ex105907fanniemsasaoceanside.htm


    
EX-10.59.07

    
 

    Prepared
by, and after recording

    return
to:

    


    James J.
Schwert, Esquire

    Oppenheimer
Wolff & Donnelly LLP

    Plaza
VII, Suite 3300

    45 S.
Seventh Street

    Minneapolis,
MN 55402

    


    


    


    


    


    


    


    


    


    


    


    


    


    SUBORDINATION,
ASSIGNMENT

    AND
SECURITY AGREEMENT

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    SUBORDINATION,
ASSIGNMENT

    AND
SECURITY AGREEMENT

    


               THIS
SUBORDINATION, ASSIGNMENT AND SECURITY AGREEMENT (this "Assignment”) is made and
entered into as of  April 30, 2008 by and among (i) EMERIKEYT SPRINGS
AT OCEANSIDE INC. (the "Borrower"), a  California corporation (ii)
KEYCORP REAL ESTATE CAPITAL MARKETS, INC. (the "Lender"), an Ohio corporation,
and (iii) EMERITUS PROPERTIES XVI, INC. (the "Operator"), a Nevada
corporation.

    


    Recitals

    


    
      	
              A.  

            	
              Borrower
      is the owner of a Seniors Housing Facility known as The Springs at
      Oceanside and located in Oceanside, California (the “Mortgaged
      Property”).  A legal description of the Mortgaged Property is
      attached hereto as Exhibit A.

            


    

    


    
      	
              B.  

            	
              Operator
      is the managing operator of the Mortgaged Property pursuant to that
      certain Operating Lease Agreement dated April 28, 2008, between Borrower
      and Operator (the "Operating Lease") and is the holder of all of the
      required Licenses required to operate the Mortgaged Property as a Seniors
      Housing Facility.

            


    

    


    
      	
              C.  

            	
              Lender
      is about to make a loan to Borrower in the amount of Five Million Five
      Hundred Eighty-Six Thousand and No/100 Dollars ($5,586,000.00) (the
      "Loan").  The Loan will be evidenced by a Multifamily Note and
      will be secured by a Multifamily Deed of Trust, Assignment of Rents,
      Security Agreement and Fixture Filing (the "Instrument") of even date
      herewith executed by the Borrower in favor of Lender which encumbers the
      Mortgaged Property.

            


    

    


    
      	
              D.  

            	
              Lender
      requires and Operator is willing to subordinate its right, title and
      interest to and under the Operating Lease to the Instrument and to assign
      all Leases, Rents, Equipment, Inventory, Contracts and Accounts to Lender
      as additional security for the
Loan.

            


    

    


    
      	
              E.  

            	
              Operator
      is willing to attorn to Lender upon a default by Borrower under the Loan
      Documents, to perform its obligations under the Operating Lease and this
      Assignment for Lender, or its successors and assigns in interest, and to
      permit Lender to terminate the Operating Lease without
      liability.

            


    

    


               NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound, Borrower,
Lender and Operator agree as follows:

    


    1. DEFINITIONS.  Capitalized
terms used in this Assignment and not otherwise defined shall have the meanings
assigned to them in the Instrument.  All terms used herein which are
defined in the Uniform Commercial Code, as in effect from time to time in the
jurisdiction in


    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-1

        
          

        

      

      
         


      

    


    which the
Mortgaged Property is located, shall have the same meanings when used
herein.  The following terms, when used in this Assignment, shall have
the following meanings:

    


    (a) “Accounts” means all money,
funds, investment property, accounts, general intangibles, deposit accounts,
chattel paper, documents, instruments, judgments, claims, settlements of claims,
causes of action, refunds, rebates, reimbursements, reserves, deposits,
subsidies, proceeds, products, rents and profits, now or hereafter arising,
received or receivable, from or on account of Operator’s management and
operation of the Mortgaged Property as a Seniors Housing Facility.

    


    (b) “Contracts” means any contract
or other agreement for the provision of goods or services at or otherwise in
connection with the operation, use or management of the Mortgaged Property,
including cash deposited to secure performance by parties of their
obligations.

    


    (c) “Equipment” means all right,
title and interest of Operator in and to all machinery, equipment, computer
equipment (hardware and software), tools, furniture, furnishings, kitchen or
restaurant supplies and facilities, office equipment, dining room supplies and
facilities, medical supplies and facilities, appliances, supplies, books,
records, fixtures, leasehold improvements, all tangible and intangible property,
and goods now owned and hereafter acquired, used in connection with the
operation of the Mortgaged Property, together with all present and future parts,
additions, accessories, replacements, attachments, accessions, replacement parts
and substitutions therefore, and the proceeds thereof (cash and non-cash
including insurance proceeds).

    


    (d) “Event of Default” means the
occurrence of any event listed in Section 22 of the Instrument or a default by
Borrower or Operator of any representation, warranty or covenant under this
Assignment or the Operating Lease.

    


    (e) "Impositions" and "Imposition Deposits" shall
have the meaning as defined in Section 7(a) of the Instrument.

    


    (f) "Improvements" means the
buildings, structures, improvements and alterations now constructed or at any
time in the future constructed or placed upon the Land, including any future
replacements and additions, which may now or hereafter constitute the Mortgaged
Property.

    


    (g) "Indebtedness" means the
principal of, interest on, and all other amounts due at any time under, the Note
(as hereinafter defined), the Instrument or any other Loan Documents (as
hereinafter defined), including prepayment premiums, late charges, default
interest.

    


    (h) “Inventory” means all right,
title and interest of Operator in and to inventory of every type and
description, now owned and hereafter acquired, including,
without


    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-2

        
          

        

      

      
         


      

    


    limitation,
raw materials, work in process, finished goods, goods returned or repossessed or
stopped in transit, goods used for demonstration, promotion, marketing or
similar purposes, property in, on or with which any of the foregoing may be
stored or maintained, all materials and supplies usable or used or consumed at
the Mortgaged Property, and all documents and documents of title relating to any
of the foregoing, together with all present and future parts, additions,
accessories, attachments, accessions, replacements, replacement parts and
substitutions therefor or thereto in any form whatsoever.

    


    (i) "Land" means the land
described in Exhibit A.

    


    (j) "Leases" means all present and
future leases, subleases, licenses, concessions or grants or other possessory
interests now or hereafter in force, whether oral or written, covering or
affecting the Mortgaged Property or any portion of the Mortgaged Property
(including proprietary leases or occupancy agreements if Operator is a
cooperative housing corporation), and all modifications, extensions or renewals
thereof.  The term "Leases" shall also include any residency,
occupancy, admission, and care agreements pertaining to residents of the
Mortgaged Property and shall also specifically include, without limitation, the
Operating Lease.

    


    (k) “Loan” shall have the meaning
as defined in Recital C above.

    


    (l) "Loan Documents" means the
Note, the Instrument, this Assignment, all guaranties and any other documents
now or in the future executed by Borrower, Operator or any other person or
entity in connection with the Loan, as such documents may be amended from time
to time.

    


    (m) "Mortgaged Property" shall
have the meaning as defined in Recital A above.

    


    (n) "Note" means that certain
Multifamily Note in the original principal amount of Five Million Five Hundred
Eighty-Six Thousand and No/100 Dollars ($5,586,000.00) executed by Borrower in
favor of Lender, and more fully described in the Instrument.

    


    (o) "Rents" means all rents
(whether from residential or non-residential space), revenues and other income
of the Land or the Improvements, including subsidy payments received from any
sources (including but not limited to payments under any Housing Assistance
Payments Contract), parking fees, laundry and vending machine income and fees
and charges for food, healthcare and other services provided at the Mortgaged
Property, whether now due, past due, or to become due, resident and tenant
security deposits, entrance fees, application fees, processing fees, community
fees and any other amounts or fees deposited by any resident or tenant (whether
forfeited or not) together with and including all proceeds from any private
insurance for residents to cover rental charges and charges for services at or
in connection with the Mortgaged Property, and the right to Third Party Payments
due for the rents or services of residents at the Mortgaged
Property.  Each of the foregoing shall be considered "Rents" for the
purposes of the actions and rights set forth in Section 3 of this
Assignment.


