the desire and intent of the Parent Guarantor and the Creditors that this Parent Guaranty shall be enforced against the Parent Guarantor to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. If, however, and to the extent that, the obligations of the Parent Guarantor under this Parent Guaranty shall be adjudicated to be invalid or unenforceable for any reason (including, without limitation, because of any applicable state or federal law relating to fraudulent conveyances or transfers), then the amount of the Guaranteed Obligations shall be deemed to be reduced and the Parent Guarantor shall pay the maximum amount of the Guaranteed Obligations which would be permissible under applicable law. 13.10 Interest Rate Protection Agreements and Other Hedging Agreements. Notwithstanding anything to the contrary contained in this Parent Guaranty, no Interest Rate Protection Agreement or Other Hedging Agreement shall be entitled to the benefits of this Parent Guaranty unless such Interest Rate Protection Agreement or Other Hedging Agreement is reasonably related to the Loans (including, in any event, any Interest Rate Protection Agreement entered into to satisfy the requirements of Section 7.16) or such Interest 121 Rate Protection Agreement or Other Hedging Agreement provides that it is to be entitled to the benefits of this Parent Guaranty or the Security Documents generally. 122 IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above written. Address: ELDERTRUST 415 McFarlan Road By:/s/ Edward B. Romanov, Jr. Suite 202 ------------------------------------- Kennett Square Name: Edward B. Romanov, Jr. Pennsylvania 19348 Title: President and CEO Address: ELDERTRUST OPERATING LIMITED PARTNERSHIP 415 McFarlan Road By:/s/ Edward B. Romanov, Jr. Suite 202 ------------------------------------- Kennett Square Name: Edward B. Romanov, Jr. Pennsylvania 19348 Title: President and CEO : Address: GERMAN AMERICAN CAPITAL CORPORATION, as a Bank and as Administrative Agent 31 West 52nd Street New York, New York 10019 By:/s/ Allisson Michaels ------------------------------------- Name: Allisson Michaels Title: Attorney-in-fact By:/s/ Janet Whang ------------------------------------- Name: Janet Whang Titl: Attorney-in-fact Address: DEUTSCHE BANK AG, NEW YORK BRANCH, as Issuing Bank 31 West 52nd Street By:/s/ Allisson Michaels New York, New York 10019 ------------------------------------- Name: Allisson Michaels Title: Attorney-in-fact By:/s/ Janet Whang ------------------------------------- Name: Janet Whang Title: Attorney-in-fact 123 SCHEDULE I ---------- COMMITMENTS ----------- Bank Commitment - ---- ------------ German American Capital Corporation $140,000,000 ------------ TOTAL: $140,000,000 ------------ SCHEDULE II ------------ BANK ADDRESSES -------------- Bank Address - ---- ------- German American Capital Corporation 31 West 52nd Street New York, New York 10019 SCHEDULE III ------------ Real Property Name/Owner Location Assisted Living Facilities: Heritage Woods Agawam, MA (ET Sub-Heritage Woods, L.L.C.) Willowbrook Clarks Summit, PA (ET Sub-Willowbrook Limited Partnership, L.L.P.) Riverview Ridge Wilkes-Barre, PA (ET Sub-Riverview Ridge Limited Partnership, L.L.P.) Highgate at Paoli Point Paoli, PA (ET Sub-Highgate, L.P.) The Woodbridge Kimberton, PA (ET Sub-Woodbridge, L.P.) Independent Living Facility: Pleasant View Concord, NH (ET Sub-Pleasant View, L.L.C.) Skilled Nursing Facilities (9): Rittenhouse CC Philadelphia, PA (ET Sub-Rittenhouse Limited Partnership, L.L.P.) Lopatcong CC Lopatcong, NJ (ET Sub-Lopatcong, L.L.C.) Phillipsburg CC Phillipsburg, NJ (ET Sub-Phillipsburg I, L.L.C.) Wayne NRC Wayne, PA (ET Sub-Wayne I Limited Partnership, L.L.P.) Belvedere NRC Chester, PA (ET Sub-Belvedere Limited Partnership, L.L.P.) Chapel Manor NRC Philadelphia, PA (ET Sub-Chapel Manor Limited Partnership, L.L.P.) Harston Hall NCH Flourtown, PA (ET Sub-Harston Hall Limited Partnership, L.L.P.) Pennsburg Manor NRC Pennsburg, PA (ET Sub-Pennsburg Manor Limited Partnership, L.L.P.) Silverlake NRC Bristol, PA (ET Sub-Silverlake Limited Partnership, L.L.P.) Medical Office and Other Buildings: Professional Office Building I Upland, PA (ET Sub-POB I Limited Partnership, L.L.P.) Salisbury Medical Office Building Salisbury, MD ET Sub-SMOB, L.L.C. Windsor Office Building Windsor, CT ET Sub-Windsor I, L.L.C. Windsor Clinic/Training Facility Windsor, CT (ET Sub-Windsor II, L.L.C.) Lacey Branch Office Building Forked River, NJ ET Sub-Lacey I, L.L.C. To Be Acquired Riverview Ridge Wilkes-Barre, PA (ET Sub-Riverview Ridge Limited Partnership, L.L.P.) Silverlake NRC Bristol, PA (ET Sub-Silverlake Limited Partnership, L.L.P.) DCMH Medical Office Building (23) Drexel Hill, PA (ET Sub-DCMH Limited Partnership, L.L.P.) SCHEDULE IV ----------- SUBSIDIARIES
Subsidiary Owner Percentage Owned - ---------- ----- ---------------- ET GENPAR, L.L.C. Borrower 100% ET Sub-Heritage Woods, L.L.C. Borrower 100% ET Sub-Pleasant View, L.L.C. Borrower 100% ET Sub-Lopatcong, L.L.C. Borrower 100% ET Sub-Phillipsburg I, L.L.C. Borrower 100% ET Sub-SMOB, L.L.C. Borrower 100% ET Sub-Windsor I, L.L.C. Borrower 100% ET Sub-Windsor II, L.L.C. Borrower 100% ET Sub-Lacey I, L.L.C. Borrower 100% ET Sub-Willowbrook Limited Partnership, Borrower 99.9% (LP) L.L.P. ET GENPAR, L.L.C. 0.1% (GP) ET Sub-Riverview Ridge Limited Partnership, Borrower 99.9% (LP) L.L.P. ET GENPAR, L.L.C. 0.1% (GP) ET Sub-Highgate, L.P. Borrower 99.9% (LP) ET GENPAR, L.L.C. 0.1% (GP) ET Sub-Woodbridge, L.P. Borrower 99.9% (LP) ET GENPAR, L.L.C. 0.1% (GP) ET Sub-Rittenhouse Limited Partnership, Borrower 99.9% (LP) L.L.P. ET GENPAR, L.L.C. 0.1% (GP) ET Sub-Wayne I Limited Partnership, L.L.P. Borrower 99.9% (LP) ET GENPAR, L.L.C. 0.1% (GP) ET Sub-Belvedere Limited Partnership, L.L.P. Borrower 99.9% (LP) ET GENPAR, L.L.C. 0.1% (GP) ET Sub-Pennsburg Manor Limited Partnership, Borrower 99.9% (LP) L.L.P. ET GENPAR, L.L.C. 0.1% (GP) ET Sub-POB I Limited Partnership, L.L.P. Borrower 99.9% (LP) ET GENPAR, L.L.C. 0.1% (GP) ET Sub-Riverview Ridge Limited Partnership, Borrower 99.9% (LP) L.L.P. ET GENPAR, L.L.C. 0.1% (GP) ET Sub-Silverlake Limited Partnership, L.L.P. Borrower 99.9% (LP) ET GENPAR, L.L.C. 0.1% (GP) ET Sub-DCMH Limited Partnership, L.L.P. Borrower 99.9% (LP) ET GENPAR, L.L.C. 0.1% (GP)
Subsidiary Owner Percentage Owned - ---------- ----- ---------------- ET Sub-Chapel Manor Limited Partnership, Borrower 99.9% (LP) L.L.P.(1) ET GENPAR, L.L.C. 0.1% (GP) ET Sub-Harston Hall Limited Partnership, Borrower 99.9% (LP) L.L.P.(2) ET GENPAR, L.L.C. 0.1% (GP) ET Capital Corp. Borrower 95% Equity 0% Voting Edward B. Romanov, Jr. 5% Equity 100% Voting
- -------- (1) This entity will not become operational and will be dissolved promptly following the Effective Time. (2) This entity will not become operational and will be dissolved promptly following the Effective Time. SCHEDULE V ---------- INDEBTEDNESS
Aggregate Principal Borrower Guarantor(s) Amount as of the Effective Date - -------- ------------ ------------------------------- ET Sub-Woodbridge, L.P. REIT $9,945,000 ET Sub-Highgate, L.P. REIT $9,680,000 ET Sub-Belvedere Limited Partnership, N/A $9,954,174 L.L.P. ET Sub-Lacey I, L.L.C. Borrower $494,488 ET Sub-Phillipsburg I, L.L.C. N/A $2,025,000 in the form of bonds secured by the property owned by the Subsidiary but not assumed by the Subsidiary and included herein pursuant to clause (iii) of the definition of "Indebtedness" in Article X of the Agreement ET Sub-Willowbrook Limited N/A $4,115,000 in the form of bonds Partnership, L.L.P. secured by the property owned by the Subsidiary but not assumed by the Subsidiary and included herein pursuant to clause (iii) of the definition of "Indebtedness" in Article X of the Agreement ET Sub-Riverview Ridge Borrower $2,739,000 Limited Partnership L.L.P.
SCHEDULE VI ----------- INSURANCE --------- The Borrower will maintain, at a minimum, the following insurance:
Type of Insurance Limits ------ A. Property "All-Risk" property insurance for physical Replacement Cost damage to real and personal property, including a) coverage for the peril of As provided in Section 7.03 of the Credit flood to the extent available under the Agreement National Flood Insurance b) coverage for the peril of As provided in Section 7.03(iv) of the Credit earthquake Agreement c) business interruption Actual Loss Sustained basis insurance for a period of not less than eighteen months B. General Liability including Automobile $100,000,000 C. Workers Compensation Statutory
SCHEDULE VII ------------ EXISTING LIENS -------------- NONE SCHEDULE VIII ------------- EXISTING MORTGAGES AND NOTES Note, dated as of the date hereof, from Philadelphia Avenue Associates to ElderTrust Operating Limited Partnership, in an amount not to exceed $5,164,000. Open-End Mortgage and Security Agreement, dated as of the date hereof, between Philadelphia Avenue Associates and ElderTrust Operating Limited Partnership (title commitment no. H185775EP). Note, dated as of the date hereof, from Delm Nursing, Inc. to ElderTrust Operating Limited Partnership, in an amount not to exceed $6,511,000. Open-End Mortgage and Security Agreement, dated as of the date hereof, between Delm Nursing, Inc. and ElderTrust Operating Limited Partnership (title commitment no. D170198MA). Note, dated as of the date hereof, from Volusia Meridian Limited Partnership to Genesis Health Ventures, Inc., in an amount not to exceed $4,577,000. Mortgage and Security Agreement dated as of the date hereof, between Volusia Meridian Limited Partnership and ElderTrust Operating Limited Partnership (title commitment no. OD97864). Note, dated as of the date hereof, from Wyncote Healthcare Corp. to ElderTrust Operating Limited Partnership, in an amount not to exceed $5,380,000. Open-End Mortgage and Security Agreement, dated as of the date hereof, between Wyncote Healthcare Corp. and ElderTrust Operating Limited Partnership (title commitment no. D176372JP). Note, dated as of the date hereof, from Lehigh Nursing Homes, Inc. to ElderTrust Operating Limited Partnership, in an amount not to exceed $6,665,000. Open-End Mortgage and Security Agreement, dated as of the date hereof, between Lehigh Nursing Homes, Inc. and ElderTrust Operating Limited Partnership (title commitment no. H185814EP). Note, dated as of the date hereof, from Berks Nursing Homes, Inc. to ElderTrust Operating Limited Partnership, in an amount not to exceed $6,269,000. Open-End Mortgage and Security Agreement, dated as of the date hereof, between Berks Nursing Homes, Inc. and ElderTrust Operating Limited Partnership (title commitment no. H185801EP). Construction Mortgage Note, dated as of September 30, 1997, by Senior LifeChoice, LLC payable to the order of Genesis Health Ventures, Inc., in an amount not to exceed $9,500,000, as assigned to ElderTrust Operating Limited Partnership pursuant to an Assignment and Assumption Agreement, dated as of the date hereof. Open-End Mortgage and Security Agreement, dated as of September 30, 1997, between Senior LifeChoice, LLC and Genesis Health Ventures, Inc. , as assigned to ElderTrust Operating Limited Partnership pursuant to an Assignment and Assumption Agreement, dated as of the date hereof. Note, dated as of November 11, 1997, from Geri-Med. Corp. to Philadelphia Suburban Development Corporation in the principal amount of $800,000, as assigned to ElderTrust Operating Limited Partnership pursuant to an Assignment and Assumption Agreement dated as of the date hereof. Open-End Mortgage and Security Agreement, dated as of November 11, 1997 between Philadelphia Suburban Development Corporation and Geri-Med Corp., as assigned to ElderTrust Operating Limited Partnership pursuant to an Assignment Agreement dated as of the date hereof. EXHIBIT A --------- NOTICE OF BORROWING [Date] German American Capital Corporation, as Administrative Agent for the Banks party to the Credit Agreement referred to below 31 West 52nd Street New York, New York 10019 Attention: Ladies and Gentlemen: The undersigned, ElderTrust Operating Limited Partnership, a Delaware limited partnership (the "Borrower"), refers to the Credit Agreement, dated as of January 30, 1998 (as amended from time to time, the "Credit Agreement," the terms defined therein being used herein as therein defined), among ElderTrust, the Borrower, various Banks (the "Banks"), Deutsche Bank AG, New York Branch, as Issuing Bank, and you, as Administrative Agent for the Banks and the Issuing Bank, and hereby gives you irrevocable notice pursuant to Section 1.03(a) of the Credit Agreement, that the undersigned hereby requests a Borrowing of Revolving Loans under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the "Proposed Borrowing") as required by Section 1.03(a) of the Credit Agreement: (i) The Business Day of the Proposed Borrowing is , .(1) ---------- --- (ii) The aggregate principal amount of the Proposed Borrowing is $ . ---------- (iii) The Revolving Loans to be made pursuant to the Proposed Borrowing shall be initially maintained as [Base Rate Loans] [Eurodollar Loans]. [(iv) The initial Interest Period for the Proposed Borrowing is _____ month(s).](2) - ------------------------ 1 Shall be a Business Day at least one Business Day in the case of Base Rate Loans and three Business Days in the case of Eurodollar Loans, in each case after the date hereof. 2 To be included for a Proposed Borrowing of Eurodollar Loans. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing: (A) the representations and warranties contained in the Credit Agreement and in the other Credit Documents are and will be true and correct in all material respects, both before and after giving effect to the Proposed Borrowing and to the application of the proceeds thereof, as though made on such date (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date); (B) no Default or Event of Default has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds thereof; and (C) set forth on Annex A attached hereto is the information required by Section 5.04(a) of the Credit Agreement, and each of the applicable conditions referred to in Sections 5.04(b), (c) and (d) of the Credit Agreement has been satisfied or will be satisfied on or before the date of the Proposed Borrowing. Very truly yours, ELDERTRUST OPERATING LIMITED PARTNERSHIP By: ElderTrust, its general partner By:_______________________________ Name: Title: ANNEX A [Set forth in reasonable detail the specific uses for the proceeds of such Revolving Loans and show the categories of such uses] EXHIBIT B-1 ----------- NOTE $_____________ New York, New York ------ ---, ---- FOR VALUE RECEIVED, ELDERTRUST OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership (the "Borrower"), hereby promises to pay to GERMAN AMERICAN CAPITAL CORPORATION or its registered assigns (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of German American Capital Corporation (the "Administrative Agent") located at 31 West 52nd Street, New York, New York 10019 on the Maturity Date (as defined in the Agreement referred to below) the principal sum of _______________________ DOLLARS ($____________) or, if less, the unpaid principal amount of all Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Notes referred to in the Credit Agreement, dated as of January 30, 1998, among ElderTrust, the Borrower, the lenders from time to time party thereto (including the Bank), Deutsche Bank AG, New York Branch, as Issuing Bank, and the Administrative Agent (as amended, modified or supplemented from time to time, the "Agreement") and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement) and is entitled to the benefits of the Guaranties (as defined in the Agreement). This Note is subject to voluntary prepayment and mandatory repayment prior to the Maturity Date, in whole or in part, as provided in the Agreement, and Loans may be converted from one Type (as defined in the Agreement) into another Type to the extent provided in the Agreement. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be or may become due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. ELDERTRUST OPERATING LIMITED PARTNERSHIP By: ElderTrust, its general partner By: _____________________________ Name: Title: EXHIBIT B-2 ----------- LETTER OF CREDIT REQUEST No. 1 Dated 2 ----- ----- German American Capital Corporation, as Administrative Agent under the Credit Agreement (as amended, modified or supplemented from time to time, the "Credit Agreement"), dated as of January 30, 1998, among ElderTrust, a Maryland real estate investment trust (the "REIT"), ElderTrust Operating Limited Partnership, a Delaware limited partnership (the "Borrower"), various lenders (the "Banks") from time to time party thereto, Deutsche Bank AG, New York Branch, as Issuing Bank (the "Issuing Bank") and the Administrative Agent 31 West 52nd Street New York, New York 10019. Attention: ______________________] Dear Sirs: We hereby request that Deutsche Bank AG, New York Branch, in its capacity as Issuing Bank under the captioned Credit Agreement, issue a standby Letter of Credit for the account of the undersigned on 3 (the "Date of Issuance") in the aggregate stated amount of 4 . The requested Letter of Credit shall be denominated in Dollars. For purposes of this Letter of Credit Request, unless otherwise defined herein, all capitalized terms used herein which are defined in the Credit Agreement shall have the respective meanings provided therein. The beneficiary of the requested Letter of Credit will be 5 , and such Letter of Credit will be in support of 6 and will have a stated expiration date of 7 . - ------------------------ 1 Letter of Credit Request Number. 2 Date of Letter of Credit Request. 3 Date of Issuance which shall be at least five Business Days after the date of this Letter of Credit Request (or such shorter period as is acceptable to the Issuing Bank). 4 Aggregate initial stated amount of Letter of Credit. 5 Insert name and address of beneficiary. 6 Insert description of L/C Supportable Obligations. 7 Insert last date upon which drafts may be presented which may not be later than the earlier of (x) the date which occurs 12 months after the Date of Issuance, or, if any such standby Letter of Credit is automatically extendable for successive periods of up to 12 months, a date not beyond the third Business Day prior to the Maturity Date or (y) the third Business Day prior to the Maturity Date. We hereby certify that: (1) the representations and warranties contained in the Credit Documents will be true and correct in all material respects on the Date of Issuance, both before and after giving effect to the issuance of the Letter of Credit requested hereby (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date); and (2) no Default or Event of Default has occurred and is continuing nor, after giving effect to the issuance of the Letter of Credit requested hereby, would such a Default or an Event of Default occur. ELDERTRUST OPERATING LIMITED PARTNERSHIP By: ElderTrust, its General Partner By --------------------------------------- Name: Title: EXHIBIT C --------- FORM OF SECTION 3.04(b)(ii) CERTIFICATE Reference is hereby made to the Credit Agreement, dated as of January 30, 1998, among ElderTrust, ElderTrust Operating Limited Partnership, the lenders from time to time party thereto, Deutsche Bank AG, New York Branch, as Issuing Bank, and German American Capital Corporation, as Administrative Agent (as amended from time to time, the "Credit Agreement"). Pursuant to the provisions of Section 3.04(b)(ii) of the Credit Agreement, the undersigned hereby certifies that it is not a "bank" as such term is used in Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended. [NAME OF BANK] By______________________________ Name: Title: Date: _________________, _____ EXHIBIT D --------- January 30, 1998 German American Capital Corporation, as Administrative Agent 31 W. 52nd Street New York, New York 10019 Re: Credit Agreement dated as of January 30, 1998 among ElderTrust, ElderTrust Operating Limited Partnership, the Banks listed therein, Deutsche Bank AG, New York Branch, as Issuing Bank, and German American Capital Corporation, as Administrative Agent and Collateral Agent Ladies and Gentlemen: This firm has acted as counsel to ElderTrust, a Maryland real estate investment trust (the "REIT"), ElderTrust Operating Limited Partnership, a Delaware limited partnership (the "Borrower"), and the subsidiaries of the Borrower identified on Schedule I attached hereto (individually, a "Subsidiary" and collectively, the "Subsidiaries"), in connection with the Credit Agreement, dated as of January 30, 1998 (the "Credit Agreement"), among the REIT, the Borrower, the banks listed on the signature pages thereof (the "Banks"), Deutsche Bank AG, New York Branch, as Issuing Bank, and German American Capital Corporation, as Administrative Agent and Collateral Agent (the "Agent"). This opinion letter is furnished to you pursuant to the requirements set forth in Section 4.03 of the Credit Agreement in connection with the Closing thereunder on the date hereof. Capitalized terms used herein which are defined in the Credit Agreement shall have the meanings set forth in the Credit Agreement, unless otherwise defined herein. For purposes of this opinion letter, we have examined copies of the following documents: 1. Executed copy of the Credit Agreement. 2. Executed copy of the Note. 3. Executed copy of the Pledge Agreement. 4. Executed copy of the Pledge and Security Agreement. 5. Executed copy of the Security Agreement. 6. Executed copy of the Subsidiaries Guaranty. 7. Executed copies of the Mortgages identified on Schedule II attached hereto (the "Mortgages"), including the Mortgage upon property owned by ET Sub-SMOB, L.L.C. ("SMOB") to be recorded in Wicomico County, Maryland (the "Maryland Mortgage"). 8. Executed copies of the Collateral Assignments identified on Schedule III attached hereto (the "Collateral Assignments"). 9. Completed UCC-1 forms naming the Borrower, the REIT (doing business as "ElderTrust REIT Co.") and each of the Subsidiaries as debtors and the Agent as secured party and executed by the Borrower, the REIT and each of the Subsidiaries, which UCC-1 forms (collectively, the "Credit Party Financing Statements") have been prepared for filing in the office of the Pennsylvania Department of State and in the chattel records of the Prothonotary of Chester County, Pennsylvania (collectively, the "Pennsylvania Filing Offices"). 10. Completed UCC-1 forms naming SMOB as debtor and the Agent as secured party and executed by SMOB, which UCC-1 forms (the "SMOB Financing Statements") have been prepared for filing in the Pennsylvania Filing Offices and in the office of the Maryland State Department of Assessments and Taxation ("MSDAT") (the "Maryland Filing Office"); and a completed UCC-1 form naming SMOB as debtor and the Agent as secured party and executed by SMOB, which UCC-1 form (the "Fixture Filing") has been prepared for filing in the land records of Wicomico County, Maryland. 11. The Amended and Restated Certificate of Limited Partnership of the Borrower, as certified by the Secretary of State of the State of Delaware on January 30, 1998, and as certified by the Secretary of the REIT, as general partner of the Borrower, on the date hereof as being complete, accurate and in effect. 12. The Second Amended and Restated Agreement of Limited Partnership of the Borrower, as certified by the Secretary of the REIT on the date hereof as being complete, accurate and in effect. 13. A certificate of good standing of the Borrower issued by the Secretary of State of the State of Delaware dated January 30, 1998. 14. A letter from CT Corporation System ("CT") dated January 29, 1998 stating that the Borrower's application for qualification to do business in the Commonwealth of Pennsylvania was filed on January 27, 1998. 15. The Amended and Restated Declaration of Trust of the REIT filed with the MSDAT on January 28, 1998, as certified by the Secretary of the REIT on the date hereof as being complete, accurate and in effect; and a certificate from the MSDAT dated January 29, 1998 stating that the REIT's Amended and Restated Declaration of Trust was accepted and approved for filing with the MSDAT on January 28, 1998. 16. The Amended and Restated Bylaws of the REIT, as certified by the Secretary of the REIT on the date hereof as being complete, accurate and in effect. 17. A certificate of good standing of the REIT issued by the MSDAT dated January 28, 1998 and a letter from CT dated January 30, 1998 stating that CT has confirmed by telephone with the MSDAT that the REIT is active as of such date. 18. A letter from CT dated January 29, 1998 stating that the REIT's application for qualification to do business in the Commonwealth of Pennsylvania (under the name "ElderTrust REIT Co.") was filed on January 27, 1998. 19. With respect to each of the Subsidiaries that is a limited liability company, as shown on Schedule I attached hereto (the "LLC Subsidiaries"), (i) the certificate of formation of such Subsidiary, as certified by the Secretary of State of the State of Delaware on January 27, 1998, and as certified by the Secretary of the REIT, on behalf of the Borrower, as the sole member of each of such Subsidiaries, on the date hereof as being complete, accurate and in effect, and (ii) the limited liability company agreement of such Subsidiary, as certified by the Secretary of the REIT on the date hereof as being complete, accurate and in effect. 20. With respect to each of the Subsidiaries that is a registered limited liability partnership, as shown on Schedule I attached hereto (the "Partnership Subsidiaries"), (i) the certificate of limited partnership of such Subsidiary, as certified by the Virginia State Corporation Commission ("VSCC") on January 28, 1998, and as certified by the Secretary of the REIT, on behalf of the Borrower, as the sole member of ET GENPAR, L.L.C ("GENPAR"), which is the general partner of each of such Subsidiaries, on the date hereof as being complete, accurate and in effect and (ii) the agreement of limited partnership of such Subsidiary, as certified by the Secretary of the REIT on the date hereof as being complete, accurate and in effect. 21. Certificates of good standing of each of the Subsidiaries issued by the Secretary of State of the State of Delaware or the VSCC, as applicable, as further described on Schedule I attached hereto. 22. A letter from CT, dated January 29, 1998 stating that each Subsidiary's application for qualification to do business in the Commonwealth of Pennsylvania was filed on January 27, 1998 and, if the Property owned by such Subsidiary is located in Massachusetts or New Hampshire, that such Subsidiary's application for qualification to do business in such jurisdiction was filed on the date set forth in such letter. 23. A foreign qualification certificate of ET-Sub Lopatcong, L.L.C. ("Lopatcong") issued by the Secretary of State of the State of New Jersey dated January 21, 1998; a foreign qualification certificate of SMOB issued by the MSDAT dated January 20, 1998; and foreign qualification certificates of ET Sub-Windsor I, L.L.C. ("Windsor I") and ET Sub-Windsor II, L.L.C. ("Windsor II") issued by the Secretary of State of the State of Connecticut dated January 27, 1998. 24. Certain resolutions of the Board of Trustees of the REIT, adopted by unanimous written consent dated as of January 30, 1998, as certified by the Secretary of the REIT on the date hereof as being complete, accurate and in effect, relating to, among other things, authorization of the Credit Agreement, the Pledge Agreement, the Pledge and Security Agreement and the Security Agreement and arrangements in connection therewith. 25. Action by the REIT, as the sole general partner of the Borrower, adopting certain resolutions by written consent dated as of January 30, 1998, as certified by the Secretary of the REIT on the date hereof as being complete, accurate and in effect, relating to, among other things, authorization on behalf of the Borrower of the Credit Agreement, the Notes, the Pledge Agreement, the Pledge and Security Agreement, the Security Agreement and the Collateral Assignments and arrangements in connection therewith. 26. Action by the Borrower, as the sole member of each of the LLC Subsidiaries, adopting certain resolutions by written consent dated as of January 30, 1998, as certified by the Secretary of the REIT on the date hereof as being complete, accurate and in effect, relating to, among other things, authorization on behalf of the LLC Subsidiaries of the Subsidiaries Guaranty, the Pledge Agreement, the Pledge and Security Agreement, the Security Agreement and arrangements in connection therewith. 27. Action by GENPAR, as the sole general partner of each of the Partnership Subsidiaries, adopting certain resolutions by written consent dated as of January 30, 1998, as certified by the Secretary of the REIT on the date hereof as being complete, accurate and in effect, relating to, among other things, authorization on behalf of the Partnership Subsidiaries of the Subsidiaries Guaranty, the Pledge Agreement, the Pledge and Security Agreement, the Security Agreement and arrangements in connection therewith. 28. A certificate of the Secretary of the REIT, dated as of the date hereof, as to the incumbency and signatures of certain officers of the REIT. 29. Certain agreements and contracts to which either the Borrower or the REIT is a party which were filed as Exhibits to the REIT's Registration Statement on Form S-11 (No. 333-37451), filed with the Securities and Exchange Commission on October 8, 1997, as amended (the "Registration Statement"). 30. A certificate of certain officers of the REIT, dated as of the date hereof, as to certain facts relating to the REIT, the Borrower and the Subsidiaries. 31. Hogan & Hartson L.L.P. litigation docket. The Pledge Agreement, the Pledge and Security Agreement, the Security Agreement and the Collateral Assignments are sometimes hereinafter referred to collectively as the "Security Documents." The Credit Agreement, the Note, the Security Documents and the Subsidiaries Guaranty are sometimes hereinafter referred to collectively as the "Financing Documents." The New York UCC, the Pennsylvania UCC, the Maryland UCC and the District of Columbia UCC (as each such term is hereinafter defined), as applicable, are hereinafter referred to as the "UCC." We have not, except as specifically identified above, made any independent review or investigation of factual or other matters, including the organization, existence, good standing, assets, business or affairs of the Borrower, the REIT or any of the Subsidiaries (collectively, the "Credit Parties"). In our examination of the Financing Documents and the aforesaid certificates, records, documents and agreements, we have assumed the genuineness of all signatures (other than those on behalf of the Credit Parties on the Financing Documents and the Mortgages), the legal capacity of all natural persons, the accuracy and completeness of all documents submitted to us, the authenticity of all original documents and the conformity to authentic original documents of all documents submitted to us as copies (including telecopies). We also have assumed the accuracy, completeness and authenticity of the foregoing certifications (of public officials, governmental agencies and departments and corporate officers) and statements of fact, on which we are relying, and have made no independent investigations thereof. In rendering the following opinions we have relied as to factual matters, without independent investigation, upon the representations, warranties and certifications made by the Borrower, the REIT and the Subsidiaries in or pursuant to the Financing Documents and the Mortgages and upon the officers' certificates identified in Paragraphs 28 and 30 above. This opinion letter is given, and all statements herein are made, in the context of the foregoing. As used in this opinion letter, the phrase "to our knowledge" means the actual knowledge (that is, the conscious awareness of facts or other information) of lawyers in the firm who have given substantive legal attention to representation of the Credit Parties in connection with the Credit Agreement and the Registration Statement. For purposes of this opinion letter, we have assumed that (i) each of the parties to the Financing Documents and the Mortgages (other than the Credit Parties) has all requisite power and authority under all applicable laws, regulations and governing documents to execute and deliver the Financing Documents and the Mortgages and to perform its obligations thereunder, (ii) each of such parties has duly authorized, executed and delivered the Financing Documents and the Mortgages to which it is a party, (iii) each of such parties is validly existing and in good standing in all necessary jurisdictions, (iv) the Financing Documents and the Mortgages constitute valid and binding obligations of each such party, as applicable, enforceable against it in accordance with their respective terms and (v) there has been no material mutual mistake of fact or misunderstanding or fraud, duress or undue influence, in connection with the negotiation, execution or delivery of the Financing Documents and the Mortgages. For purposes of the opinions expressed in Paragraphs (m) through (q) below, we have made the following additional assumptions, without any independent verification or investigation: (i) that each of the Credit Parties owns the collateral or property described in the Security Documents purported to be owned by it and the Maryland Mortgage, as applicable, (ii) that the Credit Party Financing Statements and the SMOB Financing Statements will be timely filed (and in any event within ten (10) days after the date hereof) in the Pennsylvania Filing Office and the Maryland Filing Office, (iii) that pending the completion of the filings of the Credit Party Financing Statements, the SMOB Financing Statements and the Fixture Filing, operative facts (and applicable law) will remain unchanged, and (iv) that the Pledged Notes and the certificates representing the Pledged Stock (as such terms are defined in the Pledge Agreement) and the Underlying Notes (as defined in the Collateral Assignments) in existence on the date hereof (collectively, the "Possessory Collateral") are being delivered to the Agent in the District of Columbia, who will take such Possessory Collateral to New York, New York and maintain possession thereof in the State of New York at all times thereafter. This opinion letter is based as to matters of law solely on applicable provisions of (i) the Delaware Revised Uniform Limited Partnership Act, as amended (the "Delaware Limited Partnership Act"), (ii) the Delaware Limited Liability Company Act, as amended (the "Delaware LLC Act"), (iii) the Virginia Revised Uniform Limited Partnership Act, as amended (the "Virginia Limited Partnership Act"), (iv) the Virginia Revised Uniform Partnership Act, as amended (the "Virginia Partnership Act"), (v) New York law, including the Uniform Commercial Code as in effect in the State of New York (the "New York UCC") (but not including any statutes, ordinances, administrative decisions, rules or regulations of any political subdivision of the State of New York), (vi) Maryland law, including Title 8 of the Maryland Corporations and Associations Code Annotated, as amended (the "Maryland REIT Law"), and the Uniform Commercial Code as in effect in the State of Maryland (the "Maryland UCC") (but not including any statutes, ordinances, administrative decisions, rules or regulations of any political subdivision of the State of Maryland), (vii) the Uniform Commercial Code as in effect in the Commonwealth of Pennsylvania (the "Pennsylvania UCC"), (viii) the Uniform Commercial Code as in effect in the District of Columbia (the "District of Columbia UCC") and (ix) except as set forth below, federal statutes and regulations, including the Investment Company Act of 1940, as amended (the "Investment Company Act"), and Regulations G, T, U and X of the Board of Governors of the Federal Reserve System; it being understood that, with respect to clauses (v), (vi) and (ix) above, the opinions expressed below are based upon our review of those laws, statutes and regulations that, in our experience, are normally applicable to transactions of the type contemplated by the Financing Documents and the Mortgages. Without limiting the generality of the foregoing, we express no opinion as to federal or state antitrust or unfair competition laws or regulations, tax laws or regulations or federal or state securities laws or regulations, or any other laws, statutes, ordinances, rules or regulations not expressly identified above. Based upon, subject to and limited by the foregoing, we are of the opinion that: (a) The Borrower is a limited partnership formed, validly existing and in good standing under the laws of the State of Delaware. The Borrower has filed an application to qualify as a foreign limited partnership in the Commonwealth of Pennsylvania on the date specified in the letter referred to in Paragraph 14 above. The Borrower has the partnership power and partnership authority under its limited partnership agreement and the Delaware Limited Partnership Act to transact the business in which it is currently engaged, as described in the REIT's final Prospectus dated January 26, 1998 (the "Prospectus"). (b) The Borrower has the partnership power and partnership authority under its limited partnership agreement and the Delaware Limited Partnership Act to execute and deliver the Financing Documents to which it is a party and to perform its obligations thereunder. The execution, delivery and performance as of the date hereof by the Borrower of the Financing Documents to which it is a party have been duly authorized by all necessary partnership action of the Borrower. (c) The REIT was formed, and is validly existing and in good standing under the Maryland REIT Law. The REIT has filed an application to qualify as a foreign real estate investment trust in the Commonwealth of Pennsylvania under the name "ElderTrust REIT Co." on the date specified in the letter referred to in Paragraph 18 above. The REIT has the trust power and trust authority under its declaration of trust and the Maryland REIT Law to transact the business in which it is currently engaged, as described in the Prospectus. (d) The REIT has the trust power and trust authority under its declaration of trust and bylaws and under the Maryland REIT Law to execute and deliver the Financing Documents to which it is a party and to perform its obligations thereunder. The execution, delivery and performance as of the date hereof by the REIT of the Financing Documents to which it is a party have been duly authorized by all necessary trust action of the REIT. (e) Each of the LLC Subsidiaries is a limited liability company formed, validly existing and in good standing under the laws of the State of Delaware as of the dates of the certificates referred to in Paragraph 21 above. Each of the LLC Subsidiaries has filed an application to qualify as a foreign limited liability company in the Commonwealth of Pennsylvania and, if the Property owned by such Subsidiary is located in Massachusetts or New Hampshire, such Subsidiary's application to qualify as a foreign limited liability company in such jurisdiction was filed on the dates specified in the letter referred to in Paragraph 22 above. Each of Lopatcong and SMOB is registered as a foreign limited liability company in the States of New Jersey and Maryland, respectively, as of the dates of the certificates referred to in Paragraph 23 above. Windsor I and Windsor II are registered as foreign limited liability companies as of the date of the certificates referred to in Paragraph 23 above. Each of the LLC Subsidiaries has the power and authority as a limited liability company under its limited liability company agreement and the Delaware LLC Act to transact the business in which it is currently engaged, as described in the Prospectus. (f) Each of the LLC Subsidiaries has the power and authority as a limited liability company under its limited liability company agreement and the Delaware LLC Act to execute and deliver, as applicable, the Subsidiaries Guaranty, the Security Documents and the Mortgage to which it is a party and to perform its obligations thereunder. The execution, delivery and performance as of the date hereof by each of the LLC Subsidiaries, as applicable, of the Subsidiaries Guaranty, the Security Documents and the Mortgage to which it is a party have been duly authorized by all necessary limited liability company action of such Subsidiary. (g) Each of the Partnership Subsidiaries is a limited partnership formed, validly existing and in good standing under the laws of the Commonwealth of Virginia as of the dates of the certificates referred to in Paragraph 21 above. Each of the Partnership Subsidiaries has filed an application to qualify as a foreign limited partnership in the Commonwealth of Pennsylvania on the dates specified in the letter referred to in Paragraph 22 above. Each of the Partnership Subsidiaries has the partnership power and partnership authority under its limited partnership agreement, the Virginia Limited Partnership Act and the Virginia Partnership Act to transact the business in which it is currently engaged, as described in the Prospectus. (h) Each of the Partnership Subsidiaries has the partnership power and authority under its limited partnership agreement, the Virginia Limited Partnership Act and the Virginia Partnership Act to execute and deliver, as applicable, the Subsidiaries Guaranty, the Security Documents and the Mortgage to which it is a party and to perform its obligations thereunder. The execution, delivery and performance as of the date hereof by each of the Partnership Subsidiaries, as applicable, of the Subsidiaries Guaranty, the Security Documents and the Mortgage to which it is a party have been duly authorized by all necessary partnership action of such Subsidiary. (i) Each of the Financing Documents has been duly executed and delivered on behalf of each of the Credit Parties, as applicable, and constitutes a valid and binding obligation of such Credit Party, enforceable in accordance with its terms, except as may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally (including, without limitation, the effect of statutory and other law regarding fraudulent conveyances, fraudulent transfers and preferential transfers), (ii) as may be limited by the exercise of judicial discretion and the application of principles of equity, including, without limitation, requirements of good faith, fair dealing, conscionability and materiality (regardless of whether such agreements are considered in a proceeding in equity or at law) and (iii) that certain rights, remedies, waivers and other provisions of the Financing Documents may not be enforceable in accordance with their terms, but, subject to the exceptions, qualifications and limitations set forth above and elsewhere in this opinion letter, such unenforceability would not render the Financing Documents invalid as a whole or (A) preclude the enforcement of the obligations of the Borrower to pay the principal of the Note and interest thereon at the rate or rates set forth therein (except that no opinion is expressed herein with respect to any increase in rate after default other than as expressly set forth in Paragraph (t) below with respect to usury), (B) preclude the enforcement of the obligations of the REIT and the Subsidiaries under the Credit Agreement and the Subsidiaries Guaranty, respectively, to pay the Guaranteed Obligations (as such term is defined in the Credit Agreement and the Subsidiaries Guaranty, as applicable), (C) impair the Agent's right to accelerate and demand payment of the Note upon the occurrence of an Event of Default in accordance with the Credit Agreement and (D) assuming that the Agent will comply with all requirements of applicable procedural and substantive law, preclude the foreclosure of the liens and security interests created under the Security Documents in accordance with Part 5 of Article 9 of the UCC (except that no opinion is expressed herein with respect to the creation or perfection of any liens or security interests under any of the Collateral Assignments other than as expressly set forth in Paragraph (o) below with respect to the Underlying Notes). (j) The Maryland Mortgage has been duly executed and delivered on behalf of SMOB and constitutes a valid and binding obligation of SMOB enforceable in accordance with its terms, except as may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally (including, without limitation, the effect of statutory and other law regarding fraudulent conveyances, fraudulent transfers and preferential transfers), (ii) as may be limited by the exercise of judicial discretion and the application of principles of equity, including, without limitation, requirements of good faith, fair dealing, conscionability and materiality (regardless of whether such agreements are considered in a proceeding in equity or at law) and (iii) that certain rights, remedies, waivers and other provisions of the Maryland Mortgage may not be enforceable in accordance with their terms, but, subject to the exceptions, qualifications and limitations set forth above and elsewhere in this opinion letter, such unenforceability would not render the Maryland Mortgage invalid as a whole or, assuming that the Agent will comply with all requirements of applicable procedural and substantive law, preclude the foreclosure of the liens and security interests created under the Maryland Mortgage. (k) The execution, delivery and performance as of the date hereof by each of the Credit Parties of the Financing Documents and the Mortgages do not, as to each such Credit Party, (i) violate the Maryland REIT Law, the Delaware Limited Partnership Act, the Delaware LLC Act, the Virginia Limited Partnership Act or the Virginia Partnership Act, as applicable, or its declaration of trust, bylaws, limited partnership agreement, limited liability company agreement, certificate of incorporation or bylaws, as applicable, (ii) violate any applicable federal or New York or Maryland state statute or regulation, or, to our knowledge, any order of any court or governmental authority that is binding upon it, (iii) breach or constitute a default under any agreement or contract filed as an exhibit to the Registration Statement to which any Credit Party is a party or (iv) result in or cause the creation of any lien upon any of its properties pursuant to any agreement or contract referred to in clause (iii) above. (l) No approval or consent of, or registration or filing with, any federal or New York or Maryland state governmental authority is required to be obtained or made by any of the Credit Parties in connection with the execution, delivery and performance as of the date hereof by it, as applicable, of the Financing Documents and the Mortgage to which it is a party. The Pledge and Security Agreement and the Security Agreement create in favor of the Agent security interests in each Credit Party's right, title and interest in, to and under the collateral specified therein purported to be owned by such Credit Party, to the extent that (i) such collateral consists of general intangibles, accounts, documents, chattel paper, equipment, inventory, instruments and proceeds of the foregoing (as such terms are defined in the UCC), (ii) the UCC applies to security interests in such collateral and (iii) creation of security interests in any collateral consisting of governmental authorizations, licenses or permits, contracts with governmental organizations or rights (including rights to payment) under such contracts is permissible under applicable federal law and applicable state law other than the UCC (to the extent encompassed by the foregoing clauses (i), (ii), and (iii), the "Collateral"). To the extent that UCC security interests in the Collateral owned by any of the Credit Parties, other than any such Collateral constituting fixtures, or constituting equipment or inventory located outside the Commonwealth of Pennsylvania, can be perfected currently by the filing of financing statements under the UCC, the filing of the Credit Party Financing Statements in the Pennsylvania Filing Offices, with the appropriate fees and recording taxes (if any) paid, will be sufficient to perfect such security interests. To the extent, if any, that the certificates representing the partnership interests in the Borrower (the "Units") constitute "instruments" under the UCC, the taking and retention of possession by the Agent of such certificates representing the Units held by the REIT in accordance with the terms of the Pledge and Security Agreement are sufficient to perfect such security interests in such Units. (m) The Pledge Agreement creates in favor of the Agent security interests in each Credit Party's right, title and interest in, to and under the Pledged Securities (as defined in the Pledge Agreement) pledged by such Credit Party. The taking and retention of possession by the Agent of the Notes and the certificate(s) representing the Pledged Stock in accordance with the terms of the Pledge Agreement are sufficient to perfect such security interests in the Pledged Securities. (n) Insofar as New York law is the governing law, the Collateral Assignments create in favor of the Agent security interests in the Borrower's right, title, and interest in, to and under the Underlying Notes. The taking and retention of possession by the Agent of the Underlying Notes in accordance with the terms of the Collateral Assignments are sufficient to perfect such security interests in the Underlying Notes. (o) The Maryland Mortgage creates in favor of the Agent security interests in SMOB's right, title and interest in, to and under the property specified in the granting clauses thereof, to the extent that (i) such property consists of general intangibles, accounts, equipment, inventory and proceeds of the foregoing (as such terms are defined in the UCC), (ii) the UCC applies to security interests in such property and (iii) creation of security interests in any property consisting of governmental authorizations, licenses or permits, contracts with governmental organizations or rights (including rights to payment) under such contracts is permissible under applicable federal law and applicable state law other than the UCC (to the extent encompassed by the foregoing clauses (i), (ii) and (iii), the "Maryland Collateral"). To the extent that UCC security interests in the Maryland Collateral owned by SMOB can be perfected currently by the filing of financing statements under the UCC, the filing of the SMOB Financing Statements in the Pennsylvania Filing Offices and the Maryland Filing Office and the filing of the Fixture Filing in the land records of Wicomico County, Maryland, in each case with the appropriate fees and recording taxes, if any, paid, are sufficient to perfect such security interests. Each of the SMOB Financing Statement which has been prepared for filing in the Maryland Filing Office and the Fixture Filing satisfies the formal requisites of financing statements set forth in Section 9-402 of the Maryland UCC. (p) The Maryland Mortgage satisfies the requirements relating to the form of deeds of trust set forth in Section 4-202, Real Property Article, of the Annotated Code of Maryland, sufficiently so that, upon proper recordation and indexing of the Maryland Mortgage among the land records of Wicomico County, Maryland, the Maryland Mortgage will create a valid lien on the Property described therein in favor of the Agent. (q) Neither the REIT nor the Borrower is an "investment company" within the meaning of the Investment Company Act. (r) The use by the Borrower of the Letters of Credit and of the proceeds of the Loans as contemplated in the Credit Agreement does not violate Regulations G, T, U or X of the Board of Governors of the Federal Reserve System. (s) Under applicable New York usury laws, the Banks and the Issuing Bank are permitted to charge interest with respect to the Loans and any Unpaid Drawings at the rate or rates set forth in the Credit Agreement and the Notes. You have also asked us to assume for purposes of the subject matter addressed in the next sentence that Maryland law is applicable. Based on that assumption, under Section 12-103(e), Commercial Law Article, of the Annotated Code of Maryland, the Banks and the Issuing Bank may charge interest with respect to the Loans and any Unpaid Drawings at the rate or rates set forth in the Credit Agreement and the Notes. * * * * * In addition, you have requested our opinion as to whether the partnership interests in the Borrower (the "Units") constitute "securities" within the meaning of Section 8-102 of the Delaware Uniform Commercial Code (the "Delaware UCC"). Under Section 8-103(c) of the Delaware UCC, an interest in a partnership is not a security unless it is dealt in or traded on securities exchanges or in securities markets, its terms expressly provide that it is a security governed by Article 8 of the Delaware UCC or it is an investment company security. Because the Units do not satisfy any of these criteria, it is our opinion that the Units are not "securities" for purposes of Article 8 of the Delaware UCC. * * * * * Based solely upon the officers' certificate identified in Paragraph 30 above and a review of this firm's litigation docket, we hereby confirm to you that, to our knowledge, there are no actions, suits or proceedings pending or threatened against any of the Credit Parties, or in which any of the Credit Parties is a party, before any court or governmental department, commission, board, bureau, agency or instrumentality that question the validity of the Financing Documents or any action taken or to be taken pursuant thereto, or that seek to enjoin or otherwise prevent the consummation of the transactions contemplated by the Financing Documents or to recover in damages or obtain other relief as a result thereof, or that, if determined adversely to any such Credit Party, would result in any adverse change in the financial condition of the REIT and its subsidiaries, taken as a whole, or the Borrower and its subsidiaries, taken as a whole, which the REIT or the Borrower has advised us is material. We assume no obligation to advise you of any changes in the foregoing subsequent to the delivery of this opinion letter. This opinion letter has been prepared solely for your use and the use of the Banks and the Issuing Bank in connection with the Closing under the Credit Agreement on the date hereof, and should not be quoted in whole or in part or otherwise be referred to, nor be filed with or furnished to any governmental agency or other person or entity, without the prior written consent of this firm, except that your successors and the Issuing Bank's successors and any transferees of the Notes may rely upon this opinion letter (it being understood that this opinion letter speaks only as of the date hereof, and that no such reliance will have any effect on the scope, phrasing or originally intended use of this opinion letter). Very truly yours, HOGAN & HARTSON L.L.P. SCHEDULE I ---------- Borrower Subsidiaries
