**MANAGEMENT
      AGREEMENT**


( **The
      Court at Tucson** )





THIS
      MANAGEMENT AGREEMENT (this “ **Agreement** ”)
      is
      made and entered into as of the 1 st day of
      December, 2006, by and among BREA TUCSON LLC, a Delaware limited liability
      company (“ **Owner** ”),
      TUCSON SENIORCARE, LLC, an Indiana limited liability company (“ **Licensee** ”),
      and
      EMERITUS CORPORATION, a Washington corporation (“ **Manager** ”)
      in
      connection with the memory care facility known as the “The Court at Tucson”
located at Tucson, Arizona (“ **Facility** ”).





**WITNESSETH
      THAT:**





WHEREAS, **** Owner
      has
      acquired the Facility as of the date of this Agreement.




WHEREAS, **** Owner
      has
      leased the Facility to Licensee pursuant to that certain leased of even date
      herewith (the “ **Sale
      Leaseback Agreement** ”).




WHEREAS,
      in connection with the ownership of the Facility, Owner and Licensee desire
      to
      engage Manager as its property manager for the Facility pursuant to the terms
      hereof.




NOW,
      THEREFORE, in consideration of the promises and the respective undertakings
      of
      the parties hereinafter set forth, it is hereby agreed as follows:







**AGREEMENT**





The
      parties agree as follows:





|**1.** | **Retention
              of Services**
|------ | ---------------------------------------




|**1.1** | **Retention**
|------- | -------------




Subject
      to the terms and conditions contained herein, Manager shall be the Licensee’s
      exclusive agent for the purpose of supervising, managing, operating, and
      maintaining the Facility in the name and for the account of Licensee and Owner.
      Manager accepts such retention and engagement and further agrees
      to:





|(a) | Perform
              the duties and responsibilities of Licensee as set forth in the laws
              of
              the state wherein the Facility is located, as well as under the laws
              of
              the United States government as relating to such facility, resident
              agreements (the “**Resident
              Agreements**”)
              and other agreements (the “**Leases**”),
              if any, for the use or occupancy of space in the Facility (whether
              by
              residents, licensees, concessionaires, permissive use arrangement,
              or
              otherwise);
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(b) | Perform
              the duties and responsibilities of Manager as set forth in this Agreement
              and as mandated under federal and state laws;
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------




1


|(c) | Promptly
              notify Licensee and Owner of any inquiry, investigation, complaints,
              orders, demands, or directives received from or by the state licensing
              agency, or any governmental authority or quasi governmental authority
              or
              their agents and contractors pertaining to any matter that is related
              to
              or could impact Licensee’s operating license for the Facility
              (collectively “**Investigation**”),
              and all responses, negotiations and settlements to an Investigation
              shall
              be subject to the approval by Licensee using reasonable
              discretion.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(d) | Use
              its Best Efforts (as defined in Section 4.1 hereof) to supervise and
              direct the management and operation of the Facility in an cost-effective
              and efficient manner; and
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(e) | Consult
              with Licensee and Owner and keep Licensee and Owner advised of all
              major
              policy and any licensing matters relating to the
              Facility.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




*Provided,
      however,* Owner,
      subject to the terms of the Sale Leaseback Agreement, shall retain sole
      ownership of, and nothing herein shall be construed to give Manager any interest
      in (other than such limited rights to possession or use as may be required
      to
      allow Manager to perform its obligations under this Agreement and the laws
      of
      the state wherein the facility is located, as well as any applicable federal
      laws): (i) the Facility; or (ii) any assets (including, without
      limitation, any furnishings, fixtures, trade fixtures, equipment, supplies,
      consumables, inventories, tangible and intangible personal property, accounts
      and accounts receivable, Resident Agreements and other contracts or agreements
      relating to the Facility, and insurance and condemnation proceeds) necessary
      or
      convenient to the ownership, use, and operation of the Facility and acquired
      with Owner’s funds or revenues of the Facility. Except as otherwise specifically
      provided herein, all expenses incurred by Manager in the operation and
      management of the Facility in accordance with this Agreement, including without
      limitation Manager’s Fee (as defined below), shall be paid from revenues of the
      Facility.





|**1.2** | **Services**
|------- | ------------




The
      management services to be provided by Manager with respect to the Facility
      are
      as follows:





|(a) | Performance
              of the duties and obligations of Licensee under applicable federal
              and
              state laws, the Resident Agreements and Leases;
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(b) | Diligent
              monitoring of the Facility’s profitability and oversight in accordance
              with the Approved Annual Budget (as defined
              below);
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(c) | Oversight
              of the assisted living and/or memory care program approved by the state
              licensing agency and Owner for the Facility (which approval shall include,
              without limitation, the form of Resident Agreement to be used in
              connection with the assisted living and/or memory care program at the
              Facility, and which approval shall not be withheld with respect to
              any
              form of Resident Agreement reasonably required to comply with applicable
              laws or regulations) and diligent
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2


quality
      assurance monitoring to ensure compliance with all applicable laws, statutes,
      regulations, ordinances, rules, requirements (including, without limitation
      license and permit requirements), and guidelines of any governmental or
      quasi-governmental authority, and their designated agents, lawfully asserting
      jurisdiction with respect to an assisted living facility as well as compliance
      with all public and private programs through which Owner or Licensee, or Manager
      on behalf of Owner or Licensee, receives payment, reimbursement, or other
      compensation for services provided by or at the Facility, and Manager covenants
      that Manager shall use its Best Efforts to avoid citations or complaints by
      any
      such governmental authority, or any resident or resident’s family member, with
      regard to patient care or the operation and maintenance of the
      Facility;





|(d) | Provision
              of services necessary to promote customer, resident, resident families,
              government advocacy, and employee
              satisfaction;
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(e) | Diligent
              monitoring and assurance of physical plant maintenance and housekeeping
              in
              keeping with all state and federal laws;
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(f) | Oversight
              and diligent monitoring of marketing
              functions;
|--- | -------------------------------------------------------------------------------------




|(g) | Provision
              of human resources functions, to include, without limitation,
              implementation and oversight of policies and procedures that ensure
              compliance with all applicable federal, state, and local laws pertaining
              to employment taxes, workers’ compensation, and other employment-related
              matters, including, without limitation, diligent guidance and support
              relative to all employee issues;
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(h) | Provision
              of the accounting function, which function shall include without
              limitation: (i) collecting, on behalf of Licensee, revenues
              (including, without limitation, Gross Operating Revenues, as that term
              is
              defined below) generated by or in connection with the operation of
              the
              Facility, (ii) establishing and maintaining bank accounts at such
              financial institutions, in such names, and with such restrictions on
              withdrawals, as shall be expressly approved by Owner, into which accounts
              Manager covenants to deposit all such revenue, and (iii) providing,
              using GAAP, the general ledger, accounts receivable, accounts payable,
              and
              payroll functions, as well as financial statements and data processing
              in
              accordance with Section 4, below;
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(i) | Notwithstanding
              any other provision of this Agreement to the contrary, operate the
              Facility in accordance with and in compliance with all terms and
              conditions of any loan or other financing arrangement of Owner with
              respect to the Facility (“**Owner’s
              Loan**”),
              including any financing arrangement between Owner and General Electric
              Capital Corporation, a Delaware corporation (together with any other
              lender or mortgagee under an Owner’s Loan, “**Mortgagee**”),
              including all obligations to insure the Facility and the operation
              of the
              Facility thereon; and
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3





|(j) | Manage
              the Facility and oversee all related operations in compliance with
              all
              applicable laws and regulations. Manager shall use its Best Efforts
              to
              permit no act or omission to act that results in any loss, suspension,
              revocation, de-licensure, debarment, exclusion, or discipline actions
              or
              fines against the Facility, Licensee or
              Owner.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