    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-3

        
          

        

      

      
         


      

    


    


    (p) "Taxes" shall have the meaning
as defined in Section 1(y) of the Instrument.

    


    
      	
              2.  

            	
              UNIFORM COMMERCIAL
      CODE SECURITY AGREEMENT.

            


    

    


    (a) This
Assignment is also a security agreement under the Uniform Commercial Code for
any of the Contracts, Accounts, Equipment, Inventory, Leases and Rents which,
under applicable law, may be subject to a security interest under the Uniform
Commercial Code, whether acquired now or in the future and all products and cash
and non-cash proceeds thereof (collectively, “UCC Collateral”), and
Operator hereby assigns and grants to Lender a security interest in the UCC
Collateral.  Operator hereby authorizes Lender to file financing
statements, continuation statements and financing statement amendments in such
form as Lender may require to perfect or continue the perfection of this
security interest and Operator agrees, if Lender so requests, to execute and
deliver to Lender such financing statements, continuation statements and
amendments.  Borrower shall pay all filing costs and all costs and
expenses of any record searches for financing statements that Lender may
require.  Without the prior written consent of Lender, Operator shall
not create or permit to exist any other lien or security interest in any of the
UCC Collateral.

    


    (b) If an
Event of Default has occurred and is continuing, Lender shall have the remedies
of a secured party under the Uniform Commercial Code, in addition to all
remedies provided by this Assignment or existing under applicable
law.  In exercising any remedies, Lender may exercise its remedies
against the UCC Collateral separately or together, and in any order, without in
any way affecting the availability of Lender’s other remedies.

    


    (c) Upon an
Event of Default, Lender or its designee may (in Lender’s sole discretion)
terminate Operator’s authority to collect Accounts and notify the residents and
account debtors that the Accounts have been assigned to Lender or of Lender’s
security interest therein and, either in its own name or that of Operator or
both, demand, collect (including, without limitation, through any lockbox
arrangement prescribed by Lender), receive, receipt for, sue for or give
acquittance for any or all amounts due or to become due in respect of the
Accounts, and may also, in its discretion, file any claim, institute any
proceeding or take any other action that Lender may deem necessary or
appropriate to protect and realize upon the security interest of Lender in the
Accounts.  All of Lender’s collection expenses shall be charged to the
Borrower’s account and added to the Indebtedness.  If Lender is
collecting the Accounts as above provided, Lender shall have the right to
receive, endorse, assign and deliver in Lender’s name or Operator’s name any and
all checks, drafts and other instruments for the payment of money relating to
the Accounts, and Operator hereby waives notice of presentment, protest and
non-payment of any instrument so endorsed.  If Lender is collecting
the Accounts directly as above provided, Operator hereby constitutes Lender or
Lender’s designee as Operator’s attorney-in-fact with power with respect to the
Accounts to:  (1) endorse Operator’s name upon all notes, acceptances,
checks, drafts, money orders or other evidences of payment that may come into
Lender’s possession; (2) notify the Post Office to change the address for
delivery of mail


    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-4

        
          

        

      

      
         


      

    


    addressed
to Operator for the Mortgaged Property to such address as Lender may designate;
and (3) receive, open, and dispose of all such mail addressed to
Operator.

    


    (d) Upon an
Event of Default, Lender may, without demand and without advertisement or
notice, at any time or times, sell and deliver any or all Equipment or Inventory
held by or for it at public or private sale, for cash, upon credit or otherwise,
at such prices and upon such terms as Lender, in its sole discretion, deems
advisable.  Subject to the provisions of applicable law, Lender may
postpone or cause the postponement of the sale of all or any portion of the
Equipment or Inventory by announcement at the time and place of such sale, and
such sale may, without further notice, be made at the time and place to which
the sale has been postponed or Lender may further postpone such sale by
announcement made at such time and place.  Without in any way limiting
the foregoing, Lender shall, following any Event of Default, have the right, in
addition to all other rights provided herein or by law, to enter without legal
process upon the Mortgaged Property (provided that such entry be done lawfully)
for the purpose of taking possession of the Equipment or Inventory, and the
right to maintain such possession on the Mortgaged Property or to remove the
Equipment or Inventory or any part thereof to such other places as Lender may
desire.  Whether or not Lender exercises its right to take possession
of the Equipment or Inventory, Operator shall, upon Lender's demand, promptly
assemble the Equipment or Inventory and make it available to Lender at the
Mortgaged Property.

    


    3.           ASSIGNMENT OF RENTS;
APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

    


    (a) As
consideration for the material financial benefit to be derived by Operator from
Lender’s approval of the Operating Lease and providing the Loan, to the extent
permitted by applicable law, Operator absolutely and unconditionally assigns and
transfers to Lender all Rents.  To the extent permitted by applicable
law, it is the intention of Operator to establish a present, absolute and
irrevocable transfer and assignment to Lender of all Rents and to authorize and
empower Lender to collect and receive all Rents without the necessity of further
action on the part of Operator.  Promptly upon request by Lender,
Operator agrees to execute and deliver such further assignments as Lender may
from time to time require.  To the extent permitted by applicable law,
Operator and Lender intend this assignment of Rents to be immediately effective
and to constitute an absolute present assignment and not an assignment for
additional security only.  However, if this present, absolute and
unconditional assignment of Rents is not enforceable by its terms under the laws
of the Property Jurisdiction (as that term is defined in Section 30[a] of the
Instrument), then it is the intention of Operator that in this circumstance this
Assignment create and perfect a lien on Rents in favor of Lender, which lien
shall be effective as of the date of this Assignment.

    


    (b) After the
occurrence of an Event of Default, Operator authorizes Lender to collect, sue
for and compromise Rents and directs each resident and tenant of the Mortgaged
Property to pay all Rents to, or as directed by, Lender.  However,
until the occurrence of an Event of Default, Lender hereby grants to Operator a
revocable license to collect and receive all Rents, to hold all Rents in trust
for the benefit of Lender and subject to the terms of the Operating
Lease,


    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-5

        
          

        

      

      
         


      

    


    to apply
all Rents to pay the installments of interest and principal then due and payable
under the Note and the other amounts then due and payable under the other Loan
Documents, including Imposition Deposits, and to pay the current costs and
expenses of managing, operating and maintaining the Mortgaged Property,
including utilities, Taxes and insurance premiums (to the extent not included in
Imposition Deposits), resident and tenant improvements and other capital
expenditures.  So long as no Event of Default has occurred and is
continuing, and subject to the terms of the Operating Lease, the Rents remaining
after application pursuant to the preceding sentence may be retained by Operator
free and clear of, and released from, Lender’s rights with respect to Rents
under this Assignment.  From and after the occurrence of an Event of
Default, and without the necessity of Lender entering upon and taking and
maintaining control of the Mortgaged Property directly, or by a receiver,
Operator’s license to collect Rents shall automatically terminate and Lender
shall without notice be entitled to all Rents as they become due and payable,
including Rents then due and unpaid.  Operator shall pay to Lender
upon demand all Rents to which Lender is entitled.  At any time on or
after the date of Lender’s demand for Rents, Lender may give, and Operator
hereby irrevocably authorizes Lender to give, notice to all residents and
tenants of the Mortgaged Property instructing them to pay all Rents to
Lender.  No resident or tenant shall be obligated to inquire further
as to the occurrence or continuance of an Event of Default, and no resident or
tenant shall be obligated to pay to Operator any amounts which are actually paid
to Lender in response to such a notice.  Any such notice by Lender
shall be delivered to each resident and tenant personally, by mail or by
delivering such demand to each rental unit.  Operator shall not
interfere with and shall cooperate with Lender’s collection of such
Rents.  After an Event of Default, Lender is further authorized to
give notice to all Third Party Payment payors (other than governmental entities)
at Lender's option, instructing them to pay all Third Party Payments which would
be otherwise paid to Operator to Lender, to the extent permitted by
law.  In the case of Third Party Payments from Third Party Payment
payors which are governmental entities, including Medicaid, Lender and Operator
have executed a Depositary Agreement of even date herewith which establishes
special procedures for the receipt and disposition of the Third Party
Payments.

