Note 2007 0910 Estabrook Senior Housing LP (2)

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U.S. Department of Labor Statistics ("Index") based upon the published index value for January of the year in which the adjustment is to be made; property management staff salaries; premiums for property damage, liability, and other insurance; utility service costs not paid for directly or indirectly by tenants; maintenance and repair costs; fees for licenses and permits required for the operation of the Project; organizational costs (e.g., annual franchise tax payments) and costs associated with accounting, tax preparation and legal fees of Borrower incurred in the ordinary course of business; expenses for security services; advertising and marketing costs; payment of deductibles in connection with casualty insurance claims not paid from reserves, tenant services and activities; the amount of uninsured losses actually replaced, repaired or restored and not paid from reserves; cash deposits into reserves for capital replacements in an amount no more than $250 per unit per year or such greater amount as reasonably required by the holder of an Approved Senior Loan or Borrower with the written approval of Agency; partnership management fees payable to the general partner of Developer in the maxiir~um aggregate sum of $25,000 per year payable only during the first 15 years following issuance of a final certificate of occupancy for the Project; an asset management fee not to exceed $5,000 per year increasing by 3% per year annually after the first five years (plus any accrued but unpaid amount for prior years) payable to the limited partner of Developer only during the first ] 5 years following issuance of a final certificate of occupancy for the Project ar7y previously unpaid portion of the developer fee (without interest) due in accordance with the Financing Plan approved by Agency as set forth in the OPA; cash deposits into operating reserves in the amount required by the holder of an Approved Senior Loan or reasonably required by Borrower and approved i~~ ~~~*, ;tirg by Agency; other ordinary and reasonable operating expenses; and extraordinary operating costs approved in writing by the Agency. Payments to Borrower, its partners or aff Bates in excess of the limitations set forth in this Section shall not be counted toward Annual Operating Expenses for the purpose of calculating Surplus Cash. 1.2.4 EXCLUSIONS PROM ANNUAL OPERATING EXPENSES. Annual i~perating Expenses shall exclude the following: developer fees and interest on any deferred developer fees (except as permitted pursuant to Section 1.2.3); contributions to Project operating reserves (except as permitted pursuant io Section 1.2.3); debt service payments on any loan which is not an Approved Senior Loan, including without limitation, unsecured loans or loans secured by deeds of trust which are subordinate to the Agency Deed of Trust; depreciation, amortization, depletion or other non-cash expenses; expenses paid for with disbursements from any reserve account; distributions to partners; any amount paid to Borrower, any general partner of Borrower, or any entity controlled by the persons or entities in control of Borrower or any general partner of Borrower. Notwithstanding the foregoing limitation regarding payments to Borrower and related parties, the following fees shall be included in Annual Operating Expenses in accordance with the limitations set forth in Section 1.2.3 above even if paid to an affiliate of Borrower or a partner of Borrower: fees paid to a property management agent or resident services agent, partnership management fees, and asset management fees. 13 COST SAVINGS. If the Project is not financed with HUD Section 202 financing, within ten (10) business days after Borrower's receipt of the investor's capital contribution following the issuance of the IRS Form 8609 for the Project, Borrower shall pay to the Agency as a reduction of the outstanding principal balance of this Note, aone-time payment in the amount of Fifty Percent (50%) of Excess Proceeds. "Excess Proceeds" shall mean the sum of all sources of financing received by Borrower for acquisition, construction and permanent financing of the Property and the Project, less the sum of actual uses as shown 95622")-4