(k)
            Manager
                shall inform Licensee and Owner immediately if any collective bargaining
                activities surface during the term of this Agreement and what efforts
                it
                is taking to provide stability support during any union
                campaign.





|**1.3** | **Term**
|------- | --------




The
      term
      of this Agreement (“ **Term** ”)
      shall
      be for one hundred eighty days (180), commencing on the effective date set
      forth
      above, provided, however that this Agreement shall automatically terminate
      upon
      the issuance of an operating license by the Arizona Department of Health
      Services (the “Department”) with respect to the Facility, or a replacement
      thereof being issued, to Owner.





|**2.** | **Compensation****and Payments**
|------ | --------------------------------




|**2.1** | **Manager’s
              Compensation**
|------- | ----------------------------------------




As
      compensation for the services to be rendered by Manager during the term of
      this
      Agreement, Manager shall be paid a monthly management fee (“ **Fee** ”)
      equal
      to five percent (5%) of the Gross Operating Revenues of the Facility, actually
      collected for such calendar month. For the purposes of this Agreement, the
      term
“ **Gross
      Operating Revenues** ”
shall
      include: all payments received in connection with Resident Agreements, Leases
      or
      other payments for the use or occupancy of space in the Facility (whether by
      residents, licensees, concessionaires, permissive use arrangement, or
      otherwise), including, without limitation, any such payments received pursuant
      to any sublease or assignment of any lease, license, concession, or other
      permissive use arrangement; all payments made by any third-party payors under
      any third-party payor program (including, without limitation, to the extent
      applicable to the Facility, Medicare, Medicaid, CHAMPUS, Blue Cross and/or
      Blue
      Shield, Managed Care Plans, or other private insurance plans or employee
      assistance programs), parking revenues, income from vending machines, photocopy
      machines, and other such devices, late charges, interest on past due rentals,
      payments under any licenses, concessions, or other agreements for advertising
      signs, telecommunications services, antennas, or disks, all lease modification,
      amendment, surrender, or cancellation payments, all proceeds in lieu of rental
      revenues from any business interruption insurance policies; all escalation
      payments; and all payments made by residents, or other users of the Facility
      for
      extra services, including the use of any personal property used in connection
      with the Facility and the provision of any health care or other personal
      services. Gross Operating Revenues shall not include income derived from
      interest on investments or otherwise, except for business interruption insurance
      proceeds as set forth above, proceeds of claims on account of insurance
      policies, abatement of taxes awards arising out of takings by eminent domain,
      discounts and dividends on insurance policies, sale or refinancing proceeds,
      monies paid for capital expenditures, all purchase discounts, and security
      deposits. Payment of the Fee with


4


regard
      to
      a given calendar month shall be made on the twenty-fifth (25th) day of such
      calendar month during the term, commencing with the calendar month in which
      Owner acquires the Facility, and may be paid even if the revenue from the
      Facility is insufficient to pay the other operating expenses of the Facility.
      Within twenty (20) days after the end of the Term, Manager shall provide to
      Licensee and Owner a year end reconciliation of the Fee for their review and
      Owner’s approval, and to the extent such approved reconciliation discloses a
      discrepancy between the Fee owed to, and the Fee actually paid to, Manager,
      such
      discrepancy shall be paid to Manager by Owner, or reimbursed to Owner, as the
      case may be, within five (5) days after such reconciliation is approved by
      Owner.





|**2.2** | **Owner
              Payments**
|------- | --------------------------------




Manager
      shall, on a monthly basis, pay to Owner, on behalf of Licensee and in lieu
      of
      Licensee’s payment of rent under the Sale Leaseback Agreement, all net income
      derived from the Facility during the Term. Other than for reimbursement of
      reasonable expenses incurred in connection with its obligations hereunder,
      and
      as otherwise approved by Manager and Owner, Licensee shall not be entitled
      to
      the use or retention of any revenues derived from the Facility during the
      Term..





|**3.** | **Annual
              Budget**
|------ | -------------------------------




**3.1**  **Preparation
      of Budget; Contents.**




Within
      ninety (90) days of Owner’s acquisition of the Facility, Manager shall prepare
      and submit to Owner for its approval, a detailed line item budget (the
“ **Annual
      Budget** ”)
      for
      the Term, which shall be in a form and with content acceptable to Owner. The
      Annual Budget shall include, among other matters, anticipated income,
      expenditures (including capital expenditures and any corresponding capital
      expenditure budget) and reserves for such year. The Annual Budget shall not
      contain expenses or allocations for home office expenses, general corporate
      or
      administrative charges, or payroll or other accounting expenses, or any other
      costs or expenses for which Manager is not entitled to reimbursement hereunder.
      The Annual Budget shall include a separate line item specifically identifying
      all fees payable to Manager and any Affiliate of Manager, with respect to the
      Facility, including any fees payable under this Agreement.




**3.2**  **[Intentionally
      deleted.]**




**3.3**  **Approval
      of Budget.**




Manager
      may proceed in accordance with the Annual Budget only if the same is approved
      by
      Owner in accordance with the provisions hereof. Upon the receipt of the proposed
      Annual Budget from Manager, Owner shall have thirty (30) days to approve or
      disapprove in writing (specifying with reasonable particularity the reasons
      for
      such disapproval) the Annual Budget. If Owner does not approve the Annual Budget
      in writing within this thirty (30) day period, then the submitted Annual Budget
      shall be deemed disapproved. The Annual Budget or a revision thereof shall
      be
      deemed finally approved by Owner only if it is approved in writing by Owner.
      Owner’s approval shall not be unreasonably withheld. Within ten (10) days of
      receiving a written response from Owner disapproving (with reasons) the Annual
      Budget (the




5


“ **Response** ”),
      Manager shall re-submit a revised Annual Budget to Owner addressing the concerns
      of Owner contained in the Response. Owner shall thereafter have ten (10) days
      to
      approve the Annual Budget, and if not approved or disapproved within such time
      period, such proposed Annual Budget shall be deemed provisionally approved.
      Manager and Owner shall continue with this process until the Annual Budget
      is
      finally approved. As used herein, the “ **Approved
      Annual Budget** ”
means
      (A) the Annual Budget for the then current year as approved by Owner in
      accordance with the provisions of this subsection 3.3 or (B) if the Annual
      Budget for the then current year has not yet been so approved by Owner, then
      during the interim period until such time as Owner approves the Annual Budget
      for such year, a temporary Annual Budget shall take effect which shall be equal
      to the prior year’s approved Annual Budget increased by five percent (5%) for
      all line items, except for taxes and any insurance premiums included in the
      prior year’s approved Annual Budget as well as utilities, each of which shall
      equal the amount actually incurred for each such item.