Type of Entity Date of and Formation Good Standing Name Jurisdiction Certificate - ---- ---------------- ------------- ET GENPAR, L.L.C. Delaware LLC January 27, 1998 ET Sub-Heritage Woods, L.L.C. Delaware LLC January 27, 1998 ET Sub-Pleasant View, L.L.C. Delaware LLC January 27, 1998 ET Sub-Rittenhouse Limited Partnership, L.L.P. Virginia limited January 28, 1998 liability partnership ET Sub-Lopatcong, L.L.C. Delaware LLC January 27, 1998 ET Sub-Wayne I Limited Partnership, L.L.P. Virginia limited January 28, 1998 liability partnership ET Sub-Pennsburg Manor Limited Partnership, Virginia limited January 28, 1998 L.L.P. liability partnership ET Sub-POB I Limited Partnership, L.L.P. Virginia limited January 28, 1998 liability partnership ET Sub-SMOB, L.L.C. Delaware LLC January 27, 1998 ET Sub-Windsor I, L.L.C. Delaware LLC January 27, 1998 ET Sub-Windsor II, L.L.C. Delaware LLC January 27, 1998
SCHEDULE II ----------- Mortgages 1. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement, made by ET Sub-Pennsburg Manor Limited Partnership, L.L.P., as Mortgagor to German American Capital Corporation, as Collateral Agent, as Mortgagee, dated as of January 30, 1998 (Harston Hall NRC). 2. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement, made by ET-Sub Heritage Woods, L.L.C., as Mortgagor to German American Capital Corporation, as Collateral Agent, as Mortgagee, dated as of January 30, 1998 (Heritage Woods). 3. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement, made by ET Sub-Lopatcong, L.L.C., as Mortgagor to German American Capital Corporation, as Collateral Agent, as Mortgagee, dated as of January 30, 1998 (Lopatcong Care Center). 4. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement, made by ET Sub-Pennsburg Manor Limited Partnership, L.L.P., as Mortgagor to German American Capital Corporation, as Collateral Agent, as Mortgagee, dated as of January 30, 1998 (Pennsburg Manor NRC). 5. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement, made by ET Sub-Pleasant View, L.L.C., as Mortgagor to German American Capital Corporation, as Collateral Agent, as Mortgagee, dated as of January 30, 1998 (Pleasant View Retirement Center). 6. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement, made by ET Sub-POB I Limited Partnership, L.L.P., as Mortgagor to German American Capital Corporation, as Collateral Agent, as Mortgagee, dated as of January 30, 1998 (Professional Office Building I). 7. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement, made by ET Sub-Rittenhouse Limited Partnership, L.L.P., as Mortgagor to German American Capital Corporation, as Collateral Agent, as Mortgagee, dated as of January 30, 1998 (Rittenhouse Care Center). 8. Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement, made by ET Sub-SMOB. L.L.C., as Mortgagor to the Trustee named therein for the benefit of German American Capital Corporation, as Collateral Agent, as Mortgagee, dated as of January 30, 1998 (Salisbury MOB). 9. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement, made by ET-Sub Wayne I Limited Partnership, L.L.P., as Mortgagor to German American Capital Corporation, as Collateral Agent, as Mortgagee, dated as of January 30, 1998 (Wayne NRC). 10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement, made by ET Sub-Windsor II, L.L.C., as Mortgagor to German American Capital Corporation, as Collateral Agent, as Mortgagee, dated as of January 30, 1998 (Windsor Clinic Training Facility). 11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing Statement, made by ET Sub-Windsor I, L.L.C., as Mortgagor to German American Capital Corporation, as Collateral Agent, as Mortgagee, dated as of January 30, 1998 (Windsor Office Building). SCHEDULE III ------------ Collateral Assignments 1. Assignment of Mortgage and Pledge Agreement between ElderTrust Operating Limited Partnership, as Assignor and Pledgor, and German American Capital Corporation, as Collateral Agent, dated as of January 30, 1998 (Coquina Place). 2. Assignment of Mortgage and Pledge Agreement between ElderTrust Operating Limited Partnership, as Assignor and Pledgor, and German American Capital Corporation, as Collateral Agent, dated as of January 30, 1998 (Harbor Place). 3. Assignment of Mortgage and Pledge Agreement between ElderTrust Operating Limited Partnership, as Assignor and Pledgor, and German American Capital Corporation, as Collateral Agent, dated as of January 30, 1998 (Mifflin). 4. Assignment of Mortgage and Pledge Agreement between ElderTrust Operating Limited Partnership, as Assignor and Pledgor, and German American Capital Corporation, as Collateral Agent, dated as of January 30, 1998 (Lehigh Manor). 5. Assignment of Mortgage and Pledge Agreement between ElderTrust Operating Limited Partnership, as Assignor and Pledgor, and German American Capital Corporation, as Collateral Agent, dated as of January 30, 1998 (Berkshire Manor). 6. Assignment of Mortgage and Pledge Agreement between ElderTrust Operating Limited Partnership, as Assignor and Pledgor, and German American Capital Corporation, as Collateral Agent, dated as of January 30, 1998 (Oaks). 7. Assignment of Mortgage and Pledge Agreement between ElderTrust Operating Limited Partnership, as Assignor and Pledgor, and German American Capital Corporation, as Collateral Agent, dated as of January 30, 1998 (Montchanin). 8. Assignment of Mortgage and Pledge Agreement between ElderTrust Operating Limited Partnership, as Assignor and Pledgor, and German American Capital Corporation, as Collateral Agent, dated as of January 30, 1998 (Sanatoga). EXHIBIT E --------- [NAME OF CREDIT PARTY] Officers' Certificate I, the undersigned, the [Secretary/Assistant Secretary] of [NAME OF CREDIT PARTY] [NAME OF GENERAL PARTNER OF THE APPLICABLE PARTNERSHIP CREDIT PARTY, the General Partner of _____________], a [corporation] [partnership] [limited liability company] organized and existing under the laws of the State of ________ (the "Company"), DO HEREBY CERTIFY that: 1. This Certificate is furnished pursuant to the Credit Agreement, dated as of January 30, 1998 among ElderTrust, ElderTrust Operating Limited Partnership, the lenders from time to time party thereto, Deutsche Bank AG, New York Branch, as Issuing Bank, and German American Capital Corporation, as Administrative Agent (such Credit Agreement, as in effect on the date of this Certificate, being herein called the "Credit Agreement"). Unless otherwise defined herein, capitalized terms used in this Certificate shall have the meanings set forth in the Credit Agreement. 2. The following named individuals are presently the elected officers of the Company, each holds the office of the Company set forth opposite his or her name below and has held such office as of the date of signing of any Credit Document. The signature written opposite the name and title of each such officer below is his or her correct signature. Name(1) Office Signature - -------------------- -------------------- ------------------------- - -------------------- -------------------- ------------------------- - -------------------- -------------------- ------------------------- - -------------------- -------------------- ------------------------- 3. Attached hereto as Exhibit A is a true and correct copy of the [Certificate of Incorporation of the Company] [Certificate of Limited Partnership of the Company] [Certificate of Limited Liability Company] as filed in the Office of the Secretary of State of the State of its formation, together with all amendments thereto adopted through the date hereof. 4. Attached hereto as Exhibit B is a true and correct copy of the [By-Laws of the Company] [Partnership Agreement of the Company] [Limited Liability Company Agreement], together with all amendments thereto, which were duly adopted and are in full force and effect on the date hereof. 5. Attached hereto as Exhibit C is a true and correct copy of resolutions which were duly adopted on __________, 1998 by [unanimous written consent of the Board of [Directors] [Managers] of the Company] [the written consent of the General Partner of the Company], and said resolutions have not been rescinded, amended or modified. Except as attached hereto as Exhibit C, no resolutions have been adopted by the Company which deal with the execution, delivery or performance of any of the Credit Documents to which the Company is party. 6. Attached hereto as Exhibit E are true and correct copies of all Debt Agreements referred to in Section 4.05 of the Credit Agreement. 2 7. I know of no proceeding for the dissolution or liquidation of the Company or threatening its existence. IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of _______, 1998. [NAME OF CREDIT PARTY] ------------------------------ Name: Title: - -------- 1 Include name, office and signature of each officer who will sign any Credit Document. 2 Insert for Officers' Certificates of the Borrower only. EXHIBIT F-1 ----------- PLEDGE AGREEMENT PLEDGE AGREEMENT, dated as of January 30, 1998 (as amended, modified or supplemented from time to time, this "Agreement"), made by each of the undersigned pledgors (each, a "Pledgor" and, together with any other entity that becomes a party hereto pursuant to Section 22 hereof, the "Pledgors"), in favor of GERMAN AMERICAN CAPITAL CORPORATION, as Collateral Agent (the "Pledgee"), for the benefit of the Secured Creditors (as defined below). Except as otherwise defined herein, capitalized terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. W I T N E S S E T H : WHEREAS, ElderTrust, a Maryland real estate investment trust (the "REIT"), ElderTrust Operating Limited Partnership (the "Borrower"), various lenders from time to time party thereto (the "Banks"), Deutsche Bank AG, New York Branch, as Issuing Bank (the "Issuing Bank"), and German American Capital Corporation, as Administrative Agent (together with any successor administrative agent, the "Administrative Agent"), have entered into a Credit Agreement, dated as of January 30, 1998, providing for the making of Loans to the Borrower and the issuance of and participation in Letters of Credit for the account of the Borrower, all as contemplated therein (as amended, modified or supplemented from time to time, the "Credit Agreement") (the Banks, the Issuing Bank, the Administrative Agent and the Pledgee are herein called the "Bank Creditors"); WHEREAS, the Borrower may at any time and from time to time enter into one or more Interest Rate Protection Agreements or Other Hedging Agreements with one or more Banks or affiliates thereof (each such Bank or affiliate, even if the respective Bank subsequently ceases to be a Bank under the Credit Agreement for any reason, together with such Bank's or affiliate's successors and assigns, if any, collectively, the "Other Creditors," and together with the Bank Creditors, are herein called the "Secured Creditors"); WHEREAS, pursuant to the Parent Guaranty, the Parent Guarantor has guaranteed to the Secured Creditors the payment when due of all obligations and liabilities of the Borrower under or with respect to the Credit Documents and the Interest Rate Protection Agreements and Other Hedging Agreements; WHEREAS, pursuant to the Subsidiaries Guaranty, each Subsidiary Guarantor has jointly and severally guaranteed to the Secured Creditors the payment when due of all obligations and liabilities of the Borrower under or with respect to the Credit Documents and the Interest Rate Protection Agreements and Other Hedging Agreements; WHEREAS, it is a condition precedent to the extensions of credit under the Credit Agreement that each Pledgor shall have executed and delivered to the Pledgee this Agreement; and WHEREAS, each Pledgor desires to execute this Agreement to satisfy the condition described in the preceding paragraph; NOW, THEREFORE, in consideration of the benefits accruing to each Pledgor, the receipt and sufficiency of which are hereby acknowledged, each Pledgor hereby makes the following representations and warranties to the Pledgee for the benefit of the Secured Creditors and hereby covenants and agrees with the Pledgee for the benefit of the Secured Creditors as follows: 1. SECURITY FOR OBLIGATIONS. This Agreement is made by each Pledgor for the benefit of the Secured Creditors to secure: (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities (including, without limitation, the principal of and interest on the Notes (as defined in the Credit Agreement) issued by, and Loans made to, the Borrower under the Credit Agreement, all reimbursement obligations and Unpaid Drawings with respect to Letters of Credit, and all indemnities, fees, expenses and interest thereon or owed thereunder) of such Pledgor to the Bank Creditors, whether now existing or hereafter incurred under, arising out of or in connection with the Credit Agreement and the other Credit Documents (including, without limitation, in the case of the Guarantor, all of its obligations and liabilities under its Guaranty) to which such Pledgor is a party and the due performance and compliance by such Pledgor with all of the terms, conditions and agreements contained in the Credit Agreement and in such other Credit Documents (all such principal, interest, obligations and liabilities described in this clause (i) being herein collectively called the "Credit Agreement Obligations"); (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities of such Pledgor to the Other Creditors, whether now existing or hereafter incurred under, arising out of or in connection with any Interest Rate Protection Agreement or Other Hedging Agreement (including, without limitation, in the case of the Guarantor, all of its obligations and liabilities under its Guaranty) and the due performance and compliance by such Pledgor with all the terms, conditions and agreements contained in the Interest Rate Protection Agreements or Other Hedging Agreements (all such obligations and liabilities described in this clause (ii) being herein collectively called the "Other Obligations"); (iii) any and all reasonable sums advanced by the Pledgee in order to preserve the Collateral (as hereinafter defined) or preserve its security interest in the Collateral; (iv) in the event of any proceeding for the collection or enforcement of any obligations or liabilities referred to in clauses (i) and (ii) above, upon the occurrence and during the continuance of an Event of Default (such term, as used in this Agreement, shall mean any Event of Default under, and as defined in, the Credit Agreement, or any payment default (after the expiration of any applicable grace period) under any Interest Rate Protection Agreement or Other Hedging Agreement and shall in any event include, without limitation, any payment default (after the expiration of any applicable grace period) on any of the Obligations (as hereinafter defined)) shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Pledgee of its rights hereunder, together with reasonable attorneys' fees and court costs; and (v) all amounts paid by any Indemnitee (as defined in Section 11 hereof) as to which such Indemnitee has the right to reimbursement under Section 11 of this Agreement; all such obligations, liabilities, sums and expenses set forth in clauses (i) through (v) of this Section 1 being herein collectively called the "Obligations". 2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein, (i) the term "Stock" shall mean all of the issued and outstanding shares of capital stock at any time owned by any Pledgor of any corporation (other than Excluded Stock) , (ii) the term "Notes" shall, except as otherwise defined herein, mean all promissory notes from time to time issued to, or held by, any Pledgor, (iii) the term "Securities" shall mean all of the Stock and Notes, and (iv) the term "Excluded Stock" shall mean any shares of capital stock owned by any Pledgor in any Subsidiary established after the date hereof which does not own a Borrowing Base Property or a Borrowing Base Pledged Mortgage Loan and/or an equity interest in any other Subsidiary which owns any Borrowing Base Property or Borrowing Base Pledged Mortgage Loan, provided that the conditions set forth in the last sentence of Section 8.12 of the Credit Agreement with respect to such Subsidiary are satisfied. Each Pledgor represents and warrants that on the date hereof (i) the Stock held by such Pledgor consists of the number and type of shares of the stock of the corporations as described in Annex A hereto, (ii) such Stock constitutes that percentage of the issued and outstanding capital stock of the issuing corporation as is set forth in Annex A hereto, (iii) the Notes held by such Pledgor consist of the promissory notes described in Annex B hereto where such Pledgor is listed as the lender, and (iv) such Pledgor owns no other Securities. 3. PLEDGE OF SECURITIES, ETC. 3.1. Pledge. To secure the Obligations of such Pledgor and for the purposes set forth in Section 1 hereof, each Pledgor hereby: (i) grants to the Pledgee a first priority security interest in all of the Collateral owned by such Pledgor; (ii) pledges and deposits as security with the Pledgee the Securities owned by such Pledgor, and delivers to the Pledgee certificates or instruments therefor, duly endorsed in blank in the case of Notes and accompanied by undated stock or other powers duly executed in blank by such Pledgor in the case of certificated Stock, or such other instruments of transfer as may be reasonably acceptable to the Pledgee; (iii) assigns, transfers, hypothecates, mortgages, charges and sets over to the Pledgee all of such Pledgor's right, title and interest in and to such Securities (and in and to all certificates or instruments evidencing such Securities), to be held by the Pledgee upon the terms and conditions set forth in this Agreement. 3.2. Subsequently Acquired Securities. If any Pledgor shall acquire (by purchase, stock dividend or otherwise) any additional Securities at any time or from time to time after the date hereof, such Pledgor will forthwith (and in any event within five Business Days after receipt by such Pledgor thereof) pledge and deposit such Securities (or certificates or instruments evidencing such Securities) as security with the Pledgee and deliver to the Pledgee certificates therefor or instruments thereof, duly endorsed in blank in the case of Notes and accompanied by undated stock or other powers duly executed in blank in the case of certificated Stock, or such other instruments of transfer as may be reasonably acceptable to the Pledgee, and will promptly thereafter deliver to the Pledgee a certificate executed by any Authorized Officer of such Pledgor describing such Securities and certifying that the same have been duly pledged with the Pledgee hereunder. 3.3. Uncertificated Securities. Notwithstanding anything to the contrary contained in Sections 3.1 and 3.2 hereof, if any Securities (whether now owned or hereafter acquired) are uncertificated securities, the respective Pledgor shall promptly notify the Pledgee thereof, and shall promptly take all actions required to perfect the security interest of the Pledgee under applicable law (including, in any event, under Article 8 and Article 9 of the New York UCC). Each Pledgor further agrees to take such actions as the Pledgee deems necessary or desirable to effect the foregoing and to permit the Pledgee to exercise any of its rights and remedies hereunder, and agrees to provide an opinion of counsel reasonably satisfactory to the Pledgee with respect to any such pledge of uncertificated Securities promptly upon the reasonable request of the Pledgee. 3.4 Definition of Pledged Stock, Pledged Notes, Pledged Securities and Collateral. All Stock at any time pledged or required to be pledged hereunder is hereinafter called the "Pledged Stock", all Notes at any time pledged or required to be pledged hereunder are hereinafter called the "Pledged Notes", all of the Pledged Stock and Pledged Notes together are hereinafter called the "Pledged Securities," which together with all proceeds thereof, including any securities and moneys received with respect thereto and at the time held by the Pledgee hereunder, are hereinafter called the "Collateral." 4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall have the right to appoint one or more sub-agents for the purpose of retaining physical possession of the Pledged Securities, which may be held (in the discretion of the Pledgee) in the name of the Pledgee, as pledgee, or endorsed or assigned in blank or in favor of the Pledgee, as pledgee, or any nominee or nominees of the Pledgee or a sub-agent appointed by the Pledgee. The Pledgee agrees to promptly notify the relevant Pledgor after the appointment of any sub-agent; provided, however, that the failure to give such notice shall not affect the validity of such appointment. 5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until an Event of Default shall have occurred and be continuing, each Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Securities and to give consents, waivers or ratifications in respect thereof; provided, that no vote shall be cast or any consent, waiver or ratification given or any action taken which would violate or be inconsistent with any of the terms of this Agreement, any other Credit Document or any Interest Rate Protection Agreement or Other Hedging Agreement (collectively, the "Secured Debt Agreements"), or which would have the effect of impairing the position or interests of the Pledgee or any other Secured Creditor. All such rights of such Pledgor to vote and to give consents, waivers and ratifications shall cease in case an Event of Default shall occur and be continuing, and Section 7 hereof shall become applicable. 6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless an Event of Default shall have occurred and be continuing, all cash dividends or distributions payable in respect of the Pledged Stock and all payments in respect of the Pledged Notes shall be paid to the respective Pledgor; provided, that all cash dividends or distributions payable in respect of the Pledged Stock which are determined by the Pledgee to represent in whole or in part an extraordinary, liquidating or other distribution in return of capital shall be paid, to the extent so determined to represent an extraordinary, liquidating or other distribution in return of capital, to the Pledgee and retained by it as part of the Collateral. The Pledgee shall also be entitled to receive directly, and to retain as part of the Collateral: (i) all other or additional stock or other securities or property (other than cash) paid or distributed by way of dividend or otherwise in respect of the Pledged Stock; (ii) all other or additional stock or other securities or property (including cash) paid or distributed in respect of the Pledged Stock by way of stock-split, spin-off, split-up, reclassification, combination of shares or similar rearrangement; and (iii) all other or additional stock or other securities or property (including cash) which may be paid in respect of the Collateral by reason of any consolidation, merger, exchange of stock, conveyance of assets, liquidation or similar corporate reorganization. 7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of Default shall have occurred and be continuing, the Pledgee shall be entitled to exercise all of the rights, powers and remedies (whether vested in it by this Agreement, by any other Secured Debt Agreement or by law) for the protection and enforcement of its rights in respect of the Collateral, and the Pledgee shall be entitled, without limitation, to exercise the following rights, which each Pledgor hereby agrees to be commercially reasonable remedies: (i) to receive as Collateral all amounts payable in respect of the Collateral payable to such Pledgor under Section 6 hereof; (ii) to transfer all or any part of the Pledged Securities into the Pledgee's name or the name of its nominee or nominees; (iii) to accelerate any Pledged Note which may be accelerated in accordance with its terms, and take any other action to collect upon any Pledged Note (including, without limitation, to make any demand for payment thereon); (iv) to vote all or any part of the Pledged Stock (whether or not transferred into the name of the Pledgee) and give all consents, waivers and ratifications in respect of the Collateral and otherwise act with respect thereto as though it were the outright owner thereof; and (v) at any time or from time to time to sell, assign and deliver, or grant options to purchase, all or any part of the Collateral, or any interest therein, at any public or private sale, without demand of performance, advertisement or notice of intention to sell or of the time or place of sale or adjournment thereof (except as provided below) or to redeem or otherwise (all of which are hereby waived by each Pledgor), for cash, on credit or for other property, for immediate or future delivery without any assumption of credit risk, and for such price or prices and on such terms as the Pledgee in its absolute discretion may determine; provided, that at least 10 days' prior written notice of the time and place of any such sale shall be given to such Pledgor. Each Pledgor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling the Collateral and any other security for the Obligations or otherwise. The Pledgee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the sale may be so adjourned. At any such sale, unless prohibited by applicable law, the Pledgee on behalf of the Secured Creditors may bid for and purchase all or any part of the Collateral so sold free from any such right or equity of redemption. Neither the Pledgee nor any other Secured Creditor shall be liable for failure to collect or realize upon any or all of the Collateral or for any delay in so doing nor shall any of them be under any obligation to take any action whatsoever with regard thereto. 8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of the Pledgee provided for in this Agreement or any other Secured Debt Agreement or now or hereafter existing at law or in equity or by statute shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy. The exercise or beginning of the exercise by the Pledgee or any other Secured Creditor of any one or more of the rights, powers or remedies provided for in this Agreement or any other Secured Debt Agreement or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the Pledgee or any other Secured Creditor of all such other rights, powers or remedies, and no failure or delay on the part of the Pledgee or any other Secured Creditor to exercise any such right, power or remedy shall operate as a waiver thereof. By accepting the benefits of this Agreement, the Secured Creditors agree that this Agreement may be enforced only by the action of the Pledgee, acting upon the instructions of the Required Secured Creditors (as defined in the Security Agreement) and that no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised by the Pledgee for the benefit of the Secured Creditors in accordance with the terms of this Agreement. 9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Pledgee upon any sale or other disposition of the Collateral pursuant to the terms of this Agreement, together with all other moneys received by the Pledgee hereunder, shall be applied in the manner provided by Section 5.4 of the Security Agreement. (b) It is understood and agreed that the Borrower shall remain liable, the Parent Guarantor shall remain liable, and the Subsidiary Guarantors shall remain jointly and severally liable, in each case to the extent of any deficiency between the amount of the proceeds of the Collateral hereunder and the aggregate amount of the Obligations. 10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the Pledgee hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of the Pledgee or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Pledgee or such officer or be answerable in any way for the misapplication or nonapplication thereof. 11. INDEMNITY. (a) Each Pledgor agrees jointly and severally to indemnify, reimburse and hold harmless the Pledgee, each other Secured Creditor and their respective successors, assigns, employees, agents and servants (hereinafter in this Section 11 referred to individually as an "Indemnitee," and collectively as the "Indemnitees") from any and all liabilities, obligations, damages, injuries, penalties, claims, demands, actions, suits, judgments and costs, expenses or disbursements (including reasonable attorneys' fees and expenses) (for the purposes of this Section 11 the foregoing are collectively called "expenses") of whatsoever kind and nature imposed on, asserted against or incurred by any of the Indemnitees in any way relating to or arising out of this Agreement, any other Secured Debt Agreement or any other document executed in connection herewith and therewith or the enforcement of any of the terms of, or the preservation of any rights under any such document, or in any way relating to or arising out of the ownership, control, acceptance, possession, condition, sale or other disposition, or use of the Collateral; provided that no Indemnitee shall be indemnified pursuant to this Section 11(a) for expenses to the extent caused by the gross negligence or willful misconduct of such Indemnitee. Each Pledgor agrees that upon written notice by any Indemnitee of the assertion of such a liability, obligation, damage, injury, penalty, claim, demand, action, suit or judgment, the relevant Pledgor shall to the extent requested to do so assume full responsibility for the defense thereof. Each Indemnitee agrees to promptly notify the relevant Pledgor of any such assertion of which such Indemnitee has knowledge; provided that the failure to give such notice shall not affect such Indemnitee's right to indemnification hereunder except to the extent (but only to the extent) that such Indemnitee's damages are increased as a result of such failure. (b) Without limiting the application of Section 11(a) hereof, each Pledgor agrees jointly and severally to pay or reimburse the Pledgee for any and all reasonable fees, costs and expenses of whatever kind or nature incurred in connection with the creation, preservation or protection of the Pledgee's Liens on, and security interest in, the Collateral, including, without limitation, all fees and taxes in connection with the recording or filing of instruments and documents in public offices, payment or discharge of any taxes or Liens upon or in respect of the Collateral, and all other fees, costs and expenses in connection with protecting, maintaining or preserving the Collateral and the Pledgee's interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising out of or relating to the Collateral. (c) If and to the extent that the obligations of any Pledgor under this Section 11 are unenforceable for any reason, such Pledgor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 12. FURTHER ASSURANCES. Each Pledgor agrees that it will join with the Pledgee in executing and, at such Pledgor's own expense, file and refile under the UCC of any jurisdiction such financing statements, continuation statements and other documents in such offices as the Pledgee may deem necessary or appropriate and wherever required or permitted by law in order to perfect and preserve the Pledgee's security interest in the Collateral and hereby authorizes the Pledgee to file financing statements and amendments thereto relative to all or any part of the Collateral without the signature of such Pledgor where permitted by law, and agrees to do such further acts and things and to execute and deliver to the Pledgee such additional conveyances, assignments, agreements and instruments as the Pledgee may reasonably require or deem advisable to carry into effect the purposes of this Agreement or to further assure and confirm unto the Pledgee its rights, powers and remedies hereunder. 13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with this Agreement and the Security Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed that the obligations of the Pledgee as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement and in the Security Agreement. By accepting the benefits hereof, each Secured Creditor shall be deemed to have agreed to the terms and conditions set forth in Article VIII of the Security Agreement, as the same may be amended, supplemented or otherwise modified from time to time, which is incorporated herein by reference in its entirety; provided that all references therein to "this Agreement" shall be a reference to this Agreement, provided further that all references therein to any "Assignor" shall be a reference to any "Pledgor," and provided further that all references therein to the "Collateral Agent" shall be a reference to the "Pledgee." The Pledgee shall act hereunder on the terms and conditions set forth herein and in the Security Agreement. 14. TRANSFER BY PLEDGORS. No Pledgor will sell or otherwise dispose of, grant any option with respect to, or mortgage, pledge or otherwise encumber any of the Collateral or any interest therein (except pursuant to this Agreement and as permitted by the Secured Debt Agreements). 15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGORS. Each Pledgor represents, warrants and covenants that (i) it is the legal, record and beneficial owner of, and has good and marketable title to, all Securities pledged by it hereunder, subject to no pledge, lien, mortgage, hypothecation, security interest, charge, option or other encumbrance whatsoever, except the liens and security interests created by this Agreement; (ii) it has full power, authority and legal right to pledge all the Securities pledged by it pursuant to this Agreement; (iii) this Agreement has been duly authorized, executed and delivered by such Pledgor and constitutes the legal, valid and binding obligation of such Pledgor enforceable in accordance with its terms, except to the extent that the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by equitable principles (regardless of whether enforcement is sought in equity or at law); (iv) except as have been obtained or made, no consent of any other party (including, without limitation, any stockholder, partner or creditor of such Pledgor or any of its Subsidiaries) and no consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required to be obtained by such Pledgor in connection with the execution, delivery or performance of this Agreement; (v) the execution, delivery and performance of this Agreement by such Pledgor does not violate any provision of any applicable law or regulation or of any order, judgment, writ, award or decree of any court, arbitrator or governmental authority, domestic or foreign, or of the certificate of incorporation, certificate of partnership, partnership agreement or by-laws of such Pledgor or of any securities issued by such Pledgor or any of its Subsidiaries, or of any mortgage, indenture, lease, deed of trust, agreement, instrument or undertaking to which such Pledgor or any of its Subsidiaries is a party or which purports to be binding upon such Pledgor or any of its Subsidiaries or upon any of their respective assets and will not result in the creation or imposition of (or the obligation to create or impose) any lien or encumbrance on any of the assets of such Pledgor or any of its Subsidiaries except as contemplated by this Agreement; (vi) all the shares of Stock have been duly and validly issued and are fully paid and nonassessable (it being understood that to the extent any such Stock is issued by a Person other than a Subsidiary of the REIT, such representation and warranty is made to the best of such Pledgor's knowledge); (vii) to the knowledge of such Pledgor, each of the Pledged Notes held by such Pledgor, when executed by the obligor thereof, will be the legal, valid and binding obligation of such obligor, enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by equitable principles (regardless of whether enforcement is sought in equity or at law); and (viii) the pledge and assignment of the Securities pursuant to this Agreement, together with the delivery of the Securities to the Pledgee for the benefit of the Secured Creditors pursuant to this Agreement and the taking of all other steps required under Article 8 and Article 9 of the UCC (which delivery has been made and which steps have been taken as to the Securities owned by the Pledgor on any date on which the representation and warranty is made), creates a valid and perfected first priority security interest in such Securities and the proceeds thereof, subject to no prior or other lien or encumbrance. Each Pledgor covenants and agrees that it will defend the Pledgee's right, title and security interest in and to the Securities and the proceeds thereof against the claims and demands of all persons whomsoever; and such Pledgor covenants and agrees that it will have like title to and right to pledge any other property at any time hereafter pledged to the Pledgee as Collateral hereunder and will likewise defend the right thereto and security interest therein of the Pledgee on behalf of the Secured Creditors. Each of the representations, warranties and covenants made by each Pledgor hereunder with respect to Securities shall be deemed to be made with respect to Securities pledged after the date hereof on each date on which such Pledgor pledges such Securities hereunder. 16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each Pledgor under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation: (i) any renewal, extension, amendment or modification of or addition or supplement to or deletion from any Secured Debt Agreement or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof; (ii) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such Secured Debt Agreement or other agreement or instrument or this Agreement; (iii) any furnishing of any additional security to the Pledgee or its assignee or any acceptance thereof or any release of any security by the Pledgee or its assignee; (iv) any limitation on any party's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; or (v) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to such Pledgor or any Subsidiary of such Pledgor, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not such Pledgor shall have notice or knowledge of any of the foregoing. 17. REGISTRATION, ETC. (a) If an Event of Default shall have occurred and be continuing and the REIT shall have received from the Pledgee a written request or requests that the REIT cause any registration, qualification or compliance under any Federal or state securities law or laws to be effected with respect to all or any part of the Pledged Stock of the Borrower and the REIT as soon as practicable and at their expense will use their best efforts to cause such registration to be effected (and be kept effective) and will use their best efforts to cause such qualification and compliance to be effected (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such Pledged Stock, including, without limitation, registration under the Securities Act as then in effect (or any similar statute then in effect), appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with any other government requirements; provided, that the Pledgee shall furnish to the REIT such information regarding the Pledgee as the REIT may request in writing and as shall be required in connection with any such registration, qualification or compliance. The REIT will cause the Pledgee to be kept reasonably advised in writing as to the progress of each such registration, qualification or compliance and as to the completion thereof, will furnish to the Pledgee such number of prospectuses, offering circulars or other documents incident thereto as the Pledgee from time to time may reasonably request, and will indemnify the Pledgee, each other Secured Creditor and all others participating in the distribution of such Pledged Stock against all claims, losses, damages and liabilities caused by any untrue statement (or alleged untrue statement) of a material fact contained therein (or in any related registration statement, notification or the like) or by any omission (or alleged omission) to state therein (or in any related registration statement, notification or the like) a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same may have been caused by an untrue statement or omission based upon information furnished in writing to the REIT by the Pledgee or such other Secured Creditor expressly for use therein. (b) If at any time when the Pledgee shall determine to exercise its right to sell all or any part of the Pledged Securities pursuant to Section 7 hereof, the Pledged Securities or the part thereof to be sold shall not, for any reason whatsoever, be effectively registered under the Securities Act, as then in effect, the Pledgee may, in its sole and absolute discretion, sell such Pledged Securities or part thereof by private sale in such manner and under such circumstances as the Pledgee may deem necessary or advisable in order that such sale may legally be effected without such registration; provided, that at least 10 days' prior notice of the time and place of any such sale shall be given to such Pledgor. Without limiting the generality of the foregoing, in any such event the Pledgee, in its sole and absolute discretion and subject to compliance with any applicable securities laws: (i) may proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Pledged Securities or part thereof shall have been filed under such Securities Act; (ii) may approach and negotiate with a single possible purchaser to effect such sale; and (iii) may restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Pledged Securities or part thereof. In the event of any such sale, the Pledgee and the other Secured Creditors shall incur no responsibility or liability for selling all or any part of the Pledged Securities at a price which the Pledgee, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were deferred until after registration as aforesaid. 18. TERMINATION, RELEASE. (a) After the Termination Date (as defined below), this Agreement shall terminate (provided that all indemnities set forth herein including, without limitation, in Section 11 hereof shall survive any such termination) and the Pledgee, at the request and expense of the respective Pledgor, will promptly execute and deliver to such Pledgor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Pledgee and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement. As used in this Agreement, "Termination Date" shall mean the date upon which the Total Commitment and all Interest Rate Protection Agreements or Other Hedging Agreements have been terminated, no Note or Letter of Credit under and as defined in the Credit Agreement is outstanding (and all Loans have been repaid in full), and all Obligations then owing have been paid in full. (b) Notwithstanding anything to the contrary contained above, upon the presentment of satisfactory evidence to the Pledgee in its sole discretion that all obligations evidenced by any Pledged Note have been repaid in full, and that any payments received by the Pledgor were permitted to be received by the Pledgor pursuant to Section 6 hereof, the Pledgee shall, upon the request and at the expense of the respective Pledgor, duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such Pledged Note if the same is then in the possession of the Pledgee and has not theretofore been sold or otherwise applied or released pursuant to this Agreement. (c) In the event that any part of the Collateral is sold in connection with a sale permitted by the Credit Agreement or otherwise released at the direction of the Required Secured Creditors and the proceeds of such sale or sales or from such release are applied in accordance with the provisions of the Credit Agreement, to the extent required to be so applied, the Pledgee, at the request and expense of the respective Pledgor, will duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral as is then being (or has been) so sold or released and as may be in the possession of the Pledgee and has not theretofore been released pursuant to this Agreement. (d) At any time that any Pledgor desires that Collateral be released as provided in the foregoing sub-section (a), (b) or (c), such Pledgor shall deliver to the Pledgee a certificate signed by an Authorized Officer of such Pledgor stating that the release of the respective Collateral is permitted pursuant to such subsection (a), (b) or (c). (e) The Pledgee shall have no liability whatsoever to any Secured Creditor as the result of any release of Collateral by it in accordance with this Section 18. 19. NOTICES, ETC. Except as otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been duly given or made when delivered in accordance with Section 12.03 of the Credit Agreement, addressed as follows: (a) if to any Pledgor, at its address set forth opposite its signature below; (b) if to the Pledgee, at: German American Capital Corporation 31 West 52nd Street New York, New York 10019 Attention: Allisson Michaels Telephone: (212) 469-6949 Facsimile: (212) 469-7210 (c) if to any Bank Creditor, at such address as such Bank Creditor shall have specified in the Credit Agreement; (d) if to any Other Creditor, at such address as such Other Creditor shall have specified in writing to each Pledgor and the Pledgee; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. 20. WAIVER; AMENDMENT. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each Pledgor directly affected thereby and the Pledgee (with the written consent of the Required Secured Creditors); provided, however, that any change, waiver, modification or variance affecting the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors (as defined below) of such affected Class. For the purpose of this Agreement, the term "Class" shall mean each class of Secured Creditors, i.e., whether (x) the Bank Creditors as holders of the Credit Agreement Obligations or (y) the Other Creditors as the holders of the Other Obligations. For the purpose of this Agreement, the term "Requisite Creditors" of any Class shall mean each of (x) with respect to the Credit Agreement Obligations, the Required Banks and (y) with respect to the Other Obligations, the holders of at least a majority of all obligations outstanding from time to time under the respective Interest Rate Protection Agreements or Other Hedging Agreements. 21. MISCELLANEOUS. This Agreement shall be binding upon the successors and assigns of each Pledgor (although no Pledgor may assign its rights and obligations hereunder except in accordance with the provisions of the Secured Debt Agreements) and shall inure to the benefit of and be enforceable by the Pledgee and the other Secured Creditors and their respective successors and assigns. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS EXCEPT FOR THE CHOICE OF LAW PROVISIONS OF THE NEW YORK UCC. The headings in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. 22. ADDITIONAL PLEDGORS. It is understood and agreed that any Subsidiary of the Borrower that is required to execute a counterpart of this Agreement pursuant to the Credit Agreement shall automatically become a Pledgor hereunder by executing a counterpart hereof and delivering the same to the Pledgee. 23. RECOURSE. This Agreement is made with full recourse to each Pledgor (including, without limitation, with full recourse to all assets of such Pledgor) and pursuant to and upon the representations, warranties, covenants and the agreements on the part of such Pledgor contained herein, in the other Secured Debt Agreements and otherwise in writing in connection herewith or therewith. 24. INTEREST RATE PROTECTION AGREEMENTS AND OTHER HEDGING AGREEMENTS. Notwithstanding anything to the contrary contained in this Agreement, no Interest Rate Protection Agreement or Other Hedging Agreement shall be entitled to the benefits of this Agreement unless such Interest Rate Protection Agreement or Other Hedging Agreement is reasonably related to the Loans or the Letters of Credit or such Interest Rate Protection Agreement or Other Hedging Agreement provides that it is to be entitled to the benefits of this Agreement or the Security Documents generally. 25. PLEDGEE NOT BOUND. (a) The Pledgee and the other Secured Creditors shall not be obligated to perform or discharge any obligation of any Pledgor solely as a result of the pledge hereby effected. (b) The acceptance by the Pledgee of this Agreement, with all the rights, powers, privileges and authority so created, shall not at any time or in any event obligate the Pledgee or any other Secured Creditor to appear in or defend any action or proceeding relating to the Collateral to which it is not a party, or to take any action hereunder or thereunder, or to expend any money or incur any expenses or perform or discharge any obligation, duty or liability under the Collateral except with respect to duties of care in connection with the Collateral to the extent required by applicable law. IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this Agreement to be executed by their duly elected officers duly authorized as of the date first above written. Address: ELDERTRUST, as a Pledgor 415 McFarlan Road By:______________________________ Suite 202 Name: Kennett Square Title: Pennsylvania 19348 Address: ELDERTRUST OPERATING LIMITED PARTNERSHIP, as a Pledgor 415 McFarlan Road By: ElderTrust, general partner Suite 202 Kennett Square By: ______________________________ Pennsylvania 19348 Name: Title: Address: ET GENPAR, L.L.C. 415 McFarlan Road By: ElderTrust Operating Limited Partnership, Suite 202 sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:_______________________________ Name: Title: Address: ET SUB-HERITAGE WOODS, L.L.C., as a Pledgor 415 McFarlan Road By: ElderTrust Operating Limited Partnership, Suite 202 sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:_______________________________ Name: Title: Address: ET SUB-PLEASANT VIEW, L.L.C., as a Pledgor 415 McFarlan Road By: ElderTrust Operating Limited Suite 202 Partnership, sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:_______________________________ Name: Title: Address: ET SUB-RITTENHOUSE LIMITED PARTNERSHIP, L.L.P., as a Pledgor 415 McFarlan Road By: ET GENPAR, L.L.C., general partner Suite 202 Kennett Square By: ElderTrust Operating Limited Pennsylvania 19348 Partnership, sole member By: ElderTrust, general partner By:_______________________________ Name: Title: Address: ET SUB-LOPATCONG, L.L.C., as a Pledgor 415 McFarlan Road By: ElderTrust Operating Limited Suite 202 Partnership, sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:_______________________________ Name: Title: Address: ET SUB-WAYNE I LIMITED PARTNERSHIP, L.L.P., as a Pledgor 415 McFarlan Road By: ET GENPAR, L.L.C., general partner Suite 202 Kennett Square By: ElderTrust Operating Limited Pennsylvania 19348 Partnership, sole member By: ElderTrust, general partner By:_______________________________ Name: Title: Address: ET SUB-PENNSBURG MANOR LIMITED PARTNERSHIP, L.L.P., as a Pledgor 415 McFarlan Road By: ET GENPAR, L.L.C., general partner Suite 202 Kennett Square By: ElderTrust Operating Limited Partnership, Pennsylvania 19348 sole member By: ElderTrust, general partner By:_______________________________ Name: Title: Address: ET SUB-POB I LIMITED PARTNERSHIP, L.L.P., as a Pledgor 415 McFarlan Road By: ET GENPAR, L.L.C., general partner Suite 202 Kennett Square By: ElderTrust Operating Limited Partnership, Pennsylvania 19348 sole member By: ElderTrust, general partner By:_______________________________ Name: Title: Address: ET SUB-SMOB, L.L.C., as a Pledgor 415 McFarlan Road By: ElderTrust Operating Limited Suite 202 Partnership, sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:_______________________________ Name: Title: Address: ET SUB-WINDSOR I, L.L.C., as a Pledgor 415 McFarlan Road By: ElderTrust Operating Limited Suite 202 Partnership, sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:_______________________________ Name: Title: Address: ET SUB-WINDSOR II, L.L.C., as a Pledgor 415 McFarlan Road By: ElderTrust Operating Limited Suite 202 Partnership, sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:_______________________________ Name: Title: Address: GERMAN AMERICAN CAPITAL CORPORATION, as Collateral Agent, as Pledgee 31 West 52nd Street By: _____________________________ New York, New York 10019 Name: Title: By: _____________________________ Name: Title: ANNEX A to PLEDGE AGREEMENT ---------------- LIST OF STOCK ------------- ANNEX B to PLEDGE AGREEMENT ---------------- LIST OF NOTES ------------- EXHIBIT F-2 PLEDGE AND SECURITY AGREEMENT PLEDGE AND SECURITY AGREEMENT, dated as of January 30, 1998 (as amended, modified or supplemented from time to time, this "Agreement"), made by each of the undersigned pledgors (each, a "Pledgor" and, together with any other entity that becomes a party hereto pursuant to Section 23 hereof, the "Pledgors"), in favor of GERMAN AMERICAN CAPITAL CORPORATION, as Collateral Agent (the "Pledgee"), for the benefit of the Secured Creditors (as defined below). Except as otherwise defined herein, capitalized terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. W I T N E S S E T H: WHEREAS, ElderTrust, a Maryland real estate investment trust (the "REIT"), ElderTrust Operating Limited Partnership, a Delaware limited partnership (the "Borrower"), various lenders from time to time party thereto (the "Banks"), Deutsch Bank AG, New York Branch, as Issuing Bank (the "Issuing Bank"), and German American Capital Corporation, as Administrative Agent (together with any successor administrative agent, the "Administrative Agent"), have entered into a Credit Agreement, dated as of January 30, 1998, providing for the making of Loans and the issuance of and participation in Letters of Credit for the account of the Borrower, all to the Borrower as contemplated therein (as amended, modified or supplemented from time to time, the "Credit Agreement") (the Banks, the Issuing Bank, the Administrative Agent and the Pledgee are herein called the "Bank Creditors"); WHEREAS, the Borrower may at any time and from time to time enter into one or more Interest Rate Protection Agreements or Other Hedging Agreements with one or more Banks or any affiliates thereof (each such Bank or affiliate, even if the respective Bank subsequently ceases to be a Bank under the Credit Agreement for any reason, together with such Bank's or affiliate's successors and assigns, if any, collectively, the "Other Creditors," and together with the Bank Creditors, are herein called the "Secured Creditors"); WHEREAS, pursuant to the Parent Guaranty, the Parent Guarantor has guaranteed to the Secured Creditors the payment when due of all obligations and liabilities of the Borrower under or with respect to the Credit Documents and the Interest Rate Protection Agreements and Other Hedging Agreements; WHEREAS, pursuant to the Subsidiaries Guaranty, each Subsidiary Guarantor has jointly and severally guaranteed to the Secured Creditors the payment when due of all obligations and liabilities of the Borrower under or with respect to the Credit Documents and the Interest Rate Protection Agreements and Other Hedging Agreements; Exhibit F-2 Page 2 WHEREAS, it is a condition precedent to the extensions of credit under the Credit Agreement that each Pledgor shall have executed and delivered to the Pledgee this Agreement; and WHEREAS, each Pledgor desires to execute this Agreement to satisfy the conditions described in the preceding paragraph; NOW, THEREFORE, in consideration of the benefits accruing to each Pledgor, the receipt and sufficiency of which are hereby acknowledged, each Pledgor hereby makes the following representations and warranties to the Pledgee for the benefit of the Secured Creditors and hereby covenants and agrees with the Pledgee for the benefit of the Secured Creditors as follows: 1. SECURITY FOR OBLIGATIONS. This Agreement is made by each Pledgor for the benefit of the Secured Creditors to secure: (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities (including, without limitation, the principal of and interest on the Notes issued by, and Loans made to, the Borrower under the Credit Agreement, all reimbursement obligations and unpaid drawings with respect to Letters of Credit, and all indemnities, fees, expenses and interest thereon or owed thereunder) of such Pledgor to the Bank Creditors, whether now existing or hereafter incurred under, arising out of or in connection with the Credit Agreement and the other Credit Documents (including, without limitation, in the case of the Guarantor, all of its obligations and liabilities under its Guaranty) to which such Pledgor is a party and the due performance and compliance by such Pledgor with all of the terms, conditions and agreements contained in the Credit Agreement and such other Credit Documents (all such principal, interest, obligations and liabilities described in this clause (i) being herein collectively called the "Credit Agreement Obligations"); (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities of such Pledgor to the Other Creditors, whether now existing or hereafter incurred under, arising out of or in connection with any Interest Rate Protection Agreement or Other Hedging Agreement (including, without limitation, in the case of the Guarantor, all of its obligations and liabilities under its Guaranty) and the due performance and compliance by such Pledgor with all the terms, conditions and agreements contained in the Interest Rate Protection Agreements or Other Hedging Agreements (all such obligations and liabilities described in this clause (ii) being herein collectively called the "Other Obligations"); (iii)any and all reasonable sums advanced by the Pledgee in order to preserve the Collateral (as hereinafter defined) or preserve its security interest in the Collateral; (iv) in the event of any proceeding for the collection or enforcement of any obligations or liabilities referred to in clauses (i) and (ii) above, upon the occurrence and during the continuance of an Event of Default (such term, as used in this Agreement, shall mean Exhibit F-2 Page 3 any Event of Default under, and as defined in, the Credit Agreement, or any payment default (after the expiration of any applicable grace period) under any Interest Rate Protection Agreement or Other Hedging Agreement and shall in any event include, without limitation, any payment default (after the expiration of any applicable grace period) on any of the Obligations (as hereinafter defined)) shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Pledgee of its rights hereunder, together with reasonable attorneys' fees and court costs; and (v) all amounts paid by any Indemnitee (as defined in Section 11 hereof) as to which such Indemnitee has the right to reimbursement under Section 11 of this Agreement; all such obligations, liabilities, sums and expenses set forth in clauses (i) through (v) of this Section 1 being herein collectively called the "Obligations". 