    


    (c) Operator
represents and warrants to Lender that Operator has not executed any prior
assignment of Rents that Operator has not performed, and Operator covenants and
agrees that it will not perform any acts and has not executed, and shall not
execute, any instrument which would prevent Lender from exercising its rights
under this Section 3, and that at the time of execution of this Assignment there
has been no anticipation or prepayment of any Rents for more than two months
prior to the due dates of such Rents.  Operator shall not collect or
accept payment of any Rents more than two months prior to the due dates of such
Rents.

    


    (d) If an
Event of Default has occurred and is continuing, Lender may, regardless of the
adequacy of Lender’s security or the solvency of Operator and even in the
absence of waste, to the extent permitted by applicable law, enter upon and take
and maintain full control of the Mortgaged Property in order to perform all acts
that Lender in its discretion determines to be necessary or desirable for the
operation and maintenance of the Mortgaged Property, including the execution,
cancellation or modification of Leases, the collection of all Rents, the making
of repairs to the Mortgaged Property and the execution or termination
of


    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-6

        
          

        

      

      
         


      

    


    Contracts
and Leases providing for the management, operation or maintenance of the
Mortgaged Property, for the purposes of enforcing the assignment of Rents
pursuant to Section 3(a), protecting the Mortgaged Property or the security of
this Assignment, or for such other purposes as Lender in its discretion may deem
necessary or desirable.  Alternatively, if an Event of Default has
occurred and is continuing, regardless of the adequacy of Lender’s security,
without regard to Operator’s solvency and without the necessity of giving prior
notice (oral or written) to Operator, Lender may apply to any court having
jurisdiction for the appointment of a receiver for the Mortgaged Property to
take any or all of the actions set forth in the preceding
sentence.  If Lender elects to seek the appointment of a receiver for
the Mortgaged Property at any time after an Event of Default has occurred and is
continuing, Operator, by its execution of this Assignment, expressly consents to
the appointment of such receiver, including the appointment of a receiver ex
parte if permitted by applicable law.  Lender or the receiver, as the
case may be, shall be entitled to receive a reasonable fee for managing the
Mortgaged Property.  Immediately upon appointment of a receiver or
immediately upon Lender’s entering upon and taking possession and control of the
Mortgaged Property, Operator shall, to the extent permitted by applicable law,
surrender possession of the Mortgaged Property to Lender or the receiver, as the
case may be, and shall deliver to Lender or the receiver, as the case may be,
all documents, records (including records on electronic or magnetic media),
accounts, surveys, plans, and specifications relating to the Mortgaged Property
and all security deposits and prepaid Rents.  In the event Lender
takes possession and control of the Mortgaged Property, Lender may exclude
Operator and its representatives from the Mortgaged
Property.  Operator acknowledges and agrees that the exercise by
Lender of any of the rights conferred under this Section 3 shall not be
construed to make Lender a mortgagee-in-possession of the Mortgaged Property so
long as Lender has not itself entered into actual possession of the Land and
Improvements.

    


    (e) If Lender
enters the Mortgaged Property, Lender shall be liable to account only to
Borrower and Operator and only for those Rents actually
received.  Lender shall not be liable to Operator, Borrower, anyone
claiming under or through Operator or Borrower, or anyone having an interest in
the Mortgaged Property, by reason of any act or omission of Lender under this
Section 3, and Operator and Borrower hereby release and discharge Lender from
any such liability to the fullest extent permitted by law.

    


    (f) If the
Rents are not sufficient to meet the costs of taking control of and managing the
Mortgaged Property and collecting the Rents, any funds expended by Lender for
such purposes shall become an additional part of the Indebtedness, as provided
in Section 12 of the Instrument.

    


    (g) Any
entering upon and taking of control of the Mortgaged Property by Lender or the
receiver, as the case may be, and any application of Rents as provided in this
Assignment shall not cure or waive any Event of Default or invalidate any other
right or remedy of Lender under applicable law or provided for in this
Assignment or in the Instrument.

    


    4.           ASSIGNMENT OF LEASES; LEASES
AFFECTING THE MORTGAGED PROPERTY.


    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-7

        
          

        

      

      
         


      

    


    


    (a) As
consideration for the material financial benefit to be derived by Operator from
Lender’s approval of the Operating Lease and providing the Loan, to the extent
permitted by applicable law, Operator absolutely and unconditionally assigns and
transfers to Lender all of Operator's right, title and interest in, to and under
the Leases, including Operator's right, power and authority to modify the terms
of any such Lease, or extend or terminate any such Lease.  To the
extent permitted by applicable law, it is the intention of Operator to establish
a present, absolute and irrevocable transfer and assignment to Lender of all of
Operator's right, title and interest in, to and under the Leases.  To
the extent permitted by applicable law, Operator and Lender intend this
assignment of the Leases to be immediately effective and to constitute an
absolute present assignment and not an assignment for additional security
only.  However, if this present, absolute and unconditional assignment
of the Leases is not enforceable by its terms under the laws of the Property
Jurisdiction, then it is the intention of Operator that in this circumstance
this Assignment create and perfect a lien on the Leases in favor of Lender,
which lien shall be effective as of the date of this Assignment.

    


    (b) Until
Lender gives notice to Operator of Lender’s exercise of its rights under this
Section 4, Operator shall have all rights, power and authority granted to
Operator under any Lease (except as otherwise limited by this Section or any
other provision of this Assignment), including the right, power and authority to
modify the terms of any Lease or extend or terminate any Lease, with the
exception of the Operating Lease.  Upon the occurrence of an Event of
Default and at the option of Lender, the permission given to Operator pursuant
to the preceding sentence to exercise all rights, power and authority under
Leases shall terminate.  Operator shall comply with and observe
Operator's obligations under all Leases, including Operator's obligations
pertaining to the maintenance and disposition of resident or tenant security
deposits.

    


    (c) Operator
acknowledges and agrees that the exercise by Lender, either directly or by a
receiver, of any of the rights conferred under this Section 4 shall not be
construed to make Lender a mortgagee-in-possession of the Mortgaged Property so
long as Lender has not itself entered into actual possession of the Land and the
Improvements.  The acceptance by Lender of the assignment of the
Leases pursuant to Section 4(a) shall not at any time or in any event obligate
Lender to take any action under this Assignment or to expend any money or to
incur any expenses.  Lender shall not be liable in any way for any
injury or damage to person or property sustained by any person or persons, firm
or corporation in or about the Mortgaged Property.  Prior to Lender’s
actual entry into and taking possession of the Mortgaged Property, Lender shall
not (i) be obligated to perform any of the terms, covenants and conditions
contained in any Lease (or otherwise have any obligation with respect to any
Lease); (ii) be obligated to appear in or defend any action or proceeding
relating to the Lease or the Mortgaged Property; or (iii) be responsible for the
operation, control, care, management or repair of the Mortgaged Property or any
portion of the Mortgaged Property.  The execution of this Assignment
by Operator shall constitute conclusive evidence that all responsibility for the
operation, control, care, management and repair of the Mortgaged Property is and
shall be that of Operator, prior to such actual entry and taking of
possession.


    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-8

        
          

        

      

      
         


      

    


    


    (d) Upon
delivery of notice by Lender to Operator of Lender’s exercise of Lender’s rights
under this Section 4 at any time after the occurrence of an Event of Default,
and without the necessity of Lender entering upon and taking and maintaining
control of the Mortgaged Property directly, by a receiver, or by any other
manner or proceeding permitted by the laws of the Property Jurisdiction, Lender
immediately shall have, to the extent permitted by applicable law, all rights,
powers and authority granted to Operator under any Lease, including the right,
power and authority to modify the terms of any such Lease, or extend or
terminate any such Lease.

    


    (e) Operator
shall, promptly upon Lender’s request, deliver to Lender an executed copy of
each residential Lease then in effect. All Leases for residential dwelling units
shall be on forms approved by Lender, shall be on initial terms of at least six
months and not more than two years, and shall not include options to
purchase.  If customary in the applicable market, residential Leases
with a month-to-month term or with terms of less than six months shall be
permitted with Lender’s prior written consent.