**3.4**  **Obligation
      and Authority to Implement Budget.**




Manager
      shall implement the Approved Annual Budget in accordance with the foregoing
      provisions and shall be authorized, without the need for further approval by
      Owner, to make the specified expenditures and incur the specified obligations
      provided for in the Approved Annual Budget (but only if (a) the entry into
      any
      agreement provides for a term of less than three (3) months, unless terminable
      by the Facility or by Owner without cause or penalty upon thirty (30) days’
notice to the other party), (b) the specified expenditure or obligation is
      for a
      sum less than Fifty Thousand Dollars ($50,000) (and a series of related
      expenditures for amounts less than $50,000 shall be construed as a single
      agreement for purposes of this subsection (b)), and (c) Manager acts in strict
      conformance with the Approved Annual Budget in all respects (including the
      nature, amount and timing of each such expenditure or obligation) except as
      provided in subsection 3.5 below, and subject to the other provisions of this
      Agreement).




**3.5**  **Permitted
      Deviations from Budget.**




Any
      deviation from or expenditure inconsistent with the Annual Budget (or the entry
      into any agreement requiring such deviation or expenditure) shall require the
      prior written approval of Owner. The consent of Owner to an expenditure payable
      to an unrelated third party exceeding the amount specified for such expenditure
      in the Annual Budget shall not be required in any of the following
      circumstances: (a) Manager, in its reasonable judgment, deems there to be an
      emergency requiring such expenditures to effectuate immediate action necessary
      for the protection of the assets of the Facility or to avoid property damage
      or
      personal injury or to preserve the well being of residents in the Facility
      or to
      avoid impairment of the Facility operating licenses, (b) such expenditure would
      not cause the aggregate amount of the expenses (excluding the expenses described
      in clause (c) below) within the Annual Budget to exceed 105% of the entire
      amount of budgeted expenses (excluding the expenses described in clause (c)
      below) in the Annual Budget (taking into account the amounts expended to date
      and reasonably anticipated expenses); or (c) expenditures for real property
      taxes and assessments and utilities. The provisions of clause (b) above are
      intended to be in lieu of any contingency category that covers, in whole or
      in
      part, costs of the types described in any of the other categories under the
      Annual Budget (so that excess costs in a specific category might be covered
      by
      such contingency category) and accordingly, there shall be no such contingency
      line item in the Annual Budget;




6


the
      provisions of clause (b) above are not intended, however, to be in lieu of
      a
      contingency category for unanticipated costs that are not of the types described
      in other categories under the Annual Budget. Notwithstanding the foregoing,
      if
      the Manager reasonably believes that any Annual Budget excess related to
      variable expenses shall be corrected prior to the end of the applicable fiscal
      year, or that such excess is proportionately offset by non-forecasted revenue
      gains (without any decrease in applicable profit margins), then such excess
      shall not be considered for the purposes of Default under this Agreement until
      such fiscal year is concluded and reconciled. In the event the reconciliation
      demonstrates that the Annual Budget excess related to variable expenses was
      corrected prior to the end of the such fiscal year, or was proportionately
      offset by non-forecasted revenue gains (without any decrease in applicable
      profit margins), then any penalty or default under this Agreement related to
      such excess shall be waived by Owner. Manager shall promptly notify Owner,
      both
      by telephone and in writing, of each permitted Budget deviation made pursuant
      to
      this Section 3 and shall promptly supply Owner with such information with
      respect thereto as Owner may reasonably request.




|**4.** | **Duties
              of Manager**
|------ | -----------------------------------




|**4.1** | **General
              Duty and Relationship.**
|------- | ------------------------------------------------




Manager
      shall use its Best Efforts (as hereinafter defined) in the management and
      operation of the Facility to be in compliance with all applicable statutory
      and
      regulatory requirements, and otherwise consistent with similarly situated senior
      housing assisted **** living
      facilities of comparable standard. As used in this Agreement, “ **Best
      Efforts** ”
shall
      mean diligent efforts consistent with reasonable business judgment and
      prevailing commercial practices of institutional property managers that manage
      properties similar to the Facility in the same market area as the Facility.
      Except to the extent required to perform its duties under this Agreement or
      by
      applicable law or pursuant to court order or judicial process, Manager shall
      not
      reveal or give out any information in connection with the Facility, the Resident
      Agreements or the accounts of the Facility to any person without obtaining
      Licensee’s and Owner’s prior written authorization, which shall not be
      unreasonably withheld.




|**4.2** | **Books
              and Records.**
|------- | ------------------------------------



Manager
      shall maintain records, books and accounts with respect to the management and
      operation of the Facility and shall retain those records during the Term and,
      to
      the extent Owner elects not to take possession of the same upon termination
      of
      the Term, for a period of three (3) years thereafter. Manager shall maintain
      all
      required records pertaining to the care of individual residents in accordance
      with all pertinent requirements with respect to maintaining the privacy of
      such
      records of care provided to the individual residents under applicable state
      law
      as well as Federal Law, including the Privacy and Security rules in the Federal
      Health Insurance Portability and Accountability Act of 1996 (“ **HIPAA** ”).
      Subject to the requirements of HIPAA, Licensee and Owner shall have the right,
      during Manager’s normal business hours, to inspect and copy such records and
      audit the monthly reports required by Section 5.6 hereof. Such books and records
      will include all canceled checks (if canceled checks are provided by the bank
      to
      Manager), a separate set of books and records relating to the operation of
      the
      Facility maintained on a cash and accrual basis, and monthly summaries of all
      accounts receivable and accounts payable (to be delivered no later than fifteen
      (15) days after each month). Manager will hold all




7


such
      files, books, records and checks (the “ **Records** ”)
      in a
      secure location and separate from records relating to other purposes.