2. DEFINITION OF PARTNERSHIP INTERESTS, LIMITED LIABILITY COMPANY INTERESTS, ETC. As used herein, (i) the term "Partnership Interest" shall mean the entire partnership interest (other than any Excluded Interest) at any time owned by any Pledgor of any partnership (each, a "Pledged Partnership Entity"); (ii) the term "Limited Liability Company Interest" shall mean the entire limited liability company and/or membership interest (other than any Excluded Interest) at any time owned by any Pledgor in any limited liability company (each, a "Pledged Limited Liability Company"); (iii) the term "Interest" shall mean all of the Partnership Interests and Limited Liability Company Interests; and (iv) the term "Excluded Interests" shall mean (A) the partnership, limited liability company and/or membership interests owned by the Borrower and/or ET GENPAR, L.L.C., as the case may be, in the Excluded Subsidiaries and (B) any partnership, limited liability company and/or membership interests owned by any Pledgor in any Subsidiary established after the date hereof which does not own a Borrowing Base Property or a Borrowing Base Pledged Mortgage Loan and/or an equity interest in any other Subsidiary which owns any Borrowing Base Property or Borrowing Base Pledged Mortgage Loan, provided that the conditions set forth in the last sentence of Section 8.12 of the Credit Agreement with respect to such Subsidiary are satisfied. Each Pledgor represents and warrants that on the date hereof (i) the Partnership Interests held by such Pledgor consist of those partnership interests as described in Annex A hereto; (ii) such Partnership Interests constitute that percentage of the entire partnership interest of each Pledged Partnership Entity as is set forth in Annex A hereto; (iii) the Limited Liability Company Interests held by such Pledgor consist of the number and type of limited liability company interests as described in Annex B hereto; (iv) such Limited Liability Company Interests constitute that percentage of the issued and outstanding equity interest of each Pledged Limited Liability Company as is set forth in Annex B hereto; and (v) such Pledgor owns no other Interests (other than, in the case of the Borrower and ET GENPAR, L.L.C., the partnership, limited liability company and/or membership interests owned by the Borrower and/or ET GENPAR, L.L.C., as the case may be, in the Excluded Subsidiaries). 3. GRANT OF SECURITY INTEREST Exhibit F-2 Page 4 3.1. Pledge. (a) To secure the Obligations of such Pledgor and for the purposes set forth in Section 1 hereof, each Pledgor hereby pledges and grants to the Pledgee a first priority continuing security interest in, and as part of such grant and pledge, hereby transfers and assigns to the Pledgee all of the following, whether now existing or hereafter acquired (the "Collateral"): (i) such Pledgor's Partnership Interest in each Pledged Partnership Entity and all of such Pledgor's right, title and interest in each Pledged Partnership Entity and (ii) such Pledgor's Limited Liability Company Interest in each Pledged Limited Liability Company and all of such Pledgor's right, title and interest in each Pledged Limited Liability Company, in each case whether now or hereafter acquired and including, without limitation: (A) all the capital thereof and its interest in all profits, losses, Partnership Assets (as defined below), Limited Liability Company Assets (as defined below) and other distributions to which such Pledgor shall at any time be entitled in respect of such Partnership Interest or Limited Liability Company Interest, as the case may be; (B) all other payments due or to become due to such Pledgor in respect of such Partnership Interest or Limited Liability Company Interest, as the case may be, whether under any partnership agreement, limited liability company agreement, operating agreement or otherwise, whether as contractual obligations, damages, insurance proceeds or otherwise; (C) all of its claims, rights, powers, privileges, authority, options, security interest, liens and remedies, if any, under any partnership agreement, limited liability company agreement or operating agreement or at law or otherwise in respect of such Partnership Interest or Limited Liability Company Interest, as the case may be; (D) all present and future claims, if any, of such Pledgor against any Pledged Partnership Entity or Pledged Limited Liability Company for moneys loaned or advanced, for services rendered or otherwise; (E) all of such Pledgor's rights under any partner- ship agreement, limited liability company agreement or operating agreement or at law to exercise and enforce every right, power, remedy, authority, option and privilege of such Pledgor relating to such Partnership Interest or Limited Liability Company Interest, as the case may be, including any power to terminate, cancel or modify any partnership agreement, limited liability company agreement or operating agreement, to execute any instruments and to take any and all other action on behalf of and in the name of such Pledgor in respect of such Partnership Interest or Limited Liability Company Interest and any Pledged Partnership Entity or Pledged Limited Liability Company, to make determinations, to exercise any election (including, but not limited to, election of remedies) or option or to give or receive any notice, consent, amendment, waiver or approval, together with full power and authority to demand, receive, enforce, collect, or receipt for any of the foregoing or for any Partnership Asset or Limited Liability Company Asset, to enforce or execute any checks, or other Exhibit F-2 Page 5 instruments or orders, to file any claims and to take any action in connection with any of the foregoing (with all of the foregoing rights only to be exercisable upon the occurrence and during the continuance of an Event of Default); (F) all other property hereafter delivered in substitution for or in addition to any of the foregoing, all certificates and instruments representing or evidencing such other property and all cash, securities, interest, dividends, rights and other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all thereof; and (G) to the extent not otherwise included, all proceeds of any or all of the foregoing. (b) As used herein, (i) the term "Partnership Assets" shall mean all assets, whether tangible or intangible and whether real, personal or mixed (including, without limitation, all partnership capital and interests in other partnerships), at any time owned or represented by any Partnership Interest; and (ii) the term "Limited Liability Company Assets" shall mean all assets, whether tangible or intangible and whether real, personal or mixed (including, without limitation, all limited liability company capital and interests in other limited liability companies), at any time owned or represented by any Limited Liability Company Interest. 3.2. Subsequently Acquired Interests. If any Pledgor shall acquire (by purchase, distribution or otherwise) any additional Interest at any time or from time to time after the date hereof, such Pledgor (and in any event within five Business Days after receipt by such Pledgor thereof) shall forthwith pledge such Interest as security with the Pledgee hereunder and, to the extent such Interest is certificated, deliver to the Pledgee certificates therefor, accompanied by such instruments of transfer as are acceptable to the Pledgee, and shall promptly thereafter deliver to the Pledgee a certificate executed by any Authorized Officer of such Pledgor describing such Interest and certifying that the same has been duly pledged with the Pledgee hereunder. 3.3. Uncertificated Interests. Notwithstanding anything to the contrary contained in Section 3.2 hereof, to the extent any Interest (whether now owned or hereafter acquired) is uncertificated, the respective Pledgor shall promptly notify the Pledgee thereof, and shall promptly take all actions required to perfect the security interest of the Pledgee under applicable law (including, in any event, under the provisions of Articles 8 and 9 of the New York UCC). Each Pledgor further agrees to take such actions as the Pledgee deems necessary or desirable to effect the foregoing and to permit the Pledgee to exercise any of its rights and remedies hereunder, and agrees to provide an opinion of counsel reasonably satisfactory to the Pledgee with respect to any such pledge of uncertificated Interests promptly upon the reasonable request of the Pledgee. 4. APPOINTMENT OF SUB-AGENTS. The Pledgee shall have the right to appoint one or more sub-agents for the purpose of retaining physical possession of the Collateral, which may be held (in the discretion of the Pledgee) in the name of the Pledgee, as pledgee, or endorsed or assigned in Exhibit F-2 Page 6 blank or in favor of the Pledgee, as pledgee, or any nominee or nominees of the Pledgee or a sub-agent appointed by the Pledgee. The Pledgee agrees to promptly notify the relevant Pledgor after the appointment of any sub-agent; provided, however, that the failure to give such notice shall not affect the validity of such appointment. 5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until an Event of Default shall have occurred and be continuing, each Pledgor shall be entitled to exercise any and all voting, consent, administration, management and other rights and remedies under any partnership agreement, limited liability company agreement or operating agreement or otherwise with respect to the Interests of such Pledgor; provided, that no vote shall be cast or any consent, waiver or ratification given or any action taken which would violate or be inconsistent with any of the terms of this Agreement, any other Credit Document or any Interest Rate Protection Agreement or Other Hedging Agreement (collectively, the "Secured Debt Agreements"), or which would have the effect of impairing the position or interests of the Pledgee or any other Secured Creditor. All such rights of such Pledgor to vote and to give consents, waivers and ratifications shall cease in case an Event of Default shall occur and be continuing, and Section 7 hereof shall become applicable. 6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless an Event of Default shall have occurred and be continuing, all cash dividends and distributions payable in respect of the Interests shall be paid to the respective Pledgor; provided, that all cash dividends payable in respect of the Interests which are determined by the Pledgee to represent in whole or in part an extraordinary, liquidating or other distribution in return of capital shall be paid, to the extent so determined to represent an extraordinary, liquidating or other distribution in return of capital, to the Pledgee and retained by it as part of the Collateral. The Pledgee shall also be entitled to receive directly, and to retain as part of the Collateral: (i) all other property (other than cash) paid or distributed by way of dividend, distribution or otherwise in respect of the Interests; (ii) all other property (including cash) paid or distributed in respect of the Limited Liability Company Interests by way of stock-split, spin-off, split-up, reclassification, combination of shares or similar arrangement; and (ii) all other property (including cash) which may be paid in respect of the Collateral by reason of any consolidation, merger, exchange of stock, conveyance of assets, liquidation or similar partnership or corporate reorganization. 7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of Default shall have occurred and be continuing, the Pledgee shall be entitled to exercise all of the rights, powers and remedies (whether vested in it by this Agreement, by any other Secured Debt Agreement or by law) for the protection and enforcement of its rights in respect of the Collateral, and the Pledgee shall be entitled, without limitation, to exercise the following rights, which each Pledgor hereby agrees to be commercially reasonable remedies: Exhibit F-2 Page 7 (i) to receive as Collateral all amounts payable in respect of the Collateral payable to such Pledgor under Section 6 hereof; (ii) to transfer all or any part of the Interests into the Pledgee's name or the name of its nominee or nominees; (iii)to vote all or any part of the Interests (whether or not transferred into the name of the Pledgee) and give all consents, waivers and ratifications in respect of the Collateral and otherwise act with respect thereto as though it were the outright owner thereof; and (iv) at any time or from time to time to sell, assign and deliver, or grant options to purchase, all or any part of the Collateral, or any interest therein, at any public or private sale, without demand of performance, advertisement or notice of intention to sell or of the time or place of sale or adjournment thereof (except as provided below) or to redeem or otherwise (all of which are hereby waived by each Pledgor), for cash, on credit or for other property, for immediate or future delivery without any assumption of credit risk, and for such price or prices and on such terms as the Pledgee in its absolute discretion may determine; provided, that at least 10 days' prior written notice of the time and place of any such sale shall be given to such Pledgor. Each Pledgor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling the Collateral and any other security for the Obligations or otherwise. The Pledgee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the sale may be so adjourned. At any such sale, unless prohibited by applicable law, the Pledgee on behalf of the Secured Creditors may bid for and purchase all or any part of the Collateral so sold free from any such right or equity of redemption. Neither the Pledgee nor any other Secured Creditor shall be liable for failure to collect or realize upon any or all of the Collateral or for any delay in so doing nor shall any of them be under any obligation to take any action whatsoever with regard thereto. 8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of the Pledgee provided for in this Agreement or any other Secured Debt Agreement or now or hereafter existing at law or in equity or by statute shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy. The exercise or beginning of the exercise by the Pledgee or any other Secured Creditor of any one or more of the rights, powers or remedies provided for in this Agreement or any other Secured Debt Agreement or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the Pledgee or any other Secured Creditor of all such other rights, powers or remedies, and no failure or delay on the part of the Pledgee or any other Secured Creditor to exercise any such right, power or remedy shall operate as a waiver thereof. By accepting the benefits of this Agreement, the Secured Creditors agree that this Agreement may be enforced only by the action of the Pledgee, acting upon the instructions of the Required Secured Creditors (as defined in the Security Agreement) and that Exhibit F-2 Page 8 no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised by the Pledgee for the benefit of the Secured Creditors in accordance with the terms of this Agreement. 9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Pledgee upon any sale or other disposition of the Collateral pursuant to the terms of this Agreement, together with all other moneys received by the Pledgee hereunder, shall be applied in the manner provided by Section 5.4 of the Security Agreement. (b) It is understood and agreed that the Borrower shall remain liable, the Parent Guarantor shall remain liable, and the Subsidiary Guarantors shall remain jointly and severally liable, in each case to the extent of any deficiency between the amount of the proceeds of the Collateral hereunder and the aggregate amount of the Obligations. 10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the Pledgee hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of the Pledgee or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Pledgee or such officer or be answerable in any way for the misapplication or nonapplication thereof. 11. INDEMNITY. (a) Each Pledgor agrees jointly and severally to indemnify, reimburse and hold harmless the Pledgee, each other Secured Creditor and their respective successors, assigns, employees, agents and servants (hereinafter in this Section 11 referred to individually as an "Indemnitee," and collectively as the "Indemnitees") from any and all liabilities, obligations, damages, injuries, penalties, claims, demands, actions, suits, judgments and costs, expenses or disbursements (including reasonable attorneys' fees and expenses) (for the purposes of this Section 11 the foregoing are collectively called "expenses") of whatsoever kind and nature imposed on, asserted against or incurred by any of the Indemnitees in any way relating to or arising out of this Agreement, any other Secured Debt Agreement (as defined in the Security Agreement) or any other document executed in connection herewith and therewith or the enforcement of any of the terms of, or the preservation of any rights under any such document, or in any way relating to or arising out of the ownership, control, acceptance, possession, condition, sale or other disposition, or use of the Collateral; provided that no Indemnitee shall be indemnified pursuant to this Section 11(a) for expenses to the extent caused by the gross negligence or willful misconduct of such Indemnitee. Each Pledgor agrees that upon written notice by any Indemnitee of the assertion of such a liability, obligation, damage, injury, penalty, claim, demand, action, suit or judgment, the relevant Pledgor shall to the extent requested to do so assume full responsibility for the defense thereof. Each Indemnitee agrees to promptly notify the relevant Pledgor of any such assertion of which such Indemnitee has knowledge; provided that the failure to give such notice shall not affect such Indemnitee's right to indemnification hereunder except to the extent (but only to the extent) that such Indemnitee's damages are increased as a result of such failure. Exhibit F-2 Page 9 (b) Without limiting the application of Section 11(a) hereof, each Pledgor agrees jointly and severally to pay or reimburse the Pledgee for any and all reasonable fees, costs and expenses of whatever kind or nature incurred in connection with the creation, preservation or protection of the Pledgee's Liens on, and security interest in, the Collateral, including, without limitation, all fees and taxes in connection with the recording or filing of instruments and documents in public offices, payment or discharge of any taxes or Liens upon or in respect of the Collateral, and all other fees, costs and expenses in connection with protecting, maintaining or preserving the Collateral and the Pledgee's interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising out of or relating to the Collateral. (c) If and to the extent that the obligations of any Pledgor under this Section 11 are unenforceable for any reason, such Pledgor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 12. FURTHER ASSURANCES. Each Pledgor agrees that it will join with the Pledgee in executing and, at such Pledgor's own expense, file and refile under the UCC of any jurisdiction such financing statements, continuation statements and other documents in such offices as the Pledgee may deem necessary or appropriate and wherever required or permitted by law in order to perfect and preserve the Pledgee's security interest in the Collateral and hereby authorizes the Pledgee to file financing statements and amendments thereto relative to all or any part of the Collateral without the signature of such Pledgor where permitted by law, and agrees to do such further acts and things and to execute and deliver to the Pledgee such additional conveyances, assignments, agreements and instruments as the Pledgee may reasonably require or deem advisable to carry into effect the purposes of this Agreement or to further assure and confirm unto the Pledgee its rights, powers and remedies hereunder. 13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with this Agreement and the Security Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed that the obligations of the Pledgee as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement and in the Security Agreement. By accepting the benefits hereof, each Secured Creditor shall be deemed to have agreed to the terms and conditions set forth in Article VIII of the Security Agreement, as the same may be amended, supplemented or otherwise modified from time to time, which is incorporated herein by reference in its entirety; provided that all references therein to "this Agreement" shall be a reference to this Agreement, provided further that all references therein to any "Assignor" shall be a reference to any "Pledgor," and provided further that all references therein to the "Collateral Agent" shall be a reference to the "Pledgee." The Pledgee shall act hereunder on the terms and conditions set forth herein and in the Security Agreement. 14. TRANSFER BY PLEDGORS. No Pledgor will sell or otherwise dispose of, grant any option with respect to, or mortgage, pledge or otherwise encumber any of the Collateral or any interest therein (except pursuant to this Agreement and as permitted by the Secured Debt Agreements). Exhibit F-2 Page 10 15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGORS. (a) Each Pledgor represents, warrants and covenants that (i) it is the legal, record and beneficial owner of, and has good and marketable title to, all Interests and other Collateral pledged by it hereunder, or in which it has granted a security interest pursuant hereto, subject to no pledge, lien, mortgage, hypothecation, security interest, charge, option or other encumbrance whatsoever, except the liens and security interests created by this Agreement; (ii) it has full power, authority and legal right to pledge and grant a security interest in all the Collateral pledged and assigned by it pursuant to this Agreement; (iii) this Agreement has been duly authorized, executed and delivered by such Pledgor and constitutes the legal, valid and binding obligation of such Pledgor enforceable in accordance with its terms, except to the extent that the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by equitable principles (regardless of whether enforcement is sought in equity or at law); (iv) except as have been obtained or made, no consent of any other party (including, without limitation, any stockholder, partners or creditor of such Pledgor or any of its Subsidiaries or of any partner of any Pledged Partnership Entity or any member of any Pledged Limited Liability Company) and no consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required to be obtained by such Pledgor in connection with the execution, delivery or performance of this Agreement; (v) the execution, delivery and performance of this Agreement by such Pledgor does not violate any provision of any applicable law or regulation or of any order, judgment, writ, award or decree of any court, arbitrator or governmental authority, domestic or foreign, or of the certificate of incorporation, certificate of partnership, partnership agreement or by-laws of such Pledgor or of any securities issued by such Pledgor or any of its Subsidiaries, or of any mortgage, indenture, lease, deed of trust, agreement (including any partnership agreement of any Pledged Partnership Entity or any limited liability company agreement or operating agreement of any Pledged Limited Liability Company), instrument or undertaking to which such Pledgor or any of its Subsidiaries is a party or which purports to be binding upon such Pledgor or any of its Subsidiaries or upon any of their respective assets and will not result in the creation or imposition of (or the obligation to create or impose) any lien or encumbrance on any of the assets of such Pledgor or any of its Subsidiaries except as contemplated by this Agreement; (vi) all Interests have been validly acquired and are fully paid for and validly pledged hereunder (it being understood that to the extent any such Partnership Interest is issued by a Person other than a Subsidiary of the REIT, such representation and warranty is made to the best of such Pledgor's knowledge); (vii) the Interests pledged by it hereunder are not dealt in or traded on securities exchanges or on securities markets; (viii) the terms of the Interests pledged by it hereunder do not provide that such Interests are securities governed by Article 8 of the UCC; (ix) this Agreement creates (after all steps required under Article 8 of the UCC have been taken) in favor of the Pledgee for the benefit of the Secured Creditors a legal, valid and enforceable security interest in all right, title and interest of each Pledgor in the Collateral owned by such Pledgor on any date on which this representation and warranty is made or deemed made, which security interest shall, (A) upon delivery to the Pledgee of any certificates evidencing equity interests in a Pledged Partnership Entity or in a Pledged Limited Liability Company, (B) upon the filing of appropriate financing statements under the UCC in respect of any Pledged Partnership Entity's partnership interest or Pledged Limited Liability Company's limited liability company or membership Exhibit F-2 Page 11 interest that is not represented by a certificate and (C) upon the taking of all steps required under Article 8 and Article 9 of the UCC (which delivery, filings and/or steps have been done and remain in full force and effect as to the Collateral owned by such Pledgor on any date on which this representation and warranty is made or deemed made), constitute a fully perfected first lien on, and security interest in, all right, title and interest of such Pledgor in all of such Collateral, subject to no security interests of any other Person; (x) there are no currently effective financing statements under the UCC covering any property which is now or hereafter may be included in the Collateral except financing statements filed or to be filed in favor of the Pledgee as secured party; and (xi) the chief executive office and principal place of business of such Pledgor and the sole location where the records of such Pledgor with respect to the Collateral are kept are located at the address set forth for such Pledgor in the Security Agreement and such Pledgor shall not move its chief executive office, principal place of business or such location of records except in accordance with the terms of the Security Agreement. Each Pledgor covenants and agrees that it will defend the Pledgee's right, title and security interest in and to the Collateral and the proceeds thereof against the claims and demands of all persons whomsoever; and such Pledgor covenants and agrees that it will have like title to and right to pledge any other property at any time hereafter pledged to the Pledgee as Collateral hereunder and will likewise defend the right thereto and security interest therein of the Pledgee on behalf of the Secured Creditors. Each of the representations, warranties and covenants made by each Pledgor hereunder shall be deemed to be repeated on each date on which such Pledgor pledges any Collateral hereunder. (b) Each Pledgor shall (i) execute and deliver to each Pledged Partnership Entity and Pledged Limited Liability Company with respect to which it has pledged any Interest hereunder a notice substantially in the form of Annex C to this Agreement at the time such Interest is pledged and (ii) cause each Pledged Partnership Entity and each Pledged Limited Liability Company with respect to which it has pledged any Interest hereunder to execute and deliver to the Pledgee a control agreement substantially in the form of Annex D to this Agreement with respect to such Interest at the time such Interest is pledged. 16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each Pledgor under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation: (i) any renewal, extension, amendment or modification of or addition or supplement to or deletion from any Secured Debt Agreement or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof; (ii) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such Secured Debt Agreement or other agreement or instrument or this Agreement; (iii) any furnishing of any additional security to the Pledgee or its assignee or any acceptance thereof or any release of any security by the Pledgee or its assignee; (iv) any limitation on any party's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; or (v) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to such Pledgor or any Subsidiary of such Pledgor, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not such Pledgor shall have notice or knowledge of any of the foregoing. Exhibit F-2 Page 12 17. REGISTRATION, ETC. If at any time when the Pledgee shall determine to exercise its right to sell all or any part of the Interests pursuant to Section 7 hereof, such Interests or the part thereof to be sold shall not, for any reason whatsoever, be effectively registered under the Securities Act, as then in effect, the Pledgee may, in its sole and absolute discretion, sell such Interests or part thereof by private sale in such manner and under such circumstances as the Pledgee may deem necessary or advisable in order that such sale may legally be effected without such registration; provided, that at least 10 days' prior notice of the time and place of any such sale shall be given to such Pledgor. Without limiting the generality of the foregoing, in any such event the Pledgee, in its sole and absolute discretion and subject to compliance with any applicable securities laws: (i) may proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Interests or part thereof shall have been filed under such Securities Act; (ii) may approach and negotiate with a single possible purchaser to effect such sale; and (iii) may restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Interests or part thereof. In the event of any such sale, the Pledgee and the other Secured Creditors shall incur no responsibility or liability for selling all or any part of the Interests at a price which the Pledgee, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were deferred until after registration as aforesaid. 18. TERMINATION, RELEASE. (a) After the Termination Date (as defined below), this Agreement shall terminate (provided that all indemnities set forth herein including, without limitation, in Section 11 hereof shall survive any such termination) and the Pledgee, at the request and expense of the respective Pledgor, will promptly execute and deliver to such Pledgor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Pledgee and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement. As used in this Agreement, "Termination Date" shall mean the date upon which the Total Commitment and all Interest Rate Protection Agreements or Other Hedging Agreements have been terminated, no Note or Letter of Credit is outstanding (and all Loans have been repaid in full), and all Obligations then owing have been paid in full. (b) In the event that any part of the Collateral is sold in connection with a sale permitted by the Credit Agreement or otherwise released at the direction of the Required Secured Creditors and the proceeds of such sale or sales or from such release are applied in accordance with the provisions of the Credit Agreement, to the extent required to be so applied, the Pledgee, at the request and expense of the respective Pledgor, will duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral as is then being (or has been) so sold or released and as may be in the possession of the Pledgee and has not theretofore been released pursuant to this Agreement. (c) At any time that any Pledgor desires that Collateral be released as provided in the foregoing sub-section (a) or (b), it shall deliver to the Pledgee a certificate signed by an Authorized Officer of such Pledgor stating that the release of the respective Collateral is permitted pursuant to such subsection (a) or (b). Exhibit F-2 Page 13 (d) The Pledgee shall have no liability whatsoever to any Secured Creditor as the result of any release of Collateral by it in accordance with this Section 18. 19. NOTICES, ETC. Except as otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been duly given or made when delivered in accordance with the provisions of Section 12.03 of the Credit Agreement, addressed as follows: (a) if to any Pledgor, at its address set forth opposite its signature below; (b) if to the Pledgee, at: German American Capital Corporation 31 West 52nd Street New York, New York 10019 Attention: Allisson Michaels Telephone: (212) 469-6949 Facsimile: (212) 469-7210 (c) if to any Bank Creditor, at such address as such Bank Creditor shall have specified in the Credit Agreement; (d) if to any Other Creditor, at such address as such Other Creditor shall have specified in writing to each Pledgor and the Pledgee; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. 20. WAIVER; AMENDMENT. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each Pledgor directly affected thereby and the Pledgee (with the written consent of the Required Secured Creditors); provided, however, that any change, waiver, modification or variance affecting the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors (as defined below) of such affected Class. For the purpose of this Agreement, the term "Class" shall mean each class of Secured Creditors, i.e., whether (x) the Bank Creditors as holders of the Credit Agreement Obligations or (y) the Other Creditors as the holders of the Other Obligations. For the purpose of this Agreement, the term "Requisite Creditors" of any Class shall mean each of (x) with respect to the Credit Agreement Obligations, the Required Banks and (y) with respect to the Other Obligations that are secured by this Agreement, the holders of at least a majority of all obligations outstanding from time to time under the respective Interest Rate Protection Agreements or Other Hedging Agreements. 21. PLEDGEE NOT BOUND. (a) Nothing herein shall be construed to make the Pledgee or any other Secured Creditor liable as a general partner or limited partner of any Pledged Partnership Entity or as a member of any Pledged Limited Liability Company and neither the Pledgee nor any Exhibit F-2 Page 14 other Secured Creditor by virtue of this Agreement or otherwise (except as referred to in the following sentence) shall have any of the duties, obligations or liabilities of a general partner or limited partner of any Pledged Partnership Entity or of a member of any Pledged Limited Liability Company. The parties hereto expressly agree that, unless the Pledgee shall become the absolute owner of an Interest pursuant hereto, this Agreement shall not be construed as creating a partnership or joint venture among the Pledgee, any other Secured Creditor and/or any Pledgor. (b) Except as provided in the last sentence of paragraph (a) of this Section 21, the Pledgee, by accepting this Agreement, did not intend to become (and shall not be construed to be) a general partner or limited partner of any Pledged Partnership Entity or a member of any Pledged Limited Liability Company or otherwise be deemed to be a co-venturer with respect to any Pledgor, any Pledged Partnership Entity or any Pledged Limited Liability Company either before or after an Event of Default shall have occurred. The Pledgee shall have only those powers set forth herein and, except as provided in the last sentence of paragraph (a) of this Section 21, the Secured Creditors shall assume none of the duties, obligations or liabilities of a general partner or limited partner of any Pledged Partnership Entity or of a member of any Pledged Limited Liability Company or of any Pledgor. (c) The Pledgee and the other Secured Creditors shall not be obligated to perform or discharge any obligation of any Pledgor as a result of the pledge hereby effected. (d) The acceptance by the Pledgee of this Agreement, with all the rights, powers, privileges and authority so created, shall not at any time or in any event obligate the Pledgee or any other Secured Creditor to appear in or defend any action or proceeding relating to the Collateral to which it is not a party, or to take any action hereunder or thereunder, or to expend any money or incur any expenses or perform or discharge any obligation, duty or liability under the Collateral except with respect to duties of care in connection with the Collateral to the extent required by applicable law. 22. MISCELLANEOUS. This Agreement shall be binding upon the successors and assigns of each Pledgor (although no Pledgor may assign its rights and obligations hereunder except in accordance with the provisions of the Secured Debt Agreements) and shall inure to the benefit of and be enforceable by the Pledgee and the other Secured Creditors and their respective successors and assigns. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS EXCEPT FOR THE CHOICE OF LAW PROVISIONS OF THE NEW YORK UCC. The headings in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. 23. ADDITIONAL PLEDGORS. It is understood and agreed that any Subsidiary of the Borrower that is required to execute a counterpart of this Agreement pursuant to the Credit Agreement shall automatically become a Pledgor hereunder by executing a counterpart hereof and delivering the same to the Pledgee. Exhibit F-2 Page 15 24. RECOURSE. This Agreement is made with full recourse to each Pledgor (including, without limitation, with full recourse to all assets of such Pledgor) and pursuant to and upon the representations, warranties, covenants and the agreements on the part of such Pledgor contained herein, in the other Secured Debt Agreements and otherwise in writing in connection herewith or therewith. 25. INTEREST RATE PROTECTION AGREEMENTS AND OTHER HEDGING AGREEMENTS. Notwithstanding anything to the contrary contained in this Agreement, no Interest Rate Protection Agreement or Other Hedging Agreement shall be entitled to the benefits of this Agreement unless such Interest Rate Protection Agreement or Other Hedging Agreement is reasonably related to the Loans or the Letters of Credit or such Interest Rate Protection Agreement or Other Hedging Agreement provides that it is to be entitled to the benefits of this Agreement or the Security Documents generally. Exhibit F-2 Page 16 IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this Agreement to be executed by their duly elected officers duly authorized as of the date first above written. Address: ELDERTRUST, as a Pledgor 415 McFarlan Road Suite 202 By:______________________ Kennett Square Name: Pennsylvania 19348 Title: Address: ELDERTRUST OPERATING LIMITED PARTNERSHIP, as a Pledgor 415 McFarlan Road By: Elder Trust, general partner Suite 202 Kennett Square By:______________________ Pennsylvania 19348 Name: Title: Address: ET GENPAR, L.L.C. 415 McFarlan Road By: ElderTrust Operating Limited Suite 202 Partnership, sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:______________________ Name: Title: Address: ET SUB-HERITAGE WOODS, L.L.C., as a Pledgor 415 McFarlan Road By: ElderTrust Operating Limited Suite 202 Partnership, sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:______________________ Name: Title:
Exhibit F-2 Page 17 Address: ET SUB-PLEASANT VIEW, L.L.C., as a Pledgor 415 McFarlan Road By: ElderTrust Operating Limited Suite 202 Partnership, sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:______________________ Name: Title: Address: ET SUB-RITTENHOUSE LIMITED PARTNERSHIP, L.L.P., as a Pledgor 415 McFarlan Road By: ET GENPAR, L.L.C., general partner Suite 202 Kennett Square By: ElderTrust Operating Limited Pennsylvania 19348 Partnership, sole member By: ElderTrust, general partner By:______________________ Name: Title: Address: ET SUB-LOPATCONG, L.L.C., as a Pledgor 415 McFarlan Road By: ElderTrust Operating Limited Suite 202 Partnership, sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:______________________ Name: Title:
Exhibit F-2 Page 18 Address: ET SUB-WAYNE I LIMITED PARTNERSHIP, L.L.P., as a Pledgor 415 McFarlan Road By: ET GENPAR, L.L.C., general partner Suite 202 Kennett Square By: ElderTrust Operating Limited Pennsylvania 19348 Partnership, sole member By: ElderTrust, general partner By:______________________ Name: Title: Address: ET SUB-PENNSBURG MANOR LIMITED PARTNERSHIP, L.L.P., as a Pledgor 415 McFarlan Road By: ET GENPAR, L.L.C., general partner Suite 202 Kennett Square By: ElderTrust Operating Limited Pennsylvania 19348 Partnership, sole member By: ElderTrust, general partner By:______________________ Name: Title: Address: ET SUB-POB I LIMITED PARTNERSHIP, L.L.P., as a Pledgor 415 McFarlan Road By: ET GENPAR, L.L.C., general partner Suite 202 Kennett Square By: ElderTrust Operating Limited Pennsylvania 19348 Partnership, sole member By: ElderTrust, general partner By:______________________ Name: Title:
Exhibit F-2 Page 19 Address: ET SUB-SMOB, L.L.C., as a Pledgor 415 McFarlan Road By: ElderTrust Operating Limited Suite 202 Partnership, sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:______________________ Name: Title: Address: ET SUB-WINDSOR I, L.L.C., as a Pledgor 415 McFarlan Road By: ElderTrust Operating Limited Suite 202 Partnership, sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:______________________ Name: Title: Address: ET SUB-WINDSOR II, L.L.C., as a Pledgor 415 McFarlan Road By: ElderTrust Operating Limited Suite 202 Partnership, sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:______________________ Name: Title: Address: GERMAN AMERICAN CAPITAL CORPORATION 51 West 52nd Street By:______________________ New York, New York 10019 Name: Title: By:______________________ Name: Title:
EXHIBIT F-2 ANNEX A to PLEDGE AND SECURITY AGREEMENT LIST OF PARTNERSHIP INTERESTS ANNEX B to PLEDGE AND SECURITY AGREEMENT LIST OF LIMITED LIABILITY COMPANY INTERESTS EXHIBIT F-2 ANNEX C to PLEDGE AND SECURITY AGREEMENT FORM OF PARTNERSHIP/LIMITED LIABILITY COMPANY NOTICE [Letterhead of Pledgor] [Date] TO: [Name of Pledged Entity] Notice is hereby given that, pursuant to a Pledge and Security Agreement (a true and correct copy of which is attached hereto), dated as of January 30, 1998 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Pledge Agreement"), among [NAME OF PLEDGOR] (the "Pledgor"), the other pledgors from time to time party thereto and German American Capital Corporation, as Pledgee (the "Pledgee") for the benefit of the Secured Creditors described therein, the Pledgor has pledged and assigned to the Pledgee for the benefit of the Secured Creditors, and granted to the Pledgee for the benefit of the Secured Creditors a continuing security interest in, all right, title and interest of the Pledgor, whether now existing or hereafter arising or acquired, as a [[limited] [general] partner][member] in [NAME OF PLEDGED PARTNERSHIP ENTITY/LIMITED LIABILITY COMPANY] (the "Pledged Entity"), and in, to and under the [TITLE OF APPLICABLE PARTNERSHIP/LIMITED LIABILITY COMPANY/OPERATING AGREEMENT] (the "Agreement"), including, without limitation: (i) all the capital of the Pledged Entity and the Pledgor's interest in all profits, losses, [Partnership Assets/Limited Liability Company Assets] (as defined in the Pledge Agreement) and other distributions to which the Pledgor shall at any time be entitled in respect of such partnership interest; (ii) all other payments due or to become due to the Pledgor in respect of such interest, whether under the Agreement or otherwise, whether as contractual obligations, damages, insurance proceeds or otherwise; (iii) all of its claims, rights, powers, privileges, authority, options, security interest, liens and remedies, if any, under the Agreement or at law or otherwise in respect of such interest; (iv) all present and future claims, if any, of the Pledgor against the Pledged Entity for moneys loaned or advanced, for services rendered or otherwise; ANNEX C Page 2 (v) all of the Pledgor's rights under the Agreement or at law to exercise and enforce every right, power, remedy, authority, option and privilege of the Pledgor relating to the interest, including any power to terminate, cancel or modify the Agreement, to execute any instruments and to take any and all other action on behalf of and in the name of the Pledgor in respect of the interest and the Pledged Entity, to make determinations, to exercise any election (including, but not limited, election of remedies) or option or to give or receive any notice, consent, amendment, waiver or approval, together with full power and authority to demand, receive, enforce, collect or receipt for any of the foregoing or for any [Partnership Asset/Limited Liability Company Asset], to enforce or execute any checks, or other instruments or orders, to file any claims and to take any action in connection with any of the foregoing (with all of the foregoing rights only to be exercisable upon the occurrence and during the continuance of an Event of Default); (vi) all other property hereafter delivered in substitution for or in addition to any of the foregoing, all certificates and instruments representing or evidencing such other property and all cash, securities, interest, dividends, rights and other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all thereof; and (vii) to the extent not otherwise included, all proceeds of any or all of the foregoing. The Pledgor hereby requests the Pledged Entity to indicate the Pledged Entity's acceptance of this Notice and consent to and confirmation of its terms and provisions by signing a copy hereof where indicated on the attached page and returning the same to the Pledgee on behalf of the Secured Creditors. [NAME OF PLEDGOR] By:_______________________________ Title: EXHIBIT F-2 ANNEX D to PLEDGE AND SECURITY AGREEMENT FORM OF CONTROL AGREEMENT [NAME OF PLEDGED PARTNERSHIP ENTITY/LIMITED LIABILITY COMPANY] (the "Pledged Entity") hereby acknowledges receipt of a copy of the notice of the assignment by [NAME OF PLEDGOR] (the "Pledgor") of its interest (the "Interest") under the [TITLE OF APPLICABLE PARTNERSHIP/LIMITED LIABILITY COMPANY/OPERATING AGREEMENT] (the "Agreement") pursuant to the terms of the Pledge and Security Agreement, dated as of January 30, 1998 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Pledge Agreement"), among the Pledgor, the other pledgors from time to time party thereto, and German American Capital Corporation, as Pledgee (the "Pledgee") for the benefit of the Secured Creditors described therein. The undersigned hereby confirms that it is the issuer of the Interest and that the Pledgor is the registered owner of such Interest, and hereby irrevocably agrees that the undersigned will comply with any and all instructions originated by the Pledgee on behalf of the Secured Creditors in respect of such interest without further consent from the Pledgor and, in the event of any conflict between any instructions originated by the Pledgee and any instructions originated by the Pledgor or any other person (other than a court of competent jurisdiction), the undersigned shall comply with the instructions originated by the Pledgee. The undersigned also irrevocably agrees that it shall not register the Interest in the name of any person other than the Pledgor or the Pledgee (unless otherwise instructed by the Pledgee) and that it shall not agree to comply with any instructions originated by any person other than the Pledgor or the Pledgee without the further consent of the registered owner of the Interest. Dated: ______________, ____ [NAME OF PLEDGED ENTITY] By:______________________________________ Title: ACKNOWLEDGED BY: [NAME OF PLEDGOR] By:________________________________________ Title: EXHIBIT G SECURITY AGREEMENT among ELDERTRUST, ELDERTRUST OPERATING LIMITED PARTNERSHIP, VARIOUS SUBSIDIARIES of ELDERTRUST, and GERMAN AMERICAN CAPITAL CORPORATION, as Collateral Agent Dated as of January 30, 1998 EXHIBIT G SECURITY AGREEMENT SECURITY AGREEMENT, dated as of January 30, 1998 made by each of the undersigned assignors (each, an "Assignor" and, together with any other entity that becomes a party hereto pursuant to Section 9.10 hereof, the "Assignors") in favor of German American Capital Corporation, as Collateral Agent (the "Collateral Agent"), for the benefit of the Secured Creditors (as defined below). Except as otherwise defined herein, capitalized terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as so defined. W I T N E S S E T H: WHEREAS, ElderTrust, a Maryland real estate investment trust (the "REIT"), ElderTrust Operating Limited Partnership, a Delaware limited partnership (the "Borrower"), various lenders (the "Banks") from time to time party thereto, Deutsche Bank AG, New York Branch, as Issuing Bank (the "Issuing Bank") and German American Capital Corporation, as Administrative Agent (together with any successor administrative agent, the "Administrative Agent"), have entered into a Credit Agreement, dated as of January 30, 1998, providing for the making of Loans to the Borrower and the issuance of and participation in Letters of Credit for the account of the Borrower, all as contemplated therein (as amended, modified or supplemented from time to time, the "Credit Agreement") (the Banks, the Issuing Bank, the Administrative Agent and the Collateral Agent are herein called the "Bank Creditors"); WHEREAS, the Borrower may at any time and from time to time enter into one or more Interest Rate Protection Agreements or Other Hedging Agreements with one or more Banks or any affiliate thereof (each such Bank or affiliate, even if the respective Bank subsequently ceases to be a Bank under the Credit Agreement for any reason, together with such Bank's or affiliate's successors and assigns, if any, collectively, the "Other Creditors," and together with the Bank Creditors, are herein called the "Secured Creditors"); WHEREAS, pursuant to the Parent Guaranty, the Parent Guarantor has guaranteed to the Secured Creditors the payment when due of all obligations and liabilities of the Borrower under or with respect to the Credit Documents and the Interest Rate Protection Agreements and other Hedging Agreements; WHEREAS, pursuant to the Subsidiaries Guaranty, each Subsidiary Guarantor has jointly and severally guaranteed to the Secured Creditors, the payment when due of all obligations and liabilities of the Borrower under or with respect to the Credit Documents and the Interest Rate Protection Agreements and Other Hedging Agreements; WHEREAS, it is a condition precedent to the extensions of credit under the Credit Agreement that each Assignor shall have executed and delivered to the Collateral Agent this Agreement; Exhibit G Page 2 WHEREAS, each Assignor desires to execute this Agreement to satisfy the condition described in the preceding paragraph; NOW, THEREFORE, in consideration of the benefits accruing to each Assignor, the receipt and sufficiency of which are hereby acknowledged, each Assignor hereby makes the following representations and warranties to the Collateral Agent for the benefit of the Secured Creditors and hereby covenants and agrees with the Collateral Agent for the benefit of the Secured Creditors as follows: ARTICLE I SECURITY INTERESTS 1.1. Grant of Security Interests. (a) As security for all of the Obligations of such Assignor, each Assignor does hereby pledge, assign and transfer unto the Collateral Agent, and does hereby grant to the Collateral Agent, for the benefit of the Secured Creditors, a continuing security interest of first priority in, all of the right, title and interest of such Assignor in, to and under all of the following, whether now existing or hereafter from time to time acquired: (i) each and every Receivable, (ii) all Contracts, together with all Contract Rights arising thereunder, (iii) all Inventory, (iv) all Equipment, (v) all computer programs of such Assignor and all intellectual property rights therein and all other proprietary information of such Assignor, including, but not limited to, trade secrets (to the extent such computer programs, intellectual property rights and proprietary information are assignable without violating any agreements governing same), (vi) all other Goods, General Intangibles, Permits, Chattel Paper, Documents and Instruments, (vii) the Cash Collateral Account and all monies, securities, instruments and other Cash Equivalents deposited or required to be deposited in such Cash Collateral Account, (viii) all present and future bank accounts of such Assignor including, without limitation, any demand, time savings, passbook, certificates of deposit, or like accounts maintained by such Assignor with any bank, savings and loan association, credit union or other organization, all money, cash and checks, drafts, notes, bills, bills of exchange, securities, investments, bonds or other instruments, writings or property of such Assignor from time to time received, receivable or otherwise distributed in respect thereof, in renewal or extension thereof, or in exchange therefor, whether or not deposited in any such deposit account (collectively, the "Pledged Accounts"), (ix) all revenues, receipts, income, accounts, and other Receivables derived or to be derived from the ownership or operation of any Borrowing Base Properties and Borrowing Base Pledged Mortgage Loans and related facilities located thereon, including, without limitation of the generality of the foregoing, all rent, advance deposits, charges for services and other revenues and income derived or to be derived from the sale or rental of rooms, apartments, units or other facilities, the provision of services, the sale of food, beverages and merchandise, the rental of shops, the leasing of commercial or residential spaces, the granting of concessions (including concessions for the installation of coin-operated machines to the extent of such Assignor's interest therein) within or about any Borrowing Base Properties and related facilities, the rental or operation of parking facilities and the provision of services to guests of any Borrowing Base Properties and related facilities located thereon and any other items of revenue, receipts or other income, (x) all books and records of each Assignor with respect to any and all of the foregoing and (xi) all Proceeds and products of any and all of the foregoing (all of each Assignor's right, title and interest in the above, collectively, the "Collateral"). Exhibit G Page 3 (b) The security interest of the Collateral Agent under this Agreement extends to all Collateral of the kind which is the subject of this Agreement which any Assignor may acquire at any time during the term of this Agreement. ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS Each Assignor represents, warrants and covenants, which representations, warranties and covenants shall survive execution and delivery of this Agreement, as follows: 2.1. Necessary Filings. With respect to the Collateral that consists of cash, Cash Equivalents and property in which a security interest may be perfected by the filing of a financing statement under the UCC, upon (i) possession by the Collateral Agent or its designee in the case of cash, (ii) the taking of all action required under Articles 8 and 9 of the UCC in the case of Cash Equivalents and Instruments and (iii) the filing of appropriate financing statements under the UCC in the case of such other Collateral (all of which actions described in preceding clauses (i), (ii) and (iii) shall have been taken and be in full force and effect with respect to such Collateral owned by such Assignor within 10 days following the Effective Date (or 30 days in the case of cash and Cash Equivalents) or, in the case of any Collateral acquired on an Addition Date, within 10 days following such Addition Date), the Collateral Agent has been granted, for the benefit of the Secured Creditors and pursuant to this Agreement, a legal, valid and enforceable security interest in all right, title and interest of such Assignor in such Collateral, which security interest is (with the exception of cash which is not in the possession of the Collateral Agent) a fully perfected first lien on, and security interest in, all right, title and interest of such Assignor in all of such Collateral, subject to no other Liens other than Permitted Liens, provided that it will not be a breach of the representation and warranty made in this Section 2.1 if the Collateral Agent does not have a perfected security interest in Cash Equivalents which, in the aggregate, total less than $100,000. 2.2. No Liens. Such Assignor is, and as to Collateral acquired by it from time to time after the date hereof such Assignor will be, the owner of all Collateral free from any Lien, security interest, encumbrance or other right, title or interest of any Person (other than Permitted Liens), and such Assignor shall defend the Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent and the other Secured Creditors. 2.3. Other Financing Statements. As of the date hereof, there is no financing statement (or similar statement or instrument of registration under the law of any jurisdiction) covering or purporting to cover any interest of any kind in the Collateral (other than financing statements filed in respect of Permitted Liens), and so long as the Termination Date has not occurred, such Assignor will not execute or authorize to be filed in any public office any financing statement (or similar statement or instrument of registration under Exhibit G Page 4 the law of any jurisdiction) or statements relating to the Collateral, except financing statements filed or to be filed in respect of and covering the security interests granted hereby by such Assignor or in connection with Permitted Liens. 2.4. Chief Executive Office; Records. The chief executive office of such Assignor is located at the address indicated on Annex A hereto for such Assignor. Such Assignor will not move its chief executive office except to such new location as such Assignor may establish in accordance with the last sentence of this Section 2.4. No Assignor shall establish new locations for such offices until (i) it shall have given to the Collateral Agent not less than 30 days' prior written notice of its intention to do so, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may reasonably request, (ii) with respect to such new location, it shall have taken all action, reasonably satisfactory to the Collateral Agent, to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect and (iii) at the request of the Collateral Agent, it shall have furnished an opinion of counsel reasonably acceptable to the Collateral Agent to the effect that all financing or continuation statements and amendments or supplements thereto have been filed in the appropriate filing office or offices, and all other actions have been taken, in order to perfect (and maintain the perfection of) the security interest granted hereby in respect of the types of Collateral referred to in Section 2.1 hereof. 2.5. Location of Inventory and Equipment. All Inventory and Equipment held on the date hereof by each Assignor is located at one of the locations shown on Annex B hereto for such Assignor. Each Assignor agrees that all Inventory and Equipment now held or subsequently acquired by it shall be kept at (or shall be in transport to) any one of the locations shown on Annex B hereto, or such new location as such Assignor may establish in accordance with the last sentence of this Section 2.5. Any Assignor may establish a new location for Inventory and Equipment only if (i) it shall have given to the Collateral Agent not less than 30 days' prior written notice of its intention so to do, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may request, (ii) with respect to such new location, it shall have taken all action reasonably satisfactory to the Collateral Agent to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect and (iii) at the request of the Collateral Agent, it shall have furnished an opinion of counsel reasonably acceptable to the Collateral Agent to the effect that all financing or continuation statements and amendments or supplements thereto have been filed in the appropriate filing office or offices, and all other actions have been taken, in order to perfect (and maintain the perfection of) the security interest granted hereby in respect of the types of Collateral referred to in Section 2.1 hereof. 2.6. Pledged Accounts. (a) The Pledged Accounts existing on the date hereof are, and will continue to be, maintained at, and controlled and directed from, the respective offices of those institutions set forth on Annex C hereto (such institutions, the "Pledged Account Banks"). No Assignor shall establish any additional Pledged Accounts until (i) such Assignor shall have given to the Collateral Agent prior written notice of its intention so to do, clearly describing such new account and providing such other information in connection therewith as the Collateral Agent may reasonably request; (ii) with respect to such new account, it shall have taken all action to maintain the Exhibit G Page 5 security interest of the Collateral Agent in such Collateral intended to be granted hereby at all times fully perfected and in full force and effect and (iii) at the request of the Collateral Agent, it shall have furnished an opinion of counsel reasonably acceptable to the Collateral Agent to the effect that all actions have been taken in order to perfect (and maintain the perfection of) the security interest granted hereby. (b) Upon the occurrence and during the continuance of any Event of Default, and upon notice by the Collateral Agent to the Borrower (although no such notice shall be required to be so given in the case of an Event of Default of the type described in Section 9.05 of the Credit Agreement), the Assignors shall no longer have the right to withdraw funds from any Pledged Account, and the Collateral Agent shall have the sole right to make withdrawals from the Pledged Accounts. All Collateral held in the Pledged Accounts shall be held therein in accordance with the terms of this Agreement. 2.7. Recourse. This Agreement is made with full recourse to each Assignor (including, without limitation, with full recourse to all assets of such Assignor) and pursuant to and upon all the warranties, representations, covenants and agreements on the part of such Assignor contained herein, in the other Secured Debt Agreements and otherwise in writing in connection herewith or therewith. 2.8. Trade Names; Change of Name. No Assignor has or operates in any jurisdiction under, or in the preceding 12 months has had or has operated in any jurisdiction under, any trade names, fictitious names or other names except its legal name and such other trade or fictitious names as are listed on Annex D hereto for such Assignor. No Assignor shall change its legal name or assume or operate in any jurisdiction under any trade, fictitious or other name except those names listed on Annex D hereto for such Assignor and new names established in accordance with the last sentence of this Section 2.8. No Assignor shall assume or operate in any jurisdiction under any new trade, fictitious or other name until (i) it shall have given to the Collateral Agent not less than 30 days' prior written notice of its intention so to do, clearly describing such new name and the jurisdictions in which such new name shall be used and providing such other information in connection therewith as the Collateral Agent may reasonably request, (ii) with respect to such new name, it shall have taken all action reasonably requested by the Collateral Agent to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect and (iii) at the request of the Collateral Agent, it shall have furnished an opinion of counsel reasonably acceptable to the Collateral Agent to the effect that all financing or continuation statements and amendments or supplements thereto have been filed in the appropriate filing office or offices, and all other actions have been taken, in order to perfect (and maintain the perfection of) the security interest granted hereby in respect of the types of Collateral referred to in Section 2.1 hereof. Exhibit G Page 6 ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS; CHATTEL PAPER 3.1. Additional Representations and Warranties. As of the time when each of its Receivables arises, each Assignor shall be deemed to have represented and warranted that, to the best of such Assignor's knowledge, such Receivable, and all records, papers and documents relating thereto (if any) are what they purport to be, and to the best of such Assignor's knowledge, such Receivable will evidence true and valid obligations of the account debtor named therein. 3.2. Maintenance of Records. Each Assignor will keep and maintain at its own cost and expense accurate records of its Receivables and Contracts, including, but not limited to, originals of all documentation (including each Contract) with respect thereto, records of all payments received, all credits granted thereon, all merchandise returned and all other dealings therewith, and such Assignor will make the same available on such Assignor's premises to the Collateral Agent for inspection, at such Assignor's own cost and expense, at any and all reasonable times upon prior notice to such Assignor. Upon the occurrence and during the continuance of an Event of Default and at the request of the Collateral Agent, such Assignor shall, at its own cost and expense, deliver all tangible evidence of its Receivables and Contract Rights (including, without limitation, all documents evidencing the Receivables and all Contracts) and such books and records to the Collateral Agent or to its representatives (copies of which evidence and books and records may be retained by such Assignor). 3.3. Direction to Account Debtors; Contracting Parties; etc. Upon the occurrence and during the continuance of an Event of Default, and if the Collateral Agent so directs any Assignor, such Assignor agrees (x) to cause all payments on account of the Receivables and Contracts to be made directly to the Cash Collateral Account, (y) that the Collateral Agent may, at its option, directly notify the obligors with respect to any Receivables and/or under any Contracts to make payments with respect thereto as provided in the preceding clause (x) and (y) that the Collateral Agent may enforce collection of any such Receivables and Contracts and may adjust, settle or compromise the amount of payment thereof, in the same manner and to the same extent as such Assignor. Without notice to or assent by any Assignor, the Collateral Agent may apply any or all amounts then in, or thereafter deposited in, the Cash Collateral Account which application shall be effected in the manner provided in Section 5.4 of this Agreement. The costs and expenses (including reasonable attorneys' fees) of collection, whether incurred by an Assignor or the Collateral Agent, shall be borne by the relevant Assignor. The Collateral Agent shall deliver a copy of each notice referred to in the preceding clause (y) to the relevant Assignor; provided, that the failure by the Collateral Agent to so notify such Assignor shall not affect the effectiveness of such notice or the other rights of the Collateral Agent created by this Section 3.3; provided further, that the Collateral Agent will promptly rescind any notice theretofore given under this Section 3.3 after all Events of Defaults have been cured or waived. 3.4. Modification of Terms; etc. Except in accordance with such Assignor's ordinary course of business and consistent with sound business judgment, no Assignor shall rescind or cancel any indebtedness evidenced by any Receivable or under any Contract, or materially modify any term thereof or make Exhibit G Page 7 any material adjustment with respect thereto, or extend or renew the same, or compromise or settle any material dispute, claim, suit or legal proceeding relating thereto, or sell any Receivable or Contract, or interest therein, without the prior written consent of the Collateral Agent. To the extent consistent with sound business judgment, each Assignor will duly fulfill all obligations on its part to be fulfilled under or in connection with the Receivables and Contracts and will do nothing to impair the rights of the Collateral Agent in the Receivables or Contracts. 3.5. Collection. Each Assignor shall endeavor in accordance with reasonable business practices to cause to be collected from the account debtor named in each of its Receivables or obligor under any Contract, as and when due (including, without limitation, amounts which are delinquent, such amounts to be collected in accordance with generally accepted lawful collection procedures) any and all amounts owing under or on account of such Receivable or Contract, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Receivable or under such Contract, except that, prior to the occurrence of an Event of Default, any Assignor may allow in the ordinary course of business as adjustments to amounts owing under its Receivables and Contracts (i) an extension or renewal of the time or times of payment, or settlement for less than the total unpaid balance, which such Assignor finds appropriate in accordance with reasonable business judgment and (ii) a refund or credit due as a result of returned or damaged merchandise or improperly performed services or for other reasons which such Assignor finds appropriate in accordance with reasonable business judgment. The reasonable costs and expenses (including, without limitation, reasonable attorneys' fees) of collection, whether incurred by an Assignor or the Collateral Agent, shall be borne by the relevant Assignor. 3.6. Delivery of Instruments. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument, such Instrument shall be promptly delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent, to be held as Collateral pursuant to this Agreement, provided that, so long as no Event of Default shall have occurred and be continuing, each Assignor may retain for collection in the ordinary course of business any Instruments received by such Assignor in the ordinary course of business, and the Collateral Agent shall, promptly upon request of such Assignor, make appropriate arrangements for making any other Instrument pledged by such Assignor available to such Assignor for purposes of presentation, collection or renewal (any such arrangement to be effected, to the extent deemed appropriate by the Collateral Agent, against trust receipt or like document). Until such Collateral is delivered to the Collateral Agent, such Assignor shall hold such property in trust for the Secured Creditors, segregated from other property of such Assignor, as additional collateral security for the Obligations. 3.7. Assignors Remain Liable Under Receivables. Anything herein to the contrary notwithstanding, the Assignors shall remain liable under each of the Receivables to observe and perform all of the conditions and obligations to be observed and performed by them thereunder, all in accordance with the terms of any agreement giving rise to such Receivables. Neither the Collateral Agent nor any other Secured Creditor shall have any obligation or liability under any Receivable (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Collateral Agent or Exhibit G Page 8 any other Secured Creditor of any payment relating to such Receivable pursuant hereto, nor shall the Collateral Agent or any other Secured Creditor be obligated in any manner to perform any of the obligations of any Assignor under or pursuant to any Receivable (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by them or as to the sufficiency of any performance by any party under any Receivable (or any agreement giving rise thereto), to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to them or to which they may be entitled at any time or times. 3.8. Assignors Remain Liable Under Contracts. Anything herein to the contrary notwithstanding, the Assignors shall remain liable under each of the Contracts to observe and perform all of the conditions and obligations to be observed and performed by them thereunder, all in accordance with and pursuant to the terms and provisions of each Contract. Neither the Collateral Agent nor any other Secured Creditor shall have any obligation or liability under any Contract by reason of or arising out of this Agreement or the receipt by the Collateral Agent or any other Secured Creditor of any payment relating to such contract pursuant hereto, nor shall the Collateral Agent or any other Secured Creditor be obligated in any manner to perform any of the obligations of any Assignor under or pursuant to any Contract, to make any payment, to make any inquiry as to the nature or the sufficiency of any performance by any party under any Contract, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to them or to which they may be entitled at any time or times. 3.9. Further Actions. Each Assignor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, certificates, reports and other assurances or instruments and take such further steps relating to its Receivables, Contracts, Instruments and other property or rights covered by the security interest hereby granted, as the Collateral Agent may reasonably require. ARTICLE IV PROVISIONS CONCERNING ALL COLLATERAL 4.1. Protection of Collateral Agent's Security. Each Assignor will at all times keep its Inventory and Equipment insured in favor of the Collateral Agent, at such Assignor's own expense to the extent and in the manner provided in the Secured Debt Agreements; all policies or certificates with respect to such insurance (and any other insurance maintained by such Assignor) (i) shall name the Collateral Agent as additional insured and loss payee as its respective interest may appear and (ii) shall state that such insurance policies shall not be cancelled or materially changed without at least 30 days' prior written notice thereof (or 10 days' prior written notice thereof in the case of non-payment of premium) by the insurer to the Collateral Agent; and certified copies of such policies or certificates with respect thereto shall be deposited with the Collateral Agent. If any Assignor shall fail to insure its Inventory and Equipment in accordance with the preceding sentence, or if any Assignor shall fail to so name the Collateral Agent as additional insured and loss payee or deposit all policies or certificates with respect thereto, the Collateral Exhibit G Page 9 Agent shall have the right (but shall be under no obligation) to procure such insurance and such Assignor agrees to promptly reimburse the Collateral Agent for all costs and expenses of procuring such insurance. Except to the extent otherwise permitted to be retained by such Assignor or applied by such Assignor pursuant to the terms of the Secured Debt Agreements, the Collateral Agent shall, at the time any proceeds of such insurance are distributed to the Secured Creditors, apply such proceeds in accordance with Section 5.4 hereof. Each Assignor assumes all liability and responsibility in connection with the Collateral acquired by it and the liability of such Assignor to pay the Obligations shall in no way be affected or diminished by reason of the fact that such Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to such Assignor. 4.2. Further Actions. Each Assignor will, at its own expense and upon the request of the Collateral Agent, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such lists, descriptions and designations of its Collateral, warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, certificates, reports and other assurances or instruments and take such further steps relating to the Collateral and other property or rights covered by the security interest hereby granted, which the Collateral Agent deems reasonably appropriate or advisable to perfect, preserve or protect its security interest in the Collateral. 4.3. Financing Statements. Each Assignor agrees to execute and deliver to the Collateral Agent such financing statements, in form reasonably acceptable to the Collateral Agent, as the Collateral Agent may from time to time reasonably request or as are necessary or desirable in the opinion of the Collateral Agent to establish and maintain a valid, enforceable, first priority perfected security interest in the Collateral as provided herein and the other rights and security contemplated hereby all in accordance with the UCC as enacted in any and all relevant jurisdictions or any other relevant law. Each Assignor will pay any applicable filing fees, recordation taxes and related expenses relating to its Collateral. Each Assignor hereby authorizes the Collateral Agent to file any such financing statements without the signature of such Assignor where permitted by law, provided that the Collateral Agent shall deliver a copy of any said financing statement to the relevant Assignor. ARTICLE V REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT 5.1. Remedies; Obtaining the Collateral Upon Default. Each Assignor agrees that, if any Event of Default shall have occurred and be continuing, then and in every such case, the Collateral Agent, in addition to any rights now or hereafter existing under applicable law, shall have all rights as a secured creditor under any UCC, and such additional rights and remedies to which a secured creditor is entitled under the laws in effect, in all relevant jurisdictions and may: (i) personally, or by agents or attorneys, immediately take possession of the Collateral or any part thereof, from such Assignor or any other Person who then has possession of any part thereof with or Exhibit G Page 10 without notice or process of law, and for that purpose may enter upon such Assignor's premises where any of the Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of such Assignor; (ii) instruct the obligor or obligors on any agreement, instrument or other obligation (including, without limitation, the Receivables and the Contracts) constituting the Collateral to make any payment required by the terms of such agreement, instrument or other obligation directly to the Collateral Agent; (iii) withdraw all monies, securities and instruments in the Cash Collateral Account for application to the Obligations in accordance with Section 5.4 hereof; (iv) withdraw all monies, securities and investments in any Pledged Account for application to the Obligations in accordance with Section 5.4 hereof, and in connection therewith, deliver to any Pledged Account Bank written notice directing the Pledged Account Bank to send each day's deposit to the relevant Pledged Account by wire and in tact to the account or accounts designated by the Collateral Agent in such written notice; (v) sell, assign or otherwise liquidate any or all of the Collateral or any part thereof in accordance with Section 5.2 hereof, or direct the relevant Assignor to sell, assign or otherwise liquidate any or all of the Collateral or any part thereof, and, in each case, take possession of the proceeds of any such sale or liquidation; and (vi) take possession of the Collateral or any part thereof, by directing the relevant Assignor in writing to deliver the same to the Collateral Agent at any place or places designated by the Collateral Agent, in which event such Assignor shall at its own expense: (x) forthwith cause the same to be moved to the place or places so designated by the Collateral Agent and there delivered to the Collateral Agent; (y) store and keep any Collateral so delivered to the Collateral Agent at such place or places pending further action by the Collateral Agent as provided in Section 5.2 hereof; (z) while the Collateral shall be so stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition; it being understood that each Assignor's obligation so to deliver the Collateral is of the essence of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to a decree requiring specific performance by such Assignor of said obligation. By accepting the benefits of this Agreement, the Secured Creditors agree that this Agreement may be enforced only by the action of the Collateral Agent acting upon the instructions of the Required Secured Creditors and that no other Secured Exhibit G Page 11 Creditor shall have any right individually to seek to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised only by the Collateral Agent for the benefit of the Secured Creditors in accordance with the terms of this Agreement and the Credit Agreement. 5.2. Remedies; Disposition of the Collateral. Any Collateral repossessed by the Collateral Agent under or pursuant to Section 5.1 hereof and any other Collateral whether or not so repossessed by the Collateral Agent, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as the Collateral Agent may, in compliance with any mandatory requirements of applicable law, determine to be commercially reasonable. Any of the Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by the Collateral Agent. Any such disposition which shall be a private sale or other private proceedings permitted by such requirements shall be made upon not less than 10 days' prior written notice (which notice shall be deemed reasonable) to the relevant Assignor specifying the time at which such disposition is to be made and the intended sale price or other consideration therefor, and shall be subject, for the 10 days after the giving of such notice, to the right of the relevant Assignor or any nominee of such Assignor to acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified. Any such disposition which shall be a public sale permitted by such requirements shall be made upon not less than 10 days' prior written notice (which notice shall be deemed reasonable) to the relevant Assignor specifying the time and place of such sale and, in the absence of applicable requirements of law, shall be by public auction (which may, at the Collateral Agent's option, be subject to reserve), after publication of notice of such auction (where required by applicable law) not less than 10 days prior thereto. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the sale may be so adjourned. To the extent permitted by any such requirement of law, the Collateral Agent may bid for and become the purchaser of the Collateral or any item thereof, offered for sale in accordance with this Section without accountability to the relevant Assignor. If, under mandatory requirements of applicable law, the Collateral Agent shall be required to make disposition of the Collateral within a period of time which does not permit the giving of notice to the relevant Assignor as hereinabove specified, the Collateral Agent need give such Assignor only such notice of disposition as shall be reasonably practicable in view of such mandatory requirements of applicable law. 5.3. Waiver of Claims. Except as otherwise provided in this Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES, and each Assignor hereby further waives, to the extent permitted by law: Exhibit G Page 12 (i) all damages occasioned by such taking of possession except any damages which are the direct result of the Collateral Agent's gross negligence or willful misconduct; (ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent's rights hereunder; and (iii)all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Collateral or any portion thereof, and each Assignor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws. Subject to applicable law, any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the relevant Assignor therein and thereto, and shall be a perpetual bar both at law and in equity against such Assignor and against any and all Persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through and under such Assignor. 5.4. Application of Proceeds. (a) All moneys collected by the Collateral Agent (or, to the extent the Pledge Agreement, the Partnership Pledge and Security Agreement, any Collateral Assignment or any Mortgage require proceeds of collateral under such Security Document to be applied in accordance with the provisions of this Agreement, the Pledgee, Assignee or Mortgagee under such other Security Document) upon any sale or other disposition of the Collateral, together with all other moneys received by the Collateral Agent hereunder, shall be applied as follows: (i) first, to the payment of all amounts owing the Collateral Agent of the type described in clauses (iii) and (iv) of the definition of "Obligations"; (ii) second, to the extent proceeds remain after the application pursuant to the preceding clause (i), an amount equal to the outstanding Primary Obligations shall be paid to the Secured Creditors as provided in Section 5.4(d) hereof, with each Secured Creditor receiving an amount equal to such outstanding Primary Obligations or, if the proceeds are insufficient to pay in full all such Primary Obligations, its Pro Rata Share of the amount remaining to be distributed; (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii), an amount equal to the outstanding Secondary Obligations shall be paid to the Secured Creditors as provided in Section 5.4(d) hereof, with each Secured Creditor receiving an amount equal to its outstanding Secondary Obligations or, if the proceeds are insufficient to pay in full all such Secondary Obligations, its Pro Rata Share of the amount remaining to be distributed; and Exhibit G Page 13 (iv) fourth, to the extent proceeds remain after the application pursuant to the preceding clauses (i) through (iii), inclusive, and following the termination of this Agreement pursuant to Section 9.8(a) hereof, to the relevant Assignor or to whomever may be lawfully entitled to receive such surplus. (b) For purposes of this Agreement (x) "Pro Rata Share" shall mean, when calculating a Secured Creditor's portion of any distribution or amount, that amount (expressed as a percentage) equal to a fraction the numerator of which is the then unpaid amount of such Secured Creditor's Primary Obligations or Secondary Obligations, as the case may be, and the denominator of which is the then outstanding amount of all Primary Obligations or Secondary Obligations, as the case may be, (y) "Primary Obligations" shall mean (i) in the case of the Credit Agreement Obligations, all principal of, and interest on, all Loans, all reimbursement obligations and Unpaid Drawings with respect to Letters of Credit, and all Fees and (ii) in the case of the Other Obligations, all amounts due under the Interest Rate Protection Agreements or Other Hedging Agreements (other than indemnities, fees (including, without limitation, reasonable attorneys' fees) and similar obligations and liabilities) and (z) "Secondary Obligations" shall mean all Obligations other than Primary Obligations. (c) When payments to Secured Creditors are based upon their respective Pro Rata Shares, the amounts received by such Secured Creditors hereunder shall be applied (for purposes of making determinations under this Section 5.4 only) (i) first, to their Primary Obligations and (ii) second, to their Secondary Obligations. If any payment to any Secured Creditor of its Pro Rata Share of any distribution would result in overpayment to such Secured Creditor, such excess amount shall instead be distributed in respect of the unpaid Primary Obligations or Secondary Obligations, as the case may be, of the other Secured Creditors, with each Secured Creditor whose Primary Obligations or Secondary Obligations, as the case may be, have not been paid in full to receive an amount equal to such excess amount multiplied by a fraction the numerator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of such Secured Creditor and the denominator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of all Secured Creditors entitled to such distribution. (d) All payments required to be made hereunder shall be made (x) if to the Bank Creditors, to the Administrative Agent under the Credit Agreement for the account of the Bank Creditors, and (y) if to the Other Creditors, to the trustee, paying agent or other similar representative (each a "Representative") for the Other Creditors or, in the absence of such a Representative, directly to the Other Creditors. (e) For purposes of applying payments received in accordance with this Section 5.4, the Collateral Agent shall be entitled to rely upon (i) the Administrative Agent under the Credit Agreement and (ii) the Representative for the Other Creditors or, in the absence of such a Representative, upon the Other Creditors for a determination (which the Administrative Agent, each Representative for any Other Creditors and the Secured Creditors agree (or shall agree) to provide upon request of the Collateral Agent) of the outstanding Primary Obligations and Secondary Obligations owed to the Bank Creditors or the Other Creditors, as the case may be. Unless it has actual knowledge (including by way of written notice from a Bank Creditor or an Other Creditor) to the contrary, the Administrative Agent and each Representative, in furnishing information pursuant to the preceding sentence, and the Collateral Agent, in acting hereunder, shall be entitled to assume that no Secondary Obligations are outstanding. Unless it has actual knowledge (including by way of written notice Exhibit G Page 14 from an Other Creditor) to the contrary, the Collateral Agent, in acting hereunder, shall be entitled to assume that no Interest Rate Protection Agreements or Other Hedging Agreements are in existence. (f) It is understood that the Borrower shall remain liable, the Parent Guarantor shall remain liable, and the Subsidiary Guarantors shall remain jointly and severally liable, in each case to the extent of any deficiency between the amount of the proceeds of the Collateral and the aggregate amount of the Obligations. 5.5. Remedies Cumulative. Each and every right, power and remedy hereby specifically given to the Collateral Agent shall be in addition to every other right, power and remedy specifically given under this Agreement, the other Secured Debt Agreements or now or hereafter existing at law, in equity or by statute and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by the Collateral Agent. All such rights, powers and remedies shall be cumulative and the exercise or the beginning of the exercise of one shall not be deemed a waiver of the right to exercise any other or others. No delay or omission of the Collateral Agent in the exercise of any such right, power or remedy and no renewal or extension of any of the Obligations shall impair any such right, power or remedy or shall be construed to be a waiver of any Default or Event of Default or an acquiescence therein. No notice to or demand on any Assignor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Collateral Agent to any other or further action in any circumstances without notice or demand. In the event that the Collateral Agent shall bring any suit to enforce any of its rights hereunder and shall be entitled to judgment, then in such suit the Collateral Agent may recover reasonable expenses, including reasonable attorneys' fees, and the amounts thereof shall be included in such judgment. 5.6. Discontinuance of Proceedings. In case the Collateral Agent shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Collateral Agent, then and in every such case the relevant Assignor, the Collateral Agent and each holder of any of the Obligations shall be restored to their former positions and rights hereunder with respect to the Collateral subject to the security interest created under this Agreement, and all rights, remedies and powers of the Collateral Agent shall continue as if no such proceeding had been instituted. ARTICLE VI INDEMNITY 6.1. Indemnity. (a) Each Assignor jointly and severally agrees to indemnify, reimburse and hold the Collateral Agent, each other Secured Creditor and their respective successors, permitted assigns, employees and Exhibit G Page 15 agents (hereinafter in this Section 6.1 referred to individually as "Indemnitee," and collectively as "Indemnitees") harmless from any and all liabilities, obligations, damages, injuries, penalties, claims, demands, actions, suits, judgments and costs, expenses or disbursements (including reasonable attorneys' fees and expenses) (for the purposes of this Section 6.1 the foregoing are collectively called "expenses") of whatsoever kind and nature imposed on, asserted against or incurred by any of the Indemnitees in any way relating to or arising out of this Agreement, any other Secured Debt Agreement or any other document executed in connection herewith or therewith or in any other way connected with the administration of the transactions contemplated hereby or thereby or the enforcement of any of the terms of, or the preservation of any rights under any thereof, or in any way relating to or arising out of the manufacture, ownership or use of the Collateral; provided that no Indemnitee shall be indemnified pursuant to this Section 6.1(a) for losses, damages or liabilities to the extent caused by the gross negligence or willful misconduct of such Indemnitee. Each Assignor agrees that upon written notice by any Indemnitee of the assertion of such a liability, obligation, damage, injury, penalty, claim, demand, action, suit or judgment, the relevant Assignor shall assume full responsibility for the defense thereof. Each Indemnitee agrees to promptly notify the relevant Assignor of any such assertion of which such Indemnitee has knowledge; provided that the failure to give such notice shall not affect such Indemnitee's right to indemnification hereunder except to the extent (but only to the extent) that such Indemnitee's damages are increased as a result of such failure. (b) Without limiting the application of Section 6.1(a) hereof, each Assignor agrees, jointly and severally, to pay, or reimburse the Collateral Agent for any and all reasonable fees, costs and expenses of whatever kind or nature incurred in connection with the creation, preservation or protection of the Collateral Agent's Liens on, and security interest in, the Collateral, including, without limitation, all fees and taxes in connection with the recording or filing of instruments and documents in public offices, payment or discharge of any taxes or Liens upon or in respect of the Collateral, premiums for insurance with respect to the Collateral and all other fees, costs and expenses in connection with protecting, maintaining or preserving the Collateral and the Collateral Agent's interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising out of or relating to the Collateral. (c) If and to the extent that the obligations of any Assignor under this Section 6.1 are unenforceable for any reason, such Assignor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 6.2. Indemnity Obligations Secured by Collateral; Survival. Any amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Obligations secured by the Collateral. The indemnity obligations of each Assignor contained in this Article VI shall continue in full force and effect notwithstanding the full payment of all of the other Obligations and notwithstanding the discharge thereof. Exhibit G Page 16 ARTICLE VII DEFINITIONS The following terms shall have the meanings herein specified. Such definitions shall be equally applicable to the singular and plural forms of the terms defined. "Administrative Agent" shall have the meaning provided in the recitals of this Agreement. "Agreement" shall mean this Security Agreement as the same may be modified, supplemented or amended from time to time in accordance with its terms. "Assignor" shall have the meaning provided in the first paragraph of this Agreement. "Bank Creditors" shall have the meaning provided in the recitals of this Agreement. "Banks" shall have the meaning provided in the recitals of this Agreement. "Borrower" shall have the meaning provided in the recitals of this Agreement. "Cash Collateral Account" shall mean a non-interest bearing cash collateral account maintained with, and in the sole dominion and control of, the Collateral Agent for the benefit of the Secured Creditors. "Chattel Paper" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Class" shall have the meaning provided in Section 9.2 of this Agreement. "Collateral" shall have the meaning provided in Section 1.1(a) of this Agreement. "Collateral Agent" shall have the meaning provided in the first paragraph of this Agreement. "Contract Rights" shall mean all rights of any Assignor under each Contract to which such Assignor is a party or beneficiary, including, without limitation, (i) any and all rights to receive and demand payments under any or all Contracts, (ii) any and all rights to receive and compel performance under any or all Contracts and (iii) any and all other rights, interests and claims now existing or in the future arising in connection with any or all Contracts. "Contracts" shall mean all contracts between any Assignor and one or more additional parties (including, without limitation, each Management Agreement, each franchise agreement, each partnership agreement, each limited liability company agreement or operating agreement and any Interest Rate Protection Agreements or Other Hedging Agreements). Exhibit G Page 17 "Credit Agreement" shall have the meaning provided in the recitals of this Agreement. "Credit Agreement Obligations" shall have the meaning provided in the definition of "Obligations" in this Article VII. "Default" shall mean any event which, with notice or lapse of time, or both, would constitute an Event of Default. "Documents" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Equipment" shall mean any "equipment," as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor and, in any event, shall include, but shall not be limited to, all machinery, equipment, furnishings, fixtures, appliances, signs, artwork, office furnishings and equipment, guest room furnishings, linens, dishware, partitions, screens, awnings, shades, blinds, floor coverings and vehicles now or hereafter owned by any Assignor and any and all additions, substitutions and replacements of any of the foregoing, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto. "Event of Default" shall mean any Event of Default under, and as defined in, the Credit Agreement and shall in any event, without limitation, include any payment default on any of the Other Obligations after the expiration of any applicable grace period. "General Intangibles" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York and shall in any event include all of any Assignor's claims, rights, powers, privileges, authority, options, security interests, liens and remedies under any partnership agreement, limited liability company agreement or operating agreement to which such Assignor is a party or with respect to any partnership or limited liability company of which such Assignor is a partner or a member, as the case may be. "Goods" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Indemnitee" shall have the meaning provided in Section 6.1 of this Agreement. "Instrument" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Inventory" shall mean merchandise, inventory and goods, and all additions, substitutions and replacements thereof, wherever located, together with all goods, supplies, incidentals, packaging materials, labels, materials and any other items used or usable in manufacturing, processing, packaging or shipping same, in all stages of production -- from raw materials through work-in-process to finished goods -- and all products and proceeds of whatever sort and wherever located and any portion thereof which may be Exhibit G Page 18 returned, rejected, reclaimed or repossessed by the Collateral Agent from any Assignor's customers, and shall specifically include all "inventory" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor, provided that the term inventory shall not include any liquor located in any jurisdiction to the extent that the laws of such jurisdiction prohibit the creation of a security interest in liquor. "Lien" shall mean any security interest, mortgage, pledge, lien, claim, charge, encumbrance, title retention agreement, lessor's interest in a financing lease or analogous instrument, in, of, or on any Assignor's property. "Obligations" shall mean (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities (including, without limitation, the principal of and interest on the Notes issued by, and Loans made to, the Borrower under the Credit Agreement, all reimbursement obligations and Unpaid Drawings with respect to Letters of Credit, and all indemnities, fees and interest thereon or owed thereunder) of each Assignor to the Bank Creditors, whether now existing or hereafter incurred under, arising out of or in connection with any Credit Document (including, without limitation, in the case of the Guarantor, all of its obligations and liabilities under its Guaranty) to which such Assignor is a party and the due performance and compliance by each Assignor with all of the terms, conditions and agreements contained in the Credit Agreement and such other Credit Documents (all such principal, interest, obligations and liabilities being herein collectively called the "Credit Agreement Obligations"); (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities of each Assignor to the Other Creditors, whether now existing or hereafter incurred under, arising out of or in connection with any Interest Rate Protection Agreement or Other Hedging Agreement (including, without limitation, in the case of the Guarantor, all of its obligations and liabilities under its Guaranty) and the due performance and compliance by such Assignor with all the terms, conditions and agreements contained in such Interest Rate Protection Agreements or Other Hedging Agreements (all such obligations and liabilities described in this clause (ii) being herein collectively called the "Other Obligations"); (iii) any and all reasonable sums advanced by the Collateral Agent in order to preserve the Collateral or preserve its security interest in the Collateral; (iv) in the event of any proceeding for the collection or enforcement of any obligations or liabilities referred to in clauses (i) and (ii) above, after an Event of Default shall have occurred and be continuing, the reasonable expenses of re-taking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Collateral Agent of its rights hereunder, together with reasonable attorneys' fees and court costs; and (v) all amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement under Section 6.1 of this Agreement. "Other Creditors" shall have the meaning provided in the recitals of this Agreement. "Other Obligations" shall have the meaning provided in the definition of "Obligations" in this Article VII. Exhibit G Page 19 "Permits" shall mean, to the extent permitted to be assigned by the terms thereof or by applicable law, all licenses, permits, rights, orders, variances, franchises or authorizations of or from any governmental authority or agency in connection with the maintenance or operation of any Borrowing Base Property owned or leased by any Assignor. "Pledged Account Banks" shall have the meaning provided in Section 2.6(a) of this Agreement. "Pledged Accounts" shall have the meaning provided in Section 1.1(a) of this Agreement. "Primary Obligations" shall have the meaning provided in Section 5.4(b) of this Agreement. "Pro Rata Share" shall have the meaning provided in Section 5.4(b) of this Agreement. "Proceeds" shall have the meaning provided in the Uniform Commercial Code as in effect in the State of New York on the date hereof or under other relevant law and, in any event, shall include, but not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Collateral Agent or any Assignor from time to time with respect to any of the Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to any Assignor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any person acting under color of governmental authority) and (iii) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "Receivables" shall mean any "account" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor and, in any event, shall include, but shall not be limited to, all of such Assignor's rights to payment for goods sold or leased or services performed by such Assignor, whether now in existence or arising from time to time hereafter, including, without limitation, rights evidenced by an account, note, contract, security agreement, chattel paper, or other evidence of indebtedness or security, together with (a) all security pledged, assigned, hypothecated or granted to or held by such Assignor to secure the foregoing, (b) all of any Assignor's right, title and interest in and to any goods, the sale of which gave rise thereto, (c) all guarantees, endorsements and indemnifications on, or of, any of the foregoing, (d) all powers of attorney for the execution of any evidence of indebtedness or security or other writing in connection therewith, (e) all books, records, ledger cards, and invoices relating thereto, (f) all evidences of the filing of financing statements and other statements and the registration of other instruments in connection therewith and amendments thereto, notices to other creditors or secured parties, and certificates from filing or other registration officers, (g) all credit information, reports and memoranda relating thereto and (h) all other writings related in any way to the foregoing. "REIT" shall have the meaning provided in the recitals of this Agreement. Exhibit G Page 20 "Representative" shall have the meaning provided in Section 5.4(d) of this Agreement. "Required Secured Creditors" shall mean (i) the Required Banks, or, to the extent required by Section 12.12 of the Credit Agreement, the Supermajority Banks or each of the Banks under the Credit Agreement, as the case may be, so long as any Credit Agreement Obligations remain outstanding and (ii) in any situation not covered by preceding clause (i), the holders of a majority of the outstanding principal amount of the Other Obligations. "Requisite Creditors" shall have the meaning provided in Section 9.2 of this Agreement. "Secondary Obligations" shall have the meaning provided in Section 5.4(b) of this Agreement. "Secured Creditors" shall have the meaning provided in the recitals of this Agreement. "Secured Debt Agreements" shall mean and include this Agreement, the other Credit Documents and the Interest Rate Protection Agreements and Other Hedging Agreements. "Termination Date" shall have the meaning provided in Section 9.8 of this Agreement. ARTICLE VIII THE COLLATERAL AGENT 8.1. Appointment. The Secured Creditors, by their acceptance of the benefits of this Agreement, hereby irrevocably designate German American Capital Corporation, as Collateral Agent, to act as specified herein. Each Secured Creditor hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note and by the acceptance of the benefits of this Agreement shall be deemed irrevocably to authorize, the Collateral Agent to take such action on its behalf under the provisions of this Agreement and any other instruments and agreements referred to herein and to exercise such powers and to perform such duties hereunder as are specifically delegated to or required of the Collateral Agent by the terms hereof and such other powers as are reasonably incidental thereto. The Collateral Agent may perform any of its duties hereunder by or through its authorized agents or employees. Without limiting the generality of the preceding sentence and notwithstanding the provisions of Section 8.9, GACC, in its capacity as Collateral Agent, shall have the right upon notice to the Borrower, the Banks and the Issuing Bank, to transfer and assign all of its rights, duties and obligations as Collateral Agent hereunder and under the other Credit Documents to any of its Affiliates. 