    


    (f) Operator
shall not lease any portion of the Mortgaged Property for non-residential use
except with the prior written consent and approval of Lender with the exception
of the Operating Lease which has previously been approved by
Lender.  Operator shall not modify the terms of, extend or terminate,
any Lease for non-residential use (including any Lease in existence on the date
of this Instrument) without the prior written consent of Lender. Operator shall,
without request by Lender, deliver an executed copy of each non-residential
Lease to Lender promptly after such Lease is signed.  All
non-residential Leases (including, without limitation, the Operating Lease) and
renewals or extensions of existing Leases, shall specifically provide that (1)
such Leases are subordinate to the lien of this Instrument (unless waived in
writing by Lender); (2) the resident or tenant shall attorn to Lender and any
purchaser at a foreclosure sale, such attornment to be self-executing and
effective upon acquisition of title to the Mortgaged Property by any purchaser
at a foreclosure sale or by Lender in any manner; (3) the resident or tenant
agrees to execute such further evidences of attornment as Lender or any
purchaser at a foreclosure sale may from time to time request; (4) the Lease
shall not be terminated by foreclosure or any other transfer of the Mortgaged
Property; (5) after a foreclosure sale of the Mortgaged Property, Lender or any
other purchaser at such foreclosure sale may, at Lender’s or such purchaser's
option, accept or terminate such Lease; and (6) the resident or tenant shall,
upon receipt after the occurrence of an Event of Default of a written request
from Lender, pay all Rents payable under the Lease to Lender.

    


    (g) Operator
shall not receive or accept Rent under any Lease (whether residential or
non-residential) for more than two months in advance.

    


    5. ASSIGNMENT OF CONTRACTS;
CONTRACTS AFFECTING THE MORTGAGED PROPERTY.

    



    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-9

        
          

        

      

      
         


      

    


    (a) Operator
has entered into the Contracts identified on Exhibit B for the provision of
goods or services, at or otherwise in connection with the operation, use or
management of the Mortgaged Property.  Operator may in the future
enter into Contracts for the provision of additional goods or services at or
otherwise in connection with the operation, use or management of the Mortgaged
Property.

    


    (b) As
consideration for the material financial benefit to be derived by Operator from
Lender’s approval of the Operating Lease and providing the Loan, to the extent
permitted by applicable law, Operator absolutely and unconditionally assigns and
transfers to Lender all of Operator's right, title and interest in, to and under
the Contracts, including Operator's right, power and authority to modify the
terms of, extend or terminate any such Contract.  To the extent
permitted by applicable law, it is the intention of Operator to establish a
present, absolute and irrevocable transfer and assignment to Lender of all of
Operator's right, title and interest in, to and under the
Contracts.  To the extent permitted by applicable law, Operator and
Lender intend this assignment of the Contracts to be immediately effective and
to constitute an absolute present assignment and not an assignment for
additional security only.  However, if this present, absolute and
unconditional assignment of the Contracts is not enforceable by its terms under
the laws of the Property Jurisdiction, then it is the intention of Operator that
in this circumstance this Assignment create and perfect a lien on the Contracts
in favor of Lender, which lien shall be effective as of the date of this
Assignment.  The acceptance by Lender of this assignment of the
Contracts shall not at any time or in any event obligate Lender to take any
action under this Assignment or to expend any money or to incur any
expenses.

    


    (c) Until
Lender gives notice to Operator of Lender’s exercise of its rights under this
Section 5, Operator shall have all rights, power and authority granted to
Operator under any Contract (except as otherwise limited by this Section or any
other provision of this Assignment), including the right, power and authority to
modify the terms of any Contract or extend or terminate any Contract, with the
exception of the Operating Lease.  Upon the occurrence of an Event of
Default and at the option of Lender, the permission given to Operator pursuant
to the preceding sentence to exercise all rights, power and authority under
Contracts shall terminate.

    


    (d) Upon
Lender’s delivery of notice to Operator of an Event of Default, Lender shall
immediately have all rights, powers and authority granted to Operator under any
Contract, including the right, power and authority to modify the terms of,
extend or terminate any such Contract.

    


    (e) Operator
hereby represents and warrants and agrees with Lender that:  (1) the
Contracts are assignable and no previous assignment of Operator’s interest in
the Contracts has been made; (2) the Contracts are in full force and effect in
accordance with their respective terms and there are no defaults thereunder; (3)
Operator shall fully perform all of its obligations under the Contracts, and
Operator agrees not to amend, modify, assign, sell, pledge, transfer, mortgage
or otherwise encumber its interests in any of the Contracts so long as this
Assignment is in effect, or consent to any transfer, assignment or other
disposition thereof without the written


    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-10

        
          

        

      

      
         


      

    


    approval
of Lender; and (4) each Contract entered into by Operator subsequent to the date
hereof, the average annual consideration of which, directly or indirectly, is at
least $20,000, shall provide:  (i) that it shall be terminable for
cause; and (ii) that it shall be terminable, at Lender’s option, upon the
occurrence of an Event of Default.

    


    6. BORROWER
AND OPERATOR REPRESENTATIONS, WARRANTIES AND
AGREEMENTS.  Borrower and Operator represent and warrant to
Lender that (i) after the Loan is made, Borrower and/or Operator will have
sufficient working capital, including cash flow from the Mortgaged Property or
other assets, to adequately own and/or maintain the Mortgaged Property and pay
all outstanding debts associated with the Mortgaged Property as they become due,
(ii) the Operating Lease is unmodified and is in full force and effect, (iii)
the Operating Lease is a valid and binding agreement enforceable against the
parties in accordance with its terms, and (iv) neither party is in default in
performing any of its obligations under the Operating Lease.  Borrower
and Operator hereby agree that any default by Borrower or Operator under this
Assignment or the Operating Lease which continues beyond any applicable cure
period shall at Lender’s option, constitute an Event of Default under the
Instrument.

    


    7. BORROWER
COVENANTS. Borrower hereby
covenants with Lender that during the term of this Assignment: (a) Borrower
shall not transfer the responsibility for the operation and management of the
Mortgaged Property from Operator to any other person or entity without the prior
written consent of Lender; (b) Borrower shall not terminate or amend any of the
terms or provisions of the Operating Lease nor shall Borrower assign its rights
under the Operating Lease without the prior written consent of Lender; (c)
within 5 days of Borrower’s receipt,  Borrower shall give Lender
written notice of any notice or information that Borrower receives which
indicates that either Borrower or Operator is in default under the terms of the
Operating Lease, Operator is terminating the Operating Lease or that Operator is
otherwise discontinuing its operation and management of the Mortgaged Property;
and (d) Borrower agrees that after Borrower receives notice (or otherwise has
actual knowledge) of an Event of Default under the Instrument, it will not make
any payment of fees under or pursuant to the Operating Lease without Lender’s
prior written consent.

    


    8. EVENT OF
DEFAULT.  Upon
receipt by Operator of written notice from Lender that an Event of Default has
occurred and is continuing, Lender shall have the right to exercise all rights
as owner of  the Mortgaged Property under the Operating Lease and
Operator shall pay to Lender directly all Rent and other sums due under the
Operating Lease.  Lender shall be entitled to mandate the use of a
lockbox bank account or other depositary account, to be maintained under the
control and supervision of Lender, for all income of the Mortgaged Property,
including but not limited to Rents, service charges, insurance payments and
Third Party Payments.  In order to induce Lender to lend funds
hereunder, Borrower and Operator hereby agree that upon the occurrence of an
Event of Default and at the option of Lender, Operator shall continue to provide
all necessary services required under any applicable licensing or regulatory
requirements and shall fully cooperate with Lender and any receiver as may be
appointed by a court, in performing these services until such time as Lender has
arranged for a replacement operator, and in arranging an orderly transition to a
replacement operator, manager or provider of the necessary


    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-11

        
          

        

      

      
         


      

    


    services.   Borrower
and Operator agree to cooperate with Lender in arranging an orderly transfer to
a replacement operator of all Licenses and governmental approvals necessary or
reasonably required to operate the Mortgaged Property as a Seniors Housing
Facility, and to execute promptly all applications, assignments, consents and
documents requested by Lender to facilitate such transition.

    


    9. OPERATING
LEASE TERMINATION.  After the occurrence of an Event of
Default, Lender shall have the right any time thereafter to terminate the
Operating Lease, without cause and without liability, by giving written notice
to Operator of its election to do so.  Lender's notice shall specify
the date of termination, which shall not be less than 30 days after the date of
such notice, except such lesser notice as Lender deems to be appropriate in the
event of an emergency.