Subject
      to the requirements of HIPAA, during the Term, Owner and its agents,
      representatives, employees, and auditors may, at such reasonable times as Owner
      may determine, inspect, audit, and copy any of the Manager’s records, files,
      reports, and related materials, including, but not limited to all documents,
      billing, and invoicing related to Medicare and Medicaid billing submitted as
      claims to the government, pertaining to the Facility or to Manager’s performance
      under this Agreement. If an audit by Owner discloses any sum due Owner by
      Manager or any overpayment to Manager, Manager will promptly reimburse Owner
      for
      any amounts due. If the audit discloses a shortfall variance of more than five
      percent (5%) in the aggregate of amounts due Owner by Manager, Manager will
      bear
      the reasonable cost of the audit. Otherwise, the audit will be at Owner’s
      expense.




|**4.3** | **Employment
              of Personnel.**
|------- | ------------------------------------------



Manager
      shall use its Best Efforts to have in its employ at all times a sufficient
      number of capable employees meeting state or federal government requirements,
      to
      enable it to properly, adequately, safely and economically manage, operate,
      maintain and account for the Facility. Subject to the foregoing, all matters
      pertaining to the employment, supervision, compensation, promotion and discharge
      of such employees are the responsibility of Manager, with respect to which
      Manager shall exercise reasonable care. Manager is in all respects the employer
      of such employees, including all on-site and certain off-site personnel. Manager
      shall negotiate with any union lawfully entitled to represent such employees
      and
      may execute in its own name, and not as agent for Licensee or Owner, collective
      bargaining agreements or labor contracts resulting therefrom. Manager shall
      comply with all applicable laws and regulations having to do with worker’s
      compensation, social security, unemployment insurance, hours of labor, wages,
      working conditions and other employer employee related subjects. Manager
      represents that it is and will continue to be an equal opportunity employer
      and
      must advertise as such. Manager shall have the power to hire, dismiss or
      transfer the executive director at the Facility; provided, however, Manager
      shall keep Licensee and Owner reasonably informed with respect to the Manager’s
      desire to transfer or terminate the executive director, and shall consult with
      Licensee and Owner with respect to the hiring of the position, it being
      understood, however, that any final decisions made in this regard shall be
      made
      by Manager. If Licensee or Owner becomes dissatisfied with the performance
      of
      the executive director, Licensee and Owner shall each have the right to confer
      with representatives of Manager in charge of operating the Facility to express
      such dissatisfaction and to discuss the possible consideration of replacing
      the
      executive director or otherwise placing the executive director on a performance
      action plan; it being understood, however, that any final decisions made in
      this
      regard shall be made by Manager. All employment arrangements are therefore
      solely Manager’s responsibility and Licensee and Owner shall have no liability
      with respect thereto. Nothing contained herein, however, shall be deemed to
      permit Manager to charge Owner, or to use the income of the Facility to pay,
      for
      the services of Manager’s employees (except to the extent provided in the
      Approved Annual Budget).




|**4.4** | **Maintenance
              and Repairs.**
|------- | ------------------------------------------



8


Manager
      shall make periodic inspections of the Facility, including, without limitation,
      the resident apartments, parking areas, and common areas, to determine necessary
      and appropriate repairs, maintenance and replacements. Manager shall keep and
      maintain the Facility in a good, orderly, clean, safe, sanitary and sightly
      condition and shall perform all repairs, maintenance and changes, do all
      decorating, and purchase all supplies, necessary, within the parameters of
      the
      Approved Annual Budget, for the proper operation of the Facility.




|**4.5** | **Financial
              Statements**
|------- | --------------------------------------



Manager
      shall deliver or cause to be delivered to Owner statements as
      follows:




|(a) | Annual
              financial statements (balance sheet and income statement) in a format
              acceptable to Owner within ninety (90) days of the end of the calendar
              year, audited by the “**Facility’s
              Accountants**”
              (i.e., KPMG or another independent nationally recognized accounting
              firm
              approved by Owner).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | A
              monthly report for each calendar month, certified to be true, accurate
              and
              complete in all material respects, and submitted to Owner within thirty
              (30) days of the end of each such calendar month (the “**Periodic
              Report**“).
              Each Periodic Report shall be in accordance with
              GAAP.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



All
      costs
      and expenses incurred in connection with the preparation of any statements,
      schedules, computations and other reports required under this Section 4.5 shall
      be borne by Manager. If Owner requests the preparation of any audited profit
      and
      loss or balance sheet statements, forecasts or other non-standard analysis
      the
      cost thereof shall be borne by Owner. All costs of tax return preparation and
      audits shall be at Owner expense.




|**4.6** | **Third
              Party Reports.**
|------- | --------------------------------------




Provided
      Licensee or Owner, as applicable, has given reasonable prior written notice
      to
      Manager of such reporting requirements, Manager shall prepare all reports and
      financial statements required by any third party to which Licensee or Owner,
      as
      applicable, is required by law or contract to report, including any Mortgagee,
      and deliver the same to Licensee or Owner, as applicable, within a time period
      such that Licensee or Owner, as applicable, will be able to satisfy its
      reporting obligations to such third party under the documents or regulations
      requiring such reporting, such as loan documents evidencing an Owner Loan.
      Additionally, Manager shall supply the information and reports required to
      prepare any other financial reports required by Owner in good faith. Any reports
      or financial statements required under this Section 4.6 that are in excess
      of
      those required under Section 4.5 shall be prepared at Licensee’s or Owner’s, as
      applicable, expense.





|**4.7** | **Data
              Processing.**
|------- | ----------------------------------




Manager
      shall, at its own expense, directly or through an affiliate, provide the data
      processing required to maintain the financial, payroll, and accounting records
      of the Facility.





**4.8**  **Health
      Care Licenses.**


9




Manager
      shall use its Best Efforts to maintain, and if applicable, expeditiously apply
      for, acquire, and obtain, health care licenses required under applicable law
      for
      the operation of the Facility in the name of the Owner and shall keep Owner
      fully informed of all efforts and status of said applications.





|**4.9** | **Insurance.**
|------- | --------------



It
      is the
      intention of the parties hereto to secure the broadest and most cost-effective
      insurance available to cover Owner and Manager in the protection, operation
      and
      enhancement of the Facility, which is usually accomplished when both principal
      parties are insured under the same policies. Thus, Manager, Licensee, Owner
      and
      Owner’s lender are (1) to be included as an insured under Owner’s general
      liability insurance covering inherent and operational hazards associated with
      the management of the Facility, and (2) to receive a waiver, to the extent
      necessary, of all direct damage insurers’ rights of subrogation against Manager
      and Owner under all direct damage insurance policies covering the Facility.
      Manager shall not be required to obtain separate coverage except to the extent
      Manager is no longer covered under Owner’s policies, and in such event, any
      claims made under such Manager’s coverage shall include Owner as an additional
      insured and waive Manager’s insurer’s rights of subrogation against Owner where
      such waivers are possible.