8.2. Nature of Duties. (a) The Collateral Agent shall have no duties or responsibilities except those expressly set forth in this Agreement. The duties of the Collateral Agent shall be mechanical and administrative in nature; the Collateral Agent shall not have by reason of this Agreement or any other Secured Debt Agreement a fiduciary relationship in Exhibit G Page 21 respect of any Secured Creditor; and nothing in this Agreement or any other Secured Debt Agreement, expressed or implied, is intended to or shall be so construed as to impose upon the Collateral Agent any obligations in respect of this Agreement except as expressly set forth herein. (b) The Collateral Agent shall not be responsible for insuring the Collateral or for the payment of taxes, charges or assessments or discharging of Liens upon the Collateral or otherwise as to the maintenance of the Collateral. (c) The Collateral Agent shall not be required to ascertain or inquire as to the performance by any Assignor of any of the covenants or agreements contained in this Agreement or any other Secured Debt Agreement. (d) The Collateral Agent shall be under no obligation or duty to take any action under this Agreement or any other Credit Document if taking such action (i) would subject the Collateral Agent to a tax in any jurisdiction where it is not then subject to a tax or (ii) would require the Collateral Agent to qualify to do business in any jurisdiction where it is not then so qualified, unless the Collateral Agent receives security or indemnity satisfactory to it against such tax (or equivalent liability), or any liability resulting from such qualification, in each case as results from the taking of such action under this Agreement or any other Credit Document or (iii) would subject the Collateral Agent to in personam jurisdiction in any locations where it is not then so subject. (e) Notwithstanding any other provision of this Agreement, neither the Collateral Agent nor any of its officers, directors, employees, affiliates or agents shall, in its individual capacity, be personally liable for any action taken or omitted to be taken by it in accordance with this Agreement except for its own gross negligence or willful misconduct. 8.3. Lack of Reliance on the Collateral Agent. Independently and without reliance upon the Collateral Agent, each Secured Creditor, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of each Assignor in connection with the making and the continuance of the Obligations and the taking or not taking of any action in connection therewith, and (ii) its own appraisal of the creditworthiness of each Assignor, and the Collateral Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Secured Creditor with any credit or other information with respect thereto, whether coming into its possession before the extension of any Obligations or the purchase of any Notes or at any time or times thereafter. The Collateral Agent shall not be responsible in any manner whatsoever to any Secured Creditor for the correctness of any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of this Agreement or the security interests granted hereunder or the financial condition of any Assignor or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement, or the financial condition of any Assignor, or the existence or possible existence of any Default or Event of Default. The Collateral Agent makes no representations as to the value or condition of the Exhibit G Page 22 Collateral or any part thereof, or as to the title of any Assignor thereto or as to the security afforded by this Agreement. 8.4. Certain Rights of the Collateral Agent. (a) No Secured Creditor shall have the right to cause the Collateral Agent to take any action with respect to the Collateral, with only the Required Secured Creditors having the right to direct the Collateral Agent to take any such action. If the Collateral Agent shall request instructions from the Required Secured Creditors with respect to any act or action (including failure to act) in connection with this Agreement, the Collateral Agent shall be entitled to refrain from such act or taking such action unless and until it shall have received instructions from the Required Secured Creditors and to the extent requested, appropriate indemnification in respect of actions to be taken, and the Collateral Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Secured Creditor shall have any right of action whatsoever against the Collateral Agent as a result of the Collateral Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Secured Creditors. (b) The Collateral Agent shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement at the request or direction of any of the Secured Creditors, unless such Secured Creditors shall have offered to the Collateral Agent reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. 8.5. Reliance. The Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex or telecopier message, cablegram, order or other document or telephone message signed, sent or made by the proper Person or entity, and, with respect to all legal matters pertaining to this Agreement and its duties thereunder, upon advice of counsel selected by it. 8.6. Indemnification. To the extent the Collateral Agent is not reimbursed and indemnified by any Assignor under this Agreement, the Secured Creditors will reimburse and indemnify the Collateral Agent, in proportion to their respective outstanding principal amounts (including, for this purpose, any unpaid Primary Obligations in respect of Interest Rate Protection Agreements or Other Hedging Agreements, as outstanding principal) of Obligations, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Collateral Agent in performing its duties hereunder, or in any way relating to or arising out of its actions as Collateral Agent in respect of this Agreement (including any amounts required to be returned by the Collateral Agent in respect of Collateral) except for those resulting solely from the Collateral Agent's own gross negligence or willful misconduct. The indemnities set forth in this Article VIII shall survive the repayment of all Obligations, with the respective indemnification at such time to be based upon the outstanding principal amounts (determined as described above) of Obligations at the time of the respective occurrence upon which the claim against the Collateral Agent is based or, if same is not reasonably determinable, based upon the outstanding principal amounts (determined as described above) of Obligations as in effect immediately prior to the termination of this Agreement. The indemnities set forth in this Article VIII are in addition to any indemnities provided by the Exhibit G Page 23 Banks to the Collateral Agent pursuant to the Credit Agreement, with the effect being that the Banks shall be responsible for indemnifying the Collateral Agent to the extent the Collateral Agent does not receive payments pursuant to this Section 8.6 from the Secured Creditors (although in such event, and upon the payment in full of all such amounts owing to the Collateral Agent, the respective Banks who paid same shall be subrogated to the rights of the Collateral Agent to receive payment from the Secured Creditors). 8.7. The Collateral Agent in its Individual Capacity. With respect to its obligations as a lender under the Credit Agreement and any other Credit Documents to which the Collateral Agent is a party, and to act as agent under one or more of such Credit Documents, the institution acting as Collateral Agent shall have the rights and powers specified therein and herein for a "Bank", or an "Agent", as the case may be, and may exercise the same rights and powers as though it were not performing the duties specified herein; and the terms "Banks," "Required Banks," "holders of Notes," or any similar terms shall, unless the context clearly otherwise indicates, include the institution acting as Collateral Agent in its individual capacity. The institution acting as Collateral Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with any Assignor or any Affiliate or Subsidiary of any Assignor as if it were not performing the duties specified herein or in the other Credit Documents, and may accept fees and other consideration from any Assignor for services in connection with the Credit Agreement, the other Credit Documents and otherwise without having to account for the same to the Secured Creditors. 8.8. Holders. The Collateral Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Collateral Agent. Any request, authority or consent of any person or entity who, at the time of making such request or giving such authority or consent, is the holder of any Note, shall be final and conclusive and binding on any subsequent holder, transferee, assignee or endorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor. 8.9. Resignation by the Collateral Agent. a)" \* MERGEFORMAT (a) The Collateral Agent may resign from the performance of all of its functions and duties under this Agreement at any time by giving 20 Business Days' prior written notice to each Assignor and the Secured Creditors. Such resignation shall take effect upon the appointment of a successor Collateral Agent pursuant to clause (b) or (c) below. (b) If a successor Collateral Agent shall not have been appointed within said 20 Business Day period by the Required Secured Creditors, the Collateral Agent, with the consent of each Assignor, which consent shall not be unreasonably withheld, shall then appoint a successor Collateral Agent who shall serve as Collateral Agent hereunder or thereunder until such time, if any, as the Required Secured Creditors appoint a successor Collateral Agent as provided above. (c) If no successor Collateral Agent has been appointed pursuant to clause (b) above by the 20th Business Day after the date such notice of resignation was given by the Collateral Agent, the Required Secured Creditors shall then appoint a successor Collateral Agent who shall serve as Collateral Exhibit G Page 24 Agent hereunder or thereunder until such time, if any, as the Required Secured Creditors appoint a successor Collateral Agent as provided above. 8.10. Fees and Expenses of Collateral Agent. (a) The Borrower (by its execution and delivery hereof) hereby agrees that it shall pay to German American Capital Corporation, as the initial Collateral Agent, such fees as have been separately agreed to in writing with German American Capital Corporation for acting as Administrative Agent and as Collateral Agent hereunder. In the event a successor Collateral Agent is at any time appointed pursuant to the preceding Section 8.9, the Borrower hereby agrees to pay such successor Collateral Agent such reasonable fees for acting as such as would customarily be charged by such Collateral Agent for acting in such capacity in similar situations. (b) In addition, each Assignor agrees jointly and severally to pay all reasonable out-of-pocket costs and expenses of the Collateral Agent in connection with this Agreement and any actions taken by the Collateral Agent hereunder, and agrees to pay all costs and expenses of the Collateral Agent in connection with the enforcement of this Agreement and the documents and instruments referred to herein (including, without limitation, reasonable fees and disbursements of counsel for the Collateral Agent). ARTICLE IX MISCELLANEOUS 9.1. Notices. Except as otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been duly given or made when delivered in accordance with the provisions of Section 12.03 of the Credit Agreement, addressed as follows: (a) if to any Assignor, at it address set forth opposite its signature below; (b) if to the Collateral Agent, at: German American Capital Corporation 31 West 52nd Street New York, New York 10019 Attention: Allisson Michaels Telephone No.: (212) 469-6949 Facsimile No.: (212) 469-7210 (c) if to any Bank Creditor, at such address as such Bank Creditor shall have specified in the Credit Agreement; (d) if to any Other Creditor, at such address as such Other Creditor shall have specified in writing to each Assignor and the Collateral Agent; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. Exhibit G Page 25 9.2. Waiver; Amendment. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each Assignor directly affected thereby and the Collateral Agent (with the written consent of the Required Secured Creditors); provided, however, that any change, waiver, modification or variance affecting the rights and benefits of a single Class of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors of such affected Class. For the purpose of this Agreement, the term "Class" shall mean each class of Secured Creditors, i.e., whether (x) the Bank Creditors as holders of the Credit Agreement Obligations or (y) the Other Creditors as the holders of the Other Obligations. For the purpose of this Agreement, the term "Requisite Creditors" of any Class shall mean each of (x) with respect to the Credit Agreement Obligations, the Required Banks and (y) with respect to the Other Obligations, the holders of at least a majority of all obligations outstanding from time to time under the Interest Rate Protection Agreements or Other Hedging Agreements. 9.3. Obligations Absolute. The obligations of each Assignor hereunder shall remain in full force and effect without regard to, and shall not be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of such Assignor; (b) any exercise or non-exercise, or any waiver of, any right, remedy, power or privilege under or in respect of this Agreement or any other Secured Debt Agreement; or (c) any amendment to or modification of any Secured Debt Agreement (other than this Agreement) or any security for any of the Obligations; whether or not any Assignor shall have notice or knowledge of any of the foregoing. 9.4. Successors and Assigns. This Agreement shall be binding upon each Assignor and its successors and assigns (although no Assignor may assign its rights and obligations hereunder except in accordance with the provisions of the Secured Debt Agreements) and shall inure to the benefit of the Collateral Agent and the other Secured Creditors and their respective successors and assigns. All agreements, statements, representations and warranties made by each Assignor herein or in any certificate or other instrument delivered by such Assignor or on its behalf under this Agreement shall be considered to have been relied upon by the Secured Creditors and shall survive the execution and delivery of this Agreement and the other Secured Debt Agreements regardless of any investigation made by the Secured Creditors or on their behalf. 9.5. Headings Descriptive. The headings of the several sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 9.6. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS EXCEPT FOR THE CHOICE OF LAW PROVISIONS OF THE NEW YORK UCC. 9.7. Assignor's Duties. It is expressly agreed, anything herein contained to the contrary notwithstanding, that each Assignor shall remain liable to perform all of the obligations, if any, assumed by it with Exhibit G Page 26 respect to the Collateral and unless the Collateral Agent or any Secured Creditor shall become the absolute owner of any Collateral pursuant hereto, the Collateral Agent and the other Secured Creditors shall not have any obligations or liabilities by reason of or arising out of this Agreement with respect to any such Collateral, nor shall the Collateral Agent or the other Secured Creditors be required or obligated in any manner to perform or fulfill any of the obligations of each Assignor under or with respect to any Collateral. 9.8. Termination; Release. (a) After the Termination Date, this Agreement shall terminate (provided that all indemnities set forth herein including, without limitation, in Section 6.1 hereof shall survive such termination) and the Collateral Agent, at the request and expense of the respective Assignor, will promptly execute and deliver to such Assignor a proper instrument or instruments (including Uniform Commercial Code termination statements on form UCC-3) acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to such Assignor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Collateral Agent and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement. As used in this Agreement, "Termination Date" shall mean the date upon which the Total Commitment and all Interest Rate Protection Agreements or Other Hedging Agreements have been terminated, no Note or Letter of Credit is outstanding (and all Loans have been repaid in full), and all Obligations then owing have been paid in full. (b) In the event that any part of the Collateral is sold in connection with a sale permitted by Section 8.02 of the Credit Agreement or otherwise released at the direction of the Required Secured Creditors and the proceeds of such sale or sales or from such release are applied in accordance with the provisions of the Credit Agreement, to the extent required to be so applied, such Collateral will be sold free and clear of the Liens created by this Agreement and the Collateral Agent, at the request and expense of the relevant Assignor, will duly assign, transfer and deliver to such Assignor (without recourse and without any representation or warranty) such of the Collateral as is then being (or has been) so sold or released and as may be in the possession of the Collateral Agent and has not theretofore been released pursuant to this Agreement. (c) At any time that an Assignor desires that the Collateral Agent take any action to acknowledge or give effect to any release of Collateral pursuant to the foregoing Section 9.8(a) or (b), it shall deliver to the Collateral Agent a certificate signed by an Authorized Officer of such Assignor stating that the release of the respective Collateral is permitted pursuant to said Section 9.8(a) or (b). The Collateral Agent shall have no liability whatsoever to any Secured Creditor as the result of any release of Collateral by it as permitted by this Section 9.8. 9.9. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with each Assignor and the Collateral Agent. 9.10. Additional Assignors. It is understood and agreed that any Subsidiary of the Borrower that is required to execute a counterpart of this Exhibit G Page 27 Agreement pursuant to the Secured Debt Agreements shall automatically become an Assignor hereunder by executing a counterpart hereof and delivering the same to the Collateral Agent. 9.11. Interest Rate Protection Agreements and Other Hedging Agreements. Notwithstanding anything to the contrary contained in this Agreement, no Interest Rate Protection Agreement or Other Hedging Agreement shall be entitled to the benefits of this Agreement unless such Interest Rate Protection Agreement or Other Hedging Agreement is reasonably related to the Loans or the Letters of Credit or such Interest Rate Protection Agreement or Other Hedging Agreement provides that it is to be entitled to the benefits of this Agreement or the Security Documents generally. Exhibit G Page 28 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. Address: ELDERTRUST, as an Assignor 415 McFarlan Road By:______________________________ Suite 202 Name: Kennett Square Title: Pennsylvania 19348 Address: ELDERTRUST OPERATING LIMITED PARTNERSHIP, as an Assignor 415 McFarlan Road By: ElderTrust, general partner Suite 202 Kennett Square By:______________________________ Pennsylvania 19348 Name: Title: Address: ET GENPAR, L.L.C. 415 McFarlan Road By: ElderTrust Operating Limited Partnership, Suite 202 sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:______________________ Name: Title:
Exhibit G Page 29 Address: ET SUB-HERITAGE WOODS, L.L.C., as an Assignor 415 McFarlan Road By: ElderTrust Operating Limited Suite 202 Partnership, sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:______________________ Name: Title: Address: ET SUB-PLEASANT VIEW, L.L.C., as an Assignor 415 McFarlan Road By: ElderTrust Operating Limited Suite 202 Partnership, sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:______________________ Name: Title: Address: ET SUB-RITTENHOUSE LIMITED PARTNERSHIP, L.L.P., as an Assignor 415 McFarlan Road By: ET GENPAR, L.L.C., general partner Suite 202 Kennett Square By: ElderTrust Operating Limited Pennsylvania 19348 Partnership, sole member By: ElderTrust, general partner By:______________________ Name: Title:
Exhibit G Page 30 Address: ET SUB-LOPATCONG, L.L.C., as an Assignor 415 McFarlan Road By: ElderTrust Operating Limited Suite 202 Partnership, sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:______________________ Name: Title: Address: ET SUB-WAYNE I LIMITED PARTNERSHIP, L.L.P., as an Assignor 415 McFarlan Road By: ET GENPAR, L.L.C., general partner Suite 202 Kennett Square By: ElderTrust Operating Limited Pennsylvania 19348 Partnership, sole member By: ElderTrust, general partner By:______________________ Name: Title: Address: ET SUB-PENNSBURG MANOR LIMITED PARTNERSHIP, L.L.P., as an Assignor 415 McFarlan Road By: ET GENPAR, L.L.C., general partner Suite 202 Kennett Square By: ElderTrust Operating Limited Pennsylvania 19348 Partnership, sole member By: ElderTrust, general partner By:______________________ Name: Title:
Exhibit G Page 31 Address: ET SUB-POB I LIMITED PARTNERSHIP, L.L.P., as an Assignor 415 McFarlan Road By: ET GENPAR, L.L.C., general partner Suite 202 Kennett Square By: ElderTrust Operating Limited Pennsylvania 19348 Partnership, sole member By: ElderTrust, general partner By:______________________ Name: Title: Address: ET SUB-SMOB, L.L.C., as an Assignor 415 McFarlan Road By: ElderTrust Operating Limited Suite 202 Partnership, sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:______________________ Name: Title: Address: ET SUB-WINDSOR I, L.L.C., as an Assignor 415 McFarlan Road By: ElderTrust Operating Limited Suite 202 Partnership, sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:______________________ Name: Title:
Exhibit G Page 32 Address: ET SUB-WINDSOR II, L.L.C., as an Assignor 415 McFarlan Road By: ElderTrust Operating Limited Suite 202 Partnership, sole member Kennett Square Pennsylvania 19348 By: ElderTrust, general partner By:______________________ Name: Title Address: GERMAN AMERICAN CAPITAL CORPORATION, as Collateral Agent 31 West 52nd Street By:______________________ New York, New York 10019 Name: Title By:______________________ Name: Title
Annex A TO SECURITY AGREEMENT SCHEDULE OF CHIEF EXECUTIVE OFFICES AND OTHER RECORD LOCATIONS All Assignors 1. Chief Executive Office - 415 McFarlan Road Suite 2002 Kennett Square, Pennsylvania 19348 2. Other Record Locations - See locations for such Assignor set forth on Annex B
Annex B TO SECURITY AGREEMENT SCHEDULE OF INVENTORY AND EQUIPMENT LOCATIONS Assignor Location -------- -------- ANNEX C TO SECURITY AGREEMENT PLEDGED ACCOUNTS Assignor Location -------- -------- ANNEX D TO SECURITY AGREEMENT TRADE AND FICTITIOUS NAMES Assignor Trade/Fictitious Name -------- --------------------- 1. ElderTrust ElderTrust REIT Co. TABLE OF CONTENTS Page ARTICLE I SECURITY INTERESTS.............................................................2 2.1. Necessary Filings................................................3 2.2. No Liens.........................................................3 2.3. Other Financing Statements.......................................3 2.4. Chief Executive Office; Records..................................4 2.5. Location of Inventory and Equipment..............................4 2.6. Pledged Accounts.................................................4 2.7. Recourse.........................................................5 2.8. Trade Names; Change of Name......................................5 ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS; CHATTEL PAPER...........................6 3.1. Additional Representations and Warranties........................6 3.2. Maintenance of Records...........................................6 3.3. Direction to Account Debtors; Contracting Parties; etc...........6 3.4. Modification of Terms; etc.......................................7 3.5. Collection.......................................................7 3.7. Assignors Remain Liable Under Receivables........................7 3.8. Assignors Remain Liable Under Contracts..........................8 3.9. Further Actions..................................................8 ARTICLE IV PROVISIONS CONCERNING ALL COLLATERAL...........................................8 4.1. Protection of Collateral Agent's Security........................8 4.2. Further Actions..................................................9 4.3. Financing Statements.............................................9 ARTICLE V REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT...................................9 5.1. Remedies; Obtaining the Collateral Upon Default..................9 5.2. Remedies; Disposition of the Collateral............................11 5.3. Waiver of Claims...................................................11 5.5. Remedies Cumulative................................................14 5.6. Discontinuance of Proceedings......................................14 ARTICLE VI INDEMNITY.....................................................................15 6.1. Indemnity..........................................................15 6.2. Indemnity Obligations Secured by Collateral; Survival..............16 ARTICLE VII DEFINITIONS...................................................................16 ARTICLE VIII THE COLLATERAL AGENT..........................................................20 8.1. Appointment........................................................20 8.2. Nature of Duties...................................................21 8.3. Lack of Reliance on the Collateral Agent...........................21 8.4. Certain Rights of the Collateral Agent.............................22 8.5. Reliance...........................................................22 8.6. Indemnification....................................................22 8.7. The Collateral Agent in its Individual Capacity....................23 8.8. Holders............................................................23 8.9. Resignation by the Collateral Agent................................23 8.10. Fees and Expenses of Collateral Agent.............................24 ARTICLE IX MISCELLANEOUS.................................................................24 9.1. Notices............................................................24 9.2. Waiver; Amendment..................................................25 9.3. Obligations Absolute...............................................25 9.4. Successors and Assigns.............................................25 9.5. Headings Descriptive...............................................26 9.6. Governing Law......................................................26 9.7. Assignor's Duties..................................................26 9.8. Termination; Release...............................................26 9.9. Counterparts.......................................................27 9.10. Additional Assignors..............................................27 9.11. Interest Rate Protection Agreements and Other Hedging Agreements..27 ANNEX A Schedule of Chief Executive Offices/Record Locations ANNEX B Schedule of Inventory and Equipment Locations ANNEX C Pledged Account Banks ANNEX D Schedule of Trade and Fictitious Names EXHIBIT H SUBSIDIARIES GUARANTY GUARANTY, dated as of _______, 1998 (as amended, modified or supplemented from time to time, this "Guaranty"), made by each of the undersigned guarantors (each, a "Guarantor" and, together with any other entity that becomes a party hereto pursuant to Section 23 hereof, the "Guarantors"). Except as otherwise defined herein, capitalized terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. W I T N E S S E T H: WHEREAS, ElderTrust, a Maryland real estate investment trust, ElderTrust Operating Limited Partnership, a Delaware limited partnership (the "Borrower"), various lenders from time to time party thereto (the "Banks"), and German American Capital Corporation, as Administrative Agent (together with any successor administrative agent, the "Administrative Agent"), have entered into a Credit Agreement, dated as of _______, 1998, providing for the making of Loans to the Borrower as contemplated therein (as amended, modified or supplemented from time to time, the "Credit Agreement") (the Banks, the Administrative Agent and the Collateral Agent are herein called the "Bank Creditors"); WHEREAS, the Borrower may at any time and from time to time enter into one or more Interest Rate Protection Agreements or Other Hedging Agreements with one or more Banks or any affiliate thereof (each such Bank or affiliate, even if the respective Bank subsequently ceases to be a Bank under the Credit Agreement for any reason, together with such Bank's or affiliate's successors and assigns, if any, collectively, the "Other Creditors," and together with the Bank Creditors, are herein called the "Creditors"); WHEREAS, each Guarantor is a direct or an indirect Subsidiary of the Borrower; WHEREAS, it is a condition to the making of Loans under the Credit Agreement that each Guarantor shall have executed and delivered this Guaranty; and WHEREAS, each Guarantor will obtain benefits from the incurrence of Loans by the Borrower under the Credit Agreement and the entering into by the Borrower of the Interest Rate Protection Agreements or Other Hedging Agreements referred to above and, accordingly, desires to execute this Guaranty in order to satisfy the conditions described in the preceding paragraph; NOW, THEREFORE, in consideration of the foregoing and other benefits accruing to each Guarantor, the receipt and sufficiency of which are hereby acknowledged, each Guarantor hereby makes the following representations and warranties to the Creditors and hereby covenants and agrees with each Creditor as follows: 1. Each Guarantor, jointly and severally, absolutely, irrevocably and unconditionally guarantees: (i) to the Bank Creditors the full and prompt payment when due (whether at the stated maturity, by acceleration or Exhibit H Page 2 otherwise) of (x) the principal of and interest on the Notes issued by, and the Loans made to, the Borrower under the Credit Agreement and (y) all other obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing by the Borrower to the Bank Creditors under the Credit Agreement and each other Credit Document (including, without limitation, indemnities, Fees and interest thereon), whether now existing or hereafter incurred under, arising out of or in connection with the Credit Agreement and each such other Credit Document and the due performance and compliance by the Borrower with all of the terms, conditions and agreements contained in the Credit Documents (all such principal, interest, liabilities and obligations being herein collectively called the "Credit Agreement Obligations"); and (ii) to each Other Creditor, the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing by the Borrower under any Interest Rate Protection Agreement or Other Hedging Agreement, whether now in existence or hereafter arising, and the due performance and compliance by the Borrower with all of the terms, conditions and agreements contained in the Interest Rate Protection Agreements or Other Hedging Agreements (all such obligations and liabilities being herein collectively called the "Other Obligations," and together with the Credit Agreement Obligations are herein collectively called the "Guaranteed Obligations"), provided that the maximum amount payable by each Guarantor hereunder shall at no time exceed the Maximum Amount (as hereinafter defined) of such Guarantor. As used herein, "Maximum Amount" of any Guarantor means an amount equal to 95% of the amount by which (A) the present fair saleable value of such Guarantor's assets exceeds (B) the total liabilities of such Guarantor (including the maximum amount reasonably expected to come due in respect of contingent liabilities, other than contingent liabilities of such Guarantor hereunder), in each case determined on the Effective Date (or such other date on which such Guarantor first becomes a party hereto) or on the day any demand is made under this Guaranty, whichever date results in a higher Maximum Amount. Subject to the proviso in the second preceding sentence, each Guarantor understands, agrees and confirms that the Creditors may enforce this Guaranty up to the full amount of the Guaranteed Obligations against each Guarantor without proceeding against any other Guarantor, against the Borrower, against any security for the Guaranteed Obligations, or under any other guaranty covering all or a portion of the Guaranteed Obligations. The Guaranteed Obligations may exceed any Guarantor's Maximum Amount without affecting the liability of such Guarantor hereunder. 2. Additionally, each Guarantor, jointly and severally, absolutely, unconditionally and irrevocably, guarantees the payment of any and all Guaranteed Obligations to the Creditors whether or not due or payable by the Borrower upon the occurrence in respect of the Borrower of any of the events specified in Section 9.05 of the Credit Agreement, and absolutely, unconditionally and irrevocably, jointly and severally, promises to pay such Guaranteed Obligations to the Creditors, or order, on demand, in lawful money of the United States. This Guaranty shall constitute a guaranty of payment, and not of collection. 3. The liability of each Guarantor hereunder is exclusive and independent of any security for or other guaranty of the indebtedness of the Borrower, whether executed by such Guarantor, any other Guarantor, any other guarantor or any other party, and the liability of each Guarantor hereunder Exhibit H Page 3 shall not be affected or impaired by any circumstance or occurrence whatsoever, including, without limitation: (a) any direction as to application of payment by the Borrower or by any other party, (b) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other party as to the indebtedness of the Borrower, (c) any payment on or in reduction of any such other guaranty or undertaking except to the extent that any such payment or reduction results in the actual permanent reduction of the Guaranteed Obligations, (d) any dissolution, termination or increase, decrease or change in personnel by the Borrower, (e) any payment made to any Creditor on the indebtedness which any Creditor repays the Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and each Guarantor waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding, (f) any action or inaction by the Creditors as contemplated in Section 6 hereof, or (g) any invalidity, irregularity or unenforceability of all or part of the Guaranteed Obligations or of any security therefor. 4. The obligations of each Guarantor hereunder are independent of the obligations of any other Guarantor, any other guarantor or the Borrower, and a separate action or actions may be brought and prosecuted against each Guarantor whether or not action is brought against any other Guarantor, any other guarantor or the Borrower and whether or not any other Guarantor, any other guarantor or the Borrower be joined in any such action or actions. Each Guarantor waives, to the fullest extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof. Any payment by the Borrower or other circumstance which operates to toll any statute of limitations as to the Borrower shall operate to toll the statute of limitations as to each Guarantor. 5. Each Guarantor hereby waives notice of acceptance of this Guaranty and notice of any liability to which it may apply, and waives promptness, diligence, presentment, demand of payment, protest, notice of dishonor or nonpayment of any such liabilities, suit or taking of other action by the Administrative Agent or any other Creditor against, and any other notice to, any party liable thereon (including such Guarantor, any other guarantor or the Borrower). 6. Any Creditor may at any time and from time to time without the consent of, or notice to, any Guarantor, without incurring responsibility to such Guarantor, and without impairing or releasing the obligations of such Guarantor hereunder, upon or without any terms or conditions and in whole or in part: (a) change the manner, place or terms of payment of, and/or change or extend the time of payment of, renew or alter, any of the Guaranteed Obligations (including any increase or decrease in the rate of interest thereon), any security therefor, or any liability incurred directly or indirectly in respect thereof, and the guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered; (b) take and hold security for the payment of the Guaranteed Obligations and sell, exchange, release, surrender, impair, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, the Guaranteed Obligations or any liabilities (including any Exhibit H Page 4 of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or any offset thereagainst; (c) exercise or refrain from exercising any rights against the Borrower, any other Credit Party or otherwise act or refrain from acting; (d) release or substitute any one or more endorsers, Guarantors, other guarantors, the Borrower or other obligors; (e) settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of the Borrower to creditors of the Borrower other than the Creditors provided that the Creditors will not, without the prior written consent of the respective Guarantor, contractually subordinate the payment of all or any part of the Guaranteed Obligations to any other creditor or creditors of the Borrower, provided further that if any consent required by the immediately preceding proviso is not obtained and contractual subordination as described therein is agreed to, then (x) any part of the Guaranteed Obligations not so subordinated will continue to be entitled to the full benefits of this Guaranty and (y) with respect to any part of the Guaranteed Obligations so contractually subordinated, such Guarantor will be relieved of its obligations hereunder only to the extent it establishes that it has been actually damaged by such contractual subordination; (f) apply any sums by whomsoever paid or howsoever realized to any liability or liabilities of the Borrower to the Creditors regardless of what liabilities of the Borrower remain unpaid; (g) consent to or waive any breach of, or any act, omission or default under, any of the Interest Rate Protection Agreements or Other Hedging Agreements, the Credit Documents or any of the instruments or agreements referred to therein, or otherwise amend, modify or supplement any Interest Rate Protection Agreements or Other Hedging Agreements, the Credit Documents or any of such other instruments or agreements; (h) act or fail to act in any manner referred to in this Guaranty which may deprive such Guarantor of its right to subrogation against the Borrower to recover full indemnity for any payments made pursuant to this Guaranty; and/or (i) take any other action which would, under otherwise applicable principles of common law, give rise to a legal or equitable discharge of such Guarantor from it liabilities under this Guaranty. 7. No invalidity, irregularity or unenforceability of all or any part of the Guaranteed Obligations or of any security therefor shall affect, impair or be a defense to this Guaranty, and this Guaranty shall be primary, absolute, irrevocable and unconditional notwithstanding the occurrence of any Exhibit H Page 5 event or the existence of any other circumstances which might constitute a legal or equitable discharge of a surety or guarantor except payment in full of the Guaranteed Obligations. 8. This Guaranty is a continuing one and all liabilities to which it applies or may apply under the terms hereof shall be conclusively presumed to have been created in reliance hereon. No failure or delay on the part of any Creditor in exercising any right, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein expressly specified are cumulative and not exclusive of any rights or remedies which any Creditor would otherwise have. No notice to or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of any Creditor to any other or further action in any circumstances without notice or demand. It is not necessary for any Creditor to inquire into the capacity or powers of the Borrower or the officers, directors, partners or agents acting or purporting to act on its behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. 9. Any indebtedness of the Borrower now or hereafter held by any Guarantor is hereby subordinated to the indebtedness of the Borrower to the Creditors; and such indebtedness of the Borrower to any Guarantor, if the Administrative Agent, after an Event of Default has occurred, so requests at a time when any Guaranteed Obligations are outstanding, shall be collected, enforced and received by such Guarantor as trustee for the Creditors and be paid over to the Creditors on account of the indebtedness of the Borrower to the Creditors, but without affecting or impairing in any manner the liability of such Guarantor under the other provisions of this Guaranty. Prior to the transfer by any Guarantor of any note or negotiable instrument evidencing any indebtedness of the Borrower to such Guarantor, such Guarantor shall mark such note or negotiable instrument with a legend that the same is subject to this subordination. Without limiting the generality of the foregoing, each Guarantor hereby agrees with the Creditors that it will not exercise any right of subrogation which it may at any time otherwise have as a result of this Guaranty (whether contractual, under Section 509 of the Bankruptcy Code, or otherwise) until all Guaranteed Obligations have been paid in full in cash (it being understood that each Guarantor is not waiving any right of subrogation that it may otherwise have but is only waiving the exercise thereof as provided above). 10. (a) Each Guarantor waives any right (except as shall be required by applicable statute and cannot be waived) to require the Creditors to: (i) proceed against the Borrower, any other Guarantor, any other guarantor of the Guaranteed Obligations or any other party; (ii) proceed against or exhaust any security held from the Borrower, any other Guarantor, any other guarantor of the Guaranteed Obligations or any other party; or (iii) pursue any other remedy in the Creditors' power whatsoever. Each Guarantor waives any defense based on or arising out of any defense of the Borrower, such Guarantor, any other Guarantor, any other guarantor of the Guaranteed Obligations or any other party other than payment in full of the Guaranteed Obligations, including, without limitation, any defense based on or arising out of the disability of the Borrower, such Guarantor, any other Guarantor, any other guarantor of the Guaranteed Obligations or any other party, or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from Exhibit H Page 6 any cause of the liability of the Borrower other than payment in full of the Guaranteed Obligations. The Creditors may, at their election, foreclose on any security held by the Administrative Agent, the Collateral Agent or the other Creditors by one or more judicial or nonjudicial sales or exercise any other right or remedy the Creditors may have against the Borrower or any other party, or any security, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Guaranteed Obligations have been paid in full. Each Guarantor waives any defense arising out of any such election by the Creditors, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other party or any security. (b) Each Guarantor waives all presentments, demands for performance, protests and notices, including, without limitation, notices of nonperformance, notices of protest, notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation or incurring of new or additional indebtedness. Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks which such Guarantor assumes and incurs hereunder, and agrees that the Creditors shall have no duty to advise any Guarantor of information known to them regarding such circumstances or risks. Each Guarantor warrants and agrees that each of the waivers set forth above is made with full knowledge of its significance and consequences and that if any of such waivers are determined to be contrary to any applicable law or public policy, such waivers shall be effective only to the maximum extent permitted by law. 11. In order to induce the Bank Creditors to enter into the Credit Agreement and to make the Loans pursuant to the Credit Agreement, and to induce the Other Creditors to enter into the Interest Rate Protection Agreements and Other Hedging Agreements, each Guarantor represents, warrants and covenants that: (a) Status. Such Guarantor (i) is a duly organized and validly existing corporation, partnership or limited liability company, as the case may be, in good standing (if applicable) under the laws of the jurisdiction of its organization, (ii) has the corporate, partnership or limited liability company power and authority, as the case may be, to own or lease its property and assets and to transact the business in which it is engaged and presently proposes to engage and (iii) is duly qualified and is authorized to do business and is in good standing in each jurisdiction where the conduct of its business requires such qualification, except for failures to be so qualified which, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of such Guarantor. (b) Power and Authority. Such Guarantor has the corporate, partnership or limited liability company power and authority, as the case may be, to execute, deliver and perform the terms and provisions of this Guaranty and each other Credit Document to which it is a party Exhibit H Page 7 and has taken all necessary corporate or partnership action to authorize the execution, delivery and performance by it of each such Credit Document. Such Guarantor has duly executed and delivered this Guaranty and each other Credit Document to which it is a party and each such Credit Document constitutes the legal, valid and binding obligation of such Guarantor enforceable in accordance with its terms, except to the extent that the enforceability hereof and thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting creditors' rights generally and by equitable principles (regardless of whether enforcement is sought in equity or at law). (c) No Violation. Neither the execution, delivery or performance by such Guarantor of this Guaranty or any other Credit Document to which it is a party, nor compliance by it with the terms and provisions hereof and thereof (i) will contravene any applicable provision of any law, statute, rule or regulation, or any order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict or be inconsistent with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien (except pursuant to the Security Documents) upon any of the property or assets of such Guarantor or any of its Subsidiaries pursuant to the terms of, any indenture, mortgage, deed of trust, credit agreement or loan agreement or any other material agreement, contract or instrument to which such Guarantor or any of its Subsidiaries is a party or by which it or any of its property or assets is bound or to which it may be subject or (iii) will violate any provision of the certificate of incorporation, certificate of partnership, partnership agreement, limited liability company agreement or by-laws of such Guarantor or any of its Subsidiaries. (d) Governmental Approvals. No order, consent, approval, license, authorization or validation of, or filing, recording or registration with (except as have been obtained or made), or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with, (i) the execution, delivery and performance of this Guaranty or any other Credit Document to which such Guarantor is a party or (ii) the legality, validity, binding effect or enforceability of this Guaranty or any other Credit Document to which such Guarantor is a party. (e) Litigation. There are no actions, suits or proceedings pending or, to the best knowledge of such Guarantor, threatened (i) with respect to this Guaranty or (ii) that could reasonably be expected to materially and adversely affect the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of such Guarantor. 12. Each Guarantor covenants and agrees that on and after the Effective Date and until the Total Commitment and all Interest Rate Protection Agreements and Other Hedging Agreements have terminated and when no Note remains outstanding and all Guaranteed Obligations have been paid in full, such Guarantor shall take, or will refrain from taking, as the case may be, all actions that are necessary to be taken or not taken so that no violation of any provision, covenant or agreement contained in Section 7 or 8 of the Credit Exhibit H Page 8 Agreement, and so that no Default or Event of Default, is caused by the actions of such Guarantor or any of its Subsidiaries. 13. The Guarantors hereby jointly and severally agree to pay all out-of-pocket costs and expenses of each Creditor in connection with the enforcement of this Guaranty (including reasonable legal fees and expenses) and the out-of-pocket costs and expenses of the Administrative Agent in connection with any amendment, waiver or consent relating hereto (including reasonable legal fees and expenses). 14. Neither this Guaranty nor any provision hereof may be changed, waived, discharged or terminated except with the written consent of each Guarantor directly affected thereby and with the written consent of the Required Secured Creditors (as defined in the Security Agreement); provided, that any change, waiver, modification or variance affecting the rights and benefits of a single Class (as defined below) of Creditors (and not all Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors (as defined below) of such Class of Creditors (it being understood that the addition or release of any Guarantor hereunder shall not constitute a change, waiver, discharge or termination affecting any Guarantor other than the Guarantor so added or released). For the purpose of this Guaranty the term "Class" shall mean each class of Creditors, i.e., whether (x) the Bank Creditors as holders of the Credit Agreement Obligations or (y) the Other Creditors as the holders of the Other Obligations. For the purpose of this Guaranty, the term "Requisite Creditors" of any Class shall mean (x) with respect to the Credit Agreement Obligations, the Required Banks and (y) with respect to the Other Obligations, the holders of at least a majority of all obligations outstanding from time to time under the respective Interest Rate Protection Agreements or Other Hedging Agreements. 15. Each Guarantor acknowledges that an executed (or conformed) copy of each of the Credit Documents has been made available to such Guarantor and such Guarantor is familiar with the contents thereof. 16. In addition to any rights now or hereafter granted under applicable law (including, without limitation, Section 151 of the New York Debtor and Creditor Law) and not by way of limitation of any such rights, upon the occurrence and during the continuance of an Event of Default (such term to mean and include any "Event of Default" as defined in the Credit Agreement or any payment default under any Interest Rate Protection Agreement or Other Hedging Agreement continuing after any applicable grace period), each Creditor is hereby authorized at any time or from time to time, without notice to any Guarantor or to any other Person, any such notice being expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Creditor to or for the credit or the account of such Guarantor, against and on account of the obligations and liabilities of such Guarantor to such Creditor under this Guaranty, irrespective of whether or not such Creditor shall have made any demand hereunder and although said obligations, liabilities, deposits or claims, or any of them, shall be contingent or unmatured. 17. All notices, requests, demands or other communications pursuant hereto shall be deemed to have been duly given or made when delivered to the Person to which such notice, request, demand or other communication is Exhibit H Page 9 required or permitted to be given or made under this Guaranty, addressed to such party at (i) in the case of any Bank Creditor, as provided in the Credit Agreement, (ii) in the case of any Guarantor, at its address set forth opposite its signature below and (iii) in the case of any Other Creditor, at such address as such Other Creditor shall have specified in writing to the Guarantors; or in any case at such other address as any of the Persons listed above may hereafter notify the others in writing. 