    


    10. TURNOVER
OF BOOKS AND RECORDS.  On the effective date of termination of
the Operating Lease, Operator shall turn over to Lender all books and records
relating to the Mortgaged Property and the residents and tenants (copies of
which may be retained by Operator, at Operator’s expense), together with such
authorizations and letters of direction addressed to residents, tenants,
suppliers, employees, banks and other parties as Lender may reasonably
require.  Operator shall cooperate with Lender in the transfer of
operating and management responsibilities to Lender, any receiver, or their
designees.  A final accounting of unpaid fees (if any) due to Operator
under the Operating Lease shall be made within 60 days after the effective date
of termination, but Lender shall not have any liability or obligation to
Operator for unpaid fees or other amounts payable under the Operating Lease
which accrue before Lender acquires title to the Mortgaged Property, or before
Lender becomes a mortgagee in possession.

    


    NOTICE.  Operator’s
address for Notice is 3131 Elliott Avenue, Suite 500, Seattle, Washington
98121.

    Borrower’s
address for notice is 3131 Elliott Avenue, Suite 500, Seattle, Washington
98121.

    Lender’s
address for notice is 127 Public Square, Cleveland, Ohio 44114.

    


    All
notices to be given by Lender to Operator shall be given in the same manner as
notices to Borrower pursuant to the notice provisions contained in the
Instrument.

    


    12. NO
ASSUMPTION OF OBLIGATIONS.  The Borrower and Operator, by
executing this Assignment, agree that Lender does not assume any obligations or
duties of the Borrower and Operator concerning the Operating Lease until and
unless Lender shall exercise its rights hereunder.

    


    13. POWER OF
ATTORNEY.  Borrower and Operator hereby irrevocably constitute
and appoint Lender as Borrower's and Operator’s attorney-in-fact to demand,
receive and enforce their rights with respect to the provisions set forth in
this Assignment, to give appropriate receipts, releases and satisfactions for
and on Borrower's and Operator’s behalf and to do any and all acts in Borrower's
or Operator’s names or in the name of Lender with the same force and effect
as


    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-12

        
          

        

      

      
         


      

    


    Borrower
or Operator could do if this Assignment had not been made.  The
foregoing appointment shall be deemed to be coupled with an interest and
irrevocable.

    


    14. OPERATOR
REPRESENTATIONS AND OBLIGATIONS.  Operator represents, warrants
and agrees to the following:

    


    (a) Operator
will use its best efforts to cooperate with Lender, including attendance at any
meetings requested by Lender (after reasonable prior notice), furnishing
financial statements of Operator and operating statements for the Mortgaged
Property, and allowing Lender to undertake inspections of the Mortgaged
Property.  In addition, Operator acknowledges that it has received
from Borrower and reviewed a fully executed copy of the Instrument and covenants
therein and agrees to comply with all provisions and covenants therein
applicable to the use and operation of the Mortgaged Property (the “Operating
Covenants”), including without limitation, arranging for the escrow of Taxes and
insurance with Lender and, if necessary, providing insurance coverage in
accordance with Lender’s requirements.  In the event Operator fails to
so use and operate the Mortgaged Property, Lender shall have the right to
enforce the Operating Covenants directly against Operator upon Borrower’s
failure to do so, in accordance with the provisions of the Instrument and this
Assignment.  Operator’s failure to comply with these obligations shall
constitute a default under the Operating Lease, a default under this Assignment,
and an Event of Default under the Loan Documents.  Operator agrees to
comply with all of its obligations under the Operating Lease pertaining to its
payment and performance of any repairs and capital improvements at the Mortgaged
Property;

    


    (b) the
Operating Lease is and shall be subject and subordinate in all respects to the
liens, terms, covenants and conditions of the Instrument and the other Loan
Documents, and to all renewals, modifications, consolidations, replacements and
extensions thereof, and to all advances heretofore made or which may hereafter
be made pursuant to the Instrument (including all sums advanced for the purposes
of (x) protecting or further securing the lien of the Instrument, curing
defaults by Borrower under the Loan Documents or for any other purposes
expressly permitted by the Instrument, or (y) constructing, renovating,
repairing, furnishing, fixturing or equipping the Mortgaged
Property);

    


    (c) any fees
payable to Operator by Borrower pursuant to the Operating Lease are and shall be
subordinated in right of payment to the prior payment in full of the
Indebtedness;

    


    (d) if, by
reason of its exercise of any other right or remedy under the Operating Lease,
Operator acquires by right of subrogation or otherwise a lien on the Mortgaged
Property which (but for this subsection) would be senior to the lien of the
Instrument, then, in that event, such lien shall be subject and subordinate to
the lien of the Instrument;

    


    (e) until
Operator or Borrower receives notice (or otherwise acquires actual knowledge) of
an Event of Default, Operator shall be entitled to retain for its own account
all payments made under or pursuant to the Operating Lease, subject to the terms
of this Assignment;

    



    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-13

        
          

        

      

      
         


      

    


    (f) after
Operator or Borrower receives notice (or otherwise acquires actual knowledge) of
an Event of Default, Operator will not accept or retain any payment of fees
under or pursuant to the Operating Lease without Lender’s prior written
consent;

    


    (g) if, after
Operator or Borrower receives notice (or otherwise acquires actual knowledge) of
an Event of Default, Operator receives any payment of fees under the Operating
Lease other than from Lender, or if Operator receives any other payment or
distribution of any kind from Borrower or from any other person or entity other
than from Lender in connection with the Operating Lease which Operator is not
permitted by this Assignment to retain for its own account, such payment or
other distribution will be received and held in trust for Lender and unless
Lender otherwise notifies Operator, will be promptly remitted, in cash or
readily available funds, to Lender, properly endorsed to Lender, to be applied
to the principal of, interest on and other amounts due under the Loan Documents
in such order and in such manner as Lender shall determine in its sole and
absolute discretion.  Operator hereby irrevocably designates, makes,
constitutes and appoints Lender (and all persons or entities designated by
Lender) as Operator’s true and lawful attorney in fact with power to endorse the
name of Operator upon any checks representing payments referred to in this
subsection;

    


    (h) during
the term of this Assignment, Operator will not commence, or join with any other
creditor in commencing any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings with respect to Borrower, without Lender’s prior
written consent, and Operator has not filed and is not subject to any filing for
bankruptcy or reorganization under any applicable bankruptcy or insolvency
laws;

    


    (i) Operator
will deliver to Lender at the address indicated above and at the same time as
such notice is given to Borrower, any notice of default under the Operating
Lease;

    


    (j) Operator
has not assigned or sublet and is now the sole owner of the interest or
leasehold estate created by the Operating Lease, and shall not hereafter
transfer the Operating Lease except as permitted by the terms thereof and with
Lender’s prior written approval;

    


    (k) Operator
will not seek to terminate the Operating Lease by reason of any default of
Borrower without prior written notice thereof to Lender and the lapse thereafter
of such time as under the Operating Lease was offered to Borrower in which to
remedy the default, and the lapse of 30 days after the expiration of such time
as Borrower was permitted to cure such default; provided, however, that with
respect to any default of Borrower under the Operating Lease which cannot be
remedied within such time, if Lender commences to cure such default within such
time and thereafter diligently proceeds with such efforts and pursues the same
to completion, Lender shall have such time as is reasonably necessary to
complete curing such default.  Notwithstanding the foregoing, in the
event either Lender or Borrower do not cure or commence curing such default
within the time provided to Borrower under the Operating Lease and the nature of
the default threatens Operator’s ability to conduct its daily business or
threatens to materially or adversely damage its property located on the
Mortgaged Property, Operator shall be permitted to exercise its rights under the
Operating Lease;


    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-14

        
          

        

      

      
         


      

    


    


    (l) Operator
will not pay any rent, fees or other sums due or to become due under the
Operating Lease (“Rent”) more than 30 days in advance of the date on which the
same are due or to become due under the Operating Lease; and

    


    (m) Operator
will certify promptly in writing to Lender in connection with any proposed
assignment of the Instrument, whether or not any default on the part of Borrower
then exists under the Operating Lease, and will execute such estoppel
certificates and subordination agreements as Lender shall reasonably
require.