All
      insurance policies required of either party under this Section 4.9 shall be
      maintained by Manager as an expense of the Facility (and not of Manager or
      Licensee) and shall (1) be issued by reputable, financially sound companies
      licensed to do business in the state in which the Facility is located, and
      which
      have an A.M. Best rating of A-VIII, or better; and (2) require at least thirty
      (30) days’ unconditional notice to the other party of cancellation of coverage
      (except that ten (10) days’ notice of cancellation for non-payment of premium
      may be given). Owner’s General Liability Insurance policy shall be endorsed to
      be primary insurance in its coverage of both parties, and any General Liability
      Insurance policy maintained separately by Manager shall be endorsed to be excess
      and non-contributory with policies carried by Owner.





Notwithstanding
      anything to the contrary herein, with the exception of losses, damages,
      liability or expenses incurred due to the gross negligence or willful misconduct
      of the other, neither Manager nor Owner shall assert against the other, and
      each
      does hereby waive with respect to each other, any claims for any losses,
      damages, liability or expenses (including attorneys’ fees) incurred or sustained
      by either of them on account of injury to persons or damage to property arising
      out of the ownership, operation and maintenance of the Facility to the extent
      that the same are covered by the insurance carried under this Section 4.9.
      Each
      party shall cause its respective insurance companies to waive subrogation
      against the other on account thereof.





|**5.** | **Default.******
|------ | ----------------




In
      the
      event that any party is in default of any of the obligations hereunder (the
      “ **Defaulting
      Party** ”),
      any
      of the other parties (each, a “ **Non-Defaulting
      Party** ”)
      shall
      give the Defaulting Party written notice of such default (the “ **Notice
      of Default** ”).
      The
      Defaulting Party shall thereafter have ten (10) days after receipt of such
      written Notice of Default to cure a


10


monetary
      default and thirty (30) days after receipt of such written Notice of Default
      to
      cure a non-monetary default, provided that if due to the nature of a
      non-monetary default the Defaulting Party cannot reasonably cure such default
      within such thirty (30) day period, then the Defaulting Party shall have such
      additional period of sixty (60) days to cure such default if the Defaulting
      Party commences the cure within said initial thirty (30) day period and
      thereafter diligently pursues the same to completion.








|**6.** | **Termination
              Rights.**
|------ | -------------------------------------




This
      Agreement may be terminated and, except as to liabilities or claims of either
      party hereto which may have arisen before such termination, the obligations
      of
      Manager and Owner under this Agreement may be terminated, by mutual agreement
      of
      Manager, Licensee and Owner or otherwise upon the written notice of the party
      terminating this Agreement to the other party, after the occurrence of any
      of
      the events described in this Section 6.





|**6.1** | **Termination
              by Owner****and Licensee.**
|------- | -------------------------------------------------------



Owner,
      and, subject to the preceding paragraph, Licensee, may, at its option, terminate
      this Agreement at any time for any of the reasons set forth in Section 6.1(a)
      through 6.1(g), , provided, however, that in no event may Licensee terminate
      this Agreement without the prior written approval of Owner, which, except as
      provided otherwise in Section 6.1(c), may be given or withheld in Owner’s sole
      and absolute discretion:





(a)  Default .
      Default
      by Manager under this Agreement and Manager’s failure to cure the same within
      the applicable cure period set forth in Section 5 .




(b)  Bankruptcy
      or Dissolution and Certain Other Events .
      The
      occurrence of any Bankruptcy/Dissolution Event with respect to Manager. For
      purposes of this Section 6.1(b), a “Bankruptcy/Dissolution Event with respect to
      Manager” shall mean the commencement or occurrence of any of the following:
      Manager shall apply for or consent to the appointment of a receiver, trustee,
      or
      liquidator of all or a substantial part of Manager’s assets, file a voluntary
      petition in bankruptcy, make a general assignment for the benefit of creditors,
      file a petition or any answer seeking reorganization or arrangement with
      creditors, or take advantage of any insolvency law, or if any order, judgment,
      or decree shall be entered by any court of competent jurisdiction, on the
      application of a creditor, adjudicating Manager as bankrupt or insolvent or
      approving a petition seeking reorganization of Manager, or appointing a
      receiver, trustee, or liquidator with respect to all or a substantial part
      of
      Manager’s assets, and such order, judgment, or decree shall continue for any
      period of ninety (90) consecutive days.




(c)  Suspension
      or Termination of Licensure .
      If any
      license for the operation for the Facility is suspended, terminated, or revoked
      for any reason other than a cause which is outside the control of Manager,
      or,
      to the extent applicable, any Medicare or Medicaid provider agreement with
      respect to the Facility is involuntarily decertified and such suspension,
      termination, revocation, or involuntarily decertification shall continue in
      effect for a period of thirty (30) consecutive days after all appeals have
      been
      exhausted. Notwithstanding anything to the contrary contained herein, Owner
      shall not unreasonably




11


withhold
      its approval of Licensee’s option to terminate this Agreement pursuant to this
      Section 6.1(c).




(d)  Tortious
      Acts By Manager .
      Any act
      by Manager that constitutes fraud, willful misconduct, or gross negligence.




(e)  Casualty
      or Condemnation .
      In the
      event Owner permanently discontinues the operation of the Facility on account
      of
      damage to or destruction of, or a taking by (or sale under threat of) eminent
      domain of, a substantial part of the Facility or pursuant to Section 8.8.




(f)  Debt
      Failure .
      Any
      default under any third party mortgage financing entered into by Owner and
      secured by the Facility.




(g)  Termination
      Upon Transfer .
      If
      Owner sells or otherwise transfers its interest in the Facility, or if all
      of
      the membership interests in Owner are sold to a third party.




|**6.2** | **Termination
              by Manager**
|------- | ----------------------------------------




Manager
      may, at its option, terminate this Agreement upon sixty (60) days’ notice with
      cause at any time, subject to providing notice to Licensee and Owner as set
      forth below, and for any of the reasons set forth in Section 6.2(a) through
      6.2(f), , provided, however, that in no event may Licensee terminate this
      Agreement due to a default by Licensee, without the prior written approval
      of
      Owner, which may be given or withheld in Owner’s sole and absolute
      discretion:




(a)  Default . Default
      by Licensee or Owner under this Agreement and Owner’s and Licensee’s, as
      applicable, failure to cure the same within the applicable cure period set
      forth
      in Section 5.




(b)  Suspension
      or Termination of Licensure .
      If any
      license for the operation of the Facility is at any time suspended, terminated,
      or revoked due to the fault of Owner and such suspension, termination or
      revocation shall continue in effect for a period of thirty (30) consecutive
      days
      after all appeals have been exhausted.




(c)  Bankruptcy
      or Dissolution .
      The
      occurrence of any Bankruptcy/ Dissolution Event with respect to Owner. For
      purposes of this Section 6.2(c), a “ **Bankruptcy/
      Dissolution Event with respect to Owner** ”
shall
      mean the commencement or occurrence of any of the following: if Owner shall
      apply for or consent to the appointment of a receiver, trustee, or liquidator
      of
      all or a substantial part of Owner’s assets, file a voluntary petition in
      bankruptcy, make a general assignment for the benefit of creditors, file a
      petition or any answer seeking reorganization or arrangement with creditors,
      or
      take advantage of any insolvency law, or if an order, judgment, or decree shall
      be entered by a court of competent jurisdiction, on the application of a
      creditor, adjudicating Owner as bankrupt or appointing a receiver, trustee,
      or
      liquidator of Owner with respect to all or a substantial part of Owner’s assets,
      and such order, judgment or decree shall continue in effect for any period
      of
      ninety (90) consecutive days.