18. If claim is ever made upon any Creditor for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed Obligations and any of the aforesaid payees repays all or part of said amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over such payee or any of its property or (ii) any settlement or compromise of any such claim effected by such payee with any such claimant (including the Borrower), then and in such event each Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding upon such Guarantor, notwithstanding any revocation hereof or other instrument evidencing any liability of the Borrower, and such Guarantor shall be and remain liable to the aforesaid payees hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such payee. 19. (A) This Agreement shall be binding upon the successors and assigns of each Guarantor (although no Guarantor may assign its rights and obligations hereunder except in accordance with the provisions of the Secured Debt Agreements) and shall inure to the benefit of and be enforceable by the Administrative Agent and the other Secured Creditors and their respective successors and assigns. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding with respect to this Guaranty or any other Credit Document to which any Guarantor is a party may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Guaranty, each Guarantor hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each Guarantor hereby further irrevocably waives any claim that any such courts lack jurisdiction over such Guarantor, and agrees not to plead or claim in any legal action or proceeding with respect to this Guaranty or any other Credit Document to which such Guarantor is a party brought in any of the aforesaid courts that any such court lacks jurisdiction over such Guarantor. Each Guarantor further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to each Guarantor at its address set forth opposite its signature below, such service to become effective 30 days after such mailing. Each Guarantor hereby irrevocably waives any objection to such service of process and further irrevocably waives and agrees not to plead or claim in any action or proceeding commenced hereunder or under any other Credit Document to which such Guarantor is a party that service of process was in any way invalid or ineffective. Nothing herein shall affect the right of any of the Creditors to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against each Guarantor in any other jurisdiction. Exhibit H Page 10 (B) Each Guarantor hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Guaranty or any other Credit Document to which such Guarantor is a party brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that such action or proceeding brought in any such court has been brought in an inconvenient forum. (C) EACH GUARANTOR AND EACH CREDITOR (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS GUARANTY) HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY, THE OTHER CREDIT DOCUMENTS TO WHICH SUCH GUARANTOR IS A PARTY OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 20. In the event that all of the capital stock of one or more Guarantors is sold or otherwise disposed of or liquidated in compliance with the requirements of the Credit Agreement (or such sale or other disposition has been approved in writing by the Required Secured Creditors) and the proceeds of such sale, disposition or liquidation are applied in accordance with the provisions of the Credit Agreement, to the extent applicable, such Guarantor shall be released from this Guaranty and this Guaranty shall, as to each such Guarantor or Guarantors, terminate, and have no further force or effect (it being understood and agreed that the sale of one or more Persons that own, directly or indirectly, all of the capital stock or partnership interests of any Guarantor shall be deemed to be a sale of such Guarantor for the purposes of this Section 20). 21. This Guaranty may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Guarantors and the Administrative Agent. 22. All payments made by any Guarantor hereunder will be made without setoff, counterclaim or other defense. 23. It is understood and agreed that any Subsidiary of the Borrower that is required to execute a counterpart of this Guaranty pursuant to the Credit Agreement shall automatically become a Guarantor hereunder by executing a counterpart hereof and delivering the same to the Administrative Agent. 24. Notwithstanding anything to the contrary contained in this Guaranty, no Interest Rate Protection Agreement or Other Hedging Agreement shall be entitled to the benefits of this Guaranty unless such Interest Rate Protection Agreement or Other Hedging Agreement is reasonably related to the Loans or such Interest Rate Protection Agreement or Other Hedging Agreement provides that it is to be entitled to the benefits of this Guaranty or the Security Documents generally. Exhibit H Page 11 IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed and delivered as of the date first above written. Address: ________________,as a Guarantor By__________________ Name: Title: Accepted and Agreed to: GERMAN AMERICAN CAPITAL CORPORATION, as Administrative Agent By___________________ Name: Title: EXHIBIT I This document is intended to be recorded in _______ County, _________________ MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING STATEMENT, made by [_______________________________________], as Mortgagor, to GERMAN AMERICAN CAPITAL CORPORATION, as Collateral Agent, as Mortgagee. LOCATION OF PREMISES: [ADD PROPERTY ADDRESS] - -------------------------------------------------------------------------------- THIS DOCUMENT PREPARED BY AND RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: WHITE & CASE LLP 1155 Avenue of the Americas New York, New York 10036 Attention: Barbara J. Goodman, Esq. -1- RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: WHITE & CASE LLP 1155 Avenue of the Americas New York, New York 10036 Attention: Barbara J. Goodman, Esq. MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING STATEMENT THIS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING STATEMENT, made as of the [____] day of [____], 1998 (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, this "Mortgage"), by [_________________________], a [limited partnership organized under the laws of Delaware] ("Mortgagor"), having its principal place of business at 415 McFarlan Road, Suite 202, Kennett Square, Pennsylvania 19348, Attention: Edward B. Romanov, Jr., to GERMAN AMERICAN CAPITAL CORPORATION, a corporation organized under the laws of the State of [_____], in its capacity as Collateral Agent for the benefit of the Secured Creditors (defined below) (together with its successors and assigns, "Mortgagee") having its principal place of business at 31 West 52nd Street, New York, New York 10019. All capitalized terms used herein shall have the respective meanings set forth in Section 1 hereof. W I T N E S S E T H: WHEREAS, Mortgagor is the owner of the fee simple interest and/or a valid leasehold interest in the real property described on Exhibit A annexed hereto and made a part hereof; WHEREAS, ElderTrust, a Maryland real estate investment trust, ElderTrust Operating Limited Partnership (the "Borrower"), various lenders from time to time party thereto (the "Banks"), DEUTSCHE BANK AG, New York Branch, as Issuing Bank and German American Capital Corporation, as Administrative Agent (together with any successor administrative agent, the "Administrative Agent"), have entered into a Credit Agreement, dated as of January 30, 1998, providing for the making of Loans to the Borrower and the issuance of Letters of Credit for the account of the Borrower, all as contemplated therein (as amended, modified or supplemented from time to time, the "Credit Agreement") (the Banks, the Administrative Agent and the Mortgagee are herein called the "Bank Creditors"); WHEREAS, the Borrower may at any time and from time to time enter into one or more Interest Rate Protection Agreements or Other Hedging Agreements with one or more Banks or affiliates thereof (each such Bank or affiliate, even if the respective Bank subsequently -2- ceases to be a Bank under the Credit Agreement for any reason, together with such Bank's or affiliate's successors and assigns, if any, collectively, the "Other Creditors," and together with the Bank Creditors, are herein called the "Secured Creditors"); [WHEREAS, pursuant to a Subsidiary Guaranty, dated as of January 30, 1998, made jointly and severally by the Mortgagor and the other Subsidiary Guarantors for the benefit of the Secured Creditors, the Mortgagor has guaranteed to the Secured Creditors and the Mortgagee the payment when due of all obligations and liabilities of the Borrower under or with respect to the Credit Documents and the Interest Rate Agreements;] WHEREAS, it is a condition precedent to the extensions of credit under the Credit Agreement that the Mortgagor shall have executed and delivered to the Mortgagee this Agreement; and WHEREAS, Mortgagor desires to execute and deliver this Mortgage to satisfy the condition described in the preceding paragraph and to secure the following: To secure (A) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of the Loans in the maximum principal amount of One Hundred Forty Million Dollars ($140,000,000), lawful money of the United States of America, to be paid with interest in accordance with the Credit Agreement and all obligations and liabilities (including, without limitation, the principal of and interest on the notes issued, and loans made, under the Credit Agreement, all reimbursement obligations and Unpaid Drawings with respect to letters of credit issued under the Credit Agreement, and all indemnities, fees and interest thereon or owed thereunder), (B) performance of all of Mortgagor's other obligations under the Credit Documents, (C) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities of the Mortgagor to the Other Creditors, whether now existing or hereafter incurred under, arising out of or in connection with any Interest Rate Agreement and the due performance and compliance by the Mortgagor with all the terms, conditions and agreements contained in the Interest Rate Agreements, (D) any and all sums advanced by the Mortgagee in order to preserve or protect the Mortgaged Property or preserve or protect its security title and interest in the Mortgaged Property, (E) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations or liabilities of the Mortgagor referred to in clauses (A), (B) and (C) above after an Event of Default shall have occurred and be continuing, the reasonable expenses of re-taking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Mortgaged Property, or of any exercise by the Mortgagee of its rights hereunder, together with reasonable attorneys' fees and court costs, and (F) all amounts as to which any indemnitee has the right to reimbursement under paragraph 33 of this Mortgage (said indebtedness, interest and all other sums due or obligations to be performed hereunder and under the other Credit Documents, being hereinafter referred to collectively as the "Obligations"), Mortgagor has mortgaged, given, granted, bargained, sold, aliened, conveyed, confirmed, pledged, assigned and hypothecated and by these presents does mortgage, give, grant, bargain, sell, alien, convey, confirm, pledge, assign and hypothecate unto Mortgagee the real property described in Exhibit A attached hereto -3- and made a part hereof (the "Premises") and the buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements now or hereafter located thereon (the "Improvements"); TOGETHER WITH: all appurtenant right, title, interest and estate of Mortgagor now owned, or hereafter acquired, in and to the following property, rights, interests and estates (the Premises, the Improvements and the following property, rights, interests and estates being hereinafter collectively referred to as the "Mortgaged Property", which Mortgaged Property constitutes a "Property" under and as defined in the Credit Agreement): (a) all easements, rights-of-way, strips and gores of land, streets, ways, alleys, passages, sewer rights, water, water courses, water rights and powers, air rights and development rights, licenses, permits and construction and equipment warranties and all estates, rights, titles, interests, privileges, liberties, tenements, hereditaments and appurtenances of any nature whatsoever, in any way belonging, relating or pertaining to the Premises and the Improvements and the reversion and reversions, remainder and remainders, and all land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining the Premises, to the center line thereof and all the estates, rights, titles, interests, dower and rights of dower, curtesy and rights of curtesy, property, possession, claim and demand whatsoever, both at law and in equity, of Mortgagor of, in and to the Premises and the Improvements and every part and parcel thereof, with the appurtenances thereto; (b) all machinery, equipment, fixtures (including, but not limited to any and all partitions, dynamos, window screens and shades, drapes, rugs and other floor coverings, awnings, motors, engines, boilers, furnaces, pipes, plumbing, cleaning, call and sprinkler systems, fire extinguishing apparatus and equipment, water tanks, swimming pools, heating, ventilating, plumbing, lighting, communications and elevator fixtures, laundry, incinerating, air conditioning and air cooling equipment and systems, gas and electric machinery, and equipment, disposals, dishwashers, furniture, refrigerators and ranges, recreational equipment and facilities of all kinds, and water, gas, electrical, storm and sanitary sewer facilities of all kinds, and other utilities whether or not situated in easements, together with all accessions, replacements, betterments and substitutions for any of the foregoing) and other property of every kind and nature whatsoever owned by Mortgagor, or in which Mortgagor has or shall have an interest, now or hereafter located upon the Premises and the Improvements, or appurtenant thereto, and in connection with the present or future operation and occupancy of the Premises and the Improvements and all building equipment, materials and supplies of any nature whatsoever owned by Mortgagor, or in which Mortgagor has or shall have an interest, now or hereafter located upon the Premises and the Improvements, or appurtenant thereto, or usable in connection with the present or future operation and occupancy of the Premises and the Improvements (hereinafter collectively called the "Equipment"), and the right, title and interest of Mortgagor in and to any of the Equipment which may be subject to any security interests, as defined in the Uniform Commercial Code, as adopted and enacted by the state or states where any of the Mortgaged Property is located (the "Uniform Commercial Code"), superior in lien to the lien of this Mortgage; -4- (c) all awards or payments, including interest thereon, which may heretofore or hereafter be made with respect to the Mortgaged Property, whether from the exercise of the right of eminent domain (including, but not limited to, any transfer made in lieu of or in anticipation of the exercise of said right), or for a change of grade, or for any other injury to or decrease in the value of the Mortgaged Property; (d) all leasehold estates, leases, licenses, concession agreements, franchises and other occupancy agreements and other agreements, including, without limitation, any operating lease, demising, leasing or granting rights of possession or use, or, to the extent of the interest therein of the Mortgagor, any sublease, subsublease, underletting or sublicense, which now or hereafter may affect the Mortgaged Property or any part thereof or interest therein, and all renewals, extensions, subleases or assignments thereof, (individually, a "Lease" and collectively, the "Leases"), and all rents, issues, profits, royalties, receipts, revenues, accounts receivable, security deposits and other deposits (subject to the prior right of tenants making such deposits) and income, including fixed, additional and percentage rents, occupancy charges, operating expense reimbursements, reimbursements for increases in taxes, sums paid by tenants to the Mortgagor to reimburse the Mortgagor for amounts originally paid or to be paid by the Mortgagor or its agents or affiliates for which such tenants were liable, as, for example, tenant improvement costs in excess of any work letter, lease takeover costs, moving expenses and tax and operating expense pass-throughs for which a tenant is solely liable, marketing association dues, late charges, tenant association dues, administrative cost reimbursements, parking, maintenance, common area, tax, insurance, utility and service charges and contributions, proceeds of sale of electricity, gas, heating, air-conditioning and other utilities and services, deficiency rents and liquidated damages and other benefits, including all property income (the "Rents") and all proceeds from the sale or other disposition of the Leases; (e) all proceeds of and any unearned premiums on any insurance policies covering the Mortgaged Property, including, without limitation, the right to receive and apply the proceeds of any insurance, judgments, or settlements made in lieu thereof, for damage to the Mortgaged Property; (f) any and all real estate tax refunds payable to Mortgagor with respect to the Mortgaged Property, and refunds or reimbursements payable with respect to bonds, escrow accounts, or other sums payable in connection with the use, development, or ownership of the Mortgaged Property; (g) the right, in the name and on behalf of Mortgagor, to appear in and defend any action or proceeding brought with respect to the Mortgaged Property and to commence any action or proceeding to protect the interest of Mortgagee in the Mortgaged Property; and (h) all (i) general intangibles, contract rights and accounts receivable arising from any of the foregoing, (ii) any and all replacements and renewals of or additions and substitutions to any of the foregoing and (iii) all proceeds of any of the foregoing. -5- TO HAVE AND TO HOLD the above granted and described Mortgaged Property unto and to the use and benefit of Mortgagee, and the successors and assigns of Mortgagee, forever and Mortgagor hereby binds itself and its successors and assigns to warrant and forever defend the Mortgaged Property unto Mortgagee and its successors and assigns against the claim or claims of all persons claiming or to claim the same, or any part thereof. PROVIDED, HOWEVER, these presents are upon the express condition that, if Mortgagor shall well and truly pay and perform the Obligations at the time and in the manner provided in the Credit Documents, these presents and the estate hereby granted shall cease, terminate and be void; AND, to protect the security of this Mortgage, Mortgagor represents and warrants to and covenants and agrees with Mortgagee as follows: 1. Definitions and Principles of Construction. Capitalized terms used herein without definition shall have the respective meanings ascribed to them in the Credit Agreement. Unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein, words used in this Mortgage may be used interchangeably in singular or plural form and the word "Mortgagor" shall mean "each Mortgagor and any subsequent owner or owners of the Mortgaged Property or any part thereof or any interest therein," the word "Mortgagee" shall mean "Mortgagee and any of its successors and/or assigns," the word "person" shall include an individual, corporation, partnership, limited liability company, trust, unincorporated association, government, governmental authority, and any other entity, and the words "Mortgaged Property" shall include any portion of the Mortgaged Property and any interest therein. "Access Laws" has the meaning provided in paragraph 32 hereof. "Assignment of Leases" has the meaning provided in the fifth recital hereto. "Credit Agreement" has the meaning provided in the second recital hereto. "Equipment" has the meaning provided in paragraph (b) of the seventh recital hereto. "Impositions" means all real estate and personal property taxes, water, sewer and vault charges and all other taxes, levies, assessments and other similar charges, general and special, ordinary and extraordinary, foreseen and unforeseen, of any kind or nature whatsoever, which may at any time prior to, at or after the execution hereof be assessed, levied or imposed by, in each case a Governmental Authority upon the Mortgaged Property or the property income or the ownership, use, occupancy or enjoyment thereof, and any interest, costs and penalties with respect to any of the foregoing. "Improvements" has the meaning provided in the seventh recital hereto. "Leases" has the meaning provided in paragraph (d) of the seventh recital hereto. "Mortgage" has the meaning provided in the first paragraph hereof. -6- "Mortgagee" has the meaning provided in the first paragraph hereof. "Mortgaged Property" has the meaning provided in the seventh recital hereto. "Mortgagor" has the meaning provided in the first paragraph hereof. "Obligations" has the meaning provided in the seventh recital hereto. "Other Charges" has the meaning set forth in Section 5 hereof. "Premises" has the meaning provided in the seventh recital hereto. "Rents" has the meaning provided in paragraph (d) of the seventh recital hereto. "UCC Collateral" has the meaning provided in paragraph 27 hereof. "Uniform Commercial Code" means the Uniform Commercial Code as in effect in the State of [________________]. 2. Payment and Performance of Obligations. Mortgagor will pay and perform the Obligations at the time and in the manner provided in the Credit Documents without offset or counterclaim. 3. Warranty of Title. Mortgagor represents and warrants that it has good fee simple title and/or a valid leasehold interest in and to the Premises and the Improvements and has the full power, authority and right to execute, deliver and perform its obligations under this Mortgage and to mortgage, give, grant, bargain, sell, alien, convey, confirm, encumber, pledge, assign and hypothecate the same and that Mortgagor possesses an unencumbered fee and/or leasehold estate in the Premises and the Improvements free and clear of all Liens, encumbrances, defenses, offsets and charges whatsoever except for the Permitted Encumbrances. Mortgagor shall forever warrant, defend and preserve such title and the validity and priority of the Lien of this Mortgage and shall forever warrant and defend the same to Mortgagee against the claims of all persons and parties whomsoever. 4. Insurance. Mortgagor, at its sole cost and expense, is required to obtain the insurance coverages set forth in the Credit Agreement in respect of the Mortgaged Property in accordance with the provisions thereof. 5. Payment of Impositions, etc. Mortgagor shall pay all Impositions now or hereafter levied or assessed or imposed against the Mortgaged Property or any part thereof and all ground rents, maintenance charges, other governmental impositions, and other charges, including without limitation vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Premises, now or hereafter levied or assessed or imposed against the Mortgaged Property or any part thereof (the "Other Charges") as same become due and payable. Mortgagor will deliver to Mortgagee, promptly upon Mortgagee's request, evidence satisfactory to Mortgagee that the Impositions and Other Charges have been so paid or are not then delinquent. Mortgagor shall not suffer and shall promptly cause to be paid and discharged any -7- Lien or charge whatsoever which may be or become a Lien or charge against the Mortgaged Property (except that, after prior written notice to Mortgagee, Mortgagor, at its own expense, may contest the amount or validity or application in whole or in part of any of the Impositions or Other Charges), and shall promptly pay for all utility services (including gas, electricity, steam, water, sewer and any other services or other charges of a similar nature, whether public or private) provided to the Mortgaged Property. Mortgagor shall furnish to Mortgagee or its designee receipts for the payment of real estate taxes prior to the date the same shall become delinquent. Mortgagor will pay all taxes, charges, filing, registration and recording fees, excises and levies imposed in connection with the recording of this Mortgage or imposed upon Mortgagee by reason of its ownership of this Mortgage, other than income, estate, inheritance, excess profits, franchise and doing business taxes or similar taxes, and shall pay any and all stamp taxes and other taxes required to be paid on the Obligations. In the event Mortgagor fails to make any such payment within thirty (30) days after written notice thereof from Mortgagee, then Mortgagee shall have the right, but shall not be obligated to, pay the amount due and Mortgagor shall, on demand, reimburse Mortgagee for said amount. 6. Recourse. Section 2.7 of the Security Agreement is hereby incorporated herein by reference as if set forth in full. 7. Casualty, Taking and Application of Proceeds. If a Casualty Event or a Taking occurs, Mortgagor's and Mortgagee's respective rights and obligations with respect thereto, and the provisions governing the collection and application of Insurance Proceeds and Condemnation Proceeds received in connection therewith contained in the Credit Agreement shall be applicable and are hereby incorporated herein by reference as if set forth in full. 8. Assignment of Leases and Rents. (a) Mortgagor hereby absolutely unconditionally and irrevocably transfers, assigns, conveys and sets over unto Mortgagee all of Mortgagor's right, title and interest in and to all current and future Leases, Rents and other property income, it being intended by Mortgagor that this assignment constitutes a present, absolute transfer and assignment and not an assignment for additional security only. Such assignment to Mortgagee shall not be construed to bind Mortgagee to the performance of any of the covenants, conditions or provisions contained in any Lease or otherwise impose any obligation upon Mortgagee. Mortgagor agrees to execute and deliver to Mortgagee such additional instruments, in form and substance satisfactory to Mortgagee, as may hereafter be reasonably requested by Mortgagee to further evidence and confirm such assignment. (b) Subject to the terms of this paragraph 8, Mortgagee grants to Mortgagor a revocable license to operate and manage the Mortgaged Property and to collect the Rents and the other property income; provided, that Mortgagor shall hold the Rents, or a portion thereof sufficient to discharge all current sums due on the Obligations, in trust for the benefit of Mortgagee for use in the payment of such sums. (c) Upon the occurrence of an Event of Default, the license granted to Mortgagor in this paragraph 8 shall automatically be revoked, and Mortgagee shall immediately be entitled to possession of all Rents and other property income, whether or not Mortgagee enters upon or takes control of the Mortgaged Property. Mortgagee is hereby granted and assigned by -8- Mortgagor the right, at its option, upon revocation of the license granted herein, to enter upon the Mortgaged Property in person, by agent or by court-appointed receiver to collect the Rents and the other property income. Any Rents and other property income collected after the revocation of the license may be applied toward payment of the Obligations in such priority and proportions as Mortgagee in its discretion shall deem proper. 9. Maintenance of Mortgaged Property. Mortgagor shall cause the Mortgaged Property to be maintained in a good and safe condition and repair (subject to the provisions of the Credit Agreement relating to Casualty Events and Takings). The Improvements and the Equipment shall not be removed, demolished or materially altered (except for replacement of the Equipment in the ordinary course of business) without the consent of Mortgagee. Mortgagor shall comply in all material respects with all laws, orders and ordinances affecting the Mortgaged Property, or the use thereof. Mortgagor shall not undertake to construct any new building or material Improvement on the Mortgaged Property without Mortgagee's prior written consent. Mortgagor shall not initiate, join in, acquiesce in, or consent to any change in any private restrictive covenant, zoning law or other public or private restriction, limiting or defining the uses which may be made of the Mortgaged Property or any part thereof without Mortgagee's prior written consent. If under applicable zoning provisions the use of all or any portion of the Mortgaged Property is or shall become a nonconforming use, Mortgagor will not cause or permit such nonconforming use to be discontinued or abandoned without the express written consent of Mortgagee except as required by applicable law. 10. Operation of the Mortgaged Property. Mortgagor will obtain and maintain all material licenses, authorizations, permits and/or approvals necessary for the ownership, operation and management of the Mortgaged Property, including, without limitation, all required environmental permits. 11. Transfer or Encumbrance of the Mortgaged Property. (a) Except for transfers permitted pursuant to the Credit Agreement, Mortgagor shall not sell, convey, alien, mortgage, encumber, pledge or otherwise transfer the Mortgaged Property or any part thereof. A sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer within the meaning of this paragraph 11 shall be deemed to include any installment sales agreement wherein Mortgagor agrees to sell the Mortgaged Property or any part thereof for a price to be paid in installments or any agreement by Mortgagor leasing all or a substantial part of the Mortgaged Property for other than actual occupancy by a space tenant thereunder or any sale, assignment or other transfer of, or the grant of a security interest in, Mortgagor's right, title and interest in and to any Leases or any Rents or other property income. (b) Mortgagee shall not be required to demonstrate any actual impairment of its security or any increased risk of default hereunder in order to declare the Obligations immediately due and payable upon Mortgagor's sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of the Mortgaged Property in violation of this Mortgage, or any other Mortgage Loan Document. This provision shall apply to every sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of the Mortgaged Property that is not a transfer permitted pursuant to the terms of the Credit Agreement, regardless of whether voluntary -9- or not, or whether or not Mortgagee has consented to any previous sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of the Mortgaged Property. 12. Changes in Laws Regarding Taxation. If any law is enacted or adopted or amended after the date of this Mortgage which deducts the Obligations from the value of the Mortgaged Property for the purpose of taxation or which imposes a tax, either directly or indirectly, on the Obligations or Mortgagee's interest in the Mortgaged Property, Mortgagor will pay such tax, with interest and penalties thereon, if any. In the event Mortgagee is advised by counsel chosen by it that the payment of such tax or interest and penalties by Mortgagor would be unlawful or taxable to Mortgagee or unenforceable or provide the basis for a defense of usury, then in any such event, Mortgagee shall notify Mortgagor thereof and, if Mortgagor shall not have obtained a release of the Mortgaged Property pursuant to Section 8.02 of the Credit Agreement within 30 days of receipt of such notice, Mortgagee shall have the option, upon the expiration of such 30-day period to declare the Obligations immediately due and payable. 13. No Credits on Account of the Obligations. Mortgagor will not claim or demand or be entitled to any credit or credits on account of the Obligations for any part of the Impositions or Other Charges assessed against the Mortgaged Property, or any part thereof, and no deduction shall otherwise be made or claimed from the assessed value of the Mortgaged Property, or any part thereof, for real estate tax purposes by reason of this Mortgage or the Obligations. In the event such claim, credit or deduction shall be required by law, Mortgagee shall have the option, by written notice of not less than thirty (30) days, to require that Mortgagor obtain the release of the Mortgaged Property pursuant to Section 8.02 of the Credit Agreement prior to the expiration of such 30-day period, and if Mortgagor does not obtain such release, Mortgagee shall have the option, upon expiration of such 30-day period, to declare the Obligations immediately due and payable. 14. Documentary Stamps. Mortgagor shall pay, together with interest, fines, and penalties, if any, any documentary stamp, recording, transfer, mortgage, intangibles or other taxes or fees whatsoever due under applicable laws in connection with the making, execution, delivery, filing of record, recordation, release, or discharge of this Mortgage. 15. Usury Laws. It is the intent of the Mortgagor and the Mortgagee in the execution of this Mortgage and all other instruments evidencing or securing the Obligations to contract in strict compliance with the relevant usury laws. In furtherance thereof, the Mortgagor and the Mortgagee stipulate and agree that none of the terms and provisions contained in this Mortgage shall ever be construed to create a contract for the use, forbearance or detention of money requiring payment of interest at a rate in excess of the maximum interest rate permitted to be charged by relevant law. 16. Books and Records. Mortgagor shall keep books and records of account in accordance with the applicable provisions of the Credit Agreement. 17. Performance of Other Agreements. Mortgagor shall observe and perform each and every term to be observed or performed by Mortgagor pursuant to the terms of any material agreement or recorded instrument affecting or pertaining to the Mortgaged Property. -10- 18. Further Acts. Mortgagor will, at the expense of Mortgagor, and without expense to Mortgagee, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignments, transfers and assurances as Mortgagee shall, from time to time, require, for the better assuring, conveying, assigning, transferring, and confirming unto Mortgagee the property and rights hereby mortgaged, given, granted, bargained, sold, aliened, conveyed, confirmed, pledged, assigned and hypothecated or intended now or hereafter so to be, or which Mortgagor may be or may hereafter become bound to convey or assign to Mortgagee, or for carrying out the intention or facilitating the performance of the terms of this Mortgage or for filing, registering or recording this Mortgage. Mortgagor, on demand, will execute and deliver and hereby authorizes Mortgagee to execute in the name of Mortgagor or without the signature of Mortgagor to the extent Mortgagee may lawfully do so, one or more financing statements, chattel mortgages or other instruments, to evidence more effectively the security interest of Mortgagee in the Mortgaged Property. In the event that the legal description attached hereto is inaccurate or does not fully describe all of the real property in which the Mortgagor has an interest, Mortgagor hereby agrees to the amendment of such legal description and the legal description contained in the corresponding title policy so that such error is corrected, and Mortgagor shall execute and cause to be recorded, if applicable, such documentation as may be appropriate for such purpose. Mortgagor grants to Mortgagee an irrevocable power of attorney coupled with an interest for the purpose of exercising and perfecting any and all rights and remedies available to Mortgagee at law and in equity, including, without limitation, such rights and remedies available to Mortgagee pursuant to this paragraph 18. 19. Recording of Mortgage. Mortgagor forthwith upon the execution and delivery of this Mortgage and thereafter, from time to time, will cause this Mortgage, and any security instrument creating a Lien or security interest or evidencing the Lien hereof upon the Mortgaged Property and each instrument of further assurance to be filed, registered or recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect the Lien or security interest hereof upon, and the interest of Mortgagee in, the Mortgaged Property. Mortgagor will pay all filing, registration or recording fees, and all expenses incident to the preparation, execution and acknowledgment of this Mortgage and the Notes, any mortgage supplemental hereto, any security instrument with respect to the Mortgaged Property and any instrument of further assurance, and all federal, state, county and municipal, taxes, duties, imposts, assessments and charges arising out of or in connection with the execution and delivery of this Mortgage, any mortgage supplemental hereto, any security instrument with respect to the Mortgaged Property or any instrument of further assurance, except where prohibited by law so to do. Mortgagor shall hold harmless and indemnify Mortgagee, its successors and assigns, against any liability incurred by reason of the imposition of any tax on the making and recording of this Mortgage. 20. Prepayment. The Loans may only be prepaid in accordance with the terms of the Credit Agreement and the other Credit Documents. 21. Events of Default. The Obligations shall become immediately due and payable at the option of Mortgagee upon the occurrence of an Event of Default (as defined in the Credit Agreement). -11- 22. Overdue Principal and Interest. Section 1.08 of the Credit Agreement requires interest to be paid at a higher rate ("Overdue Rate") in certain circumstances. This charge shall be added to the Obligations, and shall be deemed secured by this Mortgage. This clause, however, shall not be construed as an agreement or privilege to extend the date of the payment of the Obligations, nor as a waiver of any other right or remedy accruing to Mortgagee by reason of the occurrence of any Event of Default. If the Overdue Rate is above the maximum rate permitted by applicable law, the Overdue Rate shall be the maximum rate permitted by applicable law. 23. Right to Cure Defaults. Upon the occurrence of any Event of Default or if Mortgagor fails to make any payment or to do any act as herein provided, Mortgagee may, but without any obligation to do so and without notice to or demand on Mortgagor and without releasing Mortgagor from any obligation hereunder, make or do the same in such manner and to such extent as Mortgagee may deem necessary to protect the security hereof. Mortgagee is authorized to enter upon the Mortgaged Property for such purposes, or appear in, defend, or bring any action or proceeding to protect its interest in the Mortgaged Property or to foreclose this Mortgage or collect the Obligations, and the cost and expense thereof (including reasonable attorneys' fees to the extent permitted by law), with interest as provided in this paragraph 23, shall constitute a portion of the Obligations and shall be due and payable to Mortgagee upon demand. All such costs and expenses incurred by Mortgagee in remedying such Event of Default or in appearing in, defending, or bringing any such action or proceeding shall bear interest at the Overdue Rate, for the period after notice from Mortgagee that such cost or expense was incurred to the date of payment to Mortgagee. All such costs and expenses incurred by Mortgagee together with interest thereon calculated at the Overdue Rate shall be deemed to constitute a portion of the Obligations and be secured by this Mortgage and the other Credit Documents and shall be immediately due and payable upon demand by Mortgagee therefor. 24. Prepayment After Event of Default. If following the occurrence of any Event of Default, Mortgagor shall tender payment of an amount sufficient to satisfy the Obligations at any time prior to a sale of the Mortgaged Property either through foreclosure or the exercise of other remedies available under this Mortgage, such tender by Mortgagor shall be deemed to be a voluntary prepayment under the Credit Agreement and the Notes in the amount tendered and Mortgagor may be obligated under the Credit Agreement to pay additional sums to Mortgagee as the result of such voluntary prepayment. 25. Right of Entry. Mortgagee and its agents shall have the right to enter and inspect the Mortgaged Property at all reasonable times. 26. Remedies. (a) Upon the occurrence of any Event of Default, Mortgagee may at its election, take such action permitted at law or in equity, without notice or demand, as it deems advisable to protect and enforce its rights against Mortgagor and in and to the Mortgaged Property, including, but not limited to, any one or more of the following actions, each of which may be pursued concurrently or otherwise, at such time and in such order as Mortgagee may determine, in its sole discretion, without impairing or otherwise affecting the other rights and remedies of Mortgagee: -12- (i) declare the entire unpaid Obligations to be immediately due and payable; (ii) institute proceedings for the complete foreclosure of this Mortgage in which case the Mortgaged Property or any interest therein may be sold for cash or upon credit in one or more parcels or in several interests or portions and in any order or manner; (iii) with or without entry, to the extent permitted and pursuant to the procedures provided by applicable law, institute proceedings for the partial foreclosure of this Mortgage for the portion of the Obligations then due and payable, subject to the continuing Lien of this Mortgage for the balance of the Obligations not then due; (iv) sell for cash or upon credit the Mortgaged Property or any part thereof and all estate, claim, demand, right, title and interest of Mortgagor therein and rights of redemption thereof, pursuant to power of sale or otherwise, at one or more sales, as an entirety or in parcels, at such times and places, upon such terms and after such notice thereof as may be required or permitted by law; (v) institute an action, suit or proceeding in equity for the specific performance of any covenant, condition or agreement contained herein, in the Credit Agreement, in the Notes or in any other Credit Documents; (vi) recover judgment on the Notes either before, during or after any proceedings for the enforcement of this Mortgage; (vii) as a matter of right and without notice to Mortgagor or anyone claiming under Mortgagor, and without regard to the then value of the Mortgaged Property or the interest of Mortgagor therein, apply to any court having jurisdiction to appoint a receiver or receivers of the Mortgaged Property, and Mortgagor hereby irrevocably consents to such appointment and waives notice of any application therefor. Any such receiver or receivers shall have all the usual powers and duties of receivers in like or similar cases and all the powers and duties of Mortgagee in case of entry as provided in paragraph 25 and shall continue as such and exercise all such powers until the date of confirmation of sale of the Mortgaged Property unless such receivership is sooner terminated; (viii) enforce Mortgagee's interest in the Leases, Rents and other property income and enter into or upon the Mortgaged Property, either personally or by its agents, nominees or attorneys and dispossess Mortgagor and its agents and servants therefrom, and thereupon Mortgagee may (A) use, operate, manage, control, insure, maintain, repair, restore and otherwise deal with all and every part of the Mortgaged Property and conduct the business thereat; (B) complete any construction on the Mortgaged Property in such manner and form as Mortgagee deems advisable; (C) make alterations, additions, renewals, replacements and improvements to or on the Mortgaged Property; (D) exercise all rights and powers of Mortgagor with respect to the Mortgaged Property, whether in the name of Mortgagor or otherwise, including, without limitation, the right to make, cancel, enforce or modify Leases, obtain and evict tenants, and demand, sue for, collect and -13- receive all earnings, revenues, Rents, issues, profits and other income of the Mortgaged Property and every part thereof; and (E) apply the receipts from the Mortgaged Property to the payment of the Obligations, after deducting therefrom all expenses (including reasonable attorneys' fees) incurred in connection with the aforesaid operations and all amounts necessary to pay the taxes, assessments, insurance and other charges in connection with the Mortgaged Property, as well as just and reasonable compensation for the services of Mortgagee, its counsel, agents and employees; and (ix) pursue such other rights or remedies as may be available under the Credit Agreement, the Notes, any of the other Credit Documents or otherwise at law or in equity. In the event of a sale, by foreclosure or otherwise, of less than all of the Mortgaged Property, this Mortgage shall continue as a Lien on the remaining portion of the Mortgaged Property. (b) The proceeds of any sale made under or by virtue of this paragraph, together with any other sums which then may be held by Mortgagee under this Mortgage, whether under the provisions of this paragraph or otherwise, shall be applied by Mortgagee to the payment of the Obligations in such priority and proportions as Mortgagee in its discretion shall deem proper. (c) Mortgagee may adjourn from time to time any sale to be made under or by virtue of this Mortgage by announcement at the time and place appointed for such sale or for such adjourned sale or sales; and, except as otherwise provided by any applicable provision of law, Mortgagee, without further notice or publication, may cause such sale to be made at the time and place to which the same shall be so adjourned. (d) Upon the completion of any sale made by Mortgagee under or by virtue of this paragraph, Mortgagee, or an officer of any court empowered to do so, shall execute and deliver to the accepted purchaser a good and sufficient instrument conveying, assigning and transferring all estate, right, title and interest in and to the property and rights sold. Mortgagee is hereby irrevocably appointed the true and lawful attorney of Mortgagor, in its name and stead, to make all necessary conveyances, assignments, transfers and deliveries of the Mortgaged Property and rights so sold and for that purpose Mortgagee may execute all necessary instruments of conveyance, assignment and transfer, and may substitute one or more persons with like power, Mortgagor hereby ratifying and confirming all that its said attorney or such substitute shall lawfully do by virtue hereof. Any sale made under or by virtue of this paragraph, whether made under the power of sale herein granted or under or by virtue of judicial proceedings or of a judgment or decree of foreclosure and sale, shall operate to divest all the estate, right, title, interest, claim and demand whatsoever, whether at law or in equity, of Mortgagor in and to the property and rights so sold, and shall be a perpetual bar both at law and in equity against Mortgagor and against any and all persons claiming or who may claim the same, or any part thereof from, through or under Mortgagor. (e) Upon any sale made under or by virtue of this paragraph, whether made under the power of sale herein granted or under or by virtue of judicial proceedings or of a judgment or decree of foreclosure and sale, Mortgagee may bid for and acquire the Mortgaged -14- Property or any part thereof and in lieu of paying cash therefor may make settlement for the purchase price by crediting upon the Obligations the net sales price after deducting therefrom the expenses of the sale and costs of the action and any other sums which Mortgagee is authorized to deduct under this Mortgage. (f) No recovery of any judgment by Mortgagee and no levy of an execution under any judgment upon the Mortgaged Property or upon any other property of Mortgagor shall affect in any manner or to any extent the Lien of this Mortgage upon the Mortgaged Property or any part thereof, or any Liens, rights, powers or remedies of Mortgagee hereunder, but such Liens, rights, powers and remedies of Mortgagee shall continue unimpaired as before. 27. Security Agreement and Fixture Filing. (a) This Mortgage is both a real property mortgage and a "security agreement" within the meaning of the Uniform Commercial Code. The Mortgaged Property includes both real and personal property and all other rights and interests, whether tangible or intangible in nature, of Mortgagor in the Mortgaged Property. Mortgagor by executing and delivering this Mortgage has granted and hereby grants to Mortgagee, as security for the Obligations, a security interest in the Mortgaged Property to the full extent that the Mortgaged Property may be subject to the Uniform Commercial Code (said portion of the Mortgaged Property so subject to the Uniform Commercial Code being called in this paragraph 27 the "UCC Collateral"). If an Event of Default shall occur, Mortgagee, in addition to any other rights and remedies which it may have, shall have and may exercise immediately and without demand, any and all rights and remedies granted to a secured party upon default under the Uniform Commercial Code, including, without limiting the generality of the foregoing, the right to take possession of the UCC Collateral or any part thereof, and to take such other measures as Mortgagee may deem necessary for the care, protection and preservation of the UCC Collateral. Upon request or demand of Mortgagee, Mortgagor shall at its expense assemble the UCC Collateral and make it available to Mortgagee at a convenient place acceptable to Mortgagee. Mortgagor shall pay to Mortgagee on demand any and all expenses, including legal expenses and attorneys' fees, incurred or paid by Mortgagee in protecting the interest in the UCC Collateral and in enforcing the rights hereunder with respect to the UCC Collateral. Any notice of sale, disposition or other intended action by Mortgagee with respect to the UCC Collateral sent to Mortgagor in accordance with the provisions hereof at least ten (10) days prior to such action, shall constitute commercially reasonable notice to Mortgagor. The proceeds of any disposition of the UCC Collateral, or any part thereof, may be applied by Mortgagee to the payment of the Obligations in such priority and proportions as Mortgagee in its discretion shall deem proper. (b) Certain of the Mortgaged Property is or will become "fixtures" (as that term is defined in the Uniform Commercial Code) on the Premises, described or referred to in this Mortgage, and this Mortgage, upon being filed for record in the real estate records of the city or county wherein such fixtures are situated, shall operate also as a financing statement filed as a fixture filing in accordance with the applicable provisions of said Uniform Commercial Code upon such of the Mortgaged Property that is or may become fixtures. -15- (c) The principal place of business of Mortgagor and the place where Mortgagor's books and records in respect of the Mortgaged Property are kept is the address of Mortgagor first set forth above. 28. Actions and Proceedings. Mortgagee has the right to appear in and defend any action or proceeding brought with respect to the Mortgaged Property and to bring any action or proceeding, in the name and on behalf of Mortgagor, which Mortgagee, in its discretion, decides should be brought to protect its interest in the Mortgaged Property. Mortgagee shall, at its option, be subrogated to the Lien of any deed of trust, mortgage or other security instrument discharged in whole or in part by the Obligations, and any such subrogation rights shall constitute additional security for the payment of the Obligations. 29. Waiver of Counterclaim. Mortgagor hereby waives the right to assert a counterclaim, other than a mandatory or compulsory counterclaim, in any action or proceeding brought against it by Mortgagee, and waives trial by jury in any action or proceeding brought by either party hereto against the other or in any counterclaim asserted by Mortgagee against Mortgagor, or in any matters whatsoever arising out of or in any way connected with this Mortgage, the Credit Agreement, the Notes, any of the other Credit Documents or the Obligations. 30. Recovery of Sums Required To Be Paid. Mortgagee shall have the right from time to time to take action to recover any sum or sums which constitute a part of the Obligations as the same become due, without regard to whether or not the balance of the Obligations shall be due and without prejudice to the right of Mortgagee thereafter to bring an action of foreclosure, or any other action, for a default or defaults by Mortgagor existing at the time such earlier action was commenced. 