    


    
      	
              15.  

            	
              OPERATOR
      CERTIFICATIONS.  Operator certifies as
      follows:

            


    

    


    (a) Operator
has unconditionally accepted delivery of the Mortgaged Property pursuant to the
terms of the Operating Lease and is operating the Mortgaged Property as a
Seniors Housing Facility;

    


    (b) The
Operating Lease does not provide for free Rent, partial Rent, Rent concessions
of any kind, for the advance payment of Rent other than as set forth in Section
14(1) above, Rent abatement or offsetting of Rent and no Rent has been paid for
more than 30 days in advance;

    


    (c) Operator
has fully inspected the Mortgaged Property and found the same to be as required
by the Operating Lease in good order and repair, and all conditions and duties
of an inducement nature under the Operating Lease to be performed by the
Borrower have been satisfied, including but not limited to payment to Operator
of any Borrower contributions for improvements, completion by Borrower of the
construction of any improvements to be constructed by the Borrower, and payment
to Operator of any consulting fees;

    


    (d) the
primary term of the Operating Lease commenced on April 28, 2008 and continues to
April 27, 2023 and contains two (2) renewal options of ten (10) years
each.  Operator has no rights or options of purchase or first refusal
under the Operating Lease or with respect to the Mortgaged Property or any part
thereof;

    


    (e) payment
of monthly rent commenced on April 28, 2008 and is paid to May 31,
2008;

    


    (f) as of the
date of this Assignment, to the best of Operator’s knowledge, neither the
Borrower nor Operator is in default under any of the terms, conditions,
provisions or agreements of the Operating Lease and Operator has no offsets,
claims or defenses against the Borrower with respect to the Operating
Lease;

    


    (g) Operator
has paid a security or other deposit to Borrower, pursuant to the terms of the
Operating Lease;

    



    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-15

        
          

        

      

      
         


      

    


    (h) Operator
does not, has not and will not use the Mortgaged Property for the storage,
treatment, manufacturing, generation, disposal or release into the environment
of any petroleum product or substance which is classified as a hazardous
substance, pollutant or contaminant under the Federal Comprehensive
Environmental Response, Compensation and Liability Act (“CERCLA”) or other
applicable federal, state and local laws and regulations except for the safe and
lawful use and storage of quantities of pre-packaged supplies, cleaning
materials and petroleum products customarily used in the operation and
maintenance of comparable Senior Housing Facilities;

    


    (i) Operator
shall not look to Lender, any mortgagee in possession, or successor in title to
the Mortgaged Property for accountability for any security deposit or other
deposit held by Borrower;

    


    (j) Operator
currently holds the Licenses identified on Exhibit C with regard to the
Mortgaged Property, and is unaware of any other Licenses required to lawfully
operate the Mortgaged Property as an Assisted Living Facility.  Each
of the items listed on Exhibit C have been lawfully issued to Operator and are
in full force and effect.  There is no legal action pending or to the
best of Operator’s knowledge threatened which would adversely affect the
Licenses or the operations at the Mortgaged Property.  Operator is not
currently operating under a consent order or decree, or any other agreement or
decree mandated by the courts or a governmental entity that restricts or
otherwise affects the operation of the Mortgaged Property;

    


    (k) the
Mortgaged Property is operated as an Assisted Living Facility pursuant to its
Certificate of Occupancy and pursuant to its Licenses.  The
Certificate of Occupancy and Licenses are current and there are no violations of
record.  The operations at the Mortgaged Property comply with the
terms and conditions of the Certificate of Occupancy and the
Licenses.  The Certificate of Occupancy has no termination
date.  The Licenses are valid until N/A.  The Licenses must
be renewed every year;

    


    (l) renewal
of the Licenses must be applied for no later than N/A days prior to the
expiration of the Licenses;

    


    (m) foreclosure
of the Mortgaged Property by Lender or any other transfer of the Mortgaged
Property as a result of an Event of Default by Borrower under the Instrument
will not result in a revocation, suspension or limitation of the Licenses;
and

    


    (n) to the
best of Operator’s knowledge, there currently exist no grounds for the
revocation, suspension or limitation of the Certificate of Occupancy or any of
the Licenses for the Mortgaged Property.

    


    16. LICENSING
REQUIREMENTS.  [Reserved]

    


    17. CONSIDERATION. The Borrower and
Operator acknowledge that Operator is owned by parties who directly or
indirectly have an ownership interest in the Borrower, are
under


    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-16

        
          

        

      

      
         


      

    


    common
management and control and that the Borrower and Operator will benefit from the
Loan.  Accordingly, the Borrower and Operator both acknowledge receipt
of good and valuable consideration for Operator’s and Borrower’s entry into this
Assignment.

    


    18.           COLLECTIONS.  Operator
agrees that all monies collected on behalf of the Borrower shall be deposited in
one or more bank accounts in the name of Operator and Operator hereby pledges a
security interest in the bank accounts to Lender, so that such bank accounts are
security for the Loan and shall be subject to the terms of the Instrument and
other Loan Documents.

    


    19.           MODIFICATIONS
TO LOAN DOCUMENTS.  Any amendments heretofore or hereafter made
to any of the Loan Documents, other than this Assignment, shall not require the
consent of Operator.

    


    20. LENDER
REQUESTS.  Within 10 days of written request of Lender,
Operator will promptly furnish to Lender copies of all Leases, Contracts,
Licenses, books, records, monthly reports, statements of account, budgets, third
party payment documentation including but not limited to reimbursement
agreements, surveys, statements of deficiencies and plans of correction, and
cost reports related to any payments or the right to receive payments from
federal, state or local programs, boards, bureaus or agencies, and other items
which Operator is required to maintain or otherwise maintains under the
Operating Lease or which Operator maintains for its own purposes with respect to
the Mortgaged Property.  Upon an Event of Default under the
Instrument, Operator will furnish promptly to Lender evidence of deposits and
withdrawals from any account held or controlled by Operator relating to the
Mortgaged Property.

    


    21. OPERATOR
ASSIGNMENT.  As additional collateral security for the Loan and
the observance and performance by Borrower of the terms, covenants and
conditions of the Loan Documents, Operator to the extent permissible under
applicable law and regulations, hereby transfers, sets over and assigns to
Lender all of Operator’s right, title and interest in and to all Licenses and
any other agreements or permits of any nature whatsoever now or hereafter
obtained or entered into by Operator with respect to the occupancy, use,
operation, maintenance and administration of the Mortgaged Property as a Seniors
Housing Facility.

    


    22. COUNTERPARTS.  This
Assignment may be executed in any number of counterparts, each of which shall be
considered an original for all purposes; provided, however, that all such
counterparts shall constitute one and the same instrument.

    


    23.      GOVERNING
LAW.

    


    (a) This
Assignment shall be governed by and construed in accordance with the laws of the
Property Jurisdiction, and applicable federal law.

    


    (b) Operator
agrees that any controversy arising under or in relation to this Assignment
shall be litigated exclusively in the Property Jurisdiction and Operator and
Borrower irrevocably consent to service, jurisdiction, and venue of such course
for any such litigation and


    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-17

        
          

        

      

      
         


      

    


    waive any
other venue to which Operator or Borrower might be entitled by virtue of
domicile, habitual residence or otherwise.

    


    24.           SUCCESSORS
AND ASSIGNS.  This Assignment shall be binding upon Borrower,
Operator and Lender and their respective successors, transferees and assigns,
and shall inure to the benefit of and may be enforced by Lender and its
successors, transferees and assigns.  Borrower and Operator shall not
assign any of their respective rights and obligations under this Assignment
without the prior written consent of Lender.

    


    25.           ENTIRE
AGREEMENT; AMENDMENTS AND WAIVERS.  This Assignment contains
the complete and entire understanding of the parties as to its subject
matter.  No amendment to this Assignment will be valid unless it is
made in writing and executed by the parties to this Assignment.  No
specific waiver or forbearance for any breach of any of the terms of this
Assignment shall be considered as a general waiver of that or any other term of
this Assignment.