12


(d)  Termination
      Upon Transfer .
      If
      Owner sells or otherwise transfers its interest in the Facility, or if all
      of
      the membership interests in Owner are sold to a third party.




(e)  Casualty
      or Condemnation .
      Owner
      permanently discontinues the operation of the Facility on account of damage
      to
      or destruction of, or a taking by (or sale under threat of) eminent domain
      of, a
      substantial part of the Facility or pursuant to Section 8.8.




(f)  Insufficient
      Funds .
      The
      Facility is not generating sufficient revenue to pay the costs and expenses
      of
      the Facility, and there are insufficient funds in the Operating Account (as
      hereinafter defined), or Owner is unwilling to place sufficient funds in the
      Operating Account, to pay same, provided that Manager gives at least thirty
      (30)
      days’ prior written notice of termination to Owner.




|**6.3** | **Effect
              of Termination**
|------- | ---------------------------------------




Termination
      of this Agreement shall terminate all rights and obligations of the parties
      hereunder, except for any provision of this Agreement which is expressly
      described as surviving any expiration or termination of this Agreement. Such
      termination, however, shall not terminate the rights and obligations of the
      parties (including any compensation due to Manager under Section 2 )
      which
      accrued prior to the effective date of termination nor shall it prejudice the
      rights of either party against the other for any breach of this Agreement.
      Upon
      termination, the payment of any compensation to Manager shall be offset by
      any
      damages (including reasonable attorneys’ fees) incurred by Licensee and Owner by
      reason of any act or omission by Manager that is a breach of this Agreement
      or
      constitutes negligence, willful misconduct, or fraud or is otherwise tortious
      (as determined by final non-appealable decision of a court of competent
      jurisdiction). Without limitation on the generality of the foregoing, either
      party’s termination of this Agreement in accordance with the terms hereof shall
      terminate any and all rights of Manager to act on behalf of or with respect
      to
      the Facility (and Manager shall, if Owner so requests, execute a notice to
      third
      parties, in form reasonably satisfactory to Owner, to the effect that Manager’s
      rights have been so terminated).





|**6.4** | **Final
              Accounting**
|------- | ----------------------------------




Upon
      the
      expiration of the Term or any other termination of this Agreement as herein
      provided, Manager shall (a) deliver to Owner a final accounting within thirty
      (30) days of such expiration or termination; (b) surrender and deliver up to
      Owner possession of the Facility and all rents and income, including resident
      security deposits, of the Facility and other monies of Owner on hand and in
      any
      bank account as soon as reasonably practicable (but no later than five (5)
      business days after such termination or expiration); (c) deliver to Owner,
      as
      received, any monies due Owner under this Agreement but received after such
      termination as soon as reasonably practicable (but no later than two (2)
      business days after receipt); (d) deliver to Owner all materials and supplies,
      keys, contracts and documents, and such other accounting papers and records
      pertaining to this Agreement as Owner shall request as soon as reasonably
      practicable; (e) assign any right Manager may have in and to any existing
      contracts relating to the operation and maintenance of the Facility as Owner
      shall require as soon as reasonably practicable (but no later than five (5)
      business days after such termination or expiration); and (f)


13


deliver
      to Owner, or Owner’s duly appointed agent, all books and records, contracts,
      leases, resident’s agreements, receipts for deposits and unpaid bills relating
      to the Facility as soon as reasonably practicable (but no later than five (5)
      business days after such termination or expiration).





|**6.5** | **Cooperation**
|------- | ---------------




In
      the
      event this Agreement is terminated, Manager shall reasonably cooperate with
      Licensee and Owner to allow Licensee and Owner to effectively and productively
      continue management activities. Without limitation of the foregoing, Manager
      shall, for a period of thirty (30) days after such expiration or termination,
      make itself reasonably available, at no cost to Licensee or Owner, to consult
      with and advise Licensee and Owner regarding the operation and maintenance
      of
      the Facility and the transfer of accounts and accounting systems.





|**7.** | **Indemnification**
|------ | -------------------




Manager
      shall indemnify, defend and hold harmless Licensee and **** Owner
      and
      their respective members, directors, officers and employees from any and all
      Claims sustained or incurred by or asserted against any one or more of them
      caused by the grossly negligent or willful misconduct or fraud of Manager or
      its
      agents or employees, or acts by Manager outside the scope of its authority
      under
      this Agreement. Owner agrees to indemnify, defend and hold harmless Manager
      and
      Licensee, and their respective shareholders, directors, officers and employees
      from any and all Claims sustained or incurred by or asserted against any one
      or
      more of them caused by the grossly negligent or willful misconduct or fraud
      of
      Owner or its agents or employees or acts by Owner outside the scope of its
      authority under this Agreement. Finally, Manager and Owner shall indemnify,
      defend and hold harmless Licensee for any matters that arise or occur after the
      date of this Agreement that relate to the operation, maintenance and management
      of the Facility, including any acts or omissions of Manager, except to the
      extent caused by Licensee. As used in this Section 7, “ **Claims** ”
means
      any third party claims, demands, causes of action, losses, damages, fines,
      penalties, liabilities, costs and expenses, including attorneys’ fees and court
      costs (except to the extent covered by insurance carried or required to be
      carried by the indemnified persons pursuant to this Agreement). Notwithstanding
      any other provision of this Agreement to the contrary, each party’s obligation
      to indemnify, defend and hold harmless the other party shall survive termination
      of this Agreement.





|**8.** | **Miscellaneous**
|------ | -----------------




|**8.1** | **Notices**
|------- | -----------




All
      notices required or permitted hereunder shall be given in writing by actual
      delivery or by facsimile transmission, with a concurrent copy sent by certified
      U.S. mail, postage prepaid, addressed to the recipient as follows:





If
      to
      Owner:     BREA
      Tucson LLC


c/o
      The
      Blackstone Group


345
      Park
      Avenue


New
      York,
      New York 10154


Attention:
      Mr. David Roth


14


Telephone:  (212)
      583-5885


Facsimile:  (212)
      583-5202





With
      Copy
      To:    Pircher,
      Nichols & Meeks


900
      North
      Michigan Avenue, Suite 1050


Chicago,
      Illinois 60611


Attention:
      Real Estate Notices (JDL)


Telephone:  (312)
      915-3112


Facsimile:  (312)
      915-3348




If
      to
      Licensee     Tucson
      SeniorCare, LLC


10401
      North Meridian Street


Suite
      122


Indianapolis,
      Indiana 46290


Attention:
      Jay L. Hicks


Facsimile:
      (317) 630-3159


Telephone:
      (317) 630-3156





With
      a
      copy to:    Bose
      McKinney & Evans LLP


135
      N.
      Pennsylvania Street, Suite 2700


Indianapolis,
      IN 46204


Attention:
      Brantley Wright


Facsimile:
      (317) 223-0306


Telephone:
      (317) 684-5306




If
      to
      Manager:  Emeritus
      Corporation


3131
      Elliott Avenue, Suite 500


Seattle,
      Washington 98121


Attention:
      Eric Mendelsohn, Esq.