31. Marshalling and Other Matters. Mortgagor hereby waives, to the extent permitted by law, the benefit of all appraisement, valuation, stay, extension, reinstatement and redemption laws now or hereafter in force and all rights of marshalling in the event of any sale hereunder of the Mortgaged Property or any part thereof or any interest therein. Further, Mortgagor hereby expressly waives any and all rights of redemption from sale under any order or decree of foreclosure of this Mortgage on behalf of Mortgagor, and on behalf of each and every person acquiring any interest in or title to the Mortgaged Property subsequent to the date of this Mortgage and on behalf of all persons to the extent permitted by applicable law. 32. Handicapped Access. (a) Mortgagor agrees that the Mortgaged Property shall comply to the extent applicable with the requirements of the Americans with Disabilities Act of 1990, the Fair Housing Amendments Act of 1988, all state and local laws and ordinances related to handicapped access, and all rules, regulations, and orders issued pursuant thereto including, without limitation, the Americans with Disabilities Act Accessibility Guidelines for Buildings and Facilities (collectively "Access Laws"). (b) Notwithstanding any provisions set forth herein or in any other document regarding Mortgagee's approval of alterations of the Mortgaged Property, Mortgagor shall not alter the Mortgaged Property in any manner which would increase Mortgagor's responsibilities -16- for compliance with the applicable Access Laws after completion of the alterations without the prior written approval of Mortgagee. The foregoing shall apply to tenant improvements constructed by Mortgagor or by any of its tenants. Mortgagee may condition any such approval upon receipt of a certificate of Access Law compliance from an architect, engineer, or other person acceptable to Mortgagee. (c) Mortgagor agrees to give prompt notice to Mortgagee of the receipt by Mortgagor of any complaints related to violation of any Access Laws and of the commencement of any proceedings or investigations which relate to compliance with applicable Access Laws. 33. Indemnification. Mortgagor shall protect, defend, indemnify and save harmless Mortgagee from and against all liabilities, obligations, claims, demands, damages, penalties, causes of action, losses, fines, costs and expenses (including without limitation reasonable attorneys' fees and expenses), imposed upon or incurred by or asserted against Mortgagee by reason of (a) ownership of this Mortgage, the Mortgaged Property or any interest therein or receipt of any Rents or other property income; (b) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about the Mortgaged Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (c) any use, nonuse or condition in, on or about the Mortgaged Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (d) any failure on the part of Mortgagor to perform or comply with any of the terms of this Mortgage; (e) performance of any labor or services or the furnishing of any materials or other property in respect of the Mortgaged Property or any part thereof; or (f) any failure of the Mortgaged Property to comply with any Access Laws, except to the extent any of the foregoing result from, or arise out of, Mortgagee's gross negligence or willful misconduct. Any amounts payable to Mortgagee by reason of the application of this paragraph 33 shall be secured by this Mortgage and shall become immediately due and payable and shall bear interest at the Overdue Rate from the date loss or damage is sustained by Mortgagee until paid. The obligations and liabilities of Mortgagor under this paragraph 33 shall survive any termination, satisfaction, assignment, entry of a judgment of foreclosure, delivery of a deed in a non-judicial foreclosure or delivery of a deed in lieu of foreclosure of this Mortgage. 34. Notices. Any notice, demand, statement, request or consent made hereunder shall be in writing and shall be delivered in the manner specified for notices in the Credit Agreement to the address, as set forth above, of the party to whom such notice is to be given, or to such other address as Mortgagor or Mortgagee, as the case may be, shall in like manner designate in writing. 35. Authority. (a) Mortgagor represents and warrants that Mortgagor (and the undersigned representative of Mortgagor, if any) has full power, authority and right to execute, deliver and perform its obligations pursuant to this Mortgage, and to mortgage, give, grant, bargain, sell, alien, convey, confirm, pledge, hypothecate and assign the Mortgaged Property pursuant to the terms hereof and to keep and observe all of the terms of this Mortgage on Mortgagor's part to be performed. -17- (b) Mortgagor represents and warrants that Mortgagor is not a "foreign person" within the meaning of 1445(f)(3) of the Internal Revenue Code of 1986, as amended and the related Treasury Department regulations, including temporary regulations. 36. WAIVER OF NOTICE. MORTGAGOR SHALL NOT BE ENTITLED TO ANY NOTICES OF ANY NATURE WHATSOEVER FROM MORTGAGEE EXCEPT WITH RESPECT TO MATTERS FOR WHICH THIS MORTGAGE OR THE OTHER CREDIT DOCUMENTS SPECIFICALLY AND EXPRESSLY PROVIDE FOR THE GIVING OF NOTICE BY MORTGAGEE TO MORTGAGOR AND EXCEPT WITH RESPECT TO MATTERS FOR WHICH MORTGAGEE IS REQUIRED BY APPLICABLE LAW TO GIVE NOTICE, AND MORTGAGOR HEREBY EXPRESSLY WAIVES THE RIGHT TO RECEIVE ANY NOTICE FROM MORTGAGEE WITH RESPECT TO ANY MATTER FOR WHICH THIS MORTGAGE OR THE OTHER CREDIT DOCUMENTS DOES NOT SPECIFICALLY AND EXPRESSLY PROVIDE FOR THE GIVING OF NOTICE BY MORTGAGEE TO MORTGAGOR. 37. Sole Discretion of Mortgagee. Wherever pursuant to this Mortgage, Mortgagee exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Mortgagee, the decision of Mortgagee to approve or disapprove or to decide that arrangements or terms are satisfactory or not satisfactory shall be in the sole discretion of Mortgagee and shall be final and conclusive, except as may be otherwise expressly and specifically provided herein. 38. Non-Waiver. The failure of Mortgagee to insist upon strict performance of any term hereof shall not be deemed to be a waiver of any term of this Mortgage. Mortgagor shall not be relieved of Mortgagor's obligations hereunder by reason of (a) the failure of Mortgagee to comply with any request of Mortgagor to take any action to foreclose this Mortgage or otherwise enforce any of the provisions hereof or of the Credit Agreement, the Notes or the other Credit Documents, (b) the release, regardless of consideration, of the whole or any part of the Mortgaged Property, or of any person liable for the Obligations or any portion thereof, or (c) any agreement or stipulation by Mortgagee extending the time of payment or otherwise modifying or supplementing the terms of the Credit Agreement, the Notes, this Mortgage or the other Credit Documents. Mortgagee may resort for the payment of the Obligations to any other security held by Mortgagee in such order and manner as Mortgagee, in its discretion, may elect. Mortgagee may take action to recover the Obligations, or any portion thereof, or to enforce any covenant hereof without prejudice to the right of Mortgagee thereafter to foreclose this Mortgage or to pursue other remedies available in the other Credit Documents or at law or in equity. The rights and remedies of Mortgagee under this Mortgage shall be separate, distinct and cumulative and none shall be given effect to the exclusion of the others. No act of Mortgagee shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision. Mortgagee shall not be limited exclusively to the rights and remedies herein stated but shall be entitled to every right and remedy now or hereafter afforded in the other Credit Documents or at law or in equity. 39. No Oral Change. This Mortgage, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or -18- failure to act on the part of Mortgagor or Mortgagee, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. 40. Headings, etc. The headings and captions of various paragraphs of this Mortgage and the Table of Contents contained herein are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof. 41. Duplicate Originals. This Mortgage may be executed in any number of duplicate originals and each such duplicate original shall be deemed to be an original. 42. Successors and Assigns. This Mortgage applies to, inures to the benefit of and binds the parties hereto and their respective successors and assigns. 43. Assignments. Mortgagee shall have the right to assign or transfer its rights under this Mortgage without limitation. Any assignee or transferee shall be entitled to all the benefits afforded Mortgagee under this Mortgage. 44. Governing Law; Severability. This Mortgage shall be governed by and construed in accordance with the laws of the State of New York including, without limitation, Section 5-1401 of the General Obligations Law, but otherwise without regard to conflict of law principles; provided, however, that with respect to the creation, attachment, perfection, priority and enforcement of the Liens created by this Mortgage, this Mortgage shall be governed by and construed in accordance with the laws of the State of [________]. In the event that any provision or clause of this Mortgage conflicts with Applicable Laws, such conflicts shall not affect other provisions of this Mortgage which can be given effect without the conflicting provision, and to this end the provisions of this Mortgage are declared to be severable. 45. Priority of this Mortgage. The parties hereto intend that this Mortgage create a first priority, perfected Lien upon and security interest in the Premises and all other portions of the Mortgaged Property for so long as any of the Obligations remain outstanding, subject only to Permitted Encumbrances. Therefore, notwithstanding the relative priority of recordation of this Mortgage and any other instrument of record with respect to the Mortgaged Property or any portion thereof, the Liens and security interests created hereby in the Mortgaged Property are and shall be superior to the Liens and security interests created by any such instrument, subject only to Permitted Encumbrances. 46. Conflicts With Credit Agreement. If any term or provision of this Mortgage shall contradict or otherwise conflict with any term or provision of the Credit Agreement, the parties hereto agree that the term or provision contained in the Credit Agreement shall control for so long as the Credit Agreement remains in force in respect of Mortgagor. 47. Future Advances. In addition to all other indebtedness secured by this Mortgage, this Mortgage shall also secure and shall constitute a first Lien on the Mortgaged Property for all future advances made by Mortgagee to Mortgagor for any purpose within twenty -19- (20) years from the date of this Mortgage to the same extent as if such advances were made on the date of the execution of this Mortgage. Any such advances may be made at the option of Mortgagee. The total amount of the indebtedness, including future advances, that is secured by this Mortgage, may increase or decrease from time to time, but shall not exceed a maximum principal amount of $140,000,000 at any one time, plus accrued and unpaid interest thereon and any disbursements made by Mortgagee for the payment of taxes, levies or insurance on all or any part of the Mortgaged Property encumbered by this Mortgage, with accrued and unpaid interest on such disbursement. [SUBJECT TO REVISION BY LOCAL COUNSEL] 48. Leasehold Mortgage Provisions. If Exhibit A includes a leasehold estate, the terms and conditions set forth in Exhibit B attached hereto are made a part hereof and are incorporated into this Mortgage by reference. [LOCAL LAW PROVISIONS TO BE ADDED] -2- IN WITNESS WHEREOF, this Mortgage has been duly executed by Mortgagor as of the day and year first written above. WITNESSES MORTGAGOR [___________________________], [a Delaware limited partnership] As to Mortgagor, signed, By: __________________________, its sealed and delivered in general partner the presence of - -------------------- Unofficial Witness By: _______________________ Name: Title: - -------------------- Unofficial Witness -21- STATE OF NEW YORK ) ) ss COUNTY OF NEW YORK ) This instrument was acknowledged before me this ____ day of _______, 1998, by _________________, as _____________ of _____________________, a ___________, as general partner of [_____________________], [a Delaware limited partnership], on behalf of the partnership, who is personally known to me or who has produced __________________________ as identification and who did (did not) take an oath. --------------------------- Name: (Notarial Seal) Notary Public State of New York at Large My Commission Expires: ---------------------------- Notary Public -22- EXHIBIT A Legal Description of Property ----------------------------- Exhibit B Leasehold Mortgage Provisions Notwithstanding anything contained herein to the contrary, and in addition to any rights, privileges and remedies granted to Mortgagee elsewhere in this Mortgage, Mortgagee shall have, and Mortgagor hereby grants to Mortgagee for the benefit of the Secured Creditors, any and all rights, privileges and remedies of the leasehold provided for in the ground lease described in Exhibit A (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the "Ground Lease"), including without limitation, any renewal rights and options to purchase contained in the Ground Lease, without the necessity of particularly specifying any or all of such rights, privileges and remedies that are or could be granted to Ground Leasehold mortgagees pursuant to the Ground Lease. Mortgagor hereby represents, covenants and agrees that: (a) This Mortgage is lawfully executed and delivered in conformity with the Ground Lease. (b) Mortgagor will pay when due the rents, taxes and other sums and charges mentioned in and made payable by Mortgagor under the Ground Lease. (c) Mortgagor will promptly, in all material respects, perform and observe all of the terms, covenants and conditions required to be performed and observed by it under the Ground Lease, within the periods (including any grace or cure periods) provided therein, and will do all things reasonably necessary to preserve and to keep unimpaired its rights under the Ground Lease. In the event of the failure of Mortgagor to make any payment required to be made by the lessee pursuant to the provisions of the Ground Lease or to observe, abide by, discharge or perform, or cause to be observed, kept, discharged or performed, any of the terms, obligations, covenants, conditions, agreements, indemnities, representations, warranties or liabilities of the Ground Lease on the part of lessee thereunder to be observed, kept, discharged and performed, Mortgagor does hereby irrevocably appoint and constitute Mortgagee as its true and lawful attorney in fact, which appointment is coupled with an interest, in its name, place and stead, to take any and all actions deemed necessary or desirable by Mortgagee to perform and comply with all of the obligations of Mortgagor under the Ground Lease, to do and take, but without any obligation so to do, any action which Mortgagee deems necessary or desirable to prevent or cure any default by Mortgagor under the Ground Lease, to enter into and upon the Mortgaged Property or any part thereof to such extent and as often as Mortgagee, in its reasonable discretion, deems necessary or desirable in order to prevent or cure any default of Mortgagor pursuant thereto, to the end that the rights of Mortgagor in and to the Ground Leasehold estate created by the Ground Lease shall be kept unimpaired and free from default, and all sums so expended by Mortgagee, with interest thereon at the rate set forth in the Credit Agreement from the date of each such expenditure, shall be paid by Mortgagor to Mortgagee promptly upon demand by Mortgagee and shall be added to the indebtedness secured hereby and Mortgagee shall have, in addition to any other remedy of Mortgagee, the same rights and remedies in the event of non-payment of any such sum by Mortgagor as in the case of a default by Mortgagor in the payment of any sums due under Exhibit B Page 2 the Credit Agreement. Mortgagor shall, within seven (7) days after written request by Mortgagee, execute and deliver to Mortgagee, or to any person designated by Mortgagee, such further instruments, agreements, powers, assignments, conveyances or the like as may be necessary to complete or perfect the interest, rights or powers of Mortgagee pursuant hereto. (d) Mortgagor will promptly (i) notify Mortgagee in writing of the receipt by it of any notice of default from the lessor under the Ground Lease; (ii) notify Mortgagee in writing of the receipt by it of any notice under the Ground Lease of the termination of the Ground Lease; (iii) cause a copy of each such notice received by Mortgagor from the lessor under the Ground Lease to be delivered to Mortgagee; and (iv) cause a copy of any notice of election or the exercise of any rights of option, purchase or renewal under the Ground Lease sent by Mortgagor to the lessor under Ground Lease, to be delivered to Mortgagee. (e) Subject to the terms of and as permitted under the Credit Agreement, Mortgagor will not, without the prior written consent of Mortgagee, terminate or surrender or suffer or permit any termination or surrender of the Ground Lease, nor modify the Ground Lease, if the modification shall materially impair the Mortgagee's security interest in the Mortgaged Property or the rights and remedies of Mortgagee under this Mortgage. (f) Mortgagor will, within twenty (20) days after written demand from Mortgagee, use reasonable efforts to obtain from the lessor under the Ground Lease and deliver to Mortgagee an estoppel certificate in the form provided for in the Ground Lease, if any. (g) Mortgagor will furnish to Mortgagee upon demand, proof of payment of all items which are required to be paid by Mortgagor pursuant to the Ground Lease and a statement of any such payments which Mortgagor is contesting or arbitrating pursuant to the terms of the Ground Lease. (h) Except as otherwise provided in the Ground Lease, Mortgagor will not consent to the subordination of the Ground Lease to any lien on the fee and/or Ground Leasehold estate of the lessor under the Ground Lease. (i) Subject to and as permitted under the Credit Agreement, so long as any of the Obligations shall remain outstanding, and if an Event of Default has occurred and is continuing, Mortgagor shall not fail to exercise any option or right to renew or extend the term of the Ground Lease without the prior written consent of Mortgagee. Mortgagor shall give Mortgagee simultaneous written notice of the exercise of any such option or right to renew or extend, together with a copy of the instrument given to the lessor under the Ground Lease exercising such option or right, and thereafter, shall promptly deliver to Mortgagee a copy of any acknowledgment by such lessor with respect to the exercise of such option or right. If any such option or right has not been exercised as aforesaid, then, not more than three hundred sixty (360) and not less than two hundred seventy (270) days Exhibit B Page 3 before the right of Mortgagor to exercise any such option or right, Mortgagor shall give Mortgagee written notice specifying (i) the date on which, (ii) the term for which and (iii) the manner in which such option or renewal is to be exercised. If an Event of Default has occurred and is continuing, within ten (10) business days of written demand by Mortgagee, Mortgagor shall exercise any such option or renewal (to the extent available) which is necessary to extend the term of the Ground Lease beyond the outside maturity date set forth in the Credit Agreement. Exhibit B TABLE OF CONTENTS Page ---- 1. Definitions and Principles of Construction..................................6 2. Payment and Performance of Obligations......................................7 3. Warranty of Title...........................................................7 4. Insurance...................................................................7 5. Payment of Impositions, etc.................................................7 6. Recourse....................................................................8 7. Casualty, Taking and Application of Proceeds................................8 8. Assignment of Leases and Rents..............................................8 9. Maintenance of Mortgaged Property...........................................9 10. Operation of the Mortgaged Property........................................9 11. Transfer or Encumbrance of the Mortgaged Property..........................9 12. Changes in Laws Regarding Taxation........................................10 13. No Credits on Account of the Obligations..................................10 14. Documentary Stamps........................................................10 15. Usury Laws................................................................10 16. Books and Records.........................................................10 17. Performance of Other Agreements...........................................10 18. Further Acts..............................................................11 Page ---- 19. Recording of Mortgage.....................................................11 20. Prepayment................................................................11 21. Events of Default.........................................................11 22. Overdue Principal and Interest............................................12 23. Right to Cure Defaults....................................................12 24. Prepayment After Event of Default.........................................12 25. Right of Entry............................................................12 26. Remedies..................................................................12 27. Security Agreement and Fixture Filing.....................................15 28. Actions and Proceedings...................................................16 29. Waiver of Counterclaim....................................................16 30. Recovery of Sums Required To Be Paid......................................16 31. Marshalling and Other Matters.............................................16 32. Handicapped Access........................................................16 33. Indemnification...........................................................17 34. Notices...................................................................17 35. Authority.................................................................17 36. WAIVER OF NOTICE..........................................................18 37. Sole Discretion of Mortgagee..............................................18 38. NonWaiver.................................................................18 (ii) Page ---- 39. No Oral Change............................................................18 40. Headings, etc.............................................................19 41. Duplicate Originals.......................................................19 42 Successors and Assigns....................................................19 43. Assignments...............................................................19 44. Governing Law; Severability...............................................19 45. Priority of this Mortgage.................................................19 46. Conflicts With Credit Agreement...........................................19 47. Future Advances...........................................................19 48. Leasehold Mortgage Provisions.............................................20 (iii) EXHIBIT J OFFICER'S SOLVENCY CERTIFICATE I, the undersigned, the Chief [Accounting] Officer of ElderTrust, a real estate investment trust organized and existing under the laws of the State of Maryland (the "REIT"), do hereby certify on behalf of the REIT that: 1. This Certificate is furnished pursuant to Section [4.14(a)] of the Credit Agreement, dated as of January 30, 1998, among the REIT, ElderTrust Operating Limited Partnership, a Delaware limited partnership (the "Borrower"), the lenders from time to time party thereto, and German American Capital Corporation, as Administrative Agent (such Credit Agreement, as in effect on the date of this Certificate, being herein called the "Credit Agreement"). Unless otherwise defined herein, capitalized terms used in this Certificate shall have the meanings set forth in the Credit Agreement. 2. For purposes of this Certificate, the terms below shall have the following definitions: (a) "Fair Value" The amount at which the assets, in their entirety, of each of (i) the REIT and its Subsidiaries (taken as a whole) and (ii) the Borrower (on a stand-alone basis) would change hands between a willing buyer and a willing seller, within a commercially reasonable period of time, each having reasonable knowledge of the relevant facts, with neither being under any compulsion to act. (b) "Present Fair Salable Value" The amount that could be obtained by an independent willing seller from an independent willing buyer if the assets of each of (i) the REIT and its Subsidiaries (taken as a whole) and (ii) the Borrower (on a stand-alone basis) are sold with reasonable promptness under normal selling conditions in a current market. (c) "New Financing" The indebtedness incurred or to be incurred by the REIT and its Subsidiaries under the Credit Documents and all other financing contemplated by the Credit Documents. (d) "Stated Liabilities" The recorded liabilities (including Contingent Liabilities that would be recorded in accordance with GAAP consistently applied) of the REIT, and its Subsidiaries at ___________, 1998, together with (i) the net change in long-term debt (including current maturities) between ___________, 1998 and the date hereof and (ii) without duplication, the amount of all New Financing. (e) "Contingent Liabilities" The maximum estimated amount of liability reasonably likely to result from pending litigation, asserted claims and assessments, guaranties, uninsured risks and other contingent liabilities of the REIT and its Subsidiaries (exclusive of such Contingent Liabilities to the extent reflected in Stated Liabilities). (f) "Will be able to pay its Stated Liabilities, including Contingent Liabilities, as they mature." For the period from the date hereof through the stated maturity of all New Financing, each of (i) the REIT and its Subsidiaries (taken as a whole) and (ii) the Borrower (on a stand-alone basis) will have sufficient assets and cash flow to pay their respective Stated Liabilities and Contingent Liabilities as those liabilities mature or otherwise become due. (g) "Does not have Unreasonably Small Capital" For the period from the date hereof through the stated maturity of all New Financing, each of (i) the REIT and its Subsidiaries (taken as a whole) and (ii) the Borrower (on a stand-alone basis), after consummation of all Indebtedness (including the Loans) being incurred or assumed and Liens created by the REIT and its Subsidiaries in connection therewith, is a going concern and has sufficient capital to ensure that it will continue to be a going concern for such period and to remain a going concern despite moderately negative deviations from the Projections discussed below. 3. For purposes of this Certificate, I, or officers of the REIT and the Borrower under my direction and supervision, have performed the following procedures as of and for the periods set forth below. (a) I have reviewed the financial statements and Projections referred to in [Sections 4.15 and 6.05] of the Credit Agreement. (b) I have read: 1. the Credit Documents and the respective Schedules and Exhibits thereto. (c) With respect to Contingent Liabilities, I: 1. inquired of certain officials of the REIT and its Subsidiaries who have responsibility for legal, financial and accounting matters as to the existence and estimated liability with respect to all Contingent Liabilities known to them; 2. confirmed with senior officers of the REIT and its Subsidiaries that, to the best of such officers' knowledge, (i) all appropriate items were included in Stated Liabilities or Contingent Liabilities made known to me in the course of my inquiry and that (ii) the amounts relating thereto were the estimated amount of liability reasonably likely to result therefrom as of the date hereof; -2- 3. I hereby certify that, to the best of my knowledge, all material Contingent Liabilities have been considered in making the certification set forth in paragraph 4 below, and with respect to each such Contingent Liability the estimated amount of liability reasonably likely to result therefrom was used in making such certification. (a) I have made inquiries of certain officers of the REIT and its Subsidiaries which have responsibility for financial reporting and accounting matters regarding whether they were aware of any events or conditions that, as of the date hereof, would cause each of (i) the REIT and its Subsidiaries (taken as whole) or (ii) the Borrower (on a stand-alone basis) after giving effect to the financing transactions (including the incurrence of the New Financing), to (x) have assets with a Fair Value or Present Fair Salable Value that are less than the sum of Stated Liabilities and Contingent Liabilities; (y) have Unreasonably Small Capital; or (z) not be able to pay its Stated Liabilities and Contingent Liabilities as they mature or otherwise become due. 4. Based on and subject to the foregoing, I hereby certify on behalf of the REIT that, after giving effect to the financing transactions (including the New Financing), it is my informed opinion that as of the date hereof (x) the Fair Value and Present Fair Salable Value of the assets of each of (i) the REIT and its Subsidiaries (taken as a whole) and (ii) the Borrower (on a stand-alone basis) exceed their respective Stated Liabilities and Contingent Liabilities; (y) each of (i) the REIT and its Subsidiaries (taken as a whole) and (ii) the Borrower (on a stand-alone basis) will not have Unreasonably Small Capital; and (z) each of (i) the REIT and its Subsidiaries (taken as a whole) and (ii) the Borrower (on a stand-alone basis) will be able to pay each of their respective Stated Liabilities and Contingent Liabilities as they mature or otherwise become due. -3- IN WITNESS WHEREOF, the REIT has caused its duly authorized chief accounting officer to execute and deliver this Certificate this _______ day of ___________, 1998. ELDERTRUST OPERATING LIMITED PARTNERSHIP By______________________________ Name: Title: -4- This document is intended EXHIBIT K to be recorded in___________ County,_____________________ ________________________________________________________________________________ ASSIGNMENT OF MORTGAGE AND PLEDGE AGREEMENT between [_______________________], as Assignor and Pledgor, and GERMAN AMERICAN CAPITAL CORPORATION, as Collateral Agent Dated as of _______, 1998 ________________________________________________________________________________ THIS DOCUMENT PREPARED BY AND RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: WHITE & CASE LLP 1155 Avenue of the Americas New York, New York 10036 Attention: Barbara J. Goodman, Esq. TABLE OF CONTENTS Page ---- ARTICLE I SECURITY FOR OBLIGATIONS.......................................... 2 ARTICLE II ASSIGNMENT OF COLLATERAL......................................... 4 Section 2.1. Assignment................................................... 4 Section 2.2. Power of Attorney............................................ 5 Section 2.3. Public or Private Sale....................................... 6 Section 2.4. Application of Proceeds...................................... 8 Section 2.5. Grant of Certain Rights...................................... 8 Section 2.6. Exercise of Remedies......................................... 8 ARTICLE III DELIVERY OF DOCUMENTS .......................................... 9 Section 3.1. Documents Pertaining to the Collateral....................... 9 ARTICLE IV REPRESENTATIONS AND WARRANTIES................................... 10 Section 4.1. Representations and Warranties............................... 10 ARTICLE V AFFIRMATIVE COVENANTS............................................. 11 Section 5.1. Management and Preservation of Collateral.................... 11 ARTICLE VI NEGATIVE COVENANTS............................................... 11 Section 6.1. No Amendment................................................. 12 Section 6.2. Other Liens.................................................. 12 Section 6.3. Place of Business............................................ 12 ARTICLE VII MISCELLANEOUS................................................... 14 Section 7.1. Expenses; Indemnity.......................................... 14 Section 7.2. Termination of Security Interests; Release of Collateral..... 15 Section 7.3. Amendments................................................... 15 Section 7.4. Notice....................................................... 15 Section 7.5. No Waivers................................................... 16 Section 7.6. Continuing Obligation and Assignments........................ 16 Section 7.7. Counterparts................................................. 16 Section 7.8. Governing Law................................................ 16 Section 7.9. Headings..................................................... 16 Section 7.10. Severability................................................ 16 EXHIBIT K THIS DOCUMENT PREPARED BY AND RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: WHITE & CASE LLP 1155 Avenue of the Americas New York, New York 10036 Attention: Barbara J. Goodman, Esq. ASSIGNMENT OF MORTAGE AND PLEDGE AGREEMENT ASSIGNMENT OF MORTGAGE AND PLEDGE AGREEMENT, dated as of _______, 1998 (as amended, modified or supplemented from time to time, this "Agreement"), between [__________________], the undersigned assignor and pledgor, a [Delaware limited partnership] (the "Pledgor") having offices at 415 McFarlan Road, Suite 202, Kennett Square, Pennsylvania 19348 and German American Capital Corporation, as Collateral Agent (the "Collateral Agent") for the Secured Creditors (as defined below), as assignee and pledgee, having offices at 31 West 52nd Street, New York, New York 10019. Except as otherwise defined herein, capitalized terms used herein and not defined herein shall have the definitions specified in the Credit Agreement. W I T N E S S E T H : WHEREAS, ElderTrust, a Maryland real estate investment trust (the "REIT"), ElderTrust Operating Limited Partnership (the "Borrower"), various lenders from time to time party thereto (the "Banks"), Deutsche Bank AG, New York Branch, as Issuing Bank, and German American Capital Corporation, as Administrative Agent (together with any successor administrative agent, the "Administrative Agent"), have entered into a Credit Agreement, dated as of January 30, 1998, providing for the making of Loans to the Borrower as contemplated therein (as amended, modified or supplemented from time to time, the "Credit Agreement") (the Banks, the Administrative Agent and the Collateral Agent are herein called the "Bank Creditors"); WHEREAS, the Borrower may at any time and from time to time enter into one or more Interest Rate Protection Agreements or Other Hedging Agreements with one or more Banks or affiliates thereof (each such Bank or affiliate, even if the respective Bank subsequently ceases to be a Bank under the Credit Agreement for any reason, together with such Bank's or affiliate's successors and assigns, if any, collectively, the "Other Creditors," and together with the Bank Creditors, are herein called the "Secured Creditors"); WHEREAS, the Pledgor is the holder and owner of a mortgage loan in the principal amount of $_________ (the "Mortgage Loan") encumbering the real property more particularly described in Exhibit A annexed hereto and made a part hereof together with the improvements thereon (the "Mortgaged Property"); EXHIBIT K Page 4 [WHEREAS, pursuant to a Subsidiary Guaranty, dated as of January 30, 1998, made jointly and severally by the Pledgor and the other Subsidiary Guarantors for the benefit of the Secured Creditors, the Pledgor has guaranteed to the Secured Creditors the payment when due of all obligations and liabilities of the Pledgor under or with respect to the Credit Documents and the Interest Rate Agreements;] WHEREAS, it is a condition precedent to the extensions of credit under the Credit Agreement that the Pledgor shall have executed and delivered to the Collateral Agent this Agreement; WHEREAS, the Pledgor desires to execute this Agreement to satisfy the conditions described in the preceding paragraph; and WHEREAS, as security for the Obligations (as defined below), the Banks and the Collateral Agent have requested that the Pledgor grant, and the Pledgor has agreed to grant, certain security interests in and assign and pledge to the Collateral Agent for the benefit of the Secured Creditors (i) the mortgage listed in Schedule A hereto (together with all amendments thereto, the "Mortgage"), (ii) the note or notes secured by the Mortgage listed in Schedule A hereto (together with all amendments thereto, the "Underlying Note") and (iii) all other documents and instruments evidencing, securing or otherwise relating to the Mortgage Loan and listed in Schedule A attached hereto, including, without limitation, the mortgagee title insurance policy relating to the Mortgage Loan (collectively, the "Pledged Contracts") (the Mortgage, the Underlying Note and the Pledged Contracts, together with all proceeds and products thereof, and of all of the rights, claims, powers, remedies and privileges set forth in Article II hereof, are collectively referred to herein as the "Collateral"); NOW, THEREFORE, in consideration of the benefits accruing to the Pledgor, the receipt and sufficiency of which are hereby acknowledged, the Pledgor hereby makes the following representations and warranties to the Collateral Agent for the benefit of the Secured Creditors and hereby covenants and agrees with the Collateral Agent for the benefit of the Secured Creditors as follows: ARTICLE I SECURITY FOR OBLIGATIONS This Agreement is made by the Pledgor to the Collateral Agent for the benefit of the Secured Creditors to secure: (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of the Loans in the maximum principal amount of One Hundred Forty Million Dollars ($140,000,000), lawful money of the United States of America, to be paid with interest in accordance with the Credit Agreement and all obligations and liabilities (including, without limitation, the principal of and interest on the notes issued, and loans made, under the Credit Agreement, all reimbursement obligations and unpaid drawings with respect to letters of credit issued under the Credit Agreement, and all indemnities, fees and interest thereon or owed thereunder); EXHIBIT K Page 5 (ii) performance of all of Pledgor's other obligations under the Credit Documents; (iii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities of the Pledgor to the Other Creditors, whether now existing or hereafter incurred under, arising out of or in connection with any Interest Rate Agreement and the due performance and compliance by the Pledgor with all the terms, conditions and agreements contained in the Interest Rate Agreements; (iv) any and all sums advanced by the Collateral Agent in order to preserve or protect the Collateral or preserve or protect its security interest in the Collateral; (v) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations or liabilities of the Pledgor referred to in clauses (i), (ii) and (iii) above after an Event of Default shall have occurred and be continuing, the reasonable expenses of re-taking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Collateral Agent of its rights hereunder, together with reasonable attorneys' fees and court costs; and (vi) all amounts as to which any indemnitee has the right to reimbursement under this Agreement; all such obligations, liabilities, sums and expenses set forth in clauses (i) through (vi) of this Section 1 being herein collectively called the "Obligations". ARTICLE II ASSIGNMENT OF COLLATERAL Section 2.1. Assignment. (a) The Pledgor does hereby assign, pledge, hypothecate, transfer, set over and deliver unto the Collateral Agent for the benefit of the Secured Creditors, and does hereby grant to the Collateral Agent for the benefit of the Secured Creditors a first priority security interest in, to and under the Collateral, including without limitation, the Mortgage and the Underlying Note, including the sole right (subject to Section 2.5 hereof) to receive all moneys, additional documents or instruments or other property at any time and from time to time payable, receivable or otherwise distributable in respect of, in exchange for or in substitution for the Mortgage and the Underlying Note, all rights, claims, powers, privileges and remedies of the Pledgor whether arising by statute or at law or in equity or otherwise consequent on the failure of the obligor under the Mortgage Loan to perform or comply with any term of the Mortgage and the Underlying Note, as amended, supplemented or modified, together with full and sole power and authority, in the name of the Pledgor or otherwise, to enforce, collect, receive and give receipt for all or any of the foregoing and all rights to exercise the rights, powers and privileges of mortgagee under the Mortgage and payee under the Underlying Note; and EXHIBIT K Page 6 (b) The Pledgor does hereby assign, pledge, hypothecate, transfer, set over and deliver unto the Collateral Agent for the benefit of the Secured Creditors, and does hereby grant to the Collateral Agent for the benefit of the Secured Creditors a security interest in, all right, title and interest of the Pledgor in, to and under the Pledged Contracts, including all moneys, additional documents or instruments or other property at any time and from time to time payable, receivable or otherwise distributable in respect of, in exchange for or in substitution of its interest in, to and under the Pledged Contracts and all rights, claims, powers, privileges and remedies of the Pledgor whether arising by statute or at law or in equity or otherwise consequent on the failure on the part of any party to perform or comply with any term of the Pledged Contracts, together with full and sole power and authority, in the name of the Pledgor or otherwise, to enforce, collect, receive and give receipt for all or any of the foregoing. Section 2.2. Power of Attorney. In addition to and not in limitation of any rights, powers or remedies of the Collateral Agent pursuant to the Mortgage or the Underlying Note, the Pledgor hereby irrevocably appoints the Collateral Agent its true and lawful attorney, with full power of substitution, in the name of the Pledgor, the Secured Creditors or otherwise, for the sole use and benefit of the Secured Creditors but at the Pledgor's expense, to exercise, upon the occurrence and during the continuance of an Event of Default, all or any of the following powers, to the extent permitted by law, with respect to all or any of the Collateral: (a) to receive and retain and to sue for, collect and give acquittance for all payments and all other distributions of any kind due or to become due upon any and all of the Collateral; (b) to enforce compliance with and performance of all the terms and provisions of the Collateral, to grant waivers, extensions or modifications thereto as the Collateral Agent may deem appropriate and to endorse any checks or other instruments or orders in connection therewith; (c) to settle, compromise, compound, prosecute or defend any action or proceeding with respect to the Collateral; (d) to sell, transfer, assign or otherwise deal in or with the Collateral or any part thereof, or the proceeds or avails thereof, as fully and effectively as if the Collateral Agent were the absolute owner thereof; EXHIBIT K Page 7 (e) to take such action as it deems appropriate with respect to the foreclosure, sale, assignment, delivery or other disposition of the whole of, or from time to time any part of, the Pledgor's interest in the Mortgaged Property which is subject to the lien of the Mortgage or the Collateral Agent's interest in the Collateral or any part thereof, including, without limitation, (i) sale, assignment, delivery or other disposition, after not less than 10 Business Days prior written notice to the Pledgor, of the whole of, or from time to time any part of, the Pledgor's interest in the Mortgaged Property or the Collateral Agent's interest in the Collateral at any private or public sale, with or without demand on the Pledgor or advertisement of the time or place of sale or adjournment thereof, or otherwise, for cash, upon credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Collateral Agent shall determine, and the Collateral Agent or any of the Secured Creditors may bid for and purchase the whole or any part of the Pledgor's interest in the Mortgaged Property or the Collateral Agent's interest in the Collateral so sold free from any right or equity of redemption of the Pledgor, and the Pledgor hereby specifically waives all rights of redemption, stay or appraisal which it has or may have under any rule of law or statute now existing or hereafter adopted; (ii) adjourn any such sale or other disposition or cause the same to be adjourned from time to time to a subsequent time and place announced at the time and place fixed for the sale, or to cancel such transaction notwithstanding any notice or advertisement thereof; (iii) carry out any agreement to sell or otherwise dispose of any of the Pledgor's interest in the Mortgaged Property or the Pledgor's or Collateral Agent's interest in the Collateral or any part thereof in accordance with the terms of such agreement, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement the Obligations may have been paid in full; provided, however, that after the Obligations have been so paid in full, any proceeds received by the Collateral Agent shall be paid over to the Pledgor as their interests may appear (or as a court of competent jurisdiction may otherwise direct); and (iv) proceed by a suit or suits at law or in equity to foreclose and to sell or otherwise realize proceeds from the Collateral Agent's interest in the Collateral or any part thereof, pursuant to a judgment or decree of a court or courts of competent jurisdiction; and (f) in addition to, and not by way of limitation of, any of the rights specified above, to exercise any and all rights and remedies afforded to it, as a secured party in possession of any or all of the Collateral or otherwise, under any and all applicable provisions of law or in equity. Section 2.3. Public or Private Sale. (a) The Pledgor by its execution of this Agreement, specifically agrees and consents that the Collateral Agent shall on the happening and during the continuing of an Event of Default immediately succeed to all interests, rights and privileges of the mortgagee under the Underlying Note and the Mortgage and is entitled and will be entitled on the happening and during the continuance of any Event of Default to elect, among its other remedies provided for herein or under applicable law, immediately (if the Underlying Note is in default ("Underlying Default")) to accelerate the indebtedness evidenced by the Underlying Note and to sue on the Underlying Note or immediately to foreclose on the Mortgage in accordance with this Agreement and the Mortgage, and that neither the Pledgor nor any person or entity claiming through it will exercise any rights as mortgagee under the Mortgage or payee under the Underlying Note unless and until the Termination Date (as hereinafter defined) has occurred, at which time all interests, rights and privileges of the mortgagee under the Underlying Note and Mortgage will revert to and be reassigned to the Pledgor as set forth in Section 7.2 hereof. Without limiting the foregoing, the Pledgor expressly acknowledges its understanding that, until such time as the Underlying Note and Mortgage revert to the Pledgor as provided herein, the Collateral Agent shall have the sole right to give notices of default, to accelerate the indebtedness evidenced by the Underlying Note, to sue on the Underlying Note and to foreclose under the Mortgage, among all of the other sole rights and remedies of the holder of the Underlying Note and Mortgage. EXHIBIT K Page 8 (b) Without limiting any other provision of this Agreement, the Collateral Agent may, upon the occurrence and during the continuance of any Event of Default, exercise all remedies available to the Pledgor in the case of an Underlying Default under the Collateral including, without limitation, the right to foreclose the Mortgage. Section 2.4. Application of Proceeds. (a) The proceeds of any sale of, or other realization upon, all or any part of the Collateral Agent's interest in the Collateral or the Pledgor's interest in the Mortgaged Property shall be applied by the Collateral Agent as provided in Section 7.4 of the Security Agreement. (b) It is understood and agreed that the Pledgor shall remain liable to the extent of any deficiency between the amount of the proceeds of the Collateral and the aggregate amount of the Obligations. Section 2.5. Grant of Certain Rights. Notwithstanding the foregoing provisions of this Article II, so long as, but only so long as, no Event of Default (including no Underlying Default) has occurred and is continuing, (a) the Collateral Agent authorizes the Pledgor to, subject to the terms of the Credit Agreement, exercise all rights in, to and under, or arising out of any or all of the Collateral (including, but not limited to, to the right to receive all moneys under the Mortgage and the Underlying Note) other than any right to terminate, amend, modify, waive or supplement the Mortgage, the Underlying Note or the Pledged Contracts or exercise any remedies under any of the foregoing Collateral and (b) the Collateral Agent agrees that it will not exercise the rights granted under Section 2.2 hereof and, subject to the above, authorizes the Pledgor to exercise all such rights. Section 2.6. Exercise of Remedies. Notwithstanding the foregoing provisions of Sections 2.2 and 2.3 hereof, unless and until an Event of Default has occurred and is continuing, the Collateral Agent shall not exercise (in the case of an Underlying Default) its right to accelerate the Underlying Note or foreclose on the Mortgaged Property or on the Collateral under this Agreement in connection therewith or (in the case of an Underlying Default) seek judicial appointment of a receiver for the income or revenues of the Mortgaged Property or (in the case of an Underlying Default) sell, assign or dispose of or, except temporarily for the sole purpose of curing a default under the Mortgage requiring work to be performed on the Mortgaged Property, take possession of the Mortgaged Property under the Mortgage or the Collateral under this Agreement; provided, however, that the foregoing limitation on sale, assignment, disposal and possession shall not limit or prevent the Collateral Agent or the Secured Creditors from enforcing their other rights or remedies under this Agreement or the other Credit Documents against the Mortgaged Property (in the case of an Underlying Default) or the Collateral upon the occurrence and during the continuance of an Event of Default in any action to enforce or seek damages for breach of the terms and provisions of the Agreement or the other Credit Documents, or from seeking and obtaining orders of attachment or from levying or utilizing other remedies in connection therewith, and, provided further, that except as specifically provided in this sentence, the Collateral Agent may otherwise from time to time enforce all other rights and remedies granted to the Collateral Agent pursuant to this Agreement and the other Credit Documents and otherwise available to the Collateral Agent at law or in equity. Upon the occurrence of any Event of Default, the Collateral Agent may exercise all rights and remedies available to it pursuant to this Agreement and the other Credit Documents and otherwise available to the Collateral Agent at law or in equity. EXHIBIT K Page 9 ARTICLE III DELIVERY OF DOCUMENTS Section 3.1. Documents Pertaining to the Collateral. (a) On or prior to the date hereof, the Pledgor shall deliver, or cause to be delivered, to the Collateral Agent the following documents, to the extent applicable to each item of the Collateral as determined by the Collateral Agent, each of which shall be in form and substance satisfactory to the Collateral Agent: (i) counterparts of this Agreement duly executed and delivered by the Pledgor and the obligor under the Mortgage Loan, in proper form for recording so as to effectively grant, convey and perfect the liens and Security Interests (defined in Section 4.1 hereof), together with such UCC financing statements as the Collateral Agent may require; (ii) such additional assignments, instruments or other documents of conveyance, executed in favor of the Collateral Agent, for the benefit of the Secured Creditors, as the Collateral Agent deems necessary or desirable to grant, convey and perfect the liens and Security Interests, which documents shall be delivered duly executed and in form for filing or recording, if filing or recording is necessary or is requested by the Collateral Agent; and (iii) the originals of the Mortgage, the Pledged Contracts and the Underlying Note (duly endorsed in blank) (collectively, the "Pledged Loan Documents"). (b) Promptly and from time to time following request from the Collateral Agent, the Pledgor shall furnish or cause to be furnished to the Collateral Agent such other documents related to the Collateral or evidencing an interest in the Collateral pledged hereunder or intended to be so pledged as the Collateral Agent may reasonably request (including, without limitation, documentation of the nature referred to in subsection (a) hereof in respect of any Collateral acquired after the date hereof) and shall do such acts and things at its own expense as the Collateral Agent may reasonably request to perfect, confirm or further assure the interests granted pursuant to this Agreement and to further the purposes of this Agreement. EXHIBIT K Page 10 ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.1. Representations and Warranties. The Pledgor represents and warrants as follows: (a) The Collateral is free of any Liens other than the Permitted Liens and the security interests (the "Security Interests") granted hereunder in the Collateral. (b) The Pledgor is not a party to or otherwise bound by any agreement, other than this Agreement and the other Credit Documents, which restricts in any manner the rights of any present or future holder of any of the Collateral with respect thereto. (c) Upon the execution of this Agreement and the making of the filings and recordations contemplated by Article III hereof and the taking possession by the Collateral Agent of the Underlying Note, the Collateral Agent will have valid and perfected first priority security interests in the Collateral, as to the creation of which no consent is required from any third party other than those which have been obtained and are in full force and effect. (d) The Pledgor has not performed any acts which might prevent the Collateral Agent from enforcing any of the terms and conditions of this Agreement, the Mortgage or the Underlying Note or which would limit the ability of the Collateral Agent to enforce any of the same. (e) This Agreement has been duly executed and delivered by the Pledgor and constitutes the legal, valid and binding obligation of the Pledgor, enforceable against it in accordance with the terms hereof, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). (f) The Pledged Loan Documents are legal, valid and binding obligations of the Pledgor. (g) Schedule A contains a true, complete and correct list of all documents evidencing and/or securing the Mortgage Loan; true, complete and correct copies of all of such documents, together with any amendments thereto and assignments thereof, have been delivered to the Collateral Agent by the Pledgor; and all of such documents are in full force and effect in accordance with their terms and no default by any party thereto exists thereunder. EXHIBIT K Page 11 ARTICLE V AFFIRMATIVE COVENANTS Section 5.1. Management and Preservation of Collateral. The Pledgor hereby covenants and agrees that, so long as the Security Interests shall not have terminated in accordance with Section 7.2 hereof, the Pledgor shall perform all agreements and obligations to be performed by it in connection with the Collateral and defend the Collateral from the claims or demands of all third persons (except the parties to the Pledged Contracts (in respect of such parties rights under the Pledged Contracts) and the Collateral Agent and the Secured Creditors) asserting any interest therein. ARTICLE VI NEGATIVE COVENANTS The Pledgor hereby covenants and agrees that, so long as the Security Interests shall not have terminated in accordance with Section 7.2 hereof: Section 6.1. No Amendment. The Pledgor will not, without the prior written consent of the Collateral Agent, which consent shall not be unreasonably withheld, consent to any amendment, modification, waiver, supplement or termination of any of the terms or provisions of the Underlying Note, the Mortgage or the Pledged Contracts. Section 6.2. Other Liens. The Pledgor will not create, assume or suffer to exist any Lien on any of the Collateral except pursuant to this Agreement and the other Credit Documents. Section 6.3. Place of Business. The Pledgor will not change its principal place of business without 30 days prior written notice to the Collateral Agent. ARTICLE VII MISCELLANEOUS Section 7.1. Expenses; Indemnity. (a) The Pledgor will, promptly following written demand by the Collateral Agent, pay to the Collateral Agent: (a) the amount of any taxes which the Collateral Agent may have been required to pay by reason of any assignment, recordation, filing or perfection of the Security Interests or to free any of the Collateral from any Lien thereon not permitted by this Agreement and the other Credit Documents; and EXHIBIT K Page 12 (b) the amount of any and all out-of-pocket expenses, including the disbursements and other charges and reasonable fees of counsel and of any agents or other experts or professional advisors, which the Collateral Agent may incur in connection with (i) the administration and enforcement of this Agreement and the Collateral, (ii) the collection, sale or other disposition of any of the Collateral, or (iii) the exercise by the Collateral Agent of any of the rights conferred upon it hereunder. (c) the Pledgor agrees to indemnify, reimburse and hold the Collateral Agent, each other Secured Creditor and their respective successors, assigns, employees, agents and servants (hereinafter in this 8.1(c) referred to individually as an "Indemnitee, " and collectively as the "Indemnitees") harmless from and all liabilities, obligations, damages, injuries, penalties, claims, demands, actions, suits, judgments and any and all costs, expenses or disbursements (including reasonably attorneys' fees and expenses) (for the purposes of this Section 7.1(c) the foregoing are collectively called "expenses") of whatsoever kind and nature imposed on, asserted against or incurred by any of the Indemnitees in any way relating to or arising out of this Agreement or any other document executed in connection herewith or the enforcement of any of the terms of, or the preservation of any rights under this Agreement or any such other documents, or in any way relating to or arising out of the ownership, control, acceptance, possession, condition, sale or other disposition, or use of the Collateral; provided that no Indemnitee shall be indemnified pursuant to this Section 7.1(c) for expenses to the extent caused by the gross negligence or willful misconduct of such Indemnitee. The Pledgor agrees that upon written notice by any Indemnitee of the assertion of such a liability, obligation, damage, injury, penalty, claim, demand, action, suit or judgment, the Pledgor shall to the extent requested to do so assume full responsibility for the defense thereof. Each Indemnitee agrees to promptly notify the Pledgor of any such assertion of which such Indemnitee has knowledge. If and to the extent that the obligations of the Pledgor under this Section 7.1(c) are unenforceable for any reason, the Pledgor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. Section 7.2. Termination of Security Interests; Release of Collateral. After the Termination Date, this Agreement shall terminate (provided that all indemnities set forth herein including, without limitation, in Article VII hereof shall survive any such termination) and the Collateral Agent, at the request and expense of the Pledgor, will promptly execute and deliver to the Pledgor such proper instrument or instruments acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to the Pledgor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Collateral Agent and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement. As used in this Agreement, "Termination Date" shall mean the date upon which the Total Commitment and all Interest Rate Protection Agreements or Other Hedging Agreements have been terminated, no Note is outstanding (and all Loans have been repaid in full), and all Obligations then owing have been paid in full. EXHIBIT K Page 13 Section 7.3. Amendments. No amendment or waiver of any provision of this Agreement nor consent to any departure by the Pledgor therefrom shall in any event be effective unless the same shall be in writing and signed by the Collateral Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Section 7.4. Notice. Any notice and other communication required or permitted to be given to any Person under this Agreement shall be given by such means and to the addresses for such Person as are specified in Section 12.03 of the Credit Agreement. Section 7.5. No Waivers. No failure on the part of the Collateral Agent or the Secured Creditors to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right. The rights in this Agreement are cumulative and are not exclusive of any other remedies provided by law. Section 7.6. Continuing Obligation and Assignments. This Agreement is a continuing obligation and shall (i) be binding upon the Pledgor and its successors and (ii) inure to the benefit of and be enforceable by the Secured Creditors, the Collateral Agent and their respective successors and permitted transferees and assigns; provided, however, the Pledgor may not (by operation of law or otherwise) sell, transfer or assign any of its rights or delegate or transfer any of its obligations under this Agreement without the prior written consent of the Collateral Agent. Section 7.7. Counterparts. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed shall constitute an original but all such counterparts, when taken together, shall constitute one and the same instrument. Section 7.8. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York including, without limitation, Section 5-1401 of the General Obligations Law, but otherwise without regard to conflict of law principles; provided, however, that with respect to the creation, attachment, perfection, priority and enforcement of the liens created by this Agreement, this Agreement shall be governed by and construed in accordance with the laws of the State of [________]. Section 7.9. Headings. Section headings in this Agreement are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. Section 7.10. Severability. If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be construed in order to carry out the intentions of the parties hereto, including, without limitation, Section 2.6 hereof to the fullest extent permitted by law; and (ii) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. EXHIBIT K Page 14 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. [_____________________], as Assignor and Pledgor By ________________________, its general partner By________________________ Name: Title: ACKNOWLEDGED AND AGREED this ______ day of __________________, 199_ [Insert name of obligor under Mortgage and Underlying Note] By__________________________ Name: Title: EXHIBIT K Page 15 GERMAN AMERICAN CAPITAL CORPORATION, as Collateral Agent By________________________ Name: Title: By________________________ Name: Title: EXHIBIT K Page 16 STATE OF NEW YORK ) ) ss COUNTY OF NEW YORK ) This instrument was acknowledged before me this ____ day of _______, 1998, by _________________, as _____________ of _____________________, a ___________, as general partner of [_______________], a [Delaware limited partnership], on behalf of the partnership, who is personally known to me or who has produced __________________________ as identification and who did (did not) take an oath. ____________________________ Name: (Notarial Seal) Notary Public State of New York at Large My Commission Expires: ____________________________ EXHIBIT K Page 17 STATE OF NEW YORK ) ) ss COUNTY OF NEW YORK ) This instrument was acknowledged before me this ____ day of _______, 1998, by _________________, as _____________ of German American Capital Corporation, a Maryland corporation, on behalf of the corporation, who is personally known to me or who has produced __________________________ as identification and who did (did not) take an oath. ___________________________ Name: (Notarial Seal) Notary Public State of New York at Large My Commission Expires: ___________________________ EXHIBIT K Page 18 STATE OF NEW YORK ) ) ss COUNTY OF NEW YORK ) This instrument was acknowledged before me this ____ day of _______, 1998, by _________________, as _____________ of German American Capital Corporation, a Maryland corporation, on behalf of the corporation, who is personally known to me or who has produced __________________________ as identification and who did (did not) take an oath. ___________________________ Name: (Notarial Seal) Notary Public State of New York at Large My Commission Expires: ___________________________ STATE OF NEW YORK ) ) ss COUNTY OF NEW YORK ) This instrument was acknowledged before me this ____ day of _______, 1998, by _________________, as _____________ of _____________________, a ___________, on behalf of the [________], who is personally known to me or who has produced __________________________ as identification and who did (did not) take an oath. ___________________________ Name: (Notarial Seal) Notary Public State of New York at Large My Commission Expires: ___________________________ SCHEDULE A Mortgage Loan Documents EXHIBIT A Legal Description EXHIBIT L BORROWING BASE CERTIFICATE AS OF [DATE] ISSUED BY ELDERTRUST OPERATING LIMITED PARTNERSHIP The undersigned, the [Title] of ElderTrust Operating Limited Partnership (the "Borrower"), hereby certifies that the figures attached on Annex A hereto to calculate the Borrowing Base as of [Date] and for the period ending [Date] are true and correct and have been calculated in accordance with the Credit Agreement, dated as of January 30, 1998, among ElderTrust, the Borrower, the lenders from time to time a party thereto, Deutsche Bank AG, New York Branch, as Issuing Bank, and German American Capital Corporation, as Administrative Agent (as amended from time to time, the "Credit Agreement"). Capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. ELDERTRUST OPERATING LIMITED PARTNERSHIP By: ElderTrust, its general partner By_________________________ Name: Title: Date:_________, ____ Operating Statement Review Schedule M-1
--------- PROPERTY NAME CITY / STATE --------- --------- # OF MONTHS ANNUALIZED (Y/N) --------- Month-ended YEAR-To-DATE 4 mos. ended, 7/31/97 (INSERT PERIOD ENDED) (INSERT PERIOD ENDED) (INSERT PERIOD ENDED) --------------------- --------------------- --------------------- --------- --------- --------- Total Revenue --------- Total Revenue --------- Total Revenue --------- Operating Expense --------- Operating Expense --------- Operating Expense --------- NOI --------- NOI --------- NOI --------- --------- --------- --------- Management Fee --------- Management Fee --------- Management Fee --------- CapEx --------- CapEx --------- CapEx --------- NET CASH FLOW --------- NET CASH FLOW --------- NET CASH FLOW --------- --------- --------- --------- Debt Service --------- Debt Service --------- Debt Service --------- DSCR --------- DSCR --------- DSCR --------- LTV --------- LTV --------- LTV --------- --------- --------- --------- Occupancy --------- Occupancy --------- Occupancy --------- As Of --------- As Of --------- As Of --------- --------- --------- --------- AVAILABLE BORROWING BASE --------- AVAILABLE BORROWING BASE --------- AVAILABLE BORROWING BASE --------- LOAN AMOUNT OUTSTANDING --------- LOAN AMOUNT OUTSTANDING --------- LOAN AMOUNT OUTSTANDING ---------
Page 1 Schedule M-2
--------------------------------------------------------------------------------------- Current Period Year To Date Actuals Annualized - -------------------------------------------------------------------------------------------------------- Property Name Occupancy NOI Net Cash Flow DSCR Occupancy NOI Net Cash Flow DSCR - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- TOTAL PORTFOLIO - -------------------------------------------------------------------------------------------------------- [RESTUBED TABLE] - -------------------------------------------------------------------------------------------------------- Prior Period Change From Prior Period - -------------------------------------------------------------------------------------------------------- Property Name Occupancy NOI Net Cash Flow DSCR Occupancy NOI Net Cash Flow DSCR - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- TOTAL PORTFOLIO - --------------------------------------------------------------------------------------------------------
Page 1 Exhibit N ELDERTRUST OPERATING LIMITED PARTNERSHIP QUARTERLY CASH FLOW REPORT To the Administrative Agent and each of the Banks party to the Credit Agreement, dated as of January 30, 1998, among ElderTrust, ElderTrust Operating Limited Partnership, the lenders from time to time party thereto, Deutsche Bank AG, New York Branch, as Issuing Bank, and German American Capital Corporation, as Administrative Agent. EBITDA Operating profit $ Depreciation and amortization Interest income Corporate expenses Other non-cash charges EBITDA $ Cash interest payments FF&E - existing properties Capex - new units Cash taxes Debt maturities, net of new issuances Debt prepayments Dividends Dispositions $ Acquisitions Changes in other operating accounts NET CASH FLOW This Cash Flow Report is for ElderTrust, the Borrower and its Subsidiaries on a consolidated basis for the period ending __________, is true and correct in all material respects to the best of my knowledge. Sincerely, EXHIBIT O ANNEX A Subordination Provisions to be attached to each Intercompany Note evidencing a loan made by a Subsidiary Guarantor that is not a Wholly-Owned Subsidiary Section 1.01. Subordination of Liabilities. _________________ (the "Company"), for itself, its successors and assigns, covenants and agrees, and each holder of the Intercompany Note to which this Annex A is attached (the "Note") by its acceptance thereof likewise covenants and agrees, that the payment of the principal of, interest on, and all other amounts owing in respect of, the Note (the "Subordinated Indebtedness") is hereby expressly subordinated, to the extent and in the manner hereinafter set forth, to the prior payment in full in cash of all Senior Indebtedness (as defined in Section 1.07 hereof). The provisions of this Annex A shall constitute a continuing offer to all persons who, in reliance upon such provisions, become holders of, or continue to hold, Senior Indebtedness, and such provisions are made for the benefit of the holders of Senior Indebtedness, and such holders are hereby made obligees hereunder the same as if their names were written herein as such, and they and/or each of them may proceed to enforce such provisions. Section 1.02. Company not to Make Payments with Respect to Subordinated Indebtedness in Certain Circumstances. a)" \* MERGEFORMAT (a) Upon the maturity of any Senior Indebtedness (including interest thereon or fees or any other amounts owing in respect thereof), whether at stated maturity, by acceleration or otherwise, all Obligations (as defined in Section 1.07 hereof) owing in respect of such Senior Indebtedness, in each case to the extent due and owing, shall first be paid in full in cash, before any payment of any kind or character, whether in cash, property, securities or otherwise, is made on account of the Subordinated Indebtedness. (b) If any default or event of default under the Credit Agreement (as defined in Section 1.07 hereof) is then in existence or would result therefrom, the Company may not, directly or indirectly, make any payment of any Subordinated Indebtedness and may not acquire any Subordinated Indebtedness for cash or property until all Senior Indebtedness has been paid in full in cash. Each holder of the Note hereby agrees that, so long as any such default or event of default exists, it will not sue for, or otherwise take any action to enforce the Company's obligations to pay, amounts owing in respect of the Note. (c) In the event that notwithstanding the provisions of the preceding subsections (a) and (b) of this Section 1.02, the Company shall make any payment on account of the Subordinated Indebtedness at a time when payment is not permitted by said subsection (a) or (b), such payment shall be held by the holder of the Note, in trust for the benefit of, and shall be paid forthwith over and delivered to, the holders of Senior Indebtedness or their representative or the trustee under the indenture or other agreement pursuant to which any instruments evidencing EXHIBIT O Page 2 any Senior Indebtedness may have been issued, as their respective interests may appear, for application pro rata to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in cash in accordance with the terms of such Senior Indebtedness, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. Without in any way modifying the provisions hereof or affecting the subordination effected hereby if the hereafter referenced notice is not given, the Company shall give the holder of the Note prompt written notice of any event which would prevent payments under Section 1.02(a) or (b) hereof. Section 1.03. Subordination to Prior Payment of all Senior Indebtedness on Dissolution, Liquidation or Reorganization of Company. Upon any distribution of assets of the Company upon dissolution, winding up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency or receivership proceedings or upon an assignment for the benefit of creditors or otherwise): (a) the holders of all Senior Indebtedness shall first be entitled to receive payment in full in cash of all Senior Indebtedness (including, without limitation, post-petition interest at the rate (including the default rate) provided in the documentation with respect to the Senior Indebtedness, whether or not such post-petition interest is an allowed claim against the debtor in any bankruptcy or similar proceeding) before the holder of the Note is entitled to receive any payment of any kind or character on account of the Subordinated Indebtedness; (b) any payment or distributions of assets of the Company of any kind or character, whether in cash, property or securities to which the holder of the Note would be entitled except for the provisions hereof, shall be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or other trustee or agent, directly to the holders of Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture under which any instruments evidencing any such Senior Indebtedness may have been issued, to the extent necessary to make payment in full in cash of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness; and (c) In the event that, notwithstanding the foregoing provisions of this Section 1.03, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, shall be received by the holder of the Note on account of Subordinated Indebtedness before all Senior Indebtedness is paid in full in cash, such payment or distribution shall be received and held in trust for and shall be paid over to the holders of the Senior Indebtedness remaining unpaid or unprovided for or their representative or representatives, or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, for application to the payment of such Senior Indebtedness until all such Senior Indebtedness shall have been paid in full in cash, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness. EXHIBIT O Page 3 Without in any way modifying the provisions hereof or affecting the subordination effected hereby if the hereafter referenced notice is not given, the Company shall give prompt written notice to the holder of the Note of any dissolution, winding up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency or receivership proceedings or upon assignment for the benefit of creditors or otherwise). Section 1.04. Subrogation. Subject to the prior payment in full in cash of all Senior Indebtedness, the holder of the Note shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of assets of the Company applicable to the Senior Indebtedness until all amounts owing on the Note shall be paid in full, and for the purpose of such subrogation no payments or distributions to the holders of the Senior Indebtedness by or on behalf of the Company or by or on behalf of the holder of the Note by virtue hereof which otherwise would have been made to the holder of the Note shall, as between the Company, its creditors other than the holders of Senior Indebtedness, and the holder of the Note, be deemed to be payment by the Company to or on account of the Senior Indebtedness, it being understood that the provisions hereof are and are intended solely for the purpose of defining the relative rights of the holder of the Note, on the one hand, and the holders of the Senior Indebtedness, on the other hand. Section 1.05. Obligation of the Company Unconditional. Nothing contained herein or in the Note is intended to or shall impair, as between the Company and the holder of the Note, the obligation of the Company, which is absolute and unconditional, to pay to the holder of the Note the principal of and interest on the Note as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holder of the Note and creditors of the Company other than the holders of the Senior Indebtedness, nor, except as specifically provided herein, shall anything herein or therein prevent the holder of the Note from exercising all remedies otherwise permitted by applicable law upon an event of default under the Note, subject to the rights, if any, herein of the holders of Senior Indebtedness in respect of cash, property, or securities of the Company received upon the exercise of any such remedy. Upon any distribution of assets of the Company referred to herein, the holder of the Note shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding up, liquidation or reorganization proceedings are pending, or a certificate of the liquidating trustee or agent or other person making any distribution to the holder of the Note, for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or hereof. Section 1.06. Subordination Rights not Impaired by Acts or Omissions of Company or Holders of Senior Indebtedness. No right of any present or future holders of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act by any such holder, or by any noncompliance by the Company with the terms and provisions of the Note, regardless of any knowledge thereof which any such holder may have or be otherwise charged with. The holders of the Senior Indebtedness may, without in any way affecting the obligations of the holder of the Note with respect hereto, at any time or from time to time and in their absolute discretion, change the manner, place or terms of payment of, change or EXHIBIT O Page 4 extend the time of payment of, or renew or alter, any Senior Indebtedness or amend, modify or supplement any agreement or instrument governing or evidencing such Senior Indebtedness or any other document referred to therein, or exercise or refrain from exercising any other of their rights under the Senior Indebtedness including, without limitation, the waiver of default thereunder and the release of any collateral securing such Senior Indebtedness, all without notice to or assent from the holder of the Note. Section 1.07. Senior Indebtedness. The term "Senior Indebtedness" shall mean all Obligations (as defined below) of the Company under the Subsidiaries Guaranty (as amended, modified, supplemented, extended, restated, refinanced, replaced or refunded from time to time) dated as of January 30, 1998, among the Company and the other Subsidiary Guarantors party thereto as defined in the Credit Agreement (as amended, modified, supplemented, extended, restated, refinanced, replaced or referenced from time, the "Credit Agreement"), dated as of January 30, 1998, by and among ElderTrust, ElderTrust Operating Limited Partnership, the lenders from time to time party thereto, Deutsche Bank AG, New York Branch, as Issuing Bank, and German American Capital Corporation, as Administrative Agent (the "Agent"). As used herein, the term "Obligation" shall mean any principal, interest, premium, penalties, fees, expenses, indemnities and other liabilities and obligations (including guaranties in respect thereof) payable under the documentation governing any Senior Indebtedness (including interest accruing after the commencement of any bankruptcy, insolvency, receivership or similar proceeding at the rate provided for in the respective documentation, whether or not such interest is an allowed claim against the debtor in any such proceeding). EXHIBIT P ASSIGNMENT AND ASSUMPTION AGREEMENT Date: __________, 19__ Reference is made to the Credit Agreement described in Item 2 of Annex I hereto (as such Credit Agreement may hereafter be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"). Unless defined in Annex I hereto, terms defined in the Credit Agreement are used herein as therein defined. ___________ (the "Assignor") and __________ (the "Assignee") hereby agree as follows: 1. The Assignor hereby sells and assigns to the Assignee without recourse and without representation or warranty (other than as expressly provided herein), and the Assignee hereby purchases and assumes from the Assignor, that interest in and to all of the Assignor's rights and obligations under the Credit Agreement as of the date hereof which represents the percentage interest specified in Item 4 of Annex I hereto (the "Assigned Share") of all of the outstanding rights and obligations under the Credit Agreement; including, without limitation, all rights and obligations with respect to the Assigned Share of the Total Commitment (if not theretofore terminated) and all outstanding Loans. 2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the other Credit Documents or any other instrument or document furnished pursuant thereto, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or the other Credit Documents or any other instrument or document furnished pursuant thereto; and (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Credit Party or the performance or observance by any Credit Party of any of its obligations under the Credit Agreement or the other Credit Documents to which it is a party or any other instrument or document furnished pursuant thereto. 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement and the other Credit Documents, together with copies of the financial statements referred to therein and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption Agreement; (ii) agrees that it will, independently and without reliance upon the Administrative Agent, the Assignor or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is an Eligible Transferee under Section 12.04(b) of the Credit Agreement; (iv) appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Credit Documents as are delegated to such Agent, by the terms thereof, together with such powers as are reasonably incidental thereto; [and] (v) agrees that it will perform in accordance with their terms Exhibit P Page 2 all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Bank[; and (vi) to the extent legally entitled to do so, attaches the forms described in Section [12.04(b)] of the Credit Agreement].(1) 4. Following the execution of this Assignment and Assumption Agreement by the Assignor and the Assignee, an executed original hereof (together with all attachments) will be delivered to the Administrative Agent. The effective date of this Assignment and Assumption Agreement shall be the date of execution hereof by the Assignor and the Assignee, the receipt of the consent of the Administrative Agent to the extent required by Section 12.04(b) of the Credit Agreement, the receipt by the Administrative Agent of the administrative fee referred to in such Section 12.04(b) and the recordation of the assignment effected hereby on the Register by the Administrative Agent as provided in Section 12.16 of the Credit Agreement, or such later date, if any, which may be specified in Item 5 of Annex I hereto (the "Settlement Date"). 5. Upon the delivery of a fully executed original hereof to the Administrative Agent, as of the Settlement Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Assumption Agreement, have the rights and obligations of a Bank thereunder and under the other Credit Documents and (ii) the Assignor shall, to the extent provided in this Assignment and Assumption Agreement, relinquish its rights (except in respect of Sections 1.10, 3.04 and 12.01 of the Credit Agreement for the period prior to the Settlement Date) and be released from its obligations under the Credit Agreement and the other Credit Documents. 6. It is agreed that the Assignee shall be entitled to (x) all interest on the Assigned Share of the Loans at the rates specified in Item 6 of Annex I hereto and (y) all Commitment Commission on the Assigned Share of the Total Commitment (if not theretofore terminated) at the rate specified in Item 7 of Annex I hereto, which, in each case, accrue on and after the Settlement Date, such interest and, if applicable, Commitment Commission, to be paid by the Administrative Agent directly to the Assignee. It is further agreed that all payments of principal made on the Assigned Share of the Loans which occur on and after the Settlement Date will be paid directly by the Administrative Agent to the Assignee. Upon the Settlement Date, the Assignee shall pay to the Assignor an amount specified by the Assignor in writing which represents the Assigned Share of the principal amount of the respective Loans pursuant to the Credit Agreement which are outstanding on the Settlement Date. The Assignor and the Assignee shall make all appropriate adjustments in payments under the Credit Agreement for periods prior to the Settlement Date directly between themselves. 7. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. _________________________ (1) Include if the Assignee is organized under the laws of a jurisdiction outside of the United States. Exhibit P Page 3 Exhibit P Page 4 IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Assignment and Assumption Agreement, as of the date first above written, such execution also being made on Annex I hereto. Accepted this _____ day [NAME OF ASSIGNOR] of ____________, ____ as Assignor By_____________________________ Title: [NAME OF ASSIGNEE] as Assignee By_____________________________ Title: Consented to as of _________ ___, ____. GERMAN AMERICAN CAPITAL CORPORATION, as Administrative Agent By________________________________(2) Name: Title: By________________________________ Name: Title: __________________________ (2) The consent of the Administrative Agent is required for assignments pursuant to Section 12.04(b)(y) of the Credit Agreement. ANNEX FOR ASSIGNMENT AND ASSUMPTION AGREEMENT ANNEX I 1. Borrower: ElderTrust Operating Limited Partnership 2. Name and Date of Credit Agreement: Credit Agreement, dated as of January 30, 1998, among ElderTrust, ElderTrust Operating Limited Partnership, the Banks from time to time party thereto, Deutsche Bank AG, New York Branch, as Issuing Bank, and German American Capital Corporation, as Administrative Agent, as amended to the date hereof. 3. Date of Assignment Agreement: 4. Amounts (as of date of item #3 above):
[Assigned Commitment](3) Outstanding Principal of Loans a. Aggregate Amount for all Banks $________ $________ b. Assigned Share(4) ________% ________% c. Amount of Assigned Share $________ ________% 5. Settlement Date: 6. Rate of Interest to the Assignee: As set forth in Section 1.08 of the Credit Agreement (unless otherwise agreed to by the Assignor and the Assignee)(5)
- -------- (3) For assignments made prior to the of the Total Commitment. (4) Percentage taken to 12 decimal places. (5) The Borrower and the Administrative Agent shall direct the entire amount of the interest to the Assignee at the rate set forth in Section 1.08 of the Credit Agreement, with the Assignor and Assignee effecting the agreed upon sharing of the interest through payments by the Assignee to the Assignor. Annex I Page 2 7. Commitment As set forth in Section 2.01(a) of the Credit Agreement (unless otherwise agreed to by the Assignor and the Assignee)(6) 8. Notice: ASSIGNOR: --------------------- --------------------- --------------------- --------------------- Attention: Telephone: Telecopier: Reference: ASSIGNEE: --------------------- --------------------- --------------------- --------------------- Attention: Telephone: Telecopier: Reference: - ------------------ (6) Insert "Not Applicable" in lieu of text if the Total Commitment has been terminated. Otherwise, the Borrower and the Administrative Agent shall direct the entire amount of the Commitment Commission to the Assignee at the rate set forth in [Section 2.01(a)] of the Credit Agreement, with the Assignor and the Assignee effecting the agreed upon sharing of Commitment Commission through payment by the Assignee to the Assignor. Annex I Page 3 Payment Instructions: ASSIGNOR: --------------------- --------------------- --------------------- --------------------- Attention: Reference: ASSIGNEE: --------------------- --------------------- --------------------- --------------------- Attention: Reference: Accepted and Agreed: [NAME OF ASSIGNEE] [NAME OF ASSIGNOR] By___________ By___________ ___________ ___________ (Print Name and Title) (Print Name and Title) EXHIBIT Q INTERCOMPANY NOTE --------, -------- -------- ---, ---- FOR VALUE RECEIVED, ____________, a ____________________ (the "Company"), hereby promises to pay on demand to the order of _________, or its assigns (the "Payee"), in lawful money of the United States of America in immediately available funds, at such location in the United States of America as the Payee shall from time to time designate, the unpaid principal amount of all loans and advances made by the Payee to the Company. The Company promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at such rate per annum as shall be agreed upon from time to time by the Company and the Payee. Upon the commencement of any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar proceeding of any jurisdiction relating to the Company, the unpaid principal amount hereof shall become immediately due and payable without presentment, demand, protest or notice of any kind in connection with this Note. This Note is one of the Intercompany Notes referred to in the Credit Agreement, dated as of January 30, 1998, among ElderTrust, ElderTrust Operating Limited Partnership, the financial institutions from time to time party thereto, Deutsche Bank AG, New York Branch, as Issuing Bank, and German American Capital Corporation, as Administrative Agent (as amended, modified or supplemented from time to time, the "Credit Agreement") and is subject to the terms thereof, and shall be pledged by the Payee pursuant to the Pledge Agreement (as defined in the Credit Agreement). The Company hereby acknowledges and agrees that the Pledgee pursuant to and as defined in the Pledge Agreement, as in effect from time to time, may exercise all rights provided therein with respect to this Note. [This Note, and all of the Company's obligations hereunder, shall be subordinate and junior to all Senior Indebtedness (as defined in Section 1.07 of Annex A hereto) on the terms and conditions set forth in Annex A hereto, which Annex A is incorporated herein by reference and made a part hereof as if set forth herein in its entirety.](1) The Payee is hereby authorized to record all loans and advances made by it to the Company (all of which shall be evidenced by this Note), and all repayments or prepayments - ----------------- (1) Insert in all Intercompany Notes held by a Subsidiary Guarantor that is not a Wholly-Owned Subsidiary. Exhibit Q Page 2 thereof, in its books and records, such books and records constituting prima facie evidence of the accuracy of the information contained therein. All payments under this Note shall be made without offset, counterclaim or deduction of any kind. The Company hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. [Company] By________________________ Name: Title: Pay to the order of ____________________________ [Payee] By__________________________ Title: EXHIBIT R FORM OF COMPLETION CERTIFICATE This Certificate is delivered pursuant to Section 7.16(f) of the Credit Agreement, dated as of January 30, 1998 among ElderTrust, ElderTrust Operating Limited Partnership (the "Borrower"), the lending institutions party thereto (the "Banks"), Deutsche Bank AG, New York Branch, as Issuing Bank, and German American Capital Corporation, as Administrative Agent (as amended, restated, supplemented or otherwise modified to the date hereof, the "Credit Agreement"). All capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement. The undersigned, to the best of [his] or [her] knowledge, does hereby certify that with respect to the [Renovation/Restoration] of [SPECIFY PROPERTY] (the "Property"): (i) all work required to be performed at or about the Property to complete the [Renovation/Restoration], including all punch list items, has been performed in substantial accordance with the approved plans and specifications and otherwise in accordance with the provisions of the Credit Agreement; (ii) all necessary inspections by all applicable governmental authorities for the use, occupancy and operation of the Improvements at the Property have been satisfactorily completed; and (iii) a permanent certificate of occupancy for the entire Improvements and all other certificates, licenses, permits and approvals necessary for the use, occupancy and operation of the Property as a [senior living care facility] [medical office building] have been issued, and the Improvements are undamaged and available for regular use, occupancy and operation. DATED:______ [NAME OF ARCHITECT/ENGINEER] By:_______________________________ Name: Title: Exhibit S FORM OF NOTICE OF RENOVATION/RESTORATION This Notice is delivered pursuant to Section 7.16[(a)] [(c)] of that certain Credit Agreement, dated as of January 30, 1998 as amended, restated, supplemented or otherwise modified to the date hereof, the "Credit Agreement", the terms defined therein and not otherwise defined herein being used herein as therein defined), among ElderTrust, ElderTrust Operating Limited Partnership, (the "Borrower"), the Banks party thereto from time to time, Deutsche Bank AG, New York Branch, as Issuing Bank, and German American Capital Corporation, as Administrative Agent. Notice is hereby given that (check all that apply): __ 1. A Casualty Event with respect to [specify Borrowing Base Property] has occurred, whether or not covered by insurance, that will (or may reasonably be expected to) cost $_________ or more to Restore (Section 7.16(a)); __ 2. A Taking with respect to [specify Borrowing Base Property] has occurred that will (or may reasonably be expected to) cost $_________ or more to Restore (Section 7.16(c)); Attached hereto is a description of the applicable [Casualty Event/Taking] (the "Property Event") including, to the extent applicable, (i) the Borrowing Base Property affected by the Property Event, and (ii) the Borrower's Restoration plans required by Section 7.16(f) of the Credit Agreement, including whether the Borrower intends to Restore the Property pursuant to Sections 7.16(e) and 7.16(f) of the Credit Agreement. Attached hereto is a Restoration budget, estimated time schedule and Restoration plans delivered pursuant to Section 7.16(f) of the Credit Agreement. DATED:_____________ ELDERTRUST OPERATING LIMITED PARTNERSHIP By: ElderTrust, its general partner By:_____________________________ Name: Title: EX-10.26 15 EXHIBIT 10.26 EXHIBIT 10.26 CROSS INDEMNIFICATION AND CONTRIBUTION AGREEMENT ------------------------------------------------ THIS CROSS INDEMNIFICATION AND CONTRIBUTION AGREEMENT (this "Agreement") is made and entered into as of January 26th, 1998, by and among ELDERTRUST, a Maryland real estate investment trust (the "Company"), ELDERTRUST OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership (the "Operating Partnership"), and GENESIS HEALTH VENTURES, INC., a Pennsylvania corporation ("Genesis"). RECITALS WHEREAS, the Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-11 (No. 333-37451) (such registration statement, including the exhibits thereto and schedules thereto at the time it became effective and including the Rule 430A Information and the Rule 434 Information (as hereinafter defined by reference), as applicable, is herein called the "Form S-11"); WHEREAS, Genesis, as a co-registrant with the Company, has filed with the Commission a registration statement on Form S-3 (No. 333-37451) (such registration statement, including the exhibits thereto and schedules thereto at the time it became effective and including the Rule 430A Information and the Rule 434 Information (as hereinafter defined by reference), as applicable, is herein called the "Form S-3"; and the Form S-11 and the Form S-3 are hereinafter referred to as the "Registration Statement"); and WHEREAS, all capitalized terms used herein not otherwise defined herein shall have the meanings ascribed thereto in that certain U.S. Purchase Agreement of even date herewith among the Company, the Operating Partnership, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, BT Alex. Brown Incorporated, Goldman, Sachs & Co. and each of the other U.S. Underwriters named in Schedule A thereto and the related International Purchase Agreement. NOW, THEREFORE, in consideration of the foregoing, the mutual promises and covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: SECTION 1. Indemnification. (a) Indemnification of Genesis, Directors and Officers. The Company and the Operating Partnership jointly and severally hereby agree to indemnify and hold harmless Genesis, its directors, each of its officers who signed the Registration Statement and each person, if any, who controls Genesis within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever (including, without limitation, any and all loss, liability, claim, damage and expense to any Underwriter), as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact included in any preliminary prospectus or the Prospectuses (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever (including, without limitation, any and all loss, liability, claim, damage and expense to any Underwriter), as incurred, arising out of (A) the violation of any applicable laws or regulations of foreign jurisdictions where Reserved Securities have been offered and (B) any untrue statement or alleged untrue statement of a material fact included in the supplement or prospectus wrapper material distributed in Canada or in connection with the reservation and sale of the Reserved Securities to eligible employees and others having a business relationship with the Company or the omission or alleged omission therefrom of a material fact necessary to make the statements therein, when considered in conjunction with the Prospectuses or preliminary prospectuses, not misleading; (iii) against any and all loss, liability, claim, damage and expense whatsoever (including, without limitation, any and all loss, liability, claim, damage and expense to any Underwriter), as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission or in connection with any violation of the nature referred to in Section 1(a)(ii)(A) hereof; provided that (subject to Section 1(d) below) any such settlement is effected with the written consent of the Company; and (iv) against any and all expense whatsoever (including, without limitation, any and all loss, liability, claim, damage and expense to any Underwriter), as incurred (including the fees and disbursements of counsel chosen by Genesis), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission or in connection with any violation of the nature referred to in Section 1(a)(ii)(A) hereof, to the extent that any such expense is not paid under (i), (ii) or (iii) above; provided, however, that the indemnity agreement under this Section 1(a) shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission with respect to which Genesis agrees to provide indemnification pursuant to Section 1(b). -2- (b) Indemnification of the Company, the Operating Partnership, Trustees, Trustee Nominees and Officers. Genesis agrees to indemnify and hold harmless the Company, its trustees, trustee nominees named in the Registration Statement, each of its officers who signed the Registration Statement, the Operating Partnership, and each person, if any, who controls the Company or the Operating Partnership within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever (including, without limitation, any and all loss, liability, claim, damage and expense to any Underwriter), as incurred, arising out of any untrue statement or alleged untrue statement of a material fact, with respect to Genesis and its subsidiaries, contained in the Registration Statement (or any amendment thereto), including the Form S-3 and the Rule 430A Information and the Rule 434 Information, if applicable, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to Genesis and its subsidiaries, or arising out of any untrue statement or alleged untrue statement of a material fact included in any preliminary prospectus or the Prospectuses (or any amendment or supplement thereto), with respect to Genesis and its subsidiaries, or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; with respect to Genesis and its subsidiaries; (ii) against any and all loss, liability, claim, damage and expense whatsoever (including, without limitation, any and all loss, liability, claim, damage and expense to any Underwriter), as incurred, arising out of any untrue statement or alleged untrue statement of a material fact included in the supplement or prospectus wrapper material distributed in Canada, with respect to Genesis and its subsidiaries, or the omission or alleged omission therefrom of a material fact necessary to make the statements therein, when considered in conjunction with the Prospectuses or preliminary prospectuses, not misleading; with respect to Genesis and its subsidiaries; (iii) against any and all loss, liability, claim, damage and expense whatsoever (including, without limitation, any and all loss, liability, claim, damage and expense to any Underwriter), as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, provided that (subject to Section 1(d) below) any such settlement is effected with the written consent of Genesis; and (iv) against any and all expense whatsoever (including, without limitation, any and all loss, liability, claim, damage and expense to any Underwriter), as incurred (including the fees and disbursements of counsel chosen by the Company), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission to the extent that any such expense is not paid under (i), (ii) or (iii) above. -3- (c) Actions against Parties; Notification. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 1(a) above, counsel to the indemnified parties shall be selected by Genesis, and, in the case of parties indemnified pursuant to Section 1(b) above, counsel to the indemnified parties shall be selected by the Company. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. Notwithstanding the foregoing, if it so elects within a reasonable time after receipt of such notice, an indemnifying party, jointly with any other indemnifying parties receiving such notice, may assume the defense of such action with counsel chosen by it and approved by the indemnified parties defendant in such action (which approval shall not be unreasonably withheld), unless such indemnified parties reasonably object to such assumption on the ground that there may be legal defenses available to them which are different from or in addition to those available to such indemnifying party. If an indemnifying party assumes the defense of such action, the indemnifying party shall not be liable for any fees and expenses of counsel for the indemnified parties incurred thereafter in connection with such action, except the indemnifying party shall be liable for the reasonable costs of investigation subsequently incurred by the indemnified party in connection with the defense. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 1 or Section 2 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) Settlement without Consent if Failure to Reimburse. If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 1(a)(iii) or Section 1(b)(iii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. -4- SECTION 2. Contribution. If the indemnification provided for in Section 1 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, in such proportion as is appropriate to reflect the relative fault of the Company and the Operating Partnership on the one hand and of Genesis on the other hand in connection with the statements or omissions, or in connection with any violation of the nature referred to in Section 1(a)(ii)(A) hereof, which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative fault of the Company and the Operating Partnership on the one hand and Genesis on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Operating Partnership or by Genesis and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission or any violation of the nature referred to in Section 1(a)(ii)(A) hereof. The Company and the Operating Partnership and Genesis agree that it would not be just and equitable if contribution pursuant to this Section 2 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 2. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 2 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 2, each person, if any, who controls Genesis within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as Genesis, and each trustee of the Company, each trustee nominee of the Company named in the Registration Statement, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company or the Operating Partnership within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company and the Operating Partnership, respectively. For purposes of this Section 2, the Company, the Operating Partnership and its subsidiaries shall be deemed one party jointly and severally liable for any obligations hereunder and Genesis and its subsidiaries shall be deemed one party jointly and severally liable for any obligations hereunder. -5- SECTION 3. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to Genesis shall be directed to Genesis at 148 West State Street, Kennett Square, Pennsylvania 19348, attention of Michael R. Walker, Chairman of the Board and Chief Executive Officer; and notices to the Company or the Operating Partnership shall be directed to the Company at 415 McFarlan Road, Suite 202, Kennett Square, Pennsylvania 19348, attention of Edward B. Romanov, Jr., President and Chief Executive Officer. SECTION 4. Parties. This Agreement shall each inure to the benefit of and be binding upon the parties hereto and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the parties hereto and their respective successors and the controlling persons and officers, trustee and trustee nominees referred to in Sections 1 and 2 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the parties hereto and their respective successors, and said controlling persons and officers, trustee and trustee nominees and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase. SECTION 5. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 6. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. -6- IN WITNESS WHEREOF, the parties have caused this Cross Indemnification and Contribution Agreement to be executed on their behalf as of the date first above written. Very truly yours, ELDERTRUST By: /s/ Edward B. Romanov, Jr. --------------------------------- Edward B. Romanov, Jr. President and Chief Executive Officer ELDERTRUST OPERATING LIMITED PARTNERSHIP By: ElderTrust Realty Group, Inc. (its general partner) By: /s/ Edward B. Romanov, Jr. --------------------------------- Edward B. Romanov, Jr. Chief Executive Officer GENESIS HEALTH VENTURES, INC. By: /s/ Michael R. Walker --------------------------------- Michael R. Walker Chairman and Chief Executive Officer -7- EX-21 16 EXHIBIT 21
Subsidiaries of the Registrant Name of Subsidiary Jurisdiction of Formation Type of Entity - ------------------ ------------------------- -------------- ElderTrust Operating Limited Partnership Delaware Limited partnership ET Sub-Heritage Woods, L.L.C. Delaware Limited liability company Et Sub-Pleasant View, L.L.C. Delaware Limited liability company ET Sub-Lopatcong, L.L.C. Delaware Limited liability company ET Sub-Phillipsburg-I, L.L.C. Delaware Limited liability company ET Sub-SMOB, L.L.C. Delaware Limited liability company ET Sub-Windsor I, L.L.C. Delaware Limited liability company ET Sub-Windsor II, L.L.C. Delaware Limited liability company ET Sub-Lacey I, L.L.C. Delaware Limited liability company ET GENPAR, L.L.C. Delaware Limited liability company ET Sub-Willowbrook Limited Partnership, L.L.P. Virginia Limited liability partnership ET Sub-Rittenhouse Limited Partnership, L.L.P. Virginia Limited liability partnership ET Sub-Wayne I Limited Partnership, L.L.P. Virginia Limited liability partnership ET Sub-Belvedere Limited Partnership, L.L.P. Virginia Limited liability partnership ET Sub-Pennsburg Manor Limited Partnership, L.L.P. Virginia Limited liability partnership ET Sub-POB I Limited Partnership, L.L.P. Virginia Limited liability partnership ET Sub-Silverlake Limited Partnership,L.L.P. Virginia Limited liability partnership ET Sub-Riverview Ridge Limited Partnership, L.L.P. Virginia Limited liability partnership ET Sub-DCMH Limited Partnership, L.L.P. Virginia Limited liability partnership ET Sub-Harston Hall Limited Partnership, L.L.P. Virginia Limited liability partnership ET Sub-Chapel Manor Limited Partnership, L.L.P. Virginia Limited liability partnership Senior LifeChoice of Kimberton, L.P. Pennsylvania Limited partnership Senior LifeChoice of Paoli, L.P. Pennsylvania Limited partnership
EX-27 17 FINANCIAL DATA SCHEDULE
5 12-MOS DEC-31-1997 SEP-23-1997 DEC-31-1997 100 0 0 0 0 0 0 0 100 0 0 0 0 1 99 100 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
-----END PRIVACY-ENHANCED MESSAGE-----