    


    26.           RELATIONSHIP
OF PARTIES.  Nothing contained in this Assignment shall
constitute Lender as a joint venturer, partner or agent of Borrower or Operator,
or render Lender liable for any debts, obligations, acts, omissions or
representations of Borrower or Operator except as provided herein.

    


    27.           ENFORCEABILITY.
The determination of invalidity, illegality, or unenforceability of any
provision of this Assignment, pursuant to judicial decree, shall not affect the
validity or enforceability of any other provision of this Assignment, each of
which shall remain in full force and effect.


    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-18

        
          

        

      

      
         


      

    


    


    28.           ASSIGNMENT
TO FANNIE MAE.  If Lender assigns its rights under this
Assignment to Fannie Mae, all references in this Assignment to Lender shall be
deemed to be references to Fannie Mae.

    


    ATTACHED
EXHIBITS.  The following exhibits are attached to this
Assignment:

    


    [X]           Exhibit
A                                Legal
Description

    


    [X]           Exhibit
B                                Contracts

    


    [X]           Exhibit
C                                Licenses

    


    [X]           Exhibit
D                                Modifications
to Assignment

    


    


    (Signature
Pages Attached)


    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-19

        
          

        

      

      
         


      

    


    


    IN
WITNESS WHEREOF, Borrower, Lender and Operator have executed this Assignment as
of the day and year first above written.

    


    
      	 
      	
              BORROWER

            
	 
      	 
      
	 
      	
              EMERIKEYT
      SPRINGS AT OCEANSIDE INC., a California corporation

            
	 
      	 
      
	 
      	 
      
	 
      	
              By:/s/ Eric
      Mendelsohn                                                      

            
	 
      	
              Name:   Eric
      Mendelsohn

            
	 
      	
              Title:      Senior
      Vice President Corporate

                           Development
      

            


    

     

    STATE OF
_Washington_____

     

     

    COUNTY OF
_King___

     

     

    On April
23, 2008, before me, _Alissa B. Panzer____(here insert name), a Notary Public,
personally appeared Eric Mendelsohn, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person whose name is subscribed to
the within instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the person, or
the entity upon behalf of which the person acted, executed the
instrument.

     

     

    WITNESS
my hand and official seal.

     

     

    __/s/
Alissa B. Panzer ____________

     

     

    Notary
Public

     

     

    Print
Name: ___ Alissa B. Panzer _________

     

     

    My
commission expires:

     

     

    ___3-8-11_________

     


    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-20

        
          

        

      

      
         


      

    


    


    
      	 
      	 
      
	 
      	 
      
	 
      	
              LENDER:

            
	 
      	 
      
	 
      	
              KEYCORP
      REAL ESTATE CAPITAL MARKETS, INC., an Ohio corporation

            
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	
              By:           /s/ Robin M.
      Mullenix                                                      

            
	 
      	
              Name:   Robin
      M. Mullenix

            
	 
      	
              Title:      Vice
      President

            
	 
      	 
      


    

    


    


    


     

    STATE OF
TEXAS

     

     

    COUNTY OF
DALLAS

     

     

    On April
_25, 2008, before me, __Linda M. Taschler__________(here insert name), a Notary
Public, personally appeared Robin M. Mullenix, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that she executed the
same in her authorized capacity, and that by her signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.

     

     

    WITNESS
my hand and official seal.

     

     

    __/s/
Linda M. Taschler ____

     

     

    Notary
Public

     

     

    Print
Name: __ Linda M. Taschler _______

     

     

    My
commission expires:

     

     

    ___11-6-10_____

     


    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-21

        
          

        

      

      
         


      

    


    


    
      	 
      	 
      
	 
      	
              OPERATOR:

            
	 
      	 
      
	 
      	
              EMERITUS
      PROPERTIES XVI, INC., a Nevada corporation

            
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	
              By:           /s/ Eric
      Mendelsohn                                           

            
	 
      	
              Name:    Eric
      Mendelsohn

            
	 
      	
              Title:      Senior
      Vice President Corporate

                            Development

            
	 
      	 
      


    

    


    


    


    


     

    STATE OF
__Washington______

     

     

    COUNTY OF
___King____

     

     

    On April
23, 2008, before me, ____Marrji Padden________(here insert name), a Notary
Public, personally appeared Eric Mendelsohn, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.

     

     

    WITNESS
my hand and official seal.

     

     

    ____/s/
Marrji Padden ________

     

     

    Notary
Public

     

     

    Print
Name: __ Marrji Padden ____

     

     

    My
commission expires:

     

     

    ____12-19-08_______

     

    


    


    



    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                     

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
        Page-22

        
          

        

      

      
         


      

    


    EXHIBIT
A

    


    Legal
Description

    


    THE LAND
REFERRED TO HEREIN BELOW IS SITUATED IN THE COUNTY OF SAN DIEGO, STATE OF
CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

     

    PARCEL 1
OF PARCEL MAP NO. 7252 IN THE CITY OF OCEANSIDE, COUNTY OF SAN DIEGO, STATE OF
CALIFORNIA, ACCORDING TO MAP THEREOF FILED IN THE OFFICE OF THE COUNTY RECORDER
OF SAN DIEGO COUNTY MAY 11, 1978.

     

    EXCEPTING
ONE HALF OF ALL PETROLEUM AND GAS IF ANY AND ALLIED HYDROCARBONOUS SUBSTANCES
ARE RESERVED BY THE VISTA IRRIGATION DISTRICT BY DEED RECORDED JULY 17, 1945 IN
Book 1901, PAGE 429, EXCEPTING THE RIGHT TO ENTER UPON SAID LAND AS QUITCLAIMED
BY THE VISTA IRRIGATION DISTRICT, JUNE 18, 1987 AS INSTRUMENT NO.
87-340401.

     

    Assessor’s
Parcel Number:  168-012-27

     

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    



    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                    Page
      A-1

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
B

    


    Contracts

    


    (List all
Contracts currently encumbering the Mortgaged Property)

    


    


           Vendor
Name                                                                                     Contract
Term

    


    


    Holmes
Landscape
Company                                                                                                                     Automatic
Renewals

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    



    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                    Page
      B-1

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
C

    


    Licenses

    


    (List all
Licenses pertaining to the Mortgaged Property)

    


    
      	
              1.  

            	
              State
      of California, Department of Social Services License to operate and
      maintain a Residential-Elderly Facility with an effective date of March 1,
      2004.

            


    

    


    
      	
              2.  

            	
              City
      of Oceanside Business License effective December 7, 2007 with an
      expiration date of November 30,
2008.

            


    


    
      
        
          


          
            	
                    Subordination,
      Assignment and Security Agreement

                  	
                    Form
      4079

                  	
                    Page
      C-1

                  
	
                    (Seniors
      Housing)

                  	
                    05-05

                  	
                    ©
      2000-2005 Fannie Mae

                  


          

          


        

         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
D

    


    Modifications
to Assignment

    


    The following modifications are made to
the text of the Assignment that precedes this Exhibit:

    


    1.           Recital
E is hereby modified by replacing the words “a default by Borrower” with the
words “an Event of Default”.

    


    2.           Section
1(b) is amended by adding the following phrase to the end before the
period:  “but shall not include any contract or other agreement, or
any part of any contract or other agreement, that does not relate to the
Mortgaged Property.”

    


    3.           Paragraph
1(j) is modified by deleting the last sentence in its entirety and replacing it
with the following:

    


    
      	
               
      

            	
              “The
      term “Leases” shall also include any residency, occupancy, admission, and
      care agreements pertaining to residents of the Mortgaged Property and
      shall also specifically include, without limitation, the Operating
      Lease.”

            


    

    


    4.           The
last sentence of Paragraph 3(b) is modified by adding the words “if and to the
extent required by Lender,” before the words “Lender and Operator have
executed”.