Telephone:  (206)
      301-4493


Facsimile:  (206)
      357-7388





With
                Copy To:
            Foster
                Pepper PLLC


1111
                Third Avenue, Suite 3400


Seattle,
                Washington 98101


Attention:
                Laura L. McClellan, Esq.


Telephone:
                (206) 447-2871


Facsimile:
                (206) 749-1917





or
      to
      such other address or to such other person as may be designated by notice given
      from time to time during the term hereof by one party to the other. Any notice
      hereunder shall be deemed given upon actual receipt by the intended recipient
      if
      delivered by hand or by a facsimile transmission of which receipt is confirmed
      the recipient telephonically, or five (5) business days after depositing with
      the U.S. Postal Service in the manner described above.





|**8.2** | **Attorneys’
              Fees and Costs**
|------- | -------------------------------------------

15





In
      the
      event of a default hereunder, if the nondefaulting party employs an attorney
      to
      enforce its rights hereunder, the defaulting party shall be liable for all
      reasonable attorneys’ fees, court costs, and other expenses incurred by the
      nondefaulting party regardless of whether a lawsuit is filed.





|**8.3** | **Assignment**
|------- | --------------




Owner
      may
      assign all or part of this Agreement without the prior written approval of
      Manager to any third party purchaser of the Facility or all of the membership
      interests in Owner, subject to Manager’s termination rights set forth in Section
      6.2 above. Subject to the terms and conditions of Owner’s Loan, Manager may not
      assign its interest in this Agreement except to a wholly owned subsidiary of
      Emeritus Corporation. Notwithstanding anything in this Section 8.3, any
      assignment of interest must be in accordance with the terms and conditions
      of
      Owner’s Loan. This Agreement shall be binding upon and inure to the benefit of
      Owner and Manager, as well as to their respective successors and, to the extent
      permitted hereunder, their assigns. Licensee may not assign its interest in
      this
      Agreement.





|**8.4** | **Time
              of Essence**
|------- | ---------------------------------




Time
      is
      of the essence of this Agreement.





|**8.5** | **Cumulative Remedies**
|------- | -----------------------




The
      rights and remedies of the parties hereto shall not be mutually exclusive,
      i.e.,
      the exercise of one or more of the provisions hereof shall not preclude the
      exercise of any other provision hereof.




|**8.6** | **No
              Waiver**
|------- | ---------------------------




No
      waiver
      by either party of any default of the other party or of any event, circumstance
      or condition permitting a party to terminate this Agreement shall constitute
      a
      waiver of any other default of the other party or of any other event,
      circumstance or condition permitting such termination, whether of the same
      or of
      any other nature or type and whether preceding, concurrent or succeeding; and
      no
      failure on the part of either party to exercise any right it may have by the
      terms hereof or by law upon the default of the other party and no delay in
      the
      exercise of such right shall prevent the exercise thereof by the Non-Defaulting
      Party at any time when the other party may continue to be so in default, and
      no
      such failure or delay and no waiver of default shall operate as a waiver of
      any
      other default, or as a modification in any respect of the provisions of this
      Agreement. The subsequent acceptance of any payment or performance pursuant
      to
      this Agreement shall not constitute a waiver of any preceding default by a
      Defaulting Party or of any preceding event, circumstance or condition permitting
      termination hereunder, other than default in the payment of the particular
      payment or the performance of the particular matter so accepted, regardless
      of
      the Non-Defaulting Party’s knowledge of the preceding default or the preceding
      event, circumstance or condition, at the time of accepting such payment or
      performance, nor shall the Non-Defaulting Party’s acceptance of such payment or
      performance after termination constitute a reinstatement, extension or renewal
      of this Agreement or revocation of any notice or other act by the Non-Defaulting
      Party.


16





|**8.7** | **Approvals
              and Consents**
|------- | ----------------------------------------




Except
      as
      otherwise expressly provided herein, any approval or consent provided to be
      given by Licensee or Owner hereunder shall not be unreasonably withheld but
      must
      be contained in a writing signed by Licensee or Owner in order to be
      effective.





|**8.8** | **Condemnation**
|------- | ----------------




In
      the
      event that at any time or times prior to the termination of this Agreement,
      the
      Facility or any part thereof shall be condemned or shall be voluntarily sold
      (Owner hereby expressly reserving the right and power to do so, notwithstanding
      any other provision hereof) for a purpose for which the same could be acquired
      by the purchaser pursuant to eminent domain proceedings, then the interests
      of
      Manager hereunder in the portion or portions of the same so condemned or sold
      shall forthwith terminate, and all compensation and damages awarded or paid
      by
      reason of such condemnation or sale shall be paid and belong solely to Owner.
      In
      the event that less than all of the real property then included in the Facility
      shall be so condemned or sold but such condemnation or sale shall injure the
      Facility to such extent that the remaining portion thereof cannot be made
      effectively usable for a senior living community, then either party may
      terminate this Agreement as to the Facility by written notice to the other
      party
      given within ten (10) days after the transfer of title to the condemning
      authority. Unless this Agreement is terminated in its entirety due to casualty
      or condemnation, all of the terms and provisions hereof shall continue in full
      force and effect with respect to the remaining portion of the
      Facility.





|**8.9** | **Violations
              of Laws: Environmental Liabilities**
|------- | ---------------------------------------------------------------