    


    5.           Paragraph
3 is amended to add the following paragraph (h) at the end thereof:

    


    
      	
               
      

            	
              “(h)

            	
              "As
      consideration for the material financial benefits to be derived from
      Lender’s approval of the Operating Lease and providing the Loan, Operator
      hereby agrees upon the occurrence of an Event of Default and at the option
      of Lender, that it shall provide all necessary services required under any
      Operating Lease or applicable licensing or regulatory requirements
      subject, however, to Lender making available (to the extent in Lender’s
      possession or under Lender’s control) the revenues generated from the
      Mortgaged Property if and to the extent necessary to cover the actual
      out-of-pocket costs of such services (exclusive of fees to Operator), and
      shall fully cooperate with Lender and any receiver as may be appointed by
      a court, in performing these services and agrees to arrange for an orderly
      transition to a replacement operator, manager or provider of the necessary
      services, and to execute promptly all applications, assignments, consents
      and documents requested by Lender to facilitate such transition; provided,
      however, nothing herein shall be construed as requiring the Operator to
      allow a third party to operate the Mortgaged Property under its License
      except to the extent permitted by applicable
  law.”

            


    

    


    6.           Paragraph
4(e) is modified by adding the words “Subject to applicable Privacy Laws,” at
the beginning of the first sentence.

    


    7.           Paragraph
4(f) is hereby deleted in its entirety and restated as follows:

    



    
      
         


      

      
        Page
D-1

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              “(f)

            	
              Operator
      shall not lease any portion of the Mortgaged Property for non-residential
      use except with the prior written consent and approval of Lender with the
      exception of the Operating Lease which has previously been approved by
      Lender; provided, however, that Lender’s prior written consent and prior
      written approval shall not be required with respect to commercial leases
      for hair salons, physical therapy spaces, or other leases covering floor
      space not exceeding 3,000 square feet, provided that the lessee and its
      business and non-residential use of a portion of the Mortgaged Property
      are consistent with similarly situated senior housing facilities (an
      “Immaterial Commercial Lease”).  Operator shall not modify the
      terms of, extend or terminate, any Lease for non-residential use
      (including any Lease in existence on the date of this Instrument) without
      the prior written consent of Lender; provided, however, no such consent
      shall be required with respect to any modification, extension or
      termination of any Immaterial Commercial Lease.  Operator shall,
      without request by Lender, deliver an executed copy of each
      non-residential Lease to Lender promptly after such Lease is
      signed.  All non-residential Leases (including, without
      limitation, the Operating Lease but specifically excluding all Immaterial
      Commercial Leases) and renewals or extensions of existing Leases, shall
      specifically provide that (1) such Leases are subordinate to the lien of
      this Instrument (unless waived in writing by Lender); (2) the resident or
      tenant shall attorn to Lender and any purchaser at a foreclosure sale,
      such attornment to be self-executing and effective upon acquisition of
      title to the Mortgaged Property by any purchaser at a foreclosure sale or
      by Lender in any manner; (3) the resident or tenant agrees to execute such
      further evidences of attornment as Lender or any purchaser at a
      foreclosure sale may from time to time request; (4) the Lease shall not be
      terminated by foreclosure or any other transfer of the Mortgaged Property;
      (5) after a foreclosure sale of the Mortgaged Property, Lender or any
      other purchaser at such foreclosure sale may, at Lender’s or such
      purchaser's option, accept or terminate such Lease; and (6) the resident
      or tenant shall, upon receipt after the occurrence of an Event of Default
      of a written request from Lender, pay all Rents payable under the Lease to
      Lender.”

            


    

    


    8.           Paragraph
5(a) is modified by adding the words “, the average annual consideration of
which is at least $20,000.00,” after the words “Operator has entered into the
Contracts” in the first sentence.

    


    9.           Paragraph
5(b) is modified by adding the words “(including the Contracts identified in
Exhibit B)” after the words “in, to and under the Contracts” in the first
sentence.

    


    10.           Paragraph
5(e)(1) is hereby modified by adding the words “except as otherwise disclosed in
writing to Lender,” at the beginning of the paragraph.  In addition,
the representation that the Contracts are assignable shall be made only with
respect to the Contracts listed on Exhibit B.

    


    11.           Paragraph
6(iii) is modified by adding the words “except as such enforceability may be
limited by creditors rights laws and general principles of equity,” to the end
thereof.

    


    12.           Paragraph
7(a) is modified by adding the words “other than Borrower” before the words
“without the prior written consent of Lender;”.

    



    
      
         


      

      
        Page
D-2

        
          

        

      

      
         


      

    


    13.           Paragraph
7(b) is modified by adding the words “to any person or entity other than Lender”
before the words “without the prior written consent”.

    


    14.           Paragraph
8 is modified by:

    


    (i)           adding
the words “subject, however, to Lender making available (to the extent in
Lender’s possession or under Lender’s control) the revenues generated from the
Mortgaged Property if and to the extent necessary to cover the costs of such
services” after the words “licensing or regulatory requirements” in the third
sentence.

    


    (ii)           adding
the words “; provided, however, nothing herein shall be construed as requiring
Operator to allow a third party to operate the Mortgaged Property under its
License except to the extent permitted by applicable law” to the end of the
paragraph before the period.

    


    15.           Paragraph
9 is modified by:

    


    (i)           adding
the following after the word “thereafter” in the first sentence:

    


    “while
such Event of Default is continuing”

    


    
      	
               
      

            	
              (ii)

            	
              adding
      the following after the word “emergency” at the end of the paragraph
      before the period:

            


    

    


    “, but
subject, in each instance, to any requirements of applicable law with respect to
the operation of the Mortgaged Property by a duly licensed
operator”

    


    16.           Paragraph
14(a) is modified by:

    


    
      	
               
      

            	
              (i)

            	
              adding
      the word “those” before the words “financial statements of Operator” in
      the first sentence.

            


    

    


    
      	
               
      

            	
              (ii)

            	
              adding
      the words “as are required by the terms of the Security Instrument,”
      before the words “and allowing Lender to undertake inspections” in the
      first sentence.

            


    

    


    
      	
               
      

            	
              (iii)

            	
              adding
      the words “subject to Lender’s compliance with applicable Privacy Laws” at
      the end of the first sentence before the
period.

            


    

    


    
      	
               
      

            	
              (iv)

            	
              adding
      the words “if applicable,” after the words “including without limitation,”
      in the second sentence.

            


    

    


    
      	
               
      

            	
              (v)

            	
              adding
      the words “and fails to cure such default within any cure period set forth
      in the Operating Lease,” after the words “operate the Mortgaged Property”
      in the third sentence.

            


    

    


    17.           Paragraph
14(j) is modified by adding the words “Except as permitted by the terms hereof
or of the Security Instrument,” at the beginning of the paragraph.

    


    18.           Paragraph
15(h) is modified by deleting the “and,” after the words “cleaning materials”
and adding the words “and medical products and devices” after the words
“petroleum products”.


    
      
         


      

      
        Page
D-3

        
          

        

      

      
         


      

    


    


    19.           Paragraph
15(i) is modified by adding the words “unless the same is actually delivered to
Lender” at the end of the paragraph before the semi-colon.

    


    20.           Paragraph
15(n) is modified by adding the following at the end of the paragraph before the
“; and”:

    


    “as long
as the Operating Lease remains in effect but will, if accompanied by a
termination of the Operating Lease, require a new operator to secure a license
in its own name to operate the Mortgaged Property”

    


    21.           The
first sentence of Paragraph 20 is hereby amended by deleting the introductory
phrase in its entirety and restating it as follows:

    


    “Within
10 days after receipt of a written request from Lender and subject to applicable
Privacy Laws,”

    


    22.           All
capitalized terms used in this Exhibit not specifically defined herein shall
have the meanings set forth in the text of the Assignment that precedes this
Exhibit.

    


    


    
      	
               
      

            	
              (Initial
      Pages Attached)

            


    


    
      
         


      

      
        Page
D-4

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              Initial
      Page to Exhibit D Modifications to
Agreement

            


    

    


    


    
      	
              Borrower’s
      Initials:

            	
              /s/
      EM

            	 


    


    
      
         


      

      
        Page
D-5

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              Initial
      Page to Exhibit D Modifications to
Agreement

            


    

    


    


    
      	
              Lender’s
      Initials:

            	
              /s/
      RM

            	 


    


    
      
         


      

      
        Page
D-6

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              Initial
      Page to Exhibit D Modifications to
Agreement

            


    

    


    


    
      	
              Operator’s
      Initials:

            	
              /s/
      EM

            


    

    
      	
               

            


    

    



    
      
         


      

      
        Page
D-7