If
      Manager obtains knowledge of any Violations of Laws (as hereinafter defined)
      or
      Environmental Liabilities (as hereinafter defined) relating to the Facility,
      Manager shall promptly advise Licensee and Owner. “ **Laws** ”
herein
      shall mean all federal, state, county and local governmental or municipal laws,
      ordinances, regulations, judgments, orders, rules and other such requirements,
      decisions by courts in cases where such decisions are binding precedents in
      the
      state in which the Facility is located, and decisions of federal courts applying
      the Laws of such state, at the time in question, including but not limited
      to
      all Environmental Laws (as hereinafter defined) and those pertaining to fair
      employment, fair credit reporting, health, safety, building code, rent control,
      taxes, equal access or fair housing, including, but not limited to, any law
      prohibiting, or making illegal, discrimination on the basis of race, sex, creed,
      color, religion, national origin, economic or governmentally subsidized status,
      or physical, mental or other disability or condition, and any labor laws.
“ **Environmental
      Laws** ”
herein
      shall mean the Comprehensive Environmental Response, Compensation and Liability
      Act of 1980, as amended, 42 U.S.C. '9601, et seq., Hazardous Materials
      Transportation Act, 49 U.S.C. '1801, et seq., Resource Conservation and Recovery
      Act of 1976, 42 U.S.C '6901 et seq., Clean Air Act, 42 U.S.C '7401 et seq.,
      Clean Water Act, 33 U.S.C. '1251, et seq., Safe Drinking Water Act, 14 U.S.C.
      '300f, et seq., Toxic Substances Control Act, 15 U.S.C. '2601, et seq., Federal
      Insecticide, Fungicide and Rodenticide Act, 7 U.S.C, '136 et seq., Atomic Energy
      Act of 1954, 42 U.S.C. '2014 et seq., and any similar federal, state or local
      Laws, and all regulations, guidelines, directives and other requirements
      thereunder, all as may be amended or supplemented from time to time.
“ **Environmental
      Liabilities** ”
herein
      shall mean conditions that involve the presence (whether actual or alleged)
      of
      any Hazardous Substance, conditions that are subject to any Environmental Laws,
      and all claims relating thereto. The term “ **Hazardous
      Substance** ”
for


17


purposes
      of this paragraph shall mean any flammable, explosive, toxic, radioactive,
      biological, corrosive or otherwise hazardous chemical, substance, liquid, gas,
      device, form of energy, material or waste or component thereof including,
      without limitation, all items now or hereafter listed, defined or regulated
      as a
      hazardous or toxic chemical, substance, liquid, gas, device, form of energy,
      pathogen, material or waste or component thereof by any federal, state or local
      governing body or agency having jurisdiction. “ **Violations
      of Laws** ”
herein
      shall mean all written notices given by a governmental authority having
      jurisdiction over the Facility of an actual or alleged violation of any Laws
      and
      any violation of licensing statutes and administrative rules applicable to
      the
      Facility.





|**8.10** | **Severability**
|-------- | ----------------




If
      any
      term or provision of this Agreement or the application thereof to any person
      or
      circumstance shall, to any extent, by invalid or unenforceable, the remainder
      of
      this Agreement, or the application of such term or provision to the persons
      or
      circumstances other than those as to which it is held invalid or unenforceable,
      shall not be affected thereby; and, each term and provision of this Agreement
      shall be valid and be enforced to the fullest extent permitted by
      law.





|**8.11** | **Governing
              Law**
|-------- | -------------------------------




This
      Agreement has been made and executed in, and shall be governed by the laws
      of,
      the State of Washington.





|**8.12** | **Major
              Decisions**
|-------- | ---------------------------------




The
      parties acknowledge that Owner is a direct or indirect controlled subsidiary
      of
      an entity (the “ **Parent** ”)
      that
      is intended to qualify as a “real estate operating company” (a “ **REOC** ”)
      within
      the meaning of the U.S. Department of Labor plan assets regulation (Section
      2510.3-101, Part 2510 of Chapter XXV, Title 29 of the Code of Federal
      Regulations) and that it is intended that Owner will have the right, pursuant
      to
      this Agreement, to substantially participate directly in the management and
      development of the Facility. Without limiting the generality of the foregoing,
      notwithstanding any other provision of this Agreement, without prejudice to
      the
      other rights provided to Owner under this Agreement, Manager agrees to: (i)
      permit Owner to visit and inspect the Facility and inspect and copy the books
      and records of Manager related to the Facility, at such times as Owner shall
      reasonably request; (ii) periodically (at least quarterly) provide Owner with
      information and reports regarding Manager’s operation and management of the
      Facility and the performance of its duties under this Agreement and with respect
      to renovations, alterations, general maintenance, repairs and development
      activities that Manager has engaged in or intends to engage in with respect
      to
      the Facility and its surroundings as set forth in this Agreement; (iii)
      periodically (at least quarterly) consult with Owner with respect to the
      operation and management of the Facility including, without limitation, with
      respect to matters relating to renovations, alterations, general maintenance,
      repairs and development activities with respect to the Facility and its
      surroundings; and (iv) provide Owner with such other rights of participation
      in
      the management and development of the Facility as may reasonably be determined
      by Owner to be necessary to enable the Parent to qualify as a REOC, provided
      such additional rights do not materially adversely affect Manager’s ability to
      perform its duties under this Agreement or the economic benefits enjoyed by
      Manager under this Agreement. Manager agrees to consider, in good faith, the
      recommendations of Owner in


18


connection
      with the matters on which it is consulted as described above. Notwithstanding
      anything contained in this Agreement, in the event Manager takes an action
      with
      respect to the Facility at Owner’s direction that is contrary to Manager’s
      written recommendation based upon Manager’s good faith judgment, Owner hereby
      waives any claims it may have against Manager with regard to any adverse impacts
      or effects resulting solely from Manager’s taking such action at Owner’s
      direction, and no indemnity obligations of Manager under this Agreement shall
      apply to the consequences of such action.





|**8.13** | **Headings**
|-------- | ------------




The
      article and section headings used in this Agreement are for convenience only,
      and the parties hereto agree that such headings are not to be construed to
      define, limit or extend the meaning of any part of this Agreement.





|**8.14** | **Counterparts**
|-------- | ----------------



This
      Agreement may be executed in counterparts, each of which shall be deemed an
      original and all of which, when taken together, shall constitute one and the
      same instrument, binding on the parties, and the signature of any party to
      any
      counterpart shall be deemed a signature to, and may be appended to, any other
      counterpart. This Agreement may be delivered by facsimile or email transmission.
      This Agreement shall be effective if each party hereto has executed and
      delivered at least one counterpart hereof.





|**8.15** | **Entire
              Agreement**
|-------- | ----------------------------------




This
      Agreement contains the entire agreement between the parties hereto with respect
      to the matters herein contained, and any agreement hereafter made shall be
      ineffective to effect any change or modification, in whole or in part, unless
      such agreement is in writing and signed by the party against whom enforcement
      of
      the change or modification is sought.





[Signature
      Page Follows]








19


EXECUTED
      as of the first date first above written.








MANAGER:
            EMERITUS
                CORPORATION,


a
                Washington corporation








By:


Name:  Raymond
      R. Brandstrom


Title:
                Vice President of Finance











OWNER:
            BREA
                TUCSONLLC,


a
                Delaware limited liability company





By:  BREA
      Emeritus LLC,


a
      Delaware limited liability company,


its
      sole
      member




By:  Emeritus
      Corporation,


a
      Washington corporation,


its
      administrative member








By:


Name:
      Raymond R. Brandstrom


Title:
      Vice President of
      Finance





LICENSEE:
            TUCSON
                SENIORCARE,
                LLC,


an
                Indiana limited liability company








By:


Name:


Title: