$16,000,000
                                 LOAN AGREEMENT
                          Dated as of December 6, 2002
                                     Between
                          EMERITUS REALTY CORPORATION,
                              a Nevada corporation,
                                  as Borrower;
                                  -- --------
                                       and
                      HEALTH CARE PROPERTY INVESTORS, INC.,
                             a Maryland corporation,
                                   as Lender.
                                   -- ------

<PAGE>

                                TABLE OF CONTENTS
                                                                            Page
                                                                            ----
ARTICLE  I.  DEFINITIONS  AND  ACCOUNTING  TERMS     1
Section  1.1     Certain  Defined  Terms     1
Section  1.2     Accounting  Terms     15
Section  1.3     Other  Definitional  Provisions.     15
ARTICLE  II.  AMOUNTS  AND  TERMS  OF  LOAN     16
Section  2.1     Making  the  Loan.     16
(a)     The  Loan     16
(b)     The  Note     16
(c)     Funding  the  Loan     16
Section  2.2     Interest.     16
(a)     Interest  Rate     16
(b)     Default  Interest     16
Section  2.3     Mandatory  Payments     16
(a)     Monthly  Payments     16
(b)     Maturity  Date     16
(c)     Payment  Following  Change  of  Control     17
Section  2.4     Voluntary  Prepayments.     17
(a)     No  Prepayment  Prior  to  Third  Anniversary     17
(b)     Full  Prepayment     17
(c)     Partial  Prepayment     17
(d)     Yield  Maintenance  Premium     17
Section  2.5     Payments  and  Computations.     18
(a)     Payments     18
(b)     Computations     18
(c)     Payment  on  Business  Day     18
Section  2.6     Right  of  First  Offer  to  Finance     18
(a)     Request  to  Provide  Offer  to  Finance     18
(b)     Election  to  Finance     19
(c)     No  Election     19
(d)     Borrower's  Election  to  Finance     19
Section  2.7     Taxes.     19
(a)     Net  Payments     19
(b)     Payment  of  Other  Taxes     20
(c)     Indemnification     20
(d)     Evidence  of  Payments     20
(e)     Survival     20
Section  2.8     Additional  Cash  Collateral     20
ARTICLE  III.  CONDITIONS     20
Section  3.1     Conditions     20
(a)     Representation  and  Warranties     20
(b)     No  Default     21
(c)     Payment  of  Fees  and  Expenses     21
(d)     No  Adverse  Change     21
(e)     Loan  Documents     21
(f)     Master  Lease  Documents     22
(g)     Borrower  Corporate  Documents     22
(h)     Property  Owner  Organizational  Documents     23
(i)     Property  Operator  Organizational  Documents     23
(j)     Real  Property  Deliveries     24
(k)     Health  Care  Licenses     26
(l)     Condemnation;  Casualty     27
(m)     Financial  Statements     27
(n)     Other  Document  Deliveries     27
(o)     Legal  Opinions     28
(p)     Governmental  Consents     28
(q)     Insurance  Coverage     28
(r)     Corporate  and  Governmental  Approvals     28
(s)     Minimum  Aggregate  Net  Operating  Income     28
(t)     Occupancy  and  EBITDAR     28
(u)     No  Liability  for  Facility     29
(v)     Appraised  Value     29
(w)     Refinancing     29
(x)     Reimbursement  Obligation     29
(y)     Compliance  with  Zoning  Laws     29
(z)     Officers  Certificate     29
(aa)     Other  Permitted  Subsidiary  Organizational  Documents     29
(bb)     Documents  and  other  Evidence  Satisfactory  to  Lender     30
ARTICLE  IV.  REPRESENTATIONS  AND  WARRANTIES     30
Section  4.1     Representations  and  Warranties  of  Borrower     30
(a)     Organization     30
(b)     Power  and  Authority     31
(c)     Due  Authorization     31
(d)     Binding  and  Enforceable     31
(e)     Subsidiaries     31
(f)     No  Indebtedness     32
(g)     No  Liens     32
(h)     No  Defaults     32
(i)     No  Conflicts  or  Restrictions     32
(j)     Governmental  Approval     32
(k)     Litigation     32
(l)     Financial  Information     32
(m)     Material  Adverse  Change     33
(n)     Compliance     33
(o)     Payment  of  Taxes     33
(p)     Security  Interests     33
(q)     Title  to  Property     33
(r)     Real  Property  Matters.     33
(s)     Conduct  of  Business     34
(t)     Investment  Company     35
(u)     Margin  Stock     35
(v)     Registration  of  the  Note     35
(w)     Environmental  Laws     35
(x)     ERISA  Compliance.     36
(y)     Restrictions  on  Dividends     37
(z)     Solvency     37
(aa)     Labor  Disputes     37
(bb)     Master  Lease  Document  Default     37
(cc)     Full  Disclosure     37
(dd)     Health  Care  Permits.     38
(ee)     Compliance  with  Legal  Requirements     38
ARTICLE  V.  COVENANTS  OF  BORROWER     39
Section  5.1     Financial  Covenants     39
(a)     First  Mortgage  Outstanding  Principal  Amount     39
(b)     Minimum  Operating  Income     40
(c)     Minimum  Debt  Service  Coverage  Ratio     40
(d)     Maximum  Accounts  Payable  Period     40
Section  5.2     Reporting  Covenants     40
(a)     Monthly  Statements     41
(b)     Quarterly  Financial  Statements     41
(c)     Annual  Financial  Statements     42
(d)     Annual  Budgets     42
(e)     Census  Reports     42
(f)     Compliance  Certificates     42
(g)     Change  of  Name  or  Location     43
(h)     Management  Letter     43
(i)     Tax  Returns     43
(j)     Notice  of  Default     43
(k)     Notice  of  Litigation     43
(l)     Security  Holder  Materials  and  SEC  Filings     44
(m)     ERISA  Notices.     44
(n)     Environmental  Notices     45
(o)     Health  Care  Permit  Violation     45
(p)     Notice  of  Material  Event  or  Circumstance     45
(q)     Other  Information     46
Section  5.3     Affirmative  Covenants     46
(a)     Preservation  of  Corporate  Existence,  Etc     46
(b)     Maintenance  of  Property  and  Assets     46
(c)     Insurance     46
(d)     Compliance  With  Laws     46
(e)     Payment  of  Obligations     46
(f)     Use  of  Proceeds     47
(g)     Inspection  of  Property  and  Books  and  Records.     47
(h)     Further  Assurances     47
(i)     Disclosure  Updates     48
(j)     Environmental  Laws.     48
(k)     Health  Care  Permits  and  Approvals     49
(l)     Compliance  With  ERISA.     50
(m)     Operating  Account.     50
(n)     Reserve  Accounts.     51
(o)     Separateness  Covenants.     55
(p)     Impound  Accounts     57
(q)     Subordination  of  Management  Agreements     57
(r)     Board  Attendance     57
(s)     Reimbursement  Obligation     57
(t)     Consent  to  Acquisition  of  First  Mortgage     57
(u)     Florida  Licenses     57
(v)     Interim  Florida  Period     57
(w)     Borrower's  Interests     57
Section  5.4     Negative  Covenants     58
(a)     Liens     58
(b)     Limitation  on  Indebtedness     58
(c)     Limitation  on  Contingent  Obligations     59
(d)     Restricted  Payments     59
(e)     Consolidation,  Merger,  Sale  of  Assets     60
(f)     Loans  and  Investments     60
(g)     Conduct  of  Business     61
(h)     Transactions  With  Affiliates     61
(i)     Amendments  to  Corporate  Documents     61
(j)     Health  Care  Permits  and  Approvals     61
(k)     Accounting  Changes     61
(l)     Amendment  to  and  Refinancing  of  First  Mortgages.     62
(m)     Sale  and  Leaseback  Transactions     63
(n)     Separateness  Covenants.     63
(o)     Tax  Status     64
Section  5.5     REIT  Protections.     64
ARTICLE  VI.  EVENTS  OF  DEFAULT     66
Section  6.1     Events  of  Default     66
(a)     Non-Payment  of  Principal,  Interest  or  Other  Amounts     66
(b)     First  Mortgage  Loan  Documents     66
(c)     [Intentionally  Omitted]     66
(d)     Representations  and  Warranties     66
(e)     Financial  and  Negative  Covenants     66
(f)     Reporting  and  Affirmative  Covenants     66
(g)     Other  Covenants     66
(h)     Bankruptcy     67
(i)     Judgments     67
(j)     Transaction  Documents     67
(k)     Collateral  Documents     67
(l)     ERISA     67
(m)     Other  Indebtedness     67
(n)     Leases     68
Section  6.2     Rights  Not  Exclusive     68
ARTICLE  VII.  MISCELLANEOUS     68
Section  7.1     Collateral  Matters     68
Section  7.2     Amendments     68
Section  7.3     Notices     68
Section  7.4     No  Waiver;  Remedies     69
Section  7.5     Costs,  Expenses  and  Taxes.     69
(a)     General  Costs  and  Expenses     69
(b)     Survival     70
Section  7.6     Right  of  Set-off     70
Section  7.7     Indemnity.     70
(a)     Indemnity     70
(b)     Limitation     70
(c)     Survival     70
Section  7.8     Binding  Effect     71
Section  7.9     GOVERNING  LAW     71
Section  7.10     WAIVER  OF  JURY  TRIAL     71
Section  7.11     Confidentiality     71
Section  7.12     Limitation  of  Liability     72
Section  7.13     Entire  Agreement     72
Section  7.14     Execution  in  Counterparts     72

<PAGE>


LIST  OF  EXHIBITS
     Exhibit  A     Form  of  Note
     Exhibit  B     Form  of  Borrower  Pledge  Agreement
     Exhibit  C     Form  of  Reserve  Account  Security  Agreement
     Exhibit  D     Form  of  Negative  Pledge  Agreement
     Exhibit  E     Form  of  Separateness  Covenant  Certificate
     Exhibit  F-1     Form  of  Compliance  Certificate
     Exhibit  F-2     Form  of  Compliance  Certificate
     Exhibit  G     Reviewed  Facility  Budgets
     Exhibit  H     Form  of  Guaranty
     Exhibit  I     Form  of  Mortgage

LIST  OF  SCHEDULES
     Schedule  I     List of Facilities, Property Owners, Property Operators and
First  Mortgage  Lenders
     Schedule  II     List  of  Additional  Properties
     Schedule  III     Liability  Amounts  for  Lender's  Title  Policies
     Schedule  2.3(b)     Sample  Loan  Balance
     Schedule  3.1(j)(i)     Value  of  Facilities
     Schedule  4.1(f)     List  of  Existing  Indebtedness
     Schedule  4.1(g)     List  of  Existing  Liens
     Schedule  4.1(j)     List  of  Required  Government  Approvals
     Schedule  4.1(r)     List  of  Real  Estate
     Schedule  4.1(w)     List  of  Environmental  Reports
     Schedule  4.1(aa)     List  of  Collective  Bargaining Agreements and Other
Labor  Contracts
     Schedule  5.4(c)(ii)     List  of  Existing  Contingent  Obligations

<PAGE>

                                       78
|  OC\567831.6||
                                 LOAN AGREEMENT
     This  LOAN  AGREEMENT, dated as of December 6, 2002, is made by and between
EMERITUS  REALTY CORPORATION, a Nevada corporation, as Borrower; and HEALTH CARE
PROPERTY  INVESTORS,  INC.,  a  Maryland  corporation,  as  Lender.
                                    Recitals
                                    --------
     A.     Borrower  has  requested  that Lender make a loan to Borrower in the
aggregate  principal  amount  of  Sixteen  Million  Dollars  ($16,000,000.00).
C.     Lender  is willing to make the loan on the terms and conditions set forth
herein.
                                    Agreement
                                    ---------
     NOW,  THEREFORE,  in consideration of the foregoing Recitals and the mutual
covenants  contained  herein,  and  other  good  and valuable consideration, the
receipt  and  sufficiency  of  which are hereby acknowledged, the parties hereto
agree  as  follows:

                        DEFINITIONS AND ACCOUNTING TERMS
Certain  Defined  Terms
-----------------------
     .  As  used in this Agreement, the following terms shall have the following
meanings:
"Additional Properties" means the real properties more particularly described on
 ---------------------
Schedule  II.
------------
"Adjusted  Net  Operating  Income"  means,  for  any  period,  (i) Aggregate Net
 --------------------------------
Operating  Income  for  such  period  minus  (ii) a capital reserve equal to the
 ------
product  of  (A)  $20.83 times (B) the average number of units in the Facilities
 ----
during  such  period  times  (C)  the  number  of  months  in  such  period.
 -
"Affiliate"  of  a  specified  Person  means  any other Person that directly, or
 ---------
indirectly  through one or more intermediaries, controls, is controlled by or is
 ----
under  common control with the Person specified.  For purposes of the foregoing,
"control,"  "controlled  by" and "under common control with" with respect to any
 -------     --------------       -------------------------
Person  means (i) the possession, directly or indirectly, of the power to direct
or  cause  the  direction of the management and policies of such Person, whether
through  the  ownership  of  voting  securities,  partnership interests or other
equity  interests,  or  by  contract or otherwise, or (ii) the ownership of more
than  50  percent  of  the  voting securities of, partnership interests or other
equity interests in, such Person; provided, however, that for a corporation, the
term "Affiliate" shall exclude any affiliate of Daniel R. Baty which but for its
relationship  with  Daniel  R. Baty would not be considered an Affiliate of such
corporation.
"Aggregate  Net  Operating  Income"  means,  for  any period, the sum of the Net
 ---------------------------------
Operating  Income  for  all  of  the  Facilities  for  such  period.
 ----
"Agreement"  means  this  Loan  Agreement,  dated  as  of December 6, 2002 among
 ---------
Borrower  and  Lender.
 -----
"Anniversary  Date"  means  each  anniversary  of  the  Closing  Date.
 -----------------
"Authorized Officer" means the chief executive officer, the president, the chief
 ------------------
financial  officer,  the  secretary, the vice president of financial planning or
the  treasurer  of  Borrower.
"Borrower"  means  Emeritus  Realty  Corporation,  a  Nevada  corporation.
 --------
"Borrower  Pledge  Agreement"  has  the meaning provided in Section 3.1(e)(iii).
 ---------------------------                                -------------------
"Borrower  Pledged  Interests" means the equity interests in the Property Owners
 ----------------------------
which  are  to be pledged as security pursuant to the Borrower Pledge Agreement.
"Business  Day"  means  any  day  except  a  Saturday  or  Sunday  or a day when
 -------------
commercial  banks are authorized or required by law to be closed in Los Angeles,
 --------
California.
"Capital  Additions"  has  the  meaning  provided  in  the  Master  Lease.
 ------------------
"Capital Lease Obligations" means, with respect to any Person, any and all lease
 -------------------------
obligations of such Person and its Subsidiaries on a consolidated basis that, in
accordance  with  GAAP, have been or are required to be capitalized on the books
of  such  Person  and  its  Subsidiaries.
"Cash  Equivalents" means:  (i) securities issued or fully guaranteed or insured
 -----------------
by  the  United  States  government or any agency thereof and backed by the full
faith  and credit of the United States having a maturity of not more than 1 year
from  the  date of acquisition; (ii) marketable direct obligations issued by any
state  of  the United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within 1 year from the date
of  acquisition  thereof and, at the time of acquisition, rated A by S&P or A by
Moody's; (iii) certificates of deposit, time deposits, Eurodollar time deposits,
or  bankers'  acceptances  having  in each case a tenor of not more than 1 year,
issued  by  an United States commercial bank having combined capital and surplus
of not less than $100,000,000 whose short-term securities are rated at least A-1
by S&P or P-1 by Moody's; (iv) certificates of deposit in an amount less than or
equal  to  $100,000  in  the  aggregate  issued by any other bank insured by the
Federal  Deposit  Insurance  Corporation;  (v)  commercial  paper  or  bankers
acceptances  of  an  issuer  rated at least A-1 by S&P or P-1 by Moody's and, in
either case, having a tenor of not more than 1 year; and (vi) money market funds
invested  in  one  or  more  of  the  foregoing.
"Change  of  Control"  means the occurrence of any of the following:  (i) at any
 -------------------
time,  any  person  other  than  Daniel  R. Baty or group of persons (within the
 -
meaning  of Section 13(d) of the Securities and Exchange Act of 1934, as amended
 -
(the  "Exchange  Act")  and  the  regulations  promulgated  thereunder)  owns
       -------------
beneficially  (within  the meaning of Rule 13d-3 promulgated by the Security and
      ----
Exchange  Commission  under  the  Exchange  Act, or any successor or replacement
regulation),  25%  or more of the issued and outstanding shares of capital stock
of  Emeritus  having  ordinary  voting  power  for  the election of directors of
Emeritus;  (ii) at any time, a majority of the members of the board of directors
of Emeritus shall not be Continuing Directors; (iii) a majority of the directors
who are Continuing Directors as of any date shall resign within a 4-month period
after  such  date;  (iv)  Emeritus shall cease for any reason to own 100% of the
outstanding  ownership  interest  in  Borrower; (v) Borrower shall cease for any
reason  to  own  directly  100%  of  the  outstanding ownership interest in each
Property  Owner;  or (vi) Emeritus shall cease for any reason to own directly or
indirectly  100% of the outstanding ownership interest in each Property Operator
other  than  Emeritus.
"Closing  Date"  means  December  6,  2002.
 -------------
"Code"  means  the Internal Revenue Code of 1986, as amended, and any regulation
 ----
promulgated  thereunder.
"Collateral"  means all property which is subject or is to become subject to the
 ----------
security  interests  or  Lien  granted  by  any  of  the  Collateral  Documents.
"Collateral  Documents"  means, collectively, the Borrower Pledge Agreement, the
 ---------------------
Reserve Account Security Agreement, the Negative Pledge Agreements and all other
security agreements, collateral assignments and other instruments, documents and
agreements at any time delivered to Lender to create or evidence Liens to secure
the  Obligations  or  any  guaranty  thereof,  and  any amendments, supplements,
modifications,  renewals,  replacements,  consolidations,  substitutions  and
extensions  of  any  of  the  foregoing.
"Compliance  Certificate"  has  the  meaning  provided  in  Section  5.2(f).
 -----------------------                                    ---------------
"Condemnation"  has  the  meaning  provided  in  the  Master  Lease.
 ------------
"Contingent  Obligation" means, as applied to any Person, any direct or indirect
 ----------------------
liability  of  that  Person  with  respect to any Indebtedness, lease, dividend,
letter  of  credit  or  other  obligation  (the "primary obligation") of another
                                                 ------------------
Person (the "primary obligor"), including any obligation of that Person, whether
             ---------------
or  not  contingent,  (i)  to purchase, repurchase or otherwise acquire any such
primary  obligation  or  any  property  constituting direct or indirect security
therefor;  or  (ii) to advance or provide funds (A) for the payment or discharge
of  any  such  primary  obligation, or (B) to maintain working capital or equity
capital  of  the  primary  obligor  or  otherwise  to  maintain the net worth or
solvency  or  any  balance sheet item, level of income or financial condition of
the  primary  obligor;  or  (iii)  to  purchase property, securities or services
primarily  for  the purpose of assuring the owner of any such primary obligation
of  the  ability  of  the  primary  obligor  to  make  payment  of  such primary
obligation;  or (iv) otherwise to assure or hold harmless the holder of any such
primary  obligation  against  loss  in  respect  thereof.  The  amount  of  any
Contingent Obligation of any Person shall be deemed to be an amount equal to the
maximum  amount  of  such  Person's  liability  with  respect  to  the stated or
determinable  amount  of  the  primary  obligation  for  which  such  Contingent
Obligation is incurred or, if not stated or determinable, the maximum reasonably
anticipated  liability  in  respect thereof (assuming such Person is required to
perform  thereunder).
"Continuing  Director"  means  a  director  who (i) was a member of the Board of
 --------------------
Directors  of Emeritus on the Closing Date, or (ii) was nominated to be a member
 ---
of  the  Board  of  Directors  by a majority of the Continuing Directors then in
office to fill a vacancy left by death, retirement or voluntary resignation of a
director.
"Contribution  Documents"  has  the  meaning  provided  in  Section  3.1(n)(ii).
 -----------------------                                    -------------------
"Debt"  means,  as  applied  to  any  Person  and  in  each case determined on a
 ----
consolidated  basis  in  conformity  with  GAAP  (without duplication):  (i) all
 ----
obligations  for  borrowed  money  (whether  by  loan  or  the  issuance of debt
 ----
securities  or  otherwise); (ii) all obligations evidenced by bonds, debentures,
 ----
notes, or other similar instruments; (iii) all Capital Lease Obligations of such
Person;  (iv)  all obligations or liabilities of others secured by a Lien on any
property  or  asset  of  such Person, irrespective of whether such obligation or
liability  is  assumed;  (v)  all  obligations  owed  for all or any part of the
deferred  purchase price of property, assets, or services that are due more than
12 months after the date of the incurrence of the obligation in respect thereto;
and  (vi)  all  Unfunded  Pension  Liabilities  of  such  Person  or  any of its
Subsidiaries.
"Debt  Service  Coverage  Ratio"  means,  for  any period, the ratio obtained by
 ------------------------------
dividing  (i)  Adjusted  Net Operating Income for such period by (ii) the sum of
 ----
(A)  the  cash  payments  required  on  the Loan during such period plus (B) the
 -
aggregate  principal  and  interest  payments on the First Mortgage Loans during
 -
such  period  (excluding  there  from  any  principal  paid in connection with a
 -
Permitted  Refinancing  Loan  or  a  Permitted  Payoff)  plus  (C)  any payments
 -
required  to  be  made into the Sinking Fund Reserve Account during such period.
 -
"Default" means any event or condition which with notice, the passage of time or
 -------
both  would  constitute  an  Event  of  Default.
"Depository  Bank"  has  the  meanings  provided  in  Section  5.3(m)(i).
 ----------------                                     ------------------
"Distribution  Date" means for each calendar month from the Closing Date through
 ------------------
the  Maturity  Date, any date within the 5 days after Borrower makes the payment
due  on  the  Payment  Date  for  such  calendar  month.
"DOL" means the United States Department of Labor or any successor department or
 ---
agency.
"Dollars"  and  "$"  means United States dollars or such coin or currency of the
 -------         -
United States of America as at the time of payment shall be legal tender for the
 -
payment  of  public  and  private  debts  in  the  United  States  of  America.
"EBITDA"  means,  for  any  period for any Person, the sum of (i) Net Income for
 ------
such period, (ii) depreciation and amortization included in calculating such Net
 --
Income,  (iii)  Interest  Expense  for  such  period,  (iv) Tax Expense for such
period,  in  each  case  determined  for  such  Person and its Subsidiaries on a
consolidated  basis.
"EBITDAR"  means,  for any period, the sum of (i) EBITDA for the Property Owners
 -------
and  the  Property  Operators;  and  (ii) the aggregate amount payable under all
leases  and  rental  agreements, in each case determined for such period for the
Property Owners and the Property Operators on a consolidated basis in accordance
with  GAAP.
"Emeritus"  means  Emeritus  Corporation,  a  Washington  corporation.
 --------
"Environmental  Laws"  means  all federal, state or local laws, statutes, common
 -------------------
law  duties,  rules,  regulations,  ordinances  and  codes,  together  with  all
 -
administrative orders, directed duties, licenses, authorizations and permits of,
 -
and  agreements  with,  any  Governmental  Authority,  in  each case relating to
environmental,  health,  safety  and  land  use  matters.
"Environmental Lien" means a Lien in favor of any Governmental Authority for (a)
 ------------------
any  liability  under  Environmental Laws, or (b) damages arising from, or costs
incurred  by such Governmental Authority in response to, a Release or threatened
Release  of  a  Hazardous  Substance  into  the  environment.
"ERISA"  means  the Employee Retirement Income Security Act of 1974, as amended,
 -----
and  any  regulation  promulgated  thereunder.
"ERISA  Affiliate"  means  any  trade  or business (whether or not incorporated)
 ----------------
under common control with Borrower or any of its Subsidiaries within the meaning
 ---
of  Section  414(b)  or (c) of the Code (and Sections 414(m) and (o) of the Code
for  purposes  of  provisions  relating  to  Section  412  of  the  Code).
"ERISA  Event" means (i) a Reportable Event with respect to a Pension Plan, (ii)
 ------------
a  withdrawal  by Borrower or any ERISA Affiliate from a Pension Plan subject to
Section  4063 of ERISA during a plan year in which it was a substantial employer
(as  defined  in Section 4001(a)(2) of ERISA) or a cessation of operations which
is treated as such a withdrawal under Section 4062(e) of ERISA, (iii) a complete
or  partial  withdrawal by Borrower or any ERISA Affiliate from a Multi-Employer
Plan  or  notification that a Multi-Employer Plan is in reorganization, (iv) the
filing  of a notice of intent to terminate, the treatment of a Plan amendment as
a  termination  under  Section  4041  or  4041A of ERISA, or the commencement of
proceedings  by the PBGC to terminate a Pension Plan or Multi-Employer Plan, (v)
the  occurrence  of  an event or condition which might reasonably be expected to
constitute  grounds  under  Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan or Multi-Employer Plan,
or  (vi) the imposition of any liability under Title IV of ERISA, other than for
PBGC  premiums due but not delinquent under Section 4007 of ERISA, upon Borrower
or  any  ERISA  Affiliate.
"ESC-Land"  means  ESC-Land,  LLC,  a  Delaware  limited  liability  company.
 --------
"Event of Default" and "Events of Default" have the meanings provided in Section
 ----------------       -----------------                                -------
6.1.
---
"Facility"  means  each  facility  being  (and to be) operated or proposed to be
 --------
operated  on  the  Leased  Property,  together  with  any  Capital  Additions.
 ---
"Facilities"  means,  collectively,  all  of the Facilities.  The Facilities are
 ---
identified  on  Schedule  I.
 --             -----------
"Fee  Estate"  means  any  fee  estate  in  real  property.
 -----------
"Final  Appraisal"  has  the  meaning  provided  in  Section  3.1(j)(iii).
 ----------------                                    --------------------
"Finance,"  "Financed,""Finances,"  "Financing" and similar terms shall mean the
 -------     --------   --------     ---------
provision  of  financing  to  Borrower,  its  Subsidiaries and/or its Affiliates
whether  in the form of a loan, a synthetic lease, a sale-leaseback transaction,
or  similar or related financing structure, but shall specifically exclude trade
payables  incurred  in  the  ordinary  course  of  business consistent with past
practices  and  Indebtedness  permitted  pursuant  to  Section  5.4(b)(iv).
                                                       -------------------
"Financing  Transaction"  has  the  meaning  provided  in  Section  2.6.
 ----------------------                                    ------------
"First  Mortgage  Lenders"  means  collectively  (i) GECC and (ii) the Permitted
 ------------------------
Refinancing  Lenders,  if any.  "First Mortgage Lender" means, individually, any
 ---                             ---------------------
of  the  First  Mortgage  Lenders.
"First  Mortgage  Loan Documents" means collectively all documents evidencing or
 -------------------------------
related  to  the  First  Mortgage  Loans.  "First  Mortgage Loan Document" means
                                            -----------------------------
individually  any  of  the  First  Mortgage  Loan  Documents.
"First  Mortgage  Loans" means collectively (i) the mortgage loans identified on
 ----------------------
Schedule  I  to this Agreement and (ii) the Permitted Refinancing Loans, if any.
 ----------
"First  Mortgage  Loan"  means  individually  any  of  the First Mortgage Loans.
 ---------------------
"Flood Hazard Area" means an area designated by the Federal Emergency Management
 -----------------
Agency  and/or  the Secretary of Housing and Urban Development as having special
flood  hazards.
"Florida  Licensee"  means  ESC-Port  St.  Richie,  LLC,  a  Washington  limited
 -----------------
liability  company.
 -------
"GAAP"  means generally accepted accounting principles set forth in the opinions
 ----
and pronouncements of the Accounting Principles Board and the American Institute
of  Certified Public Accounts and statements and pronouncements of the Financial
Accounting  Standards  Board  (or  agencies with similar functions of comparable
stature  and  authority  within  the  accounting  profession),  or in such other
statements  by  such  entity as may be in general use by significant segments of
the  United  States  accounting  profession,  which  are  applicable  to  the
circumstances on the date of determination; provided that if one or more changes
in  GAAP  after  the date hereof are required to be applied to the then existing
transactions, and such change or changes have a material effect on the financial
computations required under this Agreement, then as used in this Agreement, GAAP
means generally accepted accounting principles as in effect prior to such change
or  changes.
"GECC"  means  General  Electric  Capital  Corporation.
 ----
"GECC  Loan"  means  the  First  Mortgage Loans from GECC to the Property Owners
 ----------
totaling  $58,000,000.
 ---
"Governmental  Authority"  means  any  nation  or government, any state or other
 -----------------------
political  subdivision thereof and any entity exercising executive, legislative,
 ---
judicial, regulatory or administrative functions of or pertaining to government.
"Governmental  Requirement"  means  any law, ordinance, order, rule, regulation,
 -------------------------
decree  or  similar  edict  of  a  Governmental  Authority.
 -
"Gross  Revenues"  means, for any period for any Facility, all revenues received
 ---------------
or  receivable  during  such  period  from or by reason of the operation of such
Facility  or  any  other  use  of  the Leased Property (as defined in the Master
Lease) related to such Facility, the Personal Property (as defined in the Master
Lease)  of the Property Operator for such Facility and Capital Additions related
to  such Facilities including all revenues received or receivable for the use of
or  otherwise  attributable to units, rooms, beds and other facilities provided,
meals  served,  services  performed  (including  ancillary  services),  space or
facilities  subleased  or  goods sold on or from the Leased Property and Capital
Additions  related  to  such  Facility,  all determined in accordance with GAAP;
provided,  however,  that  Gross  Revenues shall not include:  (i) non-operating
revenues  such  as interest income or income from the sale of assets not sold in
the  ordinary  course  of business; (ii) contractual allowances (relating to any
period  during  the Term (as defined in the Master Lease)) for billings not paid
by  or  received  from  the  appropriate  governmental  agencies  or third party
providers; (iii) all proper patient billing credits and adjustments according to
GAAP relating to health care accounting; and (iv) federal, state or local excise
taxes  and  any tax based upon or measured by such revenues which is added to or
made  a  part  of  the  amount  billed to the patient or other recipient of such
services  or goods, whether included in the billing or stated separately.  Gross
Revenues  for  any  period  for  any  Facility  shall  include  all  cost report
settlement  amounts  received in or payable during such period for such Facility
in  accordance  with  GAAP relating to health care accounting, regardless of the
period  to which such settlement amounts are applicable; provided, however, that
to the extent settlement amounts are applicable to periods, or portions thereof,
prior  to  the  Closing  Date,  such settlement amounts shall not be included in
Gross  Revenues  for the period in which such settlement amounts are received or
paid.  Gross Revenues for any Facility shall also include (x) the Gross Revenues
of  any  Occupant  (as defined in the Master Lease) under a Commercial Occupancy
Arrangement (as defined in the Master Lease) (i.e., the Gross Revenues generated
from  the operations conducted on or from such subleased, licensed or other used
or  occupied  portion  of  the Leased Property and all Capital Additions of such
Facility shall be included directly in the Gross Revenues) if all or any portion
of  the  rent  received or receivable by the Property Operator for such Facility
from  or  under  such Commercial Occupancy Arrangement is based on net income of
such  Occupant  or would otherwise fail to qualify as "rents from real property"
within  the  meaning  of Section 856(d) of the Code, or any similar or successor
provision  thereto  (in  which  event  the  rent  received  or receivable by the
Property  Operator  for  such  Facility  from or under such Commercial Occupancy
Arrangement  shall be excluded from Gross Revenues), or (y) the rent received or
receivable  by  the  Property  Operator  for  such  Facility  from or under such
Commercial  Occupancy  Arrangement,  if  no  portion  of  the  rent  received or
receivable  by  the  Property  Operators from or under such Commercial Occupancy
Arrangement  is  based on net income of such Occupant and such rent qualifies as
"rents  from real property" within the meaning of Section 856(d) of the Code, or
any similar or successor provision thereto (in which event the Gross Revenues of
such  Occupant  shall  be  excluded  from  Gross  Revenues  herein).
"Hazardous  Substances" means, collectively, any petroleum, petroleum product or
 ---------------------
byproduct  or  any  substance, material or waste regulated or listed pursuant to
any  Environmental  Law.
"HCPI  Lease"  means that certain Amended and Restated Master Lease, dated as of
 -----------
September  18, 2002, between HCPI, HCPI Trust, a Maryland real estate trust, and
Texas  HCP  Holding,  L.P., a Delaware limited partnership, on the one hand; and
the  HCPI  Lessees,  on  the  other  hand.
"HCPI  Lease  Documents" means the HCPI Lease and all other guaranties and other
 ----------------------
agreements,  documents  and  instruments  delivered to Lender by or on behalf of
Emeritus or any Affiliate of Emeritus pursuant to or in connection with the HCPI
Lease.
"HCPI  Lessees"  means, collectively, Emeritus and ESC III, L.P. d/b/a Texas-ESC
 -------------
III,  L.P.
"Health  Care  Facility"  means  a  facility  which  provides any pharmaceutical
 ----------------------
products  or  any  level  of  geriatric  care,  home  health  care, medical care
 -----
(including  sub-acute care), assisted living service or rehabilitative services,
 -----
whether  licensed  as  a  skilled  nursing facility, intermediate care facility,
personal  care  facility,  hospital  or  pharmacy  or  any  products or services
reasonably  related  thereto.
"Health  Care  Permit"  means every accreditation, authorization, certificate of
 --------------------
need,  license  or permit that is required pursuant to applicable federal, state
 -
or  local  law,  rule, ordinance or authority to own, lease, operate or manage a
Facility  or  any  Subsidiary  of  Borrower  or  any  Property  Operator.
"Hedging  Agreement"  means  (i)  any  foreign  exchange contract, currency swap
 ------------------
agreement,  futures  contract,  option  contract, synthetic cap or other similar
 ----
agreement  or  arrangement  designed to protect against fluctuations in currency
 --
values;  or  (ii) any interest rate swap agreement, interest rate cap agreement,
 -
interest  rate  collar agreement or other similar agreement or arrangement which
is  designed  to  protect  against  fluctuations  in  interest  rates.
"Indebtedness"  means, as applied to any Person and in each case determined on a
 ------------
consolidated basis in conformity with GAAP (without duplication):  (i) all Debt;
(ii)  all  reimbursement  obligations  with  respect to surety bonds, letters of
credit,  bankers  acceptances  and similar instruments (in each case, whether or
not  matured);  (iii)  all  obligations  (contingent  or otherwise) to purchase,
retire  or redeem any capital stock or any other equity interest of such Person;
(iv)  all  monetary  obligations measured by, or determined on the basis of, the
value  of  any capital stock of such Person; (v) all obligations, whether or not
such  obligations  constitute Indebtedness described in clauses (i) through (iv)
above,  secured  by  (or  for which the holder of the obligation has an existing
right,  contingent  or otherwise, to be secured by) any Lien upon or in property
(including  accounts and contract rights) owned by such Person or any Subsidiary
of  such  Person;  (vi)  Contingent  Obligations;  and (vii) all monetary claims
against  such  Person or any Subsidiary of such Person under Hedging Agreements.
"Indemnified  Liabilities"  has  the  meaning  provided  in  Section  7.7(a).
 ------------------------                                    ---------------
"Indemnified  Person"  has  the  meaning  provided  in  Section  7.7(a).
 -------------------                                    ---------------
"Intercreditor  Agreement"  and  "Intercreditor  Agreements"  have  the meanings
 ------------------------         -------------------------
provided  in  Section  3.1(e)(v).
 ----         ------------------
"Interest  Expense"  means,  for any period for any Person, the interest expense
 -----------------
(net  of interest income) for such period of such Person and its Subsidiaries on
 -
a  consolidated  basis,  determined  in  conformity  with  GAAP.
"Interim  Florida  Period"  means  the  period from the Closing Date through and
 ------------------------
including the earlier to occur of (i) December 30, 2002 or (ii) the date ESC-New
 ---
Port  Richey,  LLC,  a Washington limited liability company, to has obtained all
Health  Care  Permits necessary to operate the La Casa Grande Facility described
as  the  "La  Casa  Grande  Facility"  on  Schedule  I.
"IRS"  means  the  Internal  Revenue  Service  and  any  successor  agency.
 ---
"La  Casa  Grande  Facility" means the Facility described as the "La Casa Grande
 --------------------------
Facility"  on  Schedule  I.
 -
"Leased  Property"  has  the  meaning  provided  in  the  Master  Lease.
 ----------------
"Leasehold  Estate"  means  any  interest  in  real  property which is not a Fee
 -----------------
Estate.
 -----
"Lender" means Health Care Property Investors, Inc., a Maryland corporation, and
 ------
its  successors  and  assigns.
"Lender  Finance  Proposal"  has  the  meaning  provided  in  Section  2.6(c).
 -------------------------                                    ---------------
"Lien" means:  (i) any interest in property securing an obligation owed to, or a
 ----
claim  by,  a Person other than the owner of the property, whether such interest
is  based  on  the  common  law,  statute, or contract, and including a security
interest,  charge,  claim,  or  lien  arising  from  a  mortgage, deed of trust,
encumbrance,  pledge, hypothecation, assignment, deposit arrangement, agreement,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment  for  security  purposes;  (ii) to the extent not included under clause
                                                                          ------
(i), any reservation, exception, encroachment, easement, right-of-way, covenant,
condition,  restriction, lease or other title exception or encumbrance affecting
property;  and  (iii)  any  contingent  or other agreement to provide any of the
foregoing.
"Loan"  has  the  meaning  given  in  Section  2.1(a).
 ----                                 ---------------
"Loan  Documents"  means this Agreement, the Note, the Collateral Documents, the
 ---------------
Intercreditor  Agreements  and  all  other  guaranties  and  other  agreements,
instruments  and written indicia of the Obligations delivered to Lender by or on
behalf of Borrower or any other Loan Party pursuant to or in connection with the
transactions  contemplated  hereby.
"Loan  Parties"  means  Borrower,  the  Property  Owners  and  ESC-Land.
 -------------
"Master  Lease"  means  that certain Master Lease, dated as of the Closing Date,
 -------------
between the Property Owners, on the one hand, and the Property Operators, on the
 -
other  hand.
"Master  Lease  Documents"  means  the Master Lease and all other guaranties and
 ------------------------
other  agreements,  documents  and  instruments  delivered to Property Owners or
 --
Lender  by  or on behalf of Borrower or any Affiliate of Borrower pursuant to or
 --
in  connection  with  the  transactions  contemplated  by  the  Master  Lease.
"Master  Lease Payment Date" means the first Business Day of each calendar month
 --------------------------
during  the  term  of  the  Master  Lease.
"Material  Adverse  Change" means (i) a material adverse change in the business,
 -------------------------
properties,  assets, nature of the assets, liabilities, operations, prospects or
condition  (financial  or otherwise) of (a) Borrower and its Subsidiaries, taken
as  a  whole; (b) any Facility; or (c) Emeritus and its Subsidiaries, taken as a
whole, in each case as compared with the business, properties, assets, nature of
the  assets,  liabilities,  operations,  prospects  or  condition  (financial or
otherwise)  of  Borrower and its Subsidiaries, such Facility or Emeritus and its
Subsidiaries,  as  the  case  may  be, as of September 30, 2002; (ii) a material
impairment after the Closing Date of the ability of Borrower or any Affiliate of
Borrower  to  perform  under any Transaction Document to which it is a party; or
(iii)  a  material  adverse  change in the legality, validity, binding effect or
enforceability  against  any  Loan  Party  or  any  Operating  Company  of  any
Transaction  Document  to  which  it  is  a  party.
"Material Adverse Effect" means (i) a material adverse effect upon the business,
 -----------------------
properties,  assets, nature of the assets, liabilities, operations, prospects or
condition  (financial  or otherwise) of (a) Borrower and its Subsidiaries, taken
as  a  whole; (b) any Facility; or (c) Emeritus and its Subsidiaries, taken as a
whole; (ii) a material impairment of the ability of Borrower or any Affiliate of
Borrower  to  perform  under any Transaction Document to which it is a party; or
(iii)  a  material adverse effect upon the legality, validity, binding effect or
enforceability  against  any  Loan  Party  or  any  Operating  Company  of  any
Transaction  Document  to  which  it  is  a  party.
"Maturity  Date"  means  the  date  5  years  after  the  Closing  Date.
 --------------
"Moody's"  means  Moody's  Investors  Service,  Inc.  or  any successor thereto.
 -------
"Mortgage  Payment  Reserve  Account"  has  the  meaning  provided  in  Section
 -----------------------------------                                    -------
5.3(n)(i)(C).
 -----------
"Mortgage  Loan Balance Excess" has the meaning provided in Section 5.3(n)(iii).
 -----------------------------                              -------------------
 "Multi-Employer  Plan"  means  a  multi-employer  plan  (as  defined in Section
  --------------------
4001(a)(3) of ERISA) which is, or was at any time during the current year or the
  ----
immediately  preceding  6  years,  contributed  to  by  Borrower  or  any  ERISA
Affiliate.
"Negative  Pledge  Agreements" and "Negative Pledge Agreement" have the meanings
 ----------------------------       -------------------------
provided  in  Section  3.1(e)(iv).
              -------------------
"Net  Income" means, for any period for any Person, the net income (exclusive of
 -----------
minority  interests  and extraordinary items) for such period of such Person and
its  Subsidiaries  on  a consolidated basis, determined in conformity with GAAP.
"Net  Mortgage  Loan  Balance" has the meaning set forth in Section 5.3(n)(iii).
 ----------------------------                               -------------------
"Net  Operating  Income"  means,  for  any  Facility  for  any period, (i) Gross
 ----------------------
Revenues  for  such Facility for such period minus (ii) the sum of (a) Operating
 ------
Expenses  for  such  Facility for such period plus (b) a management fee equal to
the greater of (x) 5% times Gross Revenues for such Facility for such period and
(y)  the  actual  amount  of  management  fees paid by the Property Owner or the
Property  Operator  for  such  Facility  for  such  period.
"New  Florida  Property  Owner"  means  Emeritus  Realty Port St. Richie, LLC, a
 -----------------------------
Delaware  limited  liability  company.
 ----
"Non-REIT  Asset"  has  the  meaning  set  forth  in  Section  5.5(c).
 ---------------                                      ---------------
"Non-REIT  Income"  has  the  meaning  set  forth  in  Section  5.5(c).
 ----------------                                      ---------------
"Note"  has  the  meaning  provided  in  Section  2.1(b).
 ----                                    ---------------
"Obligations" means all present and future debts, obligations and liabilities of
 -----------
Borrower  of every type and description arising under or in connection with this
Agreement  or  any  other  Loan  Document, due or to become due to Lender or any
other Person required to be indemnified under any Loan Document, or any of their
respective  successors,  transferees  or  assigns  and  shall  include  (without
limitation)  (i)  all  liability  for principal of and interest on the Loan; and
(ii)  all  liability  under  the  Loan Documents for any fees, taxes, additional
compensation,  expense  reimbursements  and  indemnification.
"Operating  Expenses"  means,  for  any  period for  any Facility, the operating
 -------------------
expenses  of  such Facility during such period, as determined in accordance with
 ---
GAAP.
"Other  Permitted  Subsidiaries"  has  the  meaning provided in Section 3.2(aa).
 ------------------------------                                 ---------------
"Other  Taxes"  has  the  meaning  provided  in  Section  2.7(b).
 ------------                                    ---------------
"Payment  Date"  means  the  fourth Business Day of each calendar month from the
 -------------
Closing  Date  through  the  Maturity  Date.
 --
"PBGC"  means  the  Pension  Benefit  Guaranty  Corporation  or any Governmental
 ----
Authority  succeeding  to  the  functions  thereof.
 ----
"Pension  Plan"  means  a  pension  plan  (as  defined in Section 3(2) of ERISA)
 -------------
subject  to  Title  IV  of ERISA which Borrower or any ERISA Affiliate sponsors,
 -----
maintains,  or  to  which  it  makes,  is  making,  or  is  obligated  to  make
 --
contributions,  or  in the case of a Multi-Employer Plan is making, is obligated
 --
to  make, or has made contributions at any time during the immediately preceding
6  plan  years.
"Permitted  Letter  of Credit" means a letter of credit (i) which is issued by a
 ----------------------------
financial institution which is satisfactory to Lender in its sole discretion and
whose  long-term  debt  is  rated  at least "A" by S&P and "A2" by Moody's; (ii)
which names Lender as the beneficiary; (iii) which contains terms and provisions
satisfactory  to  Lender  in its sole discretion; and (iv) with respect to which
the Borrower has the reimbursement obligation (and such reimbursement obligation
is  not  guarantied  by  Emeritus  or  any  Affiliate  of  Emeritus).
"Permitted  Payoff"  means the payment in full of all obligations under, and the
 -----------------
release  of any Liens with respect to, a First Mortgage Loan; provided that such
payment  was  made  in  accordance  with  this  Agreement.
"Permitted  Refinancing  Loan"  means,  individually,  any  mortgage  loan which
 ----------------------------
refinances  a  First  Mortgage  Loan and is consented to by Lender in accordance
 -----
with  this  Agreement.  "Permitted  Refinancing  Loans" means, collectively, all
 --                      -----------------------------
Permitted  Refinancing  Loans.
 --
"Permitted  Refinancing  Lender"  means, individually, a Person that is a lender
 ------------------------------
under  a  Permitted  Refinancing  Loan.  "Permitted  Refinancing Lenders" means,
 -                                        ------------------------------
collectively,  all  Permitted  Refinancing  Lenders.
 -
"Permitted  Subsidiaries"  has  the  meaning  provided  in  Section  4.1(e).
 -----------------------
"Person"  means  an  individual,  partnership,  limited  liability  company,
 ------
corporation  (including  a  business  trust),  joint  stock  company,  trust,
 ------
unincorporated  association,  joint  venture or other entity, or a government or
 ------
any  political  subdivision  or  agency  thereof.
 -
"Plan"  means  an  employee  benefit  plan (as defined in Section 3(3) of ERISA)
 ----
which Borrower or any ERISA Affiliate sponsors or maintains or to which Borrower
 ---
or  any  ERISA Affiliate makes, is making, or is obligated to make contributions
and  includes  any  Pension  Plan.
"Primary  Intended  Use"  has  the  meaning  provided  in  the  Master  Lease.
 ----------------------
"Property  Operators" means the Persons identified as Property Operators on Part
 -------------------
A  of  Schedule  I.
       -----------
"Property  Owners"  means the Persons identified as Property Owners on Part A of
 ----------------
Schedule  I.
 ----------
"Proposed  Refinancing  Transaction"  has  the  meaning  provided  in  Section
 ----------------------------------                                    -------
5.4(l)(ii).
 ---------
"Real  Property"  means  any  Fee  Estate  or  any  Leasehold  Estate.
 --------------
"Reinvestment Rate" means, with respect to any prepayment of the Loan, an amount
 -----------------
equal  to the yield on U.S. Treasuries issued with a term a near to equal to the
remaining  term as the Loan as possible, such yield being based on the bid price
for  such  issue  as published in the Wall Street Journal on the date that is 14
days  prior  to  the  date  of  such  prepayment  (of,  if such bid price is not
published  on  such  date, the next preceding date on which such bid price is so
published)  and  converted  to  a  monthly  (not compounded) nominal yield, such
Reinvestment  Rate  to  be  determined  by  Lender.
"Release"  means  a  release,  spill,  emission,  leaking,  pumping,  injection,
 -------
deposit,  disposal,  discharge,  dispersal, leaching or migration of a Hazardous
 ------
Substance  into  the  indoor  or  outdoor environment or into or out of any Real
 -
Property  or  other  property,  including  the  movement of Hazardous Substances
 -
through  or  in  the  air,  soil, surface water, groundwater or Real Property or
 -
other  property.
 -
"Repair  and  Replacement  Expenditures"  has  the  meaning  provided in Section
 --------------------------------------                                  -------
5.3(n)(ii).
 ---------
"Repair  and  Replacement  Reserve  Account" has the meaning provided in Section
 ------------------------------------------                              -------
5.3(n)(i)(A).
 -----------
"Reportable  Event" shall mean any of the events set forth in Section 4043(c) of
 -----------------
ERISA  or  the  regulations  thereunder,  a  withdrawal from a plan described in
Section  4063 of ERISA or a cessation of operations described in Section 4062(e)
of  ERISA.
"Request  to  Provide  Offer  to  Finance"  has  the meaning provided in Section
 ----------------------------------------                                -------
2.6(a).
 -----
"Required  Mortgage  Loan  Balance"  has  the  meaning  provided  in  Section
 ---------------------------------                                    -------
5.3(n)(iii).
 ----------
 "Reserve  Account  Security  Agreement"  has  the  meanings provided in Section
  -------------------------------------                                  -------
3.1(e)(vi).
  --------
"Reserve  Accounts"  and "Reserve Account" have the meanings provided in Section
 -----------------        ---------------                                -------
5.3(n)(i).
 --------
"Review  Period"  has  the  meaning  provided  in  Section  2.6(b).
 --------------                                    ---------------
"Reviewed  Budget"  means  the  budget  of the Facilities delivered prior to the
 ----------------
Closing  Date  and  reviewed and accepted by Lender, a copy of which is attached
 ---
hereto  as  Exhibit  G.
 -          -----------
"Right  of  First  Offer"  has  the  meaning  provided  in  Section  2.6.
 -----------------------                                    ------------
"River  Oaks Facility" means the Facility described as the "River Oaks Facility"
 --------------------
on  Schedule  I.
"S&P"  means  Standard  &  Poor's  Corporation  or  any  successor  thereto.
 ---
"Sinking  Fund  Reserve  Account"  has  the  meaning  specified  in  Section
 -------------------------------                                     -------
5.3(n)(i)(B).
 -----------
"Solvent"  means,  when  used  with  respect  to any Person, that at the time of
 -------
determination:  (i)  the  assets  of  such  Person,  at a fair valuation, are in
 ----
excess of the total amount of its debts (including contingent liabilities); (ii)
 ----
the  present  fair  saleable  value  of  its assets is greater than its probable
liability on its existing debts as such debts become absolute and matured; (iii)
it  is  then  able and expects to be able to pay its debts (including contingent
debts  and other commitments) as they mature; and (iv) it has capital sufficient
to  carry  on  its  business  as  conducted  and  as  proposed  to be conducted.
"Stanford  Centre Facility" means the Facility described as the "Stanford Centre
 -------------------------
Facility"  on  Schedule  I.
"State"  means  the  District  of  Columbia  or  any state of the United States.
 -----
"Subsidiary"  means,  with  respect to any Person, any corporation, association,
 ----------
partnership,  joint venture or other business entity of which 50% or more of the
 -
voting  stock  or  other  equity  interests  is  owned or controlled directly or
indirectly  by  such  Person,  or  one  or more Subsidiaries of such Person or a
combination  thereof.
"Tax  Expense"  means,  for any period for any Person, charges for taxes accrued
 ------------
during  such period by such Person and its Subsidiaries on a consolidated basis,
 -
determined  in  conformity  with  GAAP.
"Taxes"  has  the  meaning  provided  in  Section  2.7(a).
 -----                                    ---------------
"Test Period" means (i) for any Distribution Date occurring on any date from the
 -----------
Closing  Date  through and including the Distribution Date in February 2003, the
period  from  November  1, 2002 to the last day of the calendar month commencing
two  calendar  months  prior  to  such  Distribution  Date;  and  (ii)  for  any
Distribution  Date  thereafter,  the period from the beginning of the applicable
calendar year through the last day of the calendar month commencing two calendar
months  prior  to  such  Distribution  Date.
"Title  Company"  has  the  meaning  provided  in  Section  3.1(j)(i).
 --------------                                    ------------------
"Title  Policy"  has  the  meaning  provided  in  Section  3.1(j)(i).
 -------------                                    ------------------
"Transaction Document" means, collectively, the Loan Documents, the Contribution
 --------------------
Documents  and  the  Master  Lease  Documents.
"Unfunded  Pension  Liability"  means  the  excess  of  a Pension Plan's benefit
 ----------------------------
liabilities  under  Section 4001(a)(16) of ERISA, over the current value of that
 -----
Pension  Plan's  assets,  determined in accordance with the assumptions used for
funding such Pension Plan pursuant to Section 412 of the Code for the applicable
plan  year.
"Unmatured  Surviving  Obligation" means, as of any date, an Obligation which is
 --------------------------------
contingent  and  unliquidated  and  not  due  and  owing  on such date and which
pursuant  to provisions of this Agreement survives termination of this Agreement
and  the  repayment  of  the  Loan,  such  as,  for  example,  a  contingent and
unliquidated  indemnification  obligation  under  Section  7.7.
                                                  ------------
Accounting  Terms
-----------------
     .  Except  where  context  otherwise  requires,  all  accounting  terms not
expressly  defined  herein  shall  be  construed  and all financial computations
required  under  this Agreement shall be made in accordance with GAAP as then in
effect.
Other  Definitional  Provisions.
-------------------------------
Unless  otherwise  specified  herein  or  therein,  all  terms  defined  in this
Agreement  have the defined meanings when used in any other Transaction Document
or  in  any  certificate  or  other  document made or delivered pursuant hereto.
The words "hereof," "herein," "hereunder," and words of similar import when used
in  this  Agreement  shall  refer  to  this  Agreement as a whole and not to any
particular  provision  of  this  Agreement,  and  section,  schedule and exhibit
references  are  to  sections,  schedules  and exhibits to this Agreement unless
otherwise  specified.
The  meaning  of  defined  terms shall be equally applicable to the singular and
plural  forms  of  the  defined  terms.
The  term  "including" is not limiting and means "including without limitation."
In the computation of periods of time from a specified date to a later specified
date,  the  word  "from"  means "from and including"; the words "to" and "until"
each  mean  "to but excluding"; and the word "through" means "to and including."
References  to  agreements  and  other  documents shall be deemed to include all
subsequent  amendments  and other modifications thereto that are permitted under
this  Agreement.
References  to  statutes  or  regulations  are  to be construed as including all
statutory  and  regulatory  provisions  consolidating, amending or replacing the
statute  or  regulation.
The  captions  and  headings  of this Agreement are for convenience of reference
only  and  shall  not  affect  the  construction  of  this  Agreement.

                            AMOUNTS AND TERMS OF LOAN
Making  the  Loan.
-----------------
The  Loan
---------
     .  Lender  agrees,  subject  to  the terms and conditions set forth in this
Agreement,  to  make  a loan to Borrower (the "Loan") in the aggregate principal
                                               ----
amount  of  $16,000,000 on any Business Day (the date of the making of the Loan,
the  "Closing  Date")  prior  to  December  6,  2002.
      -------------
The  Note
---------
     .  The  Loan  shall  be  evidenced  by  a  promissory  note  (the  "Note"),
                                                                         ----
substantially in the form of Exhibit A, in an original principal of $16,000,000.
                             ---------
Funding  the  Loan
------------------
     .  Upon  fulfillment  of  the  conditions  set forth in Section 3.1, Lender
                                                             -----------
shall  make the proceeds of the Loan available to Borrower by transferring funds
to  the  Title  Company.
Interest.
--------
Interest  Rate
--------------
     .  Interest  shall  accrue  on the unpaid principal amount of the Loan from
the  Closing  Date until the principal amount of the Loan shall be paid in full,
at  a  rate  per  annum  equal  to  13.75%.
Default  Interest
-----------------
     .  For any period of time during which an Event of Default has occurred and
is continuing, the principal amount of the Loan shall bear interest payable upon
demand  at a rate per annum equal to the sum of (i) 2 percent plus (ii) the rate
otherwise payable pursuant to Section 2.2(a), but not to exceed the maximum rate
                              --------------
permitted  by  applicable  law.
Mandatory  Payments
-------------------
     .  Borrower  agrees  to  make  the  following  payments  on  the  Loan:
Monthly  Payments
-----------------
..  On  each  Payment  Date  (other  than  the Payment Date occurring in December
2002),  Borrower  shall  make  a  cash  payment  to Lender in an amount equal to
$160,000;  provided,  however,  that if the Closing Date is prior to December 4,
2002,  Borrower  shall  make  a cash payment to Lender on the Closing Date in an
amount  equal to $160,000 times a fraction, the numerator of which is the number
of days between the Closing Date through and including December 4, 2002, and the
denominator  of  which  is 30.  Any payment made pursuant to this Section 2.3(a)
                                                                  --------------
shall  be  applied  first  to accrued and unpaid interest and then to the unpaid
principal  amount  of  the  Loan.  On  each Payment Date, any interest which has
accrued  pursuant  to  Section  2.2(a)  and is not paid pursuant to this Section
                       ---------------                                   -------
2.3(a)  shall  be added to the principal amount of the Loan and shall thereafter
    --
accrue  interest  at  the  rate  provided  in  Section  2.2(a).
                                               ---------------
Maturity  Date
--------------
     .  On  the Maturity Date, Borrower shall pay the full outstanding principal
amount  of the Loan (including any principal that was added to the Loan pursuant
to  Section  2.3(a)),  all accrued and unpaid interest on the Loan and all other
    ---------------
Obligations  then due and owing under this Agreement or any other Loan Document.
For  the  convenience  of  the  parties hereto, attached as Schedule 2.3(b) is a
                                                            ---------------
schedule showing the accrual of interest and principal amounts for the loan on a
timely  basis  and  that the Loan is funded on the Closing Date and assuming all
payments  are  made  on  the  due  dates  for  such  payments.
Payment  Following  Change  of  Control
---------------------------------------
     .  If  within  the period commencing on the date of a Change of Control and
ending  90  days  after written notice from Borrower to Lender of such Change of
Control,  Lender  shall  request  in  writing that Borrower repay the Loan, then
within  30  days  after  delivery  to Borrower of such written request, Borrower
shall  immediately  repay  the  full  outstanding  principal  amount of the Loan
(including any principal that was added to the Loan pursuant to Section 2.3(a)),
                                                                --------------
all  accrued  and unpaid interest on the Loan and all other Obligations then due
and  owing  under  this  Agreement  or  any  other  Loan  Document.
Voluntary  Prepayments.
----------------------
No  Prepayment  Prior  to  Third  Anniversary
---------------------------------------------
     .  Borrower  may  not, under any circumstance, prepay the Loan prior to the
third  anniversary  of  the  Closing  Date.
Full  Prepayment
----------------
     .  After the third anniversary of the Closing Date, Borrower may prepay the
Loan in whole, but not in part.  For any such prepayment, Borrower shall provide
Lender  written  notice  of  such prepayment not later than 30 days prior to the
date  of  such  prepayment,  and  such  written  notice must state that Borrower
intends  to  prepay  the Loan and must provide the date on which such prepayment
will  be  made.  If  such notice is given Borrower shall, on the prepayment date
set  forth  in  such notice, prepay the full outstanding principal amount of the
Loan  (including  any  principal  that was added to the Loan pursuant to Section
                                                                         -------
2.3(a)),  all  accrued and unpaid interest on the Loan and all other Obligations
   ---
then  due  and  owing  under  this  Agreement  or  any  other  Loan  Document.
Partial  Prepayment
-------------------
     .  After  the  third anniversary of the Closing Date, Borrower may with the
approval  of  Lender  (which  approval  may be withheld in the sole and absolute
discretion  of Lender) make a partial prepayment of the Loan; provided that such
partial  prepayments may not be requested more frequently than quarterly and may
not  be  requested  for  a  principal amount less than $4,000,000.  For any such
prepayment,  Borrower shall provide Lender written notice of such prepayment not
later than 30 days prior to the date of such prepayment, and such written notice
must state that Borrower desires to prepay the Loan and must provide the date on
which  such  prepayment  will be made, if approved by Lender.  If such notice is
given and the Lender approves such prepayment, Borrower shall, on the prepayment
date  set forth in such notice, prepay the principal amount of the Loan approved
by  Lender  and  all  accrued  and unpaid interest on such principal amount.  If
Borrower  makes  such  prepayment,  each  future  payment required under Section
2.3(a)  shall  be  reduced  by  a  percentage  equal  to  (i) the amount of such
prepayment,  divided  by  (ii) the then-outstanding principal amount of the Loan
(including any principal that was added to the Loan pursuant to Section 2.3(a)).
Yield  Maintenance  Premium
---------------------------
     .  If, for any reason, the Loan is involuntarily prepaid prior to the third
anniversary  of  the  Closing  Date  (including,  by  reason  of an acceleration
following  the  occurrence  of  an Event of Default but excluding by reason of a
Change  of  Control),  Borrower shall, concurrently with such prepayment, pay to
Lender an amount equal to the greater of (x) 1% and (y) the positive difference,
if any, between (i) the net present value of the remaining payments of principal
and  interest  (including  the  payment  on the Maturity Date) discounted at the
Reinvestment  Rate  expressed  in monthly terms (not compounded), determined one
Business  Day  prior  to  such  prepayment, and (ii) the principal amount of the
Loan,  as  at  the  date  of  such  prepayment.
Payments  and  Computations.
---------------------------
Payments
--------
     .  Borrower shall make each payment hereunder not later than 2:00 p.m. (Los
Angeles,  California  time)  on  the  day  when  due in Dollars to Lender at its
address  referred  to  in  Section  7.3  in  same  day  funds.
                           ------------
Computations
------------
     .  All  computations  of interest shall be made by Lender on the basis of a
year  of  360  days,  in  each case for the actual number of days (including the
first  day  but  excluding  the last day) occurring in the period for which such
interest  are  payable.
Payment  on  Business  Day
--------------------------
     .  Whenever  any  payment  under this Agreement or the other Loan Documents
shall be stated to be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day, and such extension of time shall in
such  case be included in the computation of payment of interest or fees, as the
case  may  be.
Right  of  First  Offer  to  Finance
------------------------------------
     .  So long as any Obligation (other than an Unmatured Surviving Obligation)
shall  remain  unpaid, if Borrower or any of its Subsidiaries desires to Finance
any  of its Health Care Facilities or other property (including to refinance any
loan  or  other  financing  arrangement of Borrower or any of its Subsidiaries),
including  any  financing done in the form of a sale/leaseback transaction (each
such  financing  or  refinancing,  a "Financing Transaction"), then Lender shall
                                      ---------------------
have  a  right  of  first  offer  to  Finance such Health Care Facility or other
property  or  to refinance such loan or other financing arrangement (such right,
the  "Right  of First Offer").  The Right of First Offer shall be continuing and
      ---------------------
shall not terminate until the date Lender exercises such right and Finances such
Financing  Transaction  or elects not to provide a Lender Finance Proposal.  The
following  provisions  shall  govern  such  rights  and  such  Financing:
Request  to  Provide  Offer  to  Finance
----------------------------------------
     .  For  so  long  as  the  Right  of First Offer has not expired, for every
Financing  Transaction which is proposed to be Financed in whole or in part by a
third-party,  Borrower  shall  deliver to Lender a written request for Lender to
provide  a  written  proposal  to Finance a Financing Transaction.  Such written
request  shall  set  forth  the property(ies) and/or construction plans which is
(are)  the subject of such written request, the amount requested to be Financed,
the  requested term of the loan or lease, the collateral available to secure the
loan,  and  such other information pertaining to the terms and conditions of the
proposed  Financing  as Lender may reasonably request (each such written request
to  provide  a written proposal containing the foregoing information, a "Request
                                                                         -------
to  Provide  Offer  to  Finance").
 ------------------------------
Election  to  Finance
---------------------
     .  Lender  shall  have  20  days from the date of receipt of the Request to
Provide  Offer  to  Finance  (the  "Review  Period") to determine whether or not
                                    --------------
Lender will provide a written proposal to Finance.  During the applicable Review
Period,  Borrower  shall  cooperate and shall cause the applicable Subsidiary to
cooperate  with  Lender  and shall use reasonable efforts to provide Lender with
such  further  information  as Lender may reasonably require with respect to the
applicable  Request  to  Provide  Offer  to  Finance.
No  Election
------------
     .  Lender  shall  be deemed to have declined to exercise the Right of First
Offer  with  respect to a Request to Provide Offer to Finance if Lender fails to
provide  a  written  proposal  to Finance (each such proposal, a "Lender Finance
                                                                  --------------
Proposal")  within  the  applicable Review Period.  Each Lender Finance Proposal
   -----
shall  contain  the  material  terms  under which Lender proposes to provide the
proposed Financing, including the amount to be Financed, the term of the loan or
lease,  as  applicable,  the  interest  rate  or  lease rate, as applicable, the
amounts  and  schedule  of principal and interest payments or rental amounts, as
applicable,  the  terms  of  any prepayment or yield maintenance provisions, any
loan  recourse  provisions,  any  "due  on"  provisions  and  related  transfer
restrictions,  the  collateral  to secure the loan, whether or not a guaranty of
the  loan  or  lease  is  required, any cross-default or cross-collateralization
provisions  and  any  fees  and other costs to be charged in connection with the
proposed  Financing.
Borrower's  Election  to  Finance
---------------------------------
     .  With  respect  to  each  Request  to Provide Offer to Finance, if Lender
declines  (or  is deemed to have declined its right) to provide a Lender Finance
Proposal,  Borrower  and/or  the applicable Subsidiary may elect to Finance such
Finance Transaction with any third party provided, however, that Borrower or the
                                         --------  -------
applicable  Subsidiary  shall  have  closed  escrow with respect to such Finance
Transaction  within  6  months  after  the  expiration  of the applicable Review
Period.  With  respect  to  each  Request to Provide Offer to Finance, if Lender
provides  a  Finance Proposal then Borrower and/or the applicable Subsidiary may
Finance  such  Finance Transaction with any third party only if (i) such Finance
Transaction  is  consummated on financing terms and conditions less favorable to
such  third party than those set forth in such Lender Finance Proposal, and (ii)
Borrower  or  the applicable Subsidiary shall have closed escrow with respect to
such  Finance Transaction within 6 months after the expiration of the applicable
Review  Period.  If,  within  either  such  6  month  period,  Borrower  or  the
applicable Subsidiary fails to close such Finance Transaction in accordance with
the  terms  set forth in this Section 2.6(d), then the Right of First Offer with
                              --------------
respect  to  such Finance Transaction shall be reinstated, and Lender shall have
the  review  and  financing  rights for such Finance Transaction as set forth in
this  Section  2.6.
      ------------
Taxes.
-----
Net  Payments
-------------
     .  Any and all payments by Borrower under this Agreement and the other Loan
Documents  shall be made free and clear of and without deduction for any and all
present  or  future taxes, levies, imposts, deductions, charges or withholdings,
and  all  liabilities  with  respect  thereto,  excluding,  any taxes imposed on
                                                ---------
Lender's  net  income  (whether  denominated  as a franchise or capital stock or
other  tax)  or  net  worth  (all  such  non-excluded  taxes,  levies,  imposts,
deductions,  charges, withholdings and liabilities being hereinafter referred to
as  "Taxes").  If  Borrower shall be required by law to deduct any Taxes from or
     -----
in respect of any sum payable under this Agreement or any other Loan Document to
Lender, (i) the sum payable shall be increased as may be necessary so that after
making  all  required  deductions (including deductions applicable to additional
sums  payable under this Section 2.7) Lender receives an amount equal to the sum
                         -----------
it  would  have  received  had no such deductions been made; (ii) Borrower shall
make  such  deductions; and (iii) Borrower shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with applicable
law.
Payment  of  Other  Taxes
-------------------------
     .  In  addition,  Borrower  agrees  to  pay  any present or future stamp or
documentary  taxes  or  any  other  excise or property taxes, charges or similar
levies  which arise from any payment made under this Agreement or any other Loan
Document  or  from the execution, delivery or registration of, or otherwise with
respect  to, this Agreement or any other Loan Documents, provided Borrower shall
not be required to pay any tax based on Lender's net income (whether denominated
as  a  franchise  or  capital  stock  or  other  tax)  or  net  worth  (all such
non-excluded  taxes  or  other  items hereinafter referred to as "Other Taxes").
                                                                  -----------
Indemnification
---------------
     .  Borrower  will  indemnify  Lender  for the full amount of Taxes or Other
Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable  under  this  Section  2.7)  paid by Lender and any liability (including
                      ------------
penalties,  interest  and  expenses)  arising therefrom or with respect thereto,
whether  or  not  such  Taxes or Other Taxes were correctly or legally asserted.
This  indemnification  shall  be  made  within 5 days from the date Lender makes
written  demand  therefor.
Evidence  of  Payments
----------------------
     .  Within  30  days  after  the date of any payment of Taxes, Borrower will
furnish  to Lender, at its address referred to in Section 7.3, the original or a
                                                  -----------
certified  copy  of  a  receipt  evidencing  payment  thereof.
Survival
--------
     .  Without  prejudice  to  the  survival of any other agreement of Borrower
hereunder,  the agreements and obligations of Borrower contained in this Section
                                                                         -------
2.7  shall  survive  the  termination  of  this  Agreement.
---
Additional  Cash  Collateral
----------------------------
     .  If  Lender receives any amounts pursuant to Sections 46.1(g), (h) or (i)
of the Master Lease, Lender shall hold such amounts as additional collateral for
the  Loan  in  a  cash collateral account reasonably satisfactory to Lender, and
shall,  on  the  Maturity  Date, credit any such amounts against any outstanding
principal  amount  of  the  Loan.

                                   CONDITIONS
Conditions
----------
     .  The obligation of Lender to make the Loan is subject to the satisfaction
of  each  of  the  following  conditions  unless  waived  in  writing by Lender:
Representation  and  Warranties
-------------------------------
     .  Each  of  the representations and warranties contained in this Agreement
and  in each of the other Transaction Documents shall be true and correct in all
material  respects on and as of the Closing Date, before and after giving effect
to  the  Loan  and  to  the  application  of  the  proceeds  of  the  Loan.
No  Default
-----------
     .  No event shall have occurred and be continuing, or shall result from the
Loan  or  from  the application of the proceeds of the Loan, which constitutes a
Default  or  Event  of  Default.
Payment  of  Fees  and  Expenses
--------------------------------
     .  All  fees  and  expenses  of Lender (including fees and disbursements of
counsel  to  Lender)  due and payable on or prior to the Closing Date under this
Agreement  shall  have  been  paid.
No  Adverse  Change
-------------------
     .  There  shall  not  have  been  any  Material  Adverse  Change.
Loan  Documents
---------------
     .  Borrower  shall  have  delivered  to  Lender  each  of  the  following:
this  Agreement  duly  executed  by  Borrower  and  Lender;
the  Note  duly  executed  by  Borrower;
a pledge agreement, in substantially the form of Exhibit B (the "Borrower Pledge
                                                 ---------       ---------------
Agreement"),  duly  executed  by Borrower and Lender, together with certificates
---------
representing  the  Borrower Pledged Interests identified in Part A of Schedule I
--                                                                    ----------
to  the  Borrower  Pledge  Agreement,  accompanied by undated transfer documents
executed  in  blank;
a  Negative  Pledge  Agreement,  in  substantially  the  form  of  Exhibit  D
                                                                   ----------
(collectively,  the  "Negative  Pledge Agreements", and individually a "Negative
                      ---------------------------                       --------
Pledge  Agreement"),  duly  executed  by  each  Property  Owner  and  Lender;
  ---------------
an intercreditor agreement, with each of the First Mortgage Lenders, in form and
substance  satisfactory to Lender (collectively, the "Intercreditor Agreements",
                                                      ------------------------
and  individually  an  "Intercreditor  Agreement"),  duly executed by each First
                        ------------------------
Mortgage  Lender  and  Lender;
a  reserve  account  security  agreement, in substantially the form of Exhibit C
                                                                       ---------
(the  "Reserve  Account  Security  Agreement"),  duly  executed  by Borrower and
       -------------------------------------
Lender;
a control agreement, in form and substance reasonably acceptable to Lender, duly
executed  by  the  Depository  Bank  and  Lender;
evidence  that  the  Negative  Pledge  Agreements have each been recorded in the
appropriate  real  property  recording  offices;
evidence  that  the  financing  statements referred to in the opinion of counsel
delivered  pursuant  to Section 3.1(o) have been filed in the offices identified
                        --------------
therein;
a  Guaranty of Obligations in substantially the form of Exhibit H, duly executed
                                                        ---------
by  Daniel  R.  Baty;
a Mortgage or Deed of Trust, as appropriate, for each of the Real Properties, in
substantially  the  form  of  Exhibit  I  (collectively,  the  "Mortgages",  and
                              ----------                        ---------
individually  a  "Mortgage"),  duly  executed by each Property Owner and Lender;
                  --------
evidence  that  the  Mortgages  have  each been recorded in the appropriate real
property  recording  offices;  and
an  escrow holdback agreement in a form satisfactory to Lender, duly executed by
Borrower  and  Lender,  together  with  executed  but  undated  originals of any
agreements  required  in  connection  therewith.
Master  Lease  Documents
------------------------
     .  Borrower  shall  have delivered to Lender certified copies of the Master
Lease  Documents.
Borrower  Corporate  Documents
------------------------------
     .  Borrower  shall  have  delivered  to  Lender  each  of  the  following:
the  certificate  of  incorporation  of  Borrower, certified by the Secretary of
State  of  Nevada, dated as of a date not more than 10 days prior to the Closing
Date;
a  good  standing  certificate  dated  as of a recent date for Borrower from the
Secretary  of State of (x) Nevada and (y) each other jurisdiction where Borrower
is  qualified  to do business, in each case, dated as of a date not more than 10
days  prior  to  the  Closing  Date;
a  certificate  of  an  Authorized  Officer of Borrower, dated as of the Closing
Date,  certifying  as  to:
the  certificate  of incorporation of Borrower as in effect on the Closing Date;
the  bylaws  of  Borrower  as  in  effect  on  the  Closing  Date;
the resolutions of the Board of Directors of Borrower approving each Transaction
Document to which it is a party, and of all documents evidencing other necessary
corporate  or  organizational  action  and  governmental approvals, if any, with
respect  to  each  such  Transaction  Document;  and
the  names  and  true  signatures of the officers of Borrower authorized to sign
each  Transaction  Document to which it is a party and the other documents to be
delivered  hereunder.
Property  Owner  Organizational  Documents
------------------------------------------
     .  Borrower  shall  have  delivered  to  Lender  each  of  the  following:
the articles of organization or certificate of formation, as applicable, of each
Property Owner, certified by the Secretary of State of the jurisdiction in which
each  such  Property  Owner  is formed, dated as of a date not more than 10 days
prior  to  the  Closing  Date;
a  good  standing  certificate dated as of a recent date for each Property Owner
from  the Secretary of State of (x) the jurisdiction in which each such Property
Owner  is  formed  and  (y) each other jurisdiction where such Property Owner is
qualified to do business, in each case, dated as of a date not more than 10 days
prior  to  the  Closing  Date;
a  certificate of the Secretary of Borrower, as the sole Member of each Property
Owner,  dated  as  of  the  Closing  Date,  certifying  as  to:
the articles of organization or certificate of formation, as applicable, of such
Property  Owner  as  in  effect  on  the  Closing  Date;
the  limited  liability company agreement or operating agreement, as applicable,
of  such  Property  Owner  as  in  effect  on  the  Closing  Date;
resolutions  of  the  Board of Governors or Board of Managers, as applicable, of
such  Property Owner approving each Transaction Document to which it is a party,
and  of  all  documents  evidencing  other necessary corporate or organizational
action and governmental approvals, if any, with respect to each such Transaction
Document;  and
the  names  and  true  signatures  of  the  officers of each such Property Owner
authorized  to  sign  each  Transaction  Document to which it is a party and the
other  documents  to  be  delivered  hereunder.
Property  Operator  Organizational  Documents
---------------------------------------------
     .  Borrower  shall  have  delivered  to  Lender  each  of  the  following:
the  charter,  certificate  of  incorporation,  articles  of  organization  or
certificate  of  limited  partnership, as applicable, of each Property Operator,
certified  by  the  Secretary  of  State  of the jurisdiction in which each such
Property  Operator  is formed, dated as of a date not more than 10 days prior to
the  Closing  Date;
a good standing certificate dated as of a recent date for each Property Operator
from  the Secretary of State of (x) the jurisdiction in which each such Property
Operator  is formed and (y) each other jurisdiction where such Property Operator
is  qualified  to do business, in each case, dated as of a date not more than 10
days  prior  to  the  Closing  Date;
a  certificate  of  the Secretary of each Property Operator (or of such Property
Operator's  sole  member),  dated  as  of  the  Closing  Date, certifying as to:
the  charter,  certificate  of  incorporation,  articles  of  organization  or
certificate  of limited partnership, as applicable, of such Property Operator as
in  effect  on  the  Closing  Date;
the bylaws, operating agreement or partnership agreement, as applicable, of such
Property  Operator  as  in  effect  on  the  Closing  Date;
resolutions of the Board of Directors, Board of Governors or general partner, as
applicable,  of  such  Property  Operator approving the Transaction Documents to
which  such  Property Operator is a party, and of all documents evidencing other
necessary corporate or organizational action and governmental approvals, if any,
with  respect  to  the  Transaction  Documents;  and
the  names and true signatures of the officers of each such Property Operator or
the general partner of such Property Operator, as applicable, authorized to sign
the  Transaction  Documents  to  which such Property Operator is a party and the
other  documents  to  be  delivered  thereunder  or  hereunder.
Real  Property  Deliveries
--------------------------
     .  Borrower  shall  have delivered to Lender each of the following for each
Facility:
The  current  owner's  policy  of  title  insurance  issued  by  a title company
acceptable  to  Lender (the "Title Company") showing good and indefeasible title
                             -------------
to  such  Facility  in fee simple vested in the Property Owner for such Facility
and  subject  only  to (x) liens for taxes, assessments and governmental charges
not  yet  past due and payable or delinquent and (y) such other title exceptions
as  Lender  may  approve, in its sole and absolute discretion.  Such policy (the
"Title  Policy"),  when  issued,  shall:
  ------------
be  in  current  ALTA  extended  coverage  owner's  form  (but without a general
exception  for  creditors'  rights);
be issued in an amount not less than the value of such Facility, as set forth in
Schedule  3.1(j)(i);
include  endorsements  100  (no  violations, etc., modified for an owner), 103.7
(access),  116.1  (survey  accuracy),  and  123.2 (zoning-improved property) (if
available),  and  a  non-imputation  endorsement  or  the  equivalents  thereof
available  in  the  applicable  State, and such other endorsements as Lender may
reasonably  require;  and
insure  (i)  that  any  conditions,  covenants  and  restrictions affecting such
Facility  have  not  been  violated and that a future violation thereof will not
result  in  a  forfeiture  or  reversion  of title; (ii) if obtainable, that all
streets  adjoining such Facility have been completed, dedicated and accepted for
public  maintenance and use by the appropriate governmental authorities and that
such  Facility  has  access  to  public  streets; (iii) if available, that local
zoning  ordinances,  general plans and all other applicable land use regulations
and  all  private  covenants,  conditions  and  restrictions, if any, permit the
transfer  and  use of such Facility (and reconstruction and resumption of use of
such  Facility in the event of damage or destruction thereof or cessation of use
thereof)  for all uses contemplated by the Master Lease as a matter of right for
an  unlimited time period, and specifically not merely as a legal non-conforming
use  or  any  other legal status which would by its terms or by operation of law
limit  the  duration  of such use or the right to rebuild and resume use of such
Facility  for  all uses contemplated by the Master Lease in the event of damage,
destruction  or  cessation of use of such Facility for any reason; and (iv) over
and  against  all  parties  in  possession except the current occupants thereof.
a  title  policy  for  each Facility showing good and indefeasible title to such
Facilities  in  fee  simple  vested  in  the  applicable  Property Owner, in the
principal  amount  set forth on Schedule III and insuring the continued validity
                                ------------
and  priority  of  the  lien of the Mortgage upon such Facility, subject only to
such exceptions as are acceptable to Lender in its sole and absolute discretion.
Such  title  policy  shall  be  in  current ALTA extended coverage lender's form
(without  a  creditors  right  exception) and shall include such endorsements as
Lender  may  require  in  its  sole  and  absolute  discretion.
either  (x)  a  final  "as-built"  ALTA  survey  of  such  Facility completed in
accordance  with  the  Minimum  Standard  Detail requirements for ALTA/ACSM Land
Title  Surveys, with additional Title A survey requirements, jointly established
and  adopted  by  ALTA  and ACSM in 1999 that meet the requirements of a Class A
Survey  as  defined therein, certified within 90 days of the Closing Date or (y)
such  other  form of title survey which is in form and substance satisfactory to
Lender  in  its  sole  and  absolute  discretion.  Such  survey  shall:
be  certified  to Lender, Property Owner and the Title Company as being true and
accurate,  which  such  certification shall include the acreage of such Facility
and  a  statement  that  such  Facility  is  not located in a Flood Hazard Area;
identify  thereon  all  telephone,  water,  sewage,  electricity,  gas and other
utility  facilities  to  the  points  of  connection;  and
show  no  encroachments  onto or conflicts with any adjacent property other than
pursuant to easements appurtenant to such Facility or such other agreements with
the  affected landowner approved by Lender and which are, in turn, insured under
the  Title  Policy;
a  final appraisal of such Facility, performed by a firm selected or approved by
Lender  (individually,  a  "Final  Appraisal"  and  collectively,  the  "Final
                            ----------------                             -----
Appraisals"),  each  such  Appraisal to be in form and substance satisfactory to
         -
Lender;
copies  of  the  First  Mortgage  Loan  Documents  for  such  Facility, all such
documents  to  be  satisfactory  to  Lender;
evidence  satisfactory to Lender that each Facility and each Additional Property
is  a  separate  legal  lot  or  parcel;  and
information,  satisfactory  to  Lender,  with  respect to the amount of the real
property  taxes  with  respect to each Facility and each Additional Property and
any real property that is a part of the same tax parcel as such Facility or such
Additional  Property.
Health  Care  Licenses
----------------------
     .  With  respect  to each Facility, Borrower shall have delivered to Lender
with  respect  to  such  Facility  evidence satisfactory to Lender that (i) such
Facility  and/or  the  Property  Operator  for such Facility holds all licenses,
permits,  accreditations,  authorizations and certifications from all applicable
Governmental  Authorities  required  for  the  operation thereof for its Primary
Intended  Use  and  for  all  other  uses (if any) contemplated under the Master
Lease,  including  the  applicable  licenses  (collectively,  the  "Health  Care
                                                                    ------------
Licenses") from the California Department of Health Services, the Florida Agency
       -
for  Healthcare  Administration, the Idaho Department of Health and Welfare, the
Iowa  Department  of  Public Health, the Massachusetts Public Health Department,
the  Montana  Department  of Public Health and Human Services, the Nevada Health
Planning and Statistics Bureau, and/or the Washington State Department of Health
and  each  other  state  authority  having  jurisdiction  over  such  Facility
(collectively, the "Issuing Agencies"); (ii) such Facility is not subject to, or
                    ----------------
threatened  with,  any  hold  on  admissions  or other sanction and there are no
outstanding,  or  threatened, notices of deficiency resulting from any survey of
such  Facility which have not been fully responded to with an acceptable plan of
correction  with  which such Facility is being operated in compliance; and (iii)
such  Facility  and/or the Property Operator for such Facility is, to the extent
applicable,  (A)  duly  certified  as a provider under the Medicare and Medicaid
programs  and  (B)  in compliance in all material respects with all Governmental
Requirements,  including  rules  and  regulations  relating to Medicare/Medicaid
fraud  and  abuse  practices,  and  all  insurance  requirements.
Condemnation;  Casualty
-----------------------
     .  No  Condemnation  shall  be  pending  or  threatened with respect to any
Facility  or  any  Additional  Property and no casualty shall have occurred with
respect  to  any  Facility  or  any  Additional  Property  any  portion thereof.
Financial  Statements
---------------------
     .  Borrower  shall  have  delivered  to  Lender  each  of  the  following:
a copy of the audited financial statements of Emeritus and its Subsidiaries on a
consolidated basis for the fiscal year ended December 31, 2001, audited by KPMG;
a copy of the unaudited financial statements of Emeritus and its Subsidiaries on
a  consolidated basis for each fiscal quarter ending after December 31, 2001 and
more  than  45  days  prior  to  the  Closing  Date;
a  copy  of  the  pro  forma  unaudited financial statements of Borrower and its
Subsidiaries  on  a  consolidated  basis  for the fiscal year ended December 31,
2001;
a  copy  of  the  pro  forma  unaudited financial statements of Borrower and its
Subsidiaries  on  a  consolidated  basis  for  each  fiscal quarter ending after
December  31,  2001  and  more  than  45  days  prior  to  the  Closing  Date;
unaudited  operating  statements  for  each  Facility  showing the Net Operating
Income for such Facility for the trailing twelve-month period ended December 31,
2001;  and
unaudited  operating  statements  for  each  Facility  showing the Net Operating
Income for such Facility for the trailing twelve month periods ended on the last
day  of each month ending after December 31, 2001 and more than 10 Business Days
prior  to  the  Closing  Date.
Other  Document  Deliveries
---------------------------
     .  Borrower  shall  have  delivered  to  Lender  each  of  the  following:
Written disclosure, for Lender's review, of all pending or threatened litigation
or  governmental  proceedings  seeking  to enjoin, challenge or collect material
damages  in  connection  with  Emeritus, Borrower, any Subsidiary of Emeritus or
Borrower  or  any  Facility  or  any  Additional  Property;  and
All  documents evidencing or otherwise related to the contributions of assets to
the  Property  Owners  and  the  Property  Operators,  which  documents shall be
satisfactory  to  Lender  (such  documents,  the  "Contribution  Documents").
                                                   -----------------------
Legal  Opinions
---------------
     .  Borrower  shall  have  delivered  to  Lender  each  of  the  following:
an  opinion  of  The  Nathanson  Group,  counsel for Borrower and the other Loan
Parties,  in  form  and  substance  satisfactory  to  Lender;
an  opinion,  in  form and substance satisfactory to Lender, of New York counsel
for  Borrower  and  the  other  Loan  Parties,  such counsel to be acceptable to
Lender;
an  opinion  of  special  local  counsel  to  each  Property  Owner, in form and
substance  satisfactory  to  Lender;
an  opinion with respect to the Master Lease, in form and substance satisfactory
to  Lender,  of counsel for each Property Owner and each Property Operator, such
counsel  to  be  acceptable  to  Lender;
a  substantive  non-consolidation  opinion  (with  respect  to  substantive
consolidation  of  Borrower  or  any  Property  Owner with Emeritus) from Foster
Pepper  &  Shefelman  PLLC,  counsel for Borrower and the other Loan Parties, in
form  and  substance  satisfactory  to  Lender;  and
such  other  opinions  as  Lender  may  reasonably  request.
Governmental  Consents
----------------------
     .  Each  Loan  Party  and  each  Property  Operator shall have obtained all
consents,  approvals and authorizations required from any Governmental Authority
in  connection  with  execution,  delivery  and  performance of their respective
obligations  under  this  Agreement  and  the  other  Transaction  Documents.
Insurance  Coverage
-------------------
     .  Borrower  shall have delivered to Lender evidence that Borrower and each
other  Loan Party has in place the insurance coverage required by this Agreement
and  that  Lender,  as Lender under this Agreement, has been named an additional
insured  on  all  insurance  policies  of  Borrower  or any of its Subsidiaries.
Corporate  and  Governmental  Approvals
---------------------------------------
     .  Borrower  shall  have delivered to Lender all documents evidencing other
necessary  corporate  action and governmental approvals, if any, with respect to
this  Agreement,  the  other Transaction Documents and the Collateral Documents.
Minimum  Aggregate  Net  Operating  Income
------------------------------------------
     .  The  sum  of  the Aggregate Net Operating Income for the trailing twelve
months  ended as of each month after August 31, 2002 and more than 10 days prior
to  the  Closing  Date  is  not  less  than  $8,100,000.
Occupancy  and  EBITDAR
-----------------------
     .  The  occupancy  and  the  EBITDAR  of  the  Facilities, as a whole, must
reasonably  be within the Reviewed Budget for the one-month periods, and for the
fiscal  year-to-date  periods,  ending  on  the  last day of each calendar month
ending  after  June  2002  and  more  than  10  days  prior to the Closing Date.
No  Liability  for  Facility
----------------------------
     .  Borrower  shall have delivered to Lender evidence that no Property Owner
is  subject  to  liability  for  the  operations  at  the Facility owned by such
Property  Owner.
Appraised  Value
----------------
     .  The  aggregate appraised value of all of the Facilities (as indicated in
the  Final  Appraisals)  shall  be  no  less  than  $80,500,000.  The  aggregate
appraised  value  of  the  Additional  Properties  (as  reasonably determined by
Borrower)  shall  be  no  less  than  $1,200,000.
Refinancing
-----------
       The satisfactory completion of a $58,000,000 refinancing transaction with
GECC,  such  refinancing  to  be on terms and conditions satisfactory to Lender.
Reimbursement  Obligation
-------------------------
     .  To  the  extent  that any letter of credit has been issued to support an
obligation  of  Borrower  or  any  Subsidiary  of  Borrower,  Borrower  or  such
Subsidiary  shall  either  (i)  have  the  direct  reimbursement obligation with
respect  to  such  letter  of  credit or (ii) have an intercompany reimbursement
agreement  with  Emeritus  or  the  Subsidiary  of  Emeritus that has the direct
reimbursement  obligation  with respect to such letter of credit, which shall in
each  event  be  in  form  and  substance  satisfactory  to  Lender.
Compliance  with  Zoning  Laws
------------------------------
     .  With  respect  to each Facility, Borrower shall have delivered to Lender
with respect to such Facility (i) copies of the applicable zoning ordinances and
map marked to show the location of such Facility and certified by an appropriate
Governmental  Authority  to  be  complete  and  accurate,  and  (ii)  evidence
satisfactory  to  Lender  that  such  zoning  ordinances  and  the  general
plans/specific  plans  and  all  other  land  use  regulations of the applicable
municipal  jurisdictions and all covenants, conditions and restrictions, if any,
affecting such Facility permit the transfer of such Facility and use thereof for
its  Primary Intended Use and for all other uses (if any) contemplated under the
Master  Lease  (and reconstruction and resumption of use in the event of damage,
destruction,  or  cessation  of  use) as a matter of right for an unlimited time
period  and  not  merely  as  a  legal  non-conforming  use.
Officers  Certificate
---------------------
     .  Borrower  shall  have  delivered to Lender a certificate dated as of the
Closing  Date  and  signed  by  the  Chairman,  Chief Executive Officer or Chief
Financial  Officer of Borrower, in his or her capacity as an officer (and not as
an  individual) certifying that, as of the Closing Date, (w) the representations
and  warranties  contained  in  this Agreement and each of the other Transaction
Documents  are true and correct on and as of the Closing Date, as though made on
and  as  of  such  date;  (x) no Event of Default or Default has occurred and is
continuing;  (y)  there has been no Material Adverse Change; and (z) each of the
other  conditions  precedent  to  the  Closing  Date  has  been  satisfied.
Other  Permitted  Subsidiary  Organizational  Documents
-------------------------------------------------------
     .  Borrower  shall  have delivered to Lender each of the following for each
Permitted  Subsidiary  (other  than  a Property Owner) (collectively, the "Other
                                                                           -----
Permitted  Subsidiaries",  and  individually,  an "Other Permitted Subsidiary"):
   --------------------                            --------------------------
the  charter,  certificate  of  incorporation,  articles  of  organization  or
certificate  of  limited  partnership,  as  applicable,  of each Other Permitted
Subsidiary,  certified  by  the  Secretary of State of the jurisdiction in which
each such Other Permitted Subsidiary is formed, dated as of a date not more than
10  days  prior  to  the  Funding  Date;
a  good  standing certificate dated as of a recent date for each Other Permitted
Subsidiary  from  the  Secretary  of State of (x) the jurisdiction in which each
such  Other Permitted Subsidiary is formed and (y) each other jurisdiction where
such Other Permitted Subsidiary is qualified to do business, in each case, dated
as  of  a  date  not  more  than  10  days  prior  to  the  Funding  Date;
a  certificate of the Secretary or general partner, as applicable, of each Other
Permitted  Subsidiary,  dated  as  of  the  Funding  Date,  certifying  as  to;
the  charter,  certificate  of  incorporation,  articles  of  organization  or
certificate  of  limited  partnership,  as  applicable,  of such Other Permitted
Subsidiary  as  in  effect  on  the  Funding  Date;
the bylaws, operating agreement or partnership agreement, as applicable, of such
Other  Permitted  Subsidiary  as  in  effect  on  the  Funding  Date;
resolutions of the Board of Directors, Board of Governors or general partner, as
applicable,  of  such  Other  Permitted  Subsidiary  approving  the  Transaction
Documents  to  which  such  Other  Permitted  Subsidiary  is a party, and of all
documents  evidencing  other  necessary  corporate  or organizational action and
governmental  approvals,  if any, with respect to the Transaction Documents; and
the  names  and  true  signatures  of  the officers of each such Other Permitted
Subsidiary  or  the  general  partner  of  such  Other  Permitted Subsidiary, as
applicable,  authorized  to  sign  the Transaction Documents to which such Other
Permitted  Subsidiary  is  a  party  and  the  other  documents  to be delivered
thereunder  or  hereunder.
Documents  and  other  Evidence  Satisfactory  to  Lender
---------------------------------------------------------
     .  The  documents,  agreements  and  evidence deliver by Borrower to Lender
pursuant  to  Section  3.1  shall  be  satisfactory  in  all respects to Lender.
              ------------

                         REPRESENTATIONS AND WARRANTIES
Representations  and  Warranties  of  Borrower
----------------------------------------------
     .  Borrower  represents  and  warrants  as  follows:
Organization
------------
     .  Each  of  the  Loan Parties and the Property Operators is duly organized
and in good standing under the laws of the jurisdiction where such Loan Party or
Property  Operator, as the case may be, is organized and is duly qualified to do
business in each jurisdiction where the absence of such qualification could have
a  Material  Adverse  Effect.
Power  and  Authority
---------------------
     .  Each of the Loan Parties and the Property Operators has the corporate or
other organizational power:  (i) to carry on its business as now being conducted
and as proposed to be conducted by it; (ii) to execute, deliver and perform each
Transaction Document to which it is a party; and (iii) to take all action as may
be  necessary  to  consummate  the  transactions  contemplated  thereunder.
Due  Authorization
------------------
     .  The  execution,  delivery  and  performance  by:
each  of  the  Loan  Parties of each Transaction Document to which it is a party
have  been  duly  authorized  by all necessary corporate or other organizational
action,  and  do not contravene (A) such Loan Party's charter or bylaws or other
organizational  documents  or (B) any law or any contractual restriction binding
on or affecting such Loan Party, and do not result in or require the creation of
any  Lien  upon  or with respect to any of its respective properties (other than
Liens  created  pursuant  to  the  Collateral  Documents);  and
each  of  the  Property  Operators of each Transaction Document to which it is a
party  have  been  duly  authorized  by  all  necessary  corporate  or  other
organizational  action,  and  do  not  contravene  (A)  such Property Operator's
charter  or  bylaws  or  other  organizational  documents  or (B) any law or any
contractual  restriction  binding on or affecting such Property Operator, and do
not result in or require the creation of any Lien upon or with respect to any of
its  respective  properties.
Binding  and  Enforceable
-------------------------
     .  This  Agreement  and  each  other Transaction Document to which any Loan
Party  is a party has been duly executed and delivered by such Loan Party and is
a  legally  valid  and  binding  obligation  of each such Loan Party enforceable
against  each such Loan Party in accordance with its respective terms, except as
the  enforcement  thereof  may  be  limited  by  bankruptcy,  insolvency,
reorganization,  moratorium  or  similar laws relating to or limiting creditors'
rights  generally  and  subject to the availability of equitable remedies.  Each
Transaction  Document  to  which  any Property Operator is a party has been duly
executed  and  delivered  by  such  Property Operator and is a legally valid and
binding  obligation of each such Property Operator enforceable against each such
Property  Operator  in  accordance  with  its  respective  terms,  except as the
enforcement  thereof  may  be limited by bankruptcy, insolvency, reorganization,
moratorium  or  similar laws relating to or limiting creditors' rights generally
and  subject  to  the  availability  of  equitable  remedies.
Subsidiaries
------------
..  Except  for  the  Permitted  Subsidiaries,  there  are  no direct or indirect
Subsidiaries  of Borrower on the Closing Date.  As of the Closing Date, Borrower
owns  directly  or indirectly only the following Subsidiaries (collectively, the
"Permitted  Subsidiaries"):
 -----------------------
the  Property  Owners;
ESC-Land;  and
the  New  Florida  Property  Owner.
No  Indebtedness
----------------
     .  On  the Closing Date, neither Borrower nor any Subsidiary of Borrower is
subject  to  any  Indebtedness  other  than  Indebtedness identified on Schedule
                                                                        --------
4.1(f)  and  the  Contingent Obligations on Schedule 5.4(c)(ii).  From and after
     -                                      -------------------
the  Closing Date, neither Borrower nor any Subsidiary of Borrower is subject to
any  Indebtedness  other than Indebtedness permitted pursuant to Section 5.4(b).
                                                                 --------------
No  Liens
---------
     .  As  of the Closing Date, there are no Liens on assets of Borrower or any
Subsidiary  of  Borrower,  other  than Liens securing Indebtedness identified on
Schedule  4.1(g).  From and after the Closing Date, there are no Liens on assets
   -------------
of  Borrower  or any Subsidiary of Borrower, other than Liens permitted pursuant
to  Section  5.4(a).
    ---------------
No  Defaults
------------
     .  No  Default  or  Event  of  Default  has  occurred  and  is  continuing.
No  Conflicts  or  Restrictions
-------------------------------
     .  The  execution,  delivery  and  performance  by each Loan Party and each
Property Operator of each of the Transaction Documents to which it is a party do
not  and  will not (i) conflict with, result in a breach of, or constitute (with
or  without  notice  or the lapse of time or both) a default under, any material
agreement,  document or other instrument of any Loan Party or Property Operator,
as  the  case  may be, or binding on any Loan Party or Property Operator, as the
case may be, or any property of any Loan Party or Property Operator, as the case
may be; or (ii) result in or require the creation or imposition of any Lien upon
any  of  the  property  or assets of any Loan Party or Property Operator, as the
case  may  be,  (other than Liens created pursuant to the Collateral Documents).
Governmental  Approval
----------------------
     .  Except  for those listed on Schedule 4.1(j) (each of which has been duly
                                    ---------------
obtained  or made and is in full force and effect), no authorization or approval
or  other action by, and no notice to or filing with, any Governmental Authority
is  required  for the due execution, delivery and performance by each Loan Party
and each Property Operator of any Transaction Document to which it is or will be
a  party.
Litigation
----------
     .  There is no pending or overtly threatened action or proceeding affecting
Emeritus  or  any  Subsidiaries  of  Emeritus or Borrower or any Subsidiaries of
Borrower before any Governmental Authority which could reasonably be expected to
have  a  Material  Adverse  Effect  or  which  purports  to affect the legality,
validity  or  enforceability of this Agreement or any other Transaction Document
to  which  any  Loan  Party  or  any  Property  Operator  is or will be a party.
Financial  Information
----------------------
     .  The  financial statements delivered to Lender pursuant to Section 3.1(m)
                                                                  --------------
and each of the subsequent financial statements delivered to the Lender pursuant
to Section 5.2(a), Section 5.2(b) or Section 5.2(c) fairly present the financial
   ------------------------------    --------------
condition  of Borrower and its Subsidiaries or Emeritus and its Subsidiaries, as
the  case may be, as at the date of such financial statements and the results of
the  operations  of  Borrower  and  its  Subsidiaries  or  Emeritus  and  its
Subsidiaries,  as  the  case  may  be, for the period ended on such date, all in
accordance  with  GAAP consistently applied except, (x) in the case of financial
statements  delivered pursuant to Section 3.1(m)(ii), (iii), (iv), (v), or (vi),
                                  ------------------  -----  ----  ---     ----
or  Section  5.2(a), Section 5.2(b) or Section 5.2(c)(iii) or (iv), for year-end
    ---------------  --------------    -------------------    ----
adjustments  and  the  lack  of  footnotes; and (y) in the case of statements of
income  delivered  pursuant  to  Section  5.2(c)(ii),  for  lack  of  footnotes.
                                 -------------------
Material  Adverse  Change
-------------------------
     .  There  has  been  no  Material  Adverse  Change.
Compliance
----------
     .  Each  Loan  Party  and  each  Property  Operator is in compliance in all
material  respects  with  all  applicable  laws,  rules,  regulations.
Payment  of  Taxes
------------------
     .  Borrower  and  each  of  its  Subsidiaries  and Emeritus and each of its
Subsidiaries have timely and accurately filed all federal income tax returns and
all  other tax returns required to be filed by each of them and have timely paid
all  taxes and assessments payable by each of them which have become due, except
to  the  extent that such taxes or assessments are being contested in good faith
by  appropriate  proceedings diligently pursued, and as to which Borrower or its
Subsidiaries  or  Emeritus  and  its  Subsidiaries,  as  the  case  may be, have
established  reserves  acceptable  to  Lender.
Security  Interests
-------------------
     .  The  provisions  of  each  of  the Collateral Documents are effective to
create  in  favor  of Lender legal, valid, and enforceable security interests in
all  right,  title  and interest of Borrower in the Collateral described therein
and  Borrower has taken all action necessary to perfect such security interests,
to  the  extent  they can be perfected by delivery in pledge to Lender or by the
filing  of  a  financing  statement.
Title  to  Property
-------------------
     .  Borrower,  each  Loan  Party  and  each  Property  Operator  (other than
Emeritus)  has  good  and  indefeasible title to all properties reflected in its
books  and  records  as being owned by each of them, free and clear of all Liens
other  than  Liens  permitted  pursuant to Section 5.4(a); Emeritus has good and
                                           --------------
indefeasible title to all properties reflected in its books and records as being
owned  by  it,  and related to the Facilities, free and clear of all Liens other
than  Liens  permitted  pursuant  to  Section  5.4(a).
                                      ---------------
Real  Property  Matters.
-----------------------
Schedule  4.1(r)  sets  forth each Fee Estate and each Leasehold Estate owned by
----------------
Borrower  or  any  Subsidiary  of  Borrower, including the ownership in the Real
--
Property  as  of  the  Closing  Date.
--
Current  local  zoning  ordinances,  general plans and other applicable land use
regulations  and  all  private  covenants,  conditions and restrictions, if any,
affecting  the  Facilities,  permit  the use of the Facilities for their Primary
Intended  Use  (and reconstruction and resumption of use in the event of damage,
destruction,  or  cessation  of  use) as a matter of right for an unlimited time
period  and  not  merely  as  a  legal  non-conforming  use.
The  Property  Owner and/or Property Operator for each Facility has obtained all
material  consents,  permits,  licenses  approvals  or  authorizations  from
Governmental  Authorities  or  other third parties which are necessary to permit
the  use  of  such  Facility for its Primary Intended Use and for all other uses
contemplated  under  the  Master  Lease  (if  any),  and  each  Facility  is  in
substantial  compliance  with  all  applicable  zoning  ordinances.
Each Property Operator's Medicare and Medicaid participation agreements, if any,
are  in  full  force  and effect and no action has been taken to revoke, cancel,
suspend  or  modify  any  of  such agreements; each Property Operator's material
provider  contracts, if any, including managed care contracts, are in full force
and effect and no action has been taken to revoke, cancel, suspend or modify any
such  agreement,  nor  is  there  any  basis  for such action; and reimbursement
pursuant  to the Medicare and Medicaid participation agreements, if any, and any
material  provider  contract  will  not be adversely affected as a result of the
transactions  contemplated  hereby.
No  Facility  or  Additional  Property is located within an area of special risk
with  respect  to  natural or man-made disasters or hazards, including any Flood
Hazard  Area.
There  are  no  material  adverse  geological  or  soil conditions affecting any
Facility.
All  public  utilities,  including  telephone, gas, electric power, sanitary and
storm  sewer  and  water, are available for connection at the boundaries of each
Facility;  such  utilities  are  adequate  for  the Primary Intended Use of such
Facility; and the means of ingress and egress, parking, access to public streets
and  drainage  facilities  are  adequate  for  the  Primary Intended Use of such
Facility.
Each  Facility  and  Additional  Property is a legal lot or parcel which for all
purposes  may  be  mortgaged,  conveyed  and  otherwise dealt with as a separate
parcel  and  taxed  as  a  separate  lot  or  parcel.
No  exception  to title to and no interest in any Facility will interfere in any
material  respect  with  the use of the Leased Property for its Primary Intended
Use.
The real property tax assessor's parcel numbers for each Facility and Additional
Property  are  as  set  forth  on  Schedule  4.1(r).
                                   ----------------
Neither  Borrower, any Subsidiary of Borrower nor any Affiliate of Borrower have
any  interest  in any contiguous or adjacent property to any Facility other than
such  property  that is subject to a non compete agreement acceptable to Lender.
Conduct  of  Business
---------------------
     .  Borrower  and  each Subsidiary of Borrower is in compliance with Section
                                                                         -------
5.4(g).
 -----
Investment  Company
-------------------
     .  Neither Borrower nor any other Loan Party is  an "investment company" or
a  company  "controlled"  by  and "investment company" within the meaning of the
Investment  Company  Act  of  1940,  as  amended.
Margin  Stock
-------------
     .  Borrower  is  not  engaged  in  the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of Regulation
U  issued  by  the  Board  of  Governors  of the Federal Reserve System), and no
proceeds  of  the  Loan will be used to purchase or carry any margin stock or to
extend  credit  to  others  for the purpose of purchasing or carrying any margin
stock.
Registration  of  the  Note
---------------------------
     .  It  is  not  necessary  to register the Note under the Securities Act of
1933,  as  amended, or to qualify this Agreement as an indenture under the Trust
Indenture  Act  of  1939,  as  amended.
Environmental  Laws
-------------------
     .  Except  as  set  forth  in  the  reports  set  forth on Schedule 4.1(w):
                                                                ---------------
Borrower  and  its  Subsidiaries have complied in all material respects with all
Environmental  Laws  and  neither  Borrower  nor  any  Subsidiary nor any of its
presently  owned  Real  Property  or  presently  conducted  operations,  nor its
previously  owned  Real  Property or prior operations, is subject to any current
enforcement order from or liability agreement with any Governmental Authority or
private  Person  respecting (x) compliance with any Environmental Law or (y) any
potential  liabilities  and costs or remedial action arising from the Release or
threatened  Release  of  a  Hazardous  Substance.
Borrower  and  its Subsidiaries have obtained all material permits necessary for
their  current  operations under Environmental Laws, and all such permits are in
good  standing  and  Borrower and its Subsidiaries are in substantial compliance
with  all  terms  and  conditions  of  such  permits.
Neither  Borrower  nor  any  of  its Subsidiaries, nor, to the best knowledge of
Borrower,  any  predecessors  in  interest,  has  in violation of applicable law
stored,  treated  or  disposed  of  any  hazardous  waste.
Neither  Borrower  nor  any  of  its  Subsidiaries  has  received  any  summons,
complaint,  order  or similar written notice indicating that it is not currently
in  compliance  with,  or  that  any Governmental Authority is investigating its
compliance  with,  any  Environmental Laws or that it is or may be liable to any
other  Person  as  a  result  of  a Release or threatened Release of a Hazardous
Substance.
To the knowledge of Borrower, none of the present or past operations of Borrower
and  its  Subsidiaries is the subject of any pending or threatened investigation
by  any  Governmental Authority evaluating whether any remedial action is needed
to  respond  to  a  Release  or  threatened  Release  of  a Hazardous Substance.
There  is not now, nor to the best knowledge of Borrower has there ever been, on
or  in  the  Real  Property  owned  or  operated  by  Borrower  or  any  of  its
Subsidiaries:
any  underground  storage  tanks  other  than  those maintained and/or closed in
compliance  in  all  material  respects  with  applicable  laws  or  surface
impoundments,
any  asbestos-containing  material  that  is  friable,  except  such as has been
removed  or  encapsulated  in  compliance  in  all  material  respects  with
Environmental  Laws,  or
any  polychlorinated  biphenyls  (PCBs)  used  in  hydraulic  oils,  electrical
transformers  or  other  equipment, other than those maintained in compliance in
all  material  respects  with  Environmental  Laws.
Neither  Borrower  nor  any  of  its Subsidiaries has filed any notice under any
requirement of Environmental Law reporting a spill or accidental and unpermitted
Release  or  discharge  of  a  Hazardous  Substance  into  the  environment.
Neither  Borrower  nor any of its Subsidiaries has entered into any negotiations
or  settlement  agreements  with  any  Person  (including the prior owner of its
property) imposing material obligations or liabilities on Borrower or any of its
Subsidiaries with respect to any remedial action in response to the Release of a
Hazardous  Substance  or  environmentally  related  claim.
No  Environmental  Lien  has  attached to the Real Property owned or operated by
Borrower  or  any  of  its  Subsidiaries.
ERISA  Compliance.
-----------------
Each  Plan  is  in  compliance  in  all  material  respects  with the applicable
provisions  of  ERISA, the Code and other federal or state law.  Each Plan which
is  intended to qualify under Section 401(a) of the Code either (i) has received
a  favorable  determination  letter  from  the  IRS  or (ii) uses a standardized
prototype  document,  which  prototype  document  is  subject to a determination
letter  from  the  IRS,  and,  in  each case, to the best knowledge of Borrower,
nothing  has  occurred  with  respect  to  any  such  Plan which would cause the
disqualification  of  such Plan.  Borrower and each ERISA Affiliate has made all
required  contributions  to  any Plan subject to Section 412 of the Code, and no
application  for  a  funding  waiver  or an extension of any amortization period
pursuant  to  Section  412  of  the Code has been made with respect to any Plan.
There  are  no pending or, to the best knowledge of Borrower, threatened claims,
actions  or  lawsuits,  or action by any Governmental Authority, with respect to
any  Plan.  There  has  been  no  prohibited  transaction  or  violation  of the
fiduciary  responsibility  rules  with  respect  to  any  Plan.
(A)  No  ERISA  Event  has  occurred  or is reasonably expected to occur; (B) no
Pension  Plan  has  any Unfunded Pension Liability; (C) neither Borrower nor any
ERISA  Affiliate  has  incurred,  or  reasonably expects to incur, any liability
under  Title  IV  of ERISA with respect to any Pension Plan (other than premiums
due  and  not  delinquent under Section 4007 of ERISA); (D) neither Borrower nor
any  ERISA Affiliate has incurred, or reasonably expects to incur, any liability
(and  no  event has occurred which, with the giving of notice under Section 4219
of  ERISA,  would  result in such liability) under Section 4201 or 4243 of ERISA
with  respect  to  a Multi-Employer Plan; and (E) neither Borrower nor any ERISA
Affiliate  has engaged in a transaction that could be subject to Section 4069 or
4212(c)  of  ERISA.
Restrictions  on  Dividends
---------------------------
     .  Except for restrictions contained in (i) the governing documents of each
Permitted  Subsidiary  delivered  to Lender pursuant to Section 3.1(h); and (ii)
                                                        --------------      ----
the  First  Mortgage Loan Documents, no Subsidiary of Borrower is subject to any
agreement  which restricts the ability of such Subsidiary of Borrower to declare
or  make any dividend payment or other distribution of assets, properties, cash,
rights,  obligations or securities to its stockholders or other equity owners or
to  make  any  loan  or advance to Borrower or any other Subsidiary of Borrower.
Solvency
--------
     .  Each  Loan  Party and each Property Operator is, and upon the incurrence
of  any Obligations by such Loan Party or Property Operator, as the case may be,
will  be,  Solvent.
Labor  Disputes
---------------
     .  Except  as  set  forth  on  Schedule 4.1(aa), (i) there is no collective
                                    ----------------
bargaining  agreement  or other labor contract covering employees of Borrower or
any  of  its Subsidiaries, (ii) no such collective bargaining agreement or other
labor  contract  is scheduled to expire during the term of this Agreement, (iii)
no union or other labor organization is seeking to organize, or to be recognized
as,  a  collective  bargaining  unit  of  employees  of  Borrower  or any of its
Subsidiaries or for any similar purpose, and (iv) there is no pending or (to the
best  knowledge  of  the  Borrower)  threatened, strike, work stoppage, material
unfair  labor  practice  claim,  or  other  material  labor  dispute  against or
affecting  Borrower  or  its  Subsidiaries  or  their  employees.
Master  Lease  Document  Default
--------------------------------
     .  No Property Owner or Property Operator is in default of any provision of
any  Master  Lease  Document.
Full  Disclosure
----------------
     .  None  of  the  representations  or  warranties  made  by Borrower or any
Subsidiary  in the Transaction Documents as of the date such representations and
warranties  are made or deemed made, and none of the statements contained in any
exhibit,  report, statement or certificate furnished by or on behalf of Borrower
or  any  Subsidiary  in  connection with the Transaction Documents, contains any
untrue  statement  of  a material fact or omits any material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when made
or  delivered.
Health  Care  Permits.
---------------------
Each Property Operator now has, and has no reason to believe it will not be able
to  maintain in effect, all Health Care Permits necessary for the lawful conduct
of  its  business  or  operations  wherever  now  conducted and as planned to be
conducted,  with respect to the operation of the Facility or Facilities operated
by  such  Property Operator pursuant to all applicable laws, of all Governmental
Authorities having  jurisdiction over such Property Operator or over any part of
its  operations  related to the Facilities.  All such Health Care Permits are in
full  force  and  effect  and  have  not  been  amended  or  otherwise modified,
rescinded,  revoked  or  assigned.  No  Property  Operator  is in default in any
material  respect  under,  or  in violation in any material respect of, any such
Health  Care  Permit,  and  to  the  best  knowledge  of  Borrower, no event has
occurred, and no condition exists, which, with the giving of notice, the passage
of  time, or both, could constitute a default thereunder or a violation thereof,
which  default  or  violation  would  (with the passage of time, notice or both)
result  in  the loss of any Health Care Permit which is necessary to operate any
Facility.  Neither  Borrower,  any  Property  Owner or any Property Operator has
received  any  notice  of any violation of applicable laws which could (with the
passage  of  time,  notice  or both) cause any of such Health Care Permits to be
modified, rescinded or revoked.  No condition exists or event has occurred which
in  itself  or  with  the  giving of notice or the lapse of time, or both, could
result  in  the suspension, revocation, impairment, forfeiture or non-renewal of
any  such Health Care Permit, and to the best knowledge of Borrower, there is no
claim  challenging  the  validity  of  any  such  Health  Care  Permit.  The
continuation, validity and effectiveness of all such Health Care Permits are not
reasonably  expected  to  be  in  any way adversely affected by the transactions
contemplated  by  this  Agreement  or  any  of  the other Transaction Documents.
All  Facilities  are  entitled to participate in, and receive payment under, the
appropriate  Medicare,  Medicaid  and  related  reimbursement  programs, and any
similar  state  or  local  government-sponsored  program, to the extent that any
Property Operator has decided to participate in any such program, and to receive
reimbursement  from  private  and  commercial  payers  and  health  maintenance
organizations  to  the  extent  applicable  thereto.
Compliance  with  Legal  Requirements
-------------------------------------
     .  Each  Property  Owner,  each  Property  Operator, each Facility and each
Additional  Property  is  in  compliance  with  (i)  all  requirements  of  any
Governmental  Authority  applicable  to  such  Property  Owner,  such  Property
Operator,  such  Facility  and/or  such Additional Property, as the case may be,
including  compliance  with  all  permits,  licenses and conditional use permits
applicable  to such Property Owner, such Property Operator, such Facility and/or
such  Additional  Property,  as  the  case  may  be;  and  (ii)  all  insurance
requirements  applicable  to  such  Property Owner, such Property Operator, such
Facility  and/or  such  Additional  Property,  as  the case may be except, as to
Emeritus  as  a Property Operator, where its noncompliance could not be expected
to  have  a  Material  Adverse  Effect.

                              COVENANTS OF BORROWER
Financial  Covenants
--------------------
     .  So long as any Obligation (other than an Unmatured Surviving Obligation)
shall  remain unpaid, unless Lender shall otherwise consent in writing, Borrower
will:
First  Mortgage  Outstanding  Principal  Amount
-----------------------------------------------
     .  (x)  Pay  down  or  cause  the Property Owners to pay down the principal
amount  of  the  First  Mortgage Loans and/or (y) make deposits into the Sinking
Fund  Reserve  Account  so  that as of each date set forth below the outstanding
principal  amount  of the First Mortgage Loans on such date minus the sum of (i)
the amount of all deposits in reserve accounts to be used for, or used solely to
support,  debt  service  pursuant  to  the provisions of the First Mortgage Loan
Documents for the Facilities; and (ii) the then amount on deposit in the Sinking
Fund  Reserve Account on such date is less than or equal to the amount set forth
opposite  such  date  in  the  following  table:
                                   Date     Amount
                                   ----     ------
     December  31,  2002     $58,000,000
     March  31,  2003     $57,785,000
     June  30,  2003     $57,565,000
     September  30,  2003     $57,340,000
     December  31,  2003     $57,115,000
     March  31,  2004     $56,880,000
     June  30,  2004     $56,645,000
     September  30,  2004     $56,405,000
     December  31,  2004     $56,160,000
     March  31,  2005     $55,915,000
     June  30,  2005     $55,560,000
     September  30,  2005     $55,405,000
     December  31,  2005     $55,140,000
     March  31,  2006     $54,875,000
     June  30,  2006     $54,605,000
     September  30,  2006     $54,330,000
     December  31,  2006     $54,050,000

Minimum  Operating  Income
--------------------------
     .  Maintain  an  Aggregate Net Operating Income, determined for each period
identified in the table set forth below as of the last day of such period, in an
amount  not  less  than  the  amount  set  forth in the following table for such
period:
                                          Minimum
                             Period     Operating Income
                             ------     ----------------
     Four  fiscal  quarter  period ending on the last day of each fiscal quarter
        ending after the Closing Date and on or prior to December 31, 2005
                                   $8,100,000
     One  fiscal  quarter  period  ending on the last day of each fiscal quarter
        ending after December 31, 2005 and on or prior to December 31, 2006
                                   $9,500,000
     One  fiscal  quarter  period  ending on the last day of each fiscal quarter
        ending after December 31, 2006 and on or prior to December 31, 2007
                                   $9,700,000
Minimum  Debt  Service  Coverage  Ratio
---------------------------------------
     .  Maintain a Debt Service Coverage Ratio, determined as of the last day of
each  fiscal  quarter,  at  an  amount not less than the amount set forth in the
following  table  for  the  applicable  period:
                                 Minimum Debt Service
                 Quarter Ended During Period     Coverage Ratio
                 ---------------------------     --------------
              From Closing Date through November 30, 2003     1.05
            From December 1, 2003 through November 30, 2004     1.10
            From December 1, 2004 through November 30, 2005     1.13
            From December 1, 2005 through November 30, 2006     1.16
            From December 1, 2006 through November 30, 2007     1.20
Maximum  Accounts  Payable  Period
----------------------------------
     .  Aggregate  accounts  payable,  excluding  any  accounts  payable  being
disputed  in  good faith, must be not more than 60 days old for (i) Borrower and
its  Subsidiaries,  (ii)  all Property Operators (other than Emeritus) and (iii)
the  Facilities  for  which  Emeritus  is  the  Property  Operator.
Reporting  Covenants
--------------------
     .  So long as any Obligation (other than an Unmatured Surviving Obligation)
shall  remain unpaid, unless Lender shall otherwise consent in writing, Borrower
will,  and  will cause its Subsidiaries and the Property Operators to deliver to
Lender:
Monthly  Statements
-------------------
     .  As  soon  as available, and in any event within 30 days after the end of
each  fiscal  month  of  Borrower:
the unaudited consolidated financial statements of Borrower and its Subsidiaries
(including,  for  each, a balance sheet as of the end of such fiscal month and a
statement  of  income  and  retained  earnings for such month and for the period
commencing  at  the  end  of the previous fiscal year and ending with the end of
such  month),  and,  in  the  case  of  each  statement of income, setting forth
comparable  figures  for  the  related  periods  in  the  prior  fiscal year and
comparable  budgeted figures for such period, all of which shall be certified by
the  chief  financial  officer  or  the  vice president of financial planning of
Borrower,  subject  to  normal  year-end  adjustments;
An  operating  statement  for  such  month  for  each  Property  Owner;
An  operating  statement  for  such month for each Property Operator (other than
Emeritus);  and
the  operating  statement for such month for each Facility for which Emeritus is
the  Property  Operator.
Quarterly  Financial  Statements
--------------------------------
     .  As  soon  as available, and in any event within 45 days (90 days for the
final  fiscal  quarter in each fiscal year) after the end of each fiscal quarter
of  Borrower:
the unaudited consolidated financial statements of Borrower and its Subsidiaries
and of Emeritus and its Subsidiaries (including, for each, a balance sheet as of
the  end of such fiscal quarter, a statement of income and retained earnings for
such  quarter  and  for  the period commencing at the end of the previous fiscal
year  and ending with the end of such quarter and a cash flow statement for such
quarter  and  for the period commencing at the end of the previous calendar year
and  ending with the end of such quarter), and, in the case of each statement of
income,  setting  forth  comparable figures for the related periods in the prior
fiscal  year  and  comparable  budgeted  figures  for such period (provided that
Emeritus  shall  not be required to provide comparable budgeted figures for such
period),  all  of which shall be certified by the chief financial officer or the
vice  president  of  financial planning of Borrower or Emeritus, as the case may
be,  subject  to  normal  year-end  adjustments;
An  operating  statement  for  such  quarter  for  each  Property  Owner;
An  operating  statement for such quarter for each Property Operator (other than
Emeritus);  and
the operating statement for such quarter for each Facility for which Emeritus is
the  Property  Operator.
     At  the request of Lender, not later than 5 Business Days after delivery by
Borrower  of the statements referred to in this Section 5(b) shall arrange for a
                                                ------------
conference  by  the management of Emeritus to provide Lender a detailed briefing
of  the  operations  and  activities  of  Emeritus  and  its  Subsidiaries.
Annual  Financial  Statements
-----------------------------
     .  As  soon  as available, and in any event within 90 days after the end of
each  fiscal  year  of  Borrower:
the  consolidated  financial  statements of Borrower and its Subsidiaries and of
Emeritus  and  its  Subsidiaries (including, for each, a balance sheet as of the
end  of  such  fiscal year, a statement of income and retained earnings for such
year  and  for  the period commencing at the end of the previous fiscal year and
ending with the end of such year and a cash flow statement for such year and for
the  period  commencing at the end of the previous calendar year and ending with
the  end  of  such  year), and, in the case of each statement of income, setting
forth  comparable  figures for the related periods in the prior fiscal year, all
of  which  shall  be  audited  by  KPMG  or other independent public accountants
acceptable  to  Lender,  together with an unqualified opinion of such accounting
firm;
for  each  statement  of  income  delivered  pursuant  to  Section  5.2(c)(i), a
                                                           ------------------
statement  setting  forth  comparable  budget figures for the applicable period;
An  operating  statement  for  such  year for each Property Operator (other than
Emeritus);  and
the  operating  statement  for such year for each Facility for which Emeritus is
the  Property  Operator.
Annual  Budgets
---------------
..  As  soon  as available and in any event prior to the beginning of each fiscal
year  of  Borrower,  an  operating and capital budget for each Facility for such
fiscal  year;  including,  for each, a budgeted statement of income and retained
earnings and a cash flow statement for such fiscal year and any such budget will
be  promptly  updated and such update delivered to Lender upon the occurrence of
any material change to the budget or to any of the assumptions made in preparing
the  budget.
Census  Reports
---------------
     .  As  soon  as  available, and in any event not later than 5 Business Days
after  the  end  of every other week commencing with the week ended November __,
2002,  biweekly  census  reports  for  each  Facility of each Property Operator.
Compliance  Certificates
------------------------
     .
Together  with  the  financial  statements delivered pursuant to Section 5.2(a),
                                                                 --------------
each  of  the  following:
a  Separateness Covenant Certificate of an Authorized Officer of Borrower in his
or  her  capacity  as an officer (and not as an individual) and in substantially
the  form  of Exhibit E (the "Separateness Covenant Certificate"), stating that,
              ---------       ---------------------------------
to  the  best of such officer's knowledge, during such period, Borrower and each
Subsidiary  of Borrower has observed or performed all of its covenants and other
agreements  set  forth  in  Section  5.3(o)  and  Section  5.4(n);  and
                            ---------------       ---------------
a  Compliance  Certificate  of  an  Authorized Officer of Borrower in his or her
capacity  as  an officer (and not as an individual) in substantially the form of
Exhibit  F1,  stating that, to the best of such officer's knowledge, during such
 ----------
period,  each  Loan  Party  has  observed  or  performed the covenant in Section
                                                                         -------
5.1(d).
Together  with  the financial statements delivered pursuant to Section 5.2(b), a
                                                               --------------
Compliance  Certificate  of  an  Authorized  Officer  of  Borrower in his or her
capacity  as an officer (and not as an individual) and in substantially the form
of  Exhibit  F-2,  stating that, to the best of such officer's knowledge, during
    ------------
such  period, each Loan Party has observed or performed all of its covenants and
other  agreements, and satisfied every condition contained in this Agreement and
all  other Transaction Documents to be observed, performed or satisfied by them,
and  that  such  officer  has  obtained  no knowledge of any Default or Event of
Default  except  as  set forth in a notice delivered pursuant to Section 5.2(j).
                                                                 --------------
Change  of  Name  or  Location
------------------------------
     .  Any change in any Loan Party's name, state of organization, locations of
Collateral,  or  form of organization, trade names under which it does business,
in  each  case  at  least  30  days  prior  thereto.
Management  Letter
------------------
     .  As soon as available and in any event within 15 days of receipt thereof,
a  copy  of each management letter prepared for Emeritus, Borrower, any Property
Operator  or  any  Subsidiary  of  Borrower  by any independent certified public
accountants.
Tax  Returns
------------
     .  Promptly  after  filing  with  the IRS, a copy of each income tax return
filed  by  Emeritus,  Borrower,  any  Property  Operator  or  any  Subsidiary of
Borrower.
Notice  of  Default
-------------------
     .  As  soon  as  possible  and  in  any event within 10 Business Days after
obtaining  knowledge  of each Default or Event of Default continuing on the date
of  such  statement,  a  statement  of an Authorized Officer of Borrower setting
forth  details of such Default or Event of Default and the action which Borrower
has  taken  and  proposes  to  take  with  respect  thereto.
Notice  of  Litigation
----------------------
     .  As  soon  as  possible  and  in  any  event  within 10 days of obtaining
knowledge  of  the  commencement of any action or proceeding affecting Emeritus,
Borrower  or any of their respective Subsidiaries before any court, governmental
agency  or  arbitrator, which, if decided adversely could reasonably be expected
to  have  a  Material  Adverse  Effect or which purports to affect the legality,
validity  or  enforceability of this Agreement or any other Transaction Document
to  which  any  Loan  Party  or  any  Property  Operator  is  a  party.
Security  Holder  Materials  and  SEC  Filings
----------------------------------------------
     .  Promptly after the sending or filing thereof, and in any event within 10
Business Days after such sending or filing, copies of all reports which Emeritus
or  Borrower sends to any of its security holders, and copies of all reports and
registration  statements  which Emeritus, Borrower or any Subsidiary of Emeritus
or  Borrower  files  with the Securities and Exchange Commission or any national
securities  exchange.
ERISA  Notices.
--------------
Within  10  Business  Days  after  Borrower  or any ERISA Affiliate knows or has
reason  to  know, that an ERISA Event or a prohibited transaction (as defined in
Sections  406  of ERISA and 4975 of the Code) has occurred, and, when known, any
action taken or threatened by the IRS, the DOL or the PBGC with respect thereto.
Upon  request,  or,  in the event that such filing reflects a significant change
with  respect  to  the matters covered thereby, within 3 Business Days after the
filing  thereof  with the PBGC, the DOL or the IRS, as applicable, copies of the
following:  (A)  each  annual  report  (form  5500 series), including Schedule B
thereto,  filed with the PBGC, the DOL or the IRS with respect to each Plan, (B)
a  copy  of  each funding waiver request filed with the PBGC, the DOL or the IRS
with  respect  to  any  Plan  and all communications received by Borrower or any
ERISA  Affiliate from the PBGC, the DOL or the IRS with respect to such request,
and  (C)  a  copy of each other filing or notice filed with the PBGC, the DOL or
the  IRS,  with  respect to each Plan by either Borrower or any ERISA Affiliate.
Upon  request,  copies  of  each actuarial report for any Plan or Multi-Employer
Plan  and  annual report for any Multi-Employer Plan; and within 3 Business Days
after  receipt  thereof  by  Borrower  or  any  ERISA  Affiliate,  copies of the
following:  (A)  any  notices  of the PBGC's intention to terminate a Plan or to
have  a  trustee  appointed  to  administer  such  Plan;  (B)  any  favorable or
unfavorable  determination  letter from the IRS regarding the qualification of a
Plan  under  Section 401(a) of the Code; or (C) any notice from a Multi-Employer
Plan  regarding  the  imposition  of  withdrawal  liability.
Within  3  Business  Days  after the occurrence thereof:  (A) any changes in the
benefits  of  any  existing  Plan  which materially increase the annual costs of
Borrower  and  its Subsidiaries with respect thereto or the establishment of any
new  Plan  or the commencement of contributions to any Plan to which Borrower or
any  ERISA  Affiliate  was  not  previously  contributing; or (B) any failure by
Borrower  or  any  ERISA  Affiliate  to make a required installment or any other
required  payment  under  Section  412 of the Code on or before the due date for
such  installment  or  payment.
Within 3 Business Days after Borrower or any ERISA Affiliate knows or has reason
to  know  that  any  of  the  following  events  has  or  will  occur:  (A)  a
Multi-Employer  Plan  has  been  or will be terminated; (B) the administrator or
plan  sponsor  of  a  Multi-Employer  Plan intends to terminate a Multi-Employer
Plan; or (C) the PBGC has instituted or will institute proceedings under Section
4042  of  ERISA  to  terminate  a  Multi-Employer  Plan.
Environmental  Notices
----------------------
     .  Promptly  after  receipt  of:
Any  notice of any violation by Property Operator, Borrower or any Subsidiary of
Borrower  of  any Environmental Law which could reasonably be expected to have a
Material  Adverse  Effect  or  that  any  Governmental Authority has asserted in
writing that Property Operator, Borrower or any Subsidiary of Borrower is not in
compliance  in  any  material  respect  with  any  Environmental  Law  or  is
investigating  the  compliance  with any Environmental Law by Property Operator,
Borrower  or  any  Subsidiary  of  Borrower.
Any  written  notice  that  Property  Operator,  Borrower  or  any Subsidiary of
Borrower  is  or  may  be  liable  to  any  Person as a result of the Release or
threatened  Release  of  any  Hazardous  Substance  or  that  Property Operator,
Borrower  or  any  Subsidiary  of  Borrower  is  subject to investigation by any
Governmental  Authority  evaluating  whether  any  remedial  action is needed to
respond  to  the  Release  or  threatened  Release  of  any Hazardous Substance.
Any  written  notice  of  the  imposition  of any Environmental Lien against any
property  of  Property  Operator,  Borrower  or  any  Subsidiary  of  Borrower.
Health  Care  Permit  Violation
-------------------------------
     .  As  soon  as possible, and in any event within 5 Business Days (i) after
obtaining  knowledge  thereof,  notice of the occurrence of any event that would
(with  the passage of time, notice or both) be a default under or a violation of
any  Health  Care  Permit  necessary  for  the lawful conduct of the business or
operations  of  any  Loan  Party  or  any  Property Operator with respect to the
ownership  and  operation of the Facilities; and (ii) after receipt thereof, any
notice  of  any  violation  of  applicable laws which would (with the passage of
time, notice or both) cause any of the Health Care Permits referred to in clause
(i)  to be modified, rescinded or revoked.  Notwithstanding the foregoing to the
contrary,  Borrower shall not be required to notify Lender of routine, customary
inspection  deficiencies  that  are  being  remedied  in  the  ordinary  course
consistent  with  past  practices.
Notice  of  Material  Event  or  Circumstance
---------------------------------------------
     .  As  soon  as  possible  and  in  any  event  within 10 days of obtaining
knowledge  of  such  event  or circumstance, notice of any event or circumstance
that  could  (with  the passage of time, notice or both) have a Material Adverse
Effect.
Other  Information
------------------
     .  As  soon  as  practicable after request therefor, such other information
respecting  the  condition or operations, financial or otherwise, of Borrower or
any  Subsidiary  of Borrower as Lender may from time to time reasonably request.
Affirmative  Covenants
----------------------
     .  So long as any Obligation (other than an Unmatured Surviving Obligation)
shall  remain unpaid, unless Lender shall otherwise consent in writing, Borrower
will,  and  will  cause  each of its Subsidiaries and each Property Operator to:
Preservation  of  Corporate  Existence,  Etc
--------------------------------------------
     .  Preserve  and maintain in full force and effect (i) all material rights,
privileges,  qualifications,  permits,  licenses  and  franchises  reasonably
necessary  or  desirable  in reimbursement programs and in the normal conduct of
its  business;  (ii)  its  corporate,  partnership  or limited liability company
existence  and  good  standing  under  the  laws of its state or jurisdiction of
incorporation  or  organization;  and  (iii) its good standing under the laws of
each  jurisdiction  where  the  character of its properties or the nature of its
activities  makes  it  necessary  for  it  to qualify to do business, except any
jurisdiction  where the failure to be in good standing could not have a Material
Adverse  Effect.
Maintenance  of  Property  and  Assets
--------------------------------------
     .  Maintain and preserve all its property which is necessary for use in its
business  in  good  working order and condition, ordinary wear and tear excepted
and  to use the standard of care typical in the industry in the operation of the
Facilities  in  each  case  except  where failure to do so would have a Material
Adverse  Effect.
Insurance
---------
     .  Maintain  insurance  required  pursuant  to  the Master Lease; and, upon
request  of  Lender, (i) furnish Lender a certificate of any insurance broker of
Borrower  and/or  the Property Operators) setting forth the nature and extent of
all  insurance  maintained  by  Borrower,  the  Property  Operators  and  the
Subsidiaries  of  Borrower in accordance with this Section 5.3(c) (and which, in
                                                   --------------
the  case  of  a  certificate of a broker, was placed through such broker); (ii)
furnish  Lender  a  certified  copy  of  each  policy of insurance maintained in
accordance  with  this  Section 5.3(c); and (iii) cause Lender to be named as an
                        --------------
additional  insured  on  all  or  any  of  such  insurance.
Compliance  With  Laws
----------------------
     .  Comply  in  all  material  respects  with  all  applicable  laws, rules,
regulations  and orders applicable to Borrower, such Subsidiaries, such Property
Operators  or  its  properties.
Payment  of  Obligations
------------------------
     .  Pay  and  discharge  as  the  same  shall  become  due  and  payable:
all  material  tax  liabilities,  assessments and governmental charges or levies
upon  it  or  its  properties  or  assets;  and
all  material  lawful  claims which, if unpaid, would, with the passage of time,
notice  or  both,  by  law  become  a  Lien  upon  its  property;
except  that  any such item may be contested in good faith and when so contested
may  remain  unpaid so long as (A) adequate reserves have been established in an
amount sufficient to pay any such claims, accrued interest thereon and potential
penalties  or  other costs relating thereto, or other adequate provision for the
payment  thereof  shall have been made, (B) enforcement of the contested item is
effectively  stayed  for the entire duration of such contest, and (C) any amount
determined  to  be  due,  together  with  any  interest or penalties thereon, is
promptly  paid  after  resolution  of  such  contest.
Use  of  Proceeds
-----------------
     .  Use  the  proceeds  of  the  Loan  for lawful general corporate purposes
permitted  under  and  in  accordance  with  the  terms  of  this  Agreement.
Inspection  of  Property  and  Books  and  Records.
--------------------------------------------------
Maintain  proper  books  of  record and account, in which full, true and correct
entries  in  conformity  with  GAAP  consistently  applied  shall be made of all
financial  transactions  and  matters  involving  the  assets  and  business  of
Borrower,  the  Property  Operators and the Subsidiaries of Borrower, and permit
representatives  of  Lender  to  visit  and  inspect  any  of  their  respective
properties  (with  respect to Emeritus, which are related to the Facilities), to
examine  their  respective  corporate,  financial and operating records and make
copies  thereof or abstracts therefrom, and to discuss their respective affairs,
finances  and accounts with their respective officers, employees and independent
public  accountants, all at the expense of Borrower and at such reasonable times
during  normal  business hours and as often as may be reasonably requested, upon
reasonable  notice  to  Borrower;  provided  that  unless  a Default or Event of
Default shall have occurred and be continuing, Borrower shall not be required to
pay  expenses  for  more  than  one  visit  per  fiscal  year.
Cause  each  Property Owner to permit Lender and its authorized representatives,
upon  reasonable  prior  notice,  to inspect the Leased Property and any Capital
Additions  of such Property Owner during usual business hours and subject to any
reasonable  security,  health,  safety  or  confidentiality requirements of such
Property Owner or any Legal Requirements (as defined in the Master Lease) or any
insurance  required  pursuant to the Master Lease.  Each Property Operator shall
cooperate  with  each  Property  Owner in exhibiting the Leased Property and any
Capital  Additions  to  prospective  lenders  and,  if  an  Event of Default has
occurred  and  is  continuing,  prospective  purchasers,  lessees  and managers.
Further  Assurances
-------------------
     .  Promptly  upon  reasonable  request  by  Lender,  execute,  acknowledge,
deliver, file, re-file, register and re-register, any and all such further acts,
security  agreements,  assignments,  estoppel certificates, financing statements
and  continuations  thereof,  termination  statements,  notices  of  assignment,
transfers,  certificates, assurances and other instruments as Lender may require
from  time  to  time  in order (i) to carry out more effectively the purposes of
this  Agreement or any other Loan Document; (ii) to subject to the Liens created
by any of the Collateral Documents to any of the properties, rights or interests
covered  thereby;  (iii) to perfect and maintain the validity, effectiveness and
priority  of  any of the Collateral Documents or any of the Liens intended to be
created  thereby;  and  (iv)  to better assure, convey, grant, assign, transfer,
preserve,  protect  and confirm to Lender the rights granted or now or hereafter
intended  to be granted to the Lender under any Loan Document or under any other
instrument  executed  in  connection  therewith.
Disclosure  Updates
-------------------
     .  Promptly  and  in  no  event  later than 5 Business Days after obtaining
knowledge  thereof,  (i)  notify Lender if any written information, exhibits and
reports furnished to Lender contained any untrue statement of a material fact or
omitted  to state any material fact or any fact necessary to make the statements
contained  therein  not  misleading in light of the circumstances in which made;
and  (ii)  correct  any defect or error that may be discovered therein or in any
Transaction Document or in the execution, acknowledgement, filing or recordation
thereof.
Environmental  Laws.
-------------------
Conduct  its  business  in  compliance  in  all  material  respects  with  all
Environmental Laws applicable to it, including those relating to the generation,
handling, use, storage, and disposal of any Hazardous Substance; take prompt and
appropriate  action to respond to any material non-compliance with Environmental
Laws  and  shall  regularly  report  to  Lender  on  such  response.
Without  limiting  the  generality  of the foregoing, submit to Lender annually,
commencing  on  the  first  Anniversary  Date,  and  on  each  Anniversary  Date
thereafter, an update of the status of each material environmental compliance or
material  liability  issue, if any; provided that with respect to Emeritus, only
as such issues relate to the Facilities.  Lender may request copies of technical
reports  prepared  by Borrower or any of its Subsidiaries and its communications
with  any  Governmental  Authority  to  determine whether Borrower or any of its
Subsidiaries  is proceeding reasonably to correct, cure or contest in good faith
any  alleged  material  non-compliance  or  material  environmental  liability.
Borrower  shall,  at  Lender's  request and at Borrower's expense, (i) retain an
independent  environmental  engineer  acceptable to Lender to evaluate the site,
including  tests  if  appropriate,  where the material non-compliance or alleged
material  non-compliance  with  Environmental  Laws has occurred and prepare and
deliver  to  Lender  a  report  setting  forth the results of such evaluation, a
proposed  plan  for  responding to any environmental problems described therein,
and  an estimate of the costs thereof, and (ii) provide to Lender a supplemental
report of such engineer whenever the scope of the environmental problems, or the
response  thereto or the estimated costs thereof, shall increase in any material
respect.
Lender  and  its  representatives  will have the right at any reasonable time to
enter and visit the Real Property related to the Facilities owned or operated by
Borrower,  any  Property  Operator  or  any Subsidiary of Borrower and any other
place  where  any  property  of  any  Loan  Party is located for the purposes of
observing  such  Real  Property and, if Lender reasonably believes Borrower, any
Property  Operator  or any Subsidiary of Borrower is not in compliance with this
Section  5.3(j), taking and removing soil or groundwater samples, and conducting
 --------------
tests  on  any  part  of  the  Real  Property related to the Facilities owned or
operated  by  Borrower,  any  Property  Operator  or any Subsidiary of Borrower.
Lender  is  under no duty, however, to visit or observe such Real Property or to
conduct  tests,  and  any such acts by Lender will be solely for the purposes of
protecting  Lender's  Liens and preserving Lender's rights under the Transaction
Documents.  No  site  visit,  observation  or testing by Lender will result in a
waiver  of  any default or impose any liability on Lender.  In no event will any
site  visit, observation or testing by Lender be a representation that hazardous
substances  are  or  are  not present in, on or under the Real Property, or that
there  has  been  or  will  be  compliance  with any Environmental Law.  Neither
Borrower,  any Property Operator nor any of its Subsidiaries nor any other party
is entitled to rely on any site visit, observation or testing by Lender.  Lender
owes  no  duty  of care to protect Borrower, any Property Operator or any of its
Subsidiaries  or  any  other  party against, or to inform Borrower, any Property
Operator  or  any  of  its  Subsidiaries  or  any  other party of, any hazardous
substances  or  any other adverse condition affecting the Real Property owned or
operated  by  Borrower,  any  Property  Operator  or any Subsidiary of Borrower.
Lender  may  in  its discretion disclose to Borrower or to any other party if so
required  by  law  any  report or findings made as a result of, or in connection
with,  any  site  visit, observation or testing by Lender.  Borrower understands
and  agrees that Lender makes no warranty or representation to any Loan Party or
any other party regarding the truth, accuracy or completeness of any such report
or  findings that may be disclosed.  Borrower also understands that depending on
the results of any site visit, observation or testing by Lender and disclosed to
Borrower,  Borrower,  a Property Operator or a Subsidiary of Borrower may have a
legal  obligation  to  notify one or more environmental agencies of the results,
that  such  reporting requirements are site-specific, and are to be evaluated by
Borrower,  the Property Operators or its Subsidiaries of Borrower without advice
or  assistance  from  Lender.  In  each  instance,  Lender  will  give  Borrower
reasonable  notice  before  entering  the  Real  Property  owned  or operated by
Borrower, any Property Operator or any Subsidiary of Borrower or any other place
Lender  is  permitted  to  enter  under  this  Section 5.3(j).  Lender will make
                                               --------------
reasonable efforts to avoid interfering with the use of the Real Property or any
other  property  in  exercising  any  rights  provided  hereunder.
Health  Care  Permits  and  Approvals
-------------------------------------
     .  Take  all  action reasonably necessary (i) to maintain in full force and
effect  all  Health  Care Permits reasonably necessary for the lawful conduct of
its business or operations wherever now conducted and as planned to be conducted
with  respect  to the ownership and operation of the Facilities, pursuant to all
applicable  laws,  of  all Governmental Authorities having jurisdiction over any
such  Loan Party or over any part of its operations; and (ii) to ensure that all
of the Facilities owned, leased, managed or operated by any Property Operator or
any  Subsidiary  of Borrower are entitled to participate in, and receive payment
under,  the  appropriate  Medicare, Medicaid and related reimbursement programs,
and  any similar state or local government-sponsored program, to the extent that
such  Property  Operator  or such Subsidiary, as the case may be, has decided to
participate  in  any such program, and to receive reimbursement from private and
commercial  payers and health maintenance organizations to the extent applicable
thereto,  except  (in  each  case)  where  a  failure  to do so could not have a
Material  Adverse  Effect.
Compliance  With  ERISA.
-----------------------
maintain  each  Plan  in compliance in all material respects with the applicable
provisions  of  ERISA,  the  Code  and  other  federal  or  state  law;
cause  each Plan which is qualified under Section 401(a) of the Code to maintain
such  qualification;
make  all required contributions to any Plan subject to Section 412 of the Code;
not  engage  in  a  prohibited  transaction  or  violation  of  the  fiduciary
responsibility  rules  which  prohibited  transaction  or violation of fiduciary
responsibility  rules,  together  with  all  other  prohibited  transactions and
violations  of  fiduciary  responsibility  rules;  and
not  engage in a transaction that could be subject to Section 4069 or 4212(c) of
ERISA.
Operating  Account.
------------------
On  or  prior  to  the  Closing  Date,  Borrower  shall establish at a financial
institution  acceptable  to  Lender (the "Depository Bank") an operating account
                                          ---------------
(the  "Operating  Account").  The  Operating  Account  shall  be  in the name of
       ------------------
Borrower,  but shall be subject to a control agreement permitting Lender, at its
election  if  an  Event  of  Default  has  occurred and is continuing, to assume
exclusive  control  over  the  Operating  Account.
All  rents, issues and profits received by any Property Owner (other than rents,
issues  and  profits  required  to  be  deposited  with  the holder of the First
Mortgage  Loan  Documents  with  respect to the Facility of such Property Owner)
shall  be deposited into the Operating Account.  In addition, all other payments
to which any Property Owner is entitled pursuant to the Master Lease, including,
insurance  or  condemnation  proceeds,  proceeds  of  any  put  payment required
pursuant  to  the  Master  Lease,  shall  also  be  deposited into the Operating
Account.
So long as no Event of Default has occurred and is continuing or will occur upon
giving effect to the application described below, funds in the Operating Account
may  be  applied  by  Borrower  to  make additional investments in the Permitted
Subsidiaries  or  for  general  corporate  purposes  of  Borrower; provided that
Borrower  may  make  dividend payments, loans or other distributions to Emeritus
only  on  a  Distribution  Date  and  only if such payments or distributions are
permitted  pursuant  to  this  Loan  Agreement  and  the  other  Loan Documents.
Lender  and Borrower acknowledge that Borrower, and not Lender, shall be treated
as  the  owner of the funds in the Operating Account for tax purposes, except to
the  extent  and  at  such  time  that  Lender actually withdraws funds from the
Operating Account in accordance with this Section 5.3(m) and the Reserve Account
                                          --------------
Security  Agreement.
Reserve  Accounts.
-----------------
On  or prior to the Closing Date Borrower shall establish at the Depository Bank
the  following  reserve  accounts  (collectively,  the  "Reserve  Accounts," and
                                                         -----------------
individually,  a  "Reserve  Account"):
                   ----------------
a  repair  and  replacement reserve account (the "Repair and Replacement Reserve
                                                  ------------------------------
Account")  to  be  used in accordance with the provisions of Section 5.3(n)(ii);
  -----                                                      ------------------
a  sinking  fund reserve account (the "Sinking Fund Reserve Account") to be used
                                       ----------------------------
in  accordance  with  the  provisions  of  Section  5.3(n)(iii);
                                           ---------------------
a  mortgage  payment reserve account (the "Mortgage Payment Reserve Account") to
                                           --------------------------------
be  used  in  accordance  with  the  provisions  of  Section  5.3(n)(iv).
                                                     -------------------
The  Sinking Fund Reserve Account shall be in the name of Borrower, but Borrower
hereby  acknowledges  and  agrees,  that  Lender,  or  at  Lender's  election, a
servicing  agent  for Lender, shall have exclusive control over the Sinking Fund
Reserve  Account,  but the Sinking Fund Reserve Account shall be subject to, and
Lender  shall have only the rights provided in, the provisions of this Agreement
and  the  other  Loan Documents, including Section 5.3(n)(iii), (iv) and (v) and
                                           -------------------  ----     ---
the  provisions  of  the  Reserve  Account  Security  Agreement.  The Repair and
Replacement Reserve Account and the Mortgage Payment Reserve Account shall be in
the  name  of  Borrower,  but shall be subject to a control agreement permitting
Lender, at its election if an Event of Default has occurred, to assume exclusive
control over the Repair and Replacement Reserve Account and the Mortgage Payment
Reserve Account, but the Repair and Replacement Reserve Account and the Mortgage
Payment Reserve Account shall be subject to the provisions of this Agreement and
the  other Loan Documents.  Until Lender assumes exclusive control, Borrower may
issue  instructions  with  respect  to  the disbursement and use of funds in the
Repair and Replacement Reserve Account and the Mortgage Payment Reserve Account,
provided  that  such  instructions are in compliance with the provisions of this
Agreement  and  the  other  Loan  Documents.
On  each  Distribution  Date,  Borrower shall make a deposit into the Repair and
Replacement  Reserve  Account  for  the  Facilities in an amount equal to (A)(I)
$20.83  times  (II) the number of units in the Facilities on the last day of the
calendar  month  commencing  two calendar months prior to such Distribution Date
times  (III) the number of calendar months in the then current Test Period minus
(B)  the  sum  of  (I)  the  aggregate  amount  spent on repair, replacement and
renovation  of  the Facilities (but specifically excluding all Capital Additions
and  day-to-day  maintenance  with  respect  to the Facilities) (the "Repair and
                                                                      ----------
Replacement  Expenditures")  made  at  the Facilities during the applicable Test
    ---------------------
Period  plus  (II)  the  difference, if positive, between (x) the sum of (A) the
amount  of  all  deposits  made during the applicable Test Period into a reserve
account  to  be  used  for  Repair  and Replacement Expenditures pursuant to the
provisions  of  the First Mortgage Loan Documents for the Facilities and (B) the
amount  of  deposits  made during the applicable Test Period into the Repair and
Replacement Reserve Account and (y) the Repair and Replacement Expenditures made
during  the  applicable  Test Period.  So long as no Default or Event of Default
has  occurred and is continuing, Borrower may withdraw funds from the Repair and
Replacement  Reserve  to pay Repair and Replacement Expenditures, provided that,
if  Lender  so  requests,  Borrower shall deliver to Lender the following to the
extent  reasonably  applicable:  (w)  copies of paid invoices, receipts or other
evidence  satisfactory  to  Lender, verifying the cost and payment of the Repair
and  Replacement  Expenditures;  (x) copies of affidavits, lien waivers or other
evidence  reasonably  satisfactory  to  Lender  showing  that  all  materialmen,
laborers,  subcontractors  and  any  other  parties  who  might  or  could claim
statutory  or  common law liens and are furnishing or have furnished material or
labor  to  the  applicable Facility have been paid all amounts due for labor and
materials  furnished  to  such  Facility; (y) a certification from an inspecting
architect,  engineer  or  other  consultant  acceptable  to  Lender  (the  "Work
                                                                            ----
Inspector")  describing  the  completed  Repair and Replacement Expenditures and
        -
verifying  the  completion of the Repair and Replacement Expenditures; and (z) a
copy  of  a  new  (or  amended)  certificate of occupancy for the portion of the
Facility  covered  by  such Repair and Replacement Expenditures, if said new (or
amended)  certificate  of  occupancy  is  required  by  law,  or a certification
acceptable  to Lender by the Work Inspector that no new (or amended) certificate
of  occupancy  is required.  Lender may, at Borrower's expense, make or cause to
be  made  an  annual  inspection  at  each  Facility  to  determine the need, as
determined  by  Lender  in  its  judgment,  for  further  Repair and Replacement
Expenditures at such Facility (or at such other times as Lender shall elect if a
Default  or  Event of Default has occurred and is continuing, in an emergency or
in  connection with inspecting the Repair and Replacement Expenditures).  In the
event  that  such  inspection  reveals  that  further  Repair  and  Replacement
Expenditures on any Facility are required in order to maintain the Facilities in
compliance  with  the Master Lease, Lender shall provide Borrower with a written
description  of  the  required  Repair and Replacement Expenditures and Borrower
shall  complete,  or cause the applicable Property Owner or Property Operator to
complete, such Repair and Replacement Expenditures to the satisfaction of Lender
within  90 days after the receipt of such description from Lender, or such later
date  as  may  be  approved  by  Lender.
On  each  Distribution  Date that is in the last month of any fiscal quarter, if
(A) the difference (the "Net Mortgage Loan Balance") between (I) the outstanding
                         -------------------------
principal  amount of the First Mortgage Loans as of the last day of the calendar
month  ending  immediately prior to such Distribution Date minus (II) the sum of
(w)  the  amount  of  all  deposits  in reserve accounts to be used for, or used
solely to support, debt service pursuant to the provisions of the First Mortgage
Loan Documents for the Facilities; (x) the amount on deposit in the Sinking Fund
Reserve  Account  as  of  the last day of such calendar month; (y) the scheduled
principal payments for the First Mortgage Loans for the period from the last day
of  such  calendar  month  through the end of the fiscal quarter containing such
Distribution  Date;  and (z) the stated amount of any Permitted Letter of Credit
outstanding  with  respect  to the Sinking Fund Reserve Account, is greater than
(B)  the  balance (the "Required Mortgage Loan Balance") required as of the last
                        ------------------------------
day  of  the  calendar  quarter  containing  such  Distribution Date pursuant to
Section 5.1(a), then Borrower shall make a deposit into the Sinking Fund Reserve
      --------
Account  in  an  amount  sufficient  to  cause  the  Net  Mortgage  Loan Balance
calculated as of such Distribution Date to be less than or equal to the Required
Mortgage  Loan  Balance in each case, as of the last day of such fiscal quarter.
So long as no Default or Event of Default has occurred and is continuing, on any
Distribution  Date  that is in the last month of any fiscal quarter on which the
sum  of  (w)  the  amount of all deposits in reserve accounts to be used for, or
used  to  solely  support,  debt service pursuant to the provisions of the First
Mortgage  Loan  Documents  for  the Facilities; (x) the amount on deposit in the
Sinking  Fund  Reserve Account and (z) the stated amount of any Permitted Letter
of  Credit  outstanding  with respect to the Sinking Fund Reserve Account, is in
excess  of  (such  excess,  the  "Mortgage  Loan Balance Excess") the difference
                                  -----------------------------
between (i) the Required Mortgage Loan Balance as of the last day of such fiscal
quarter  minus  (ii)  the  Net  Mortgage  Loan  Balance  calculated  as  of such
Distribution  Date,  then  Lender  shall,  on the written request from Borrower,
release  funds from the Sinking Fund Reserve Account or reduce the stated amount
of  the  Permitted  Letter  of  Credit  issued  with respect to the Sinking Fund
Reserve  Account in an amount equal to the Mortgage Loan Balance Excess for such
Distribution  Date.
On  each  Distribution  Date,  Borrower  shall deposit into the Mortgage Payment
Reserve  Account  an amount equal to the difference, if positive between (i) the
sum of the required principal and interest payments for each First Mortgage Loan
that  has  a  required payment prior to the next subsequent Master Lease Payment
Date  minus  (ii)  the  sum,  for  all  First  Mortgage Loans that have required
payments  prior  to  the  next  subsequent Master Lease Payment Date, of (x) the
amount  held  by  the  holders  of  such First Mortgage Loans for the payment of
principal  and  interest  with  respect  to such First Mortgage Loan and (y) the
amount  held  by  the  Property Owners for the payment of principal and interest
with  respect  to  such  First  Mortgage Loans.  Amounts in the Mortgage Payment
Reserve Account may only be used to make required payments on the First Mortgage
Loans  on  the  date  such  payments  are  due.
None  of  the  Reserve  Accounts  shall, unless otherwise explicitly required by
applicable  law,  be  or be deemed to be escrow or trust funds, but, at Lender's
option  and  in Lender's discretion, may either be held in a separate account or
be  commingled with the other Reserve Accounts.  The Reserve Accounts are solely
for  the  protection  of  Lender  and  entail no responsibility on Lender's part
beyond  the  payment  of  the respective items for which they are held following
receipt  of  bills, invoices or statements therefor in accordance with the terms
hereof and beyond the allowing of due credit for the sums actually received.  If
an Event of Default has occurred and is continuing, Lender may, but shall not be
obligated,  to apply at any time the balance then remaining in any or all of the
Reserve  Accounts  against  the  Obligations  in  whatever  order  Lender  shall
subjectively  determine.  No  such  application  of  any  or  all of the Reserve
Accounts shall be deemed to cure any Event of Default.  Upon full payment of the
Obligations  in  accordance  with  the  terms  of  the Loan Documents or at such
earlier  time  as  Lender  may  elect,  the balance of any or all of the Reserve
Accounts  then  in  Lender's control shall be paid over to Borrower and no other
party  shall  have  any right or claim thereto.  Lender and Borrower acknowledge
that Borrower, and not Lender, shall be treated as the owner of the funds in the
Reserve  Accounts  for  tax purposes, except to the extent and at such time that
Lender  actually  withdraws funds from a Reserve Account in accordance with this
Section  5.3(n)  and  the  Reserve  Account  Security  Agreement.
 --------------
On  any  Distribution Date so long as no Event of Default has occurred, Borrower
may  substitute  a  Permitted  Letter  of  Credit  for  any  cash required to be
maintained  in  a  Reserve  Account,  so  long  as  after  giving effect to such
substitution  the  stated amount of such Permitted Letter of Credit plus amounts
on deposit in the Reserve Account with respect to which such Permitted Letter of
Credit  was issued equals or exceed the amount required to be on deposit in such
Reserve  Account.  In  addition,  if,  on  any Distribution Date, the amounts on
deposit in any Reserve Account plus the stated amount of the Permitted Letter of
Credit  issued  with respect to such Reserve Account exceeds the amount required
to  be on deposit in such Reserve Account, upon the written request of Borrower,
cash in such Reserve Account in an amount equal to such excess shall be released
to  Borrower.  If  no  agreement  for  a renewal or replacement of any Permitted
Letter of Credit has been made 15 days prior to the expiration of such Permitted
Letter  of  Credit,  Lender  may  draw  upon such Permitted Letter of Credit and
deposit such drawing in the Reserve Account with respect to which such Permitted
Letter  of  Credit  was  issued.
Separateness  Covenants.
-----------------------
maintain  an  arm's length relationship with its Affiliates and its shareholders
or  other  equity  holders  and  any  other  parties  furnishing services to it;
be  solvent  and  pay  its  own liabilities, indebtedness and obligations of any
kind,  including  administrative expenses, from its own assets as the same shall
become  due;
do  all  things necessary to preserve its existence, and observe all formalities
applicable  to  it,  and  do all things necessary to maintain its identity as an
entity  separate  and  distinct  from  the Permitted Subsidiaries and all of its
other  Affiliates;
conduct  and operate its business in its own name and as presently conducted and
operated;
maintain financial statements, books and records and bank accounts separate from
those  of  its  Affiliates,  including,  without limitation, its shareholders or
other  equity  holders  or any other Person; provided, however, that Borrower or
any  Subsidiary  may be included in consolidated financial statements of another
Person,  provided  that  such  consolidated  financial statements contain a note
indicating that management intends that Borrower or such Subsidiary, as the case
may be, is a separate legal entity and the assets and liabilities of Borrower or
such  Subsidiary,  as the case may be, neither are available to pay the debts of
the  consolidated  Person  nor constitute obligations of the consolidated Person
and  that  the  consolidated  Person is not liable for any of the liabilities of
Borrower  or  such  Subsidiary,  as  the  case  may  be;
be,  and  at all times hold itself out to the public as, a legal entity separate
and  distinct  from  any  other  Person  (including,  without  limitation,  any
Affiliate, shareholder or other equity holder of Borrower or such Subsidiary, or
any  Affiliate  of  any  shareholder  or other equity holder of Borrower or such
Subsidiary);
file  its  own  tax returns (except to the extent it is treated as a division of
another  taxpayer  for  tax  purposes)  and pay any taxes so required to be paid
under  applicable  law; provided, however, that so long as (x) the tax liability
of Borrower or any Subsidiary and its respective income and expenses are readily
determinable  based  on  a  review  of the books and records of Borrower or such
Subsidiary, as the case may be, and (y) Borrower or such Subsidiary, as the case
may  be,  maintains  sufficient  books and records to determine its separate tax
obligations for any particular reporting periods, Borrower or any Subsidiary, as
the  case  may  be,  may  file  consolidated  tax  returns;
maintain adequate capital for the normal obligations reasonably foreseeable in a
business  of  its  size  and character and in light of its contemplated business
operations;
maintain  its  assets  in  such  a  manner that it is not costly or difficult to
segregate,  ascertain  or  identify  its  individual  assets  from  those of any
Affiliate  or  any  other  Person;
pay  any  liabilities out of its own funds, including salaries of its employees,
not  out  of  the  funds  of  any  Affiliate;
use stationery, invoices, and checks separate from its Affiliates, including the
Permitted  Subsidiaries;
deposit  all  of its funds in checking accounts, savings accounts, time deposits
or  certificates  of  deposit  of  Borrower or any Subsidiary in its own name or
invest  such  funds  in  its  own  name;
correct  any  known misunderstanding regarding the separate identity of Borrower
or  any  Subsidiary;
participate  in  the  fair  and  reasonable  allocation  of any and all overhead
expenses and other common expenses for facilities, goods or services provided to
multiple  entities;
establish  and  maintain  an  office  through  which  its  business is conducted
separate  and  apart  from  that  of  the  Permitted  Subsidiaries  or any other
Affiliate;  provided,  however,  that nothing herein shall be construed so as to
prevent  Borrower or any Subsidiary from having office space at the same address
as  any  of  the  Permitted  Subsidiaries or any other Affiliate, so long as the
costs  and expenses associated with such office space are allocated as set forth
in  paragraph  (xiv)  above;  and
maintain  a separate telephone number from that of the Permitted Subsidiaries or
any  other  Affiliate  (except that (x) any Subsidiary that is a partnership may
maintain the same telephone number as its General Partner and (y) any Subsidiary
that  is  a  General  Partner  may  maintain  the  same  telephone number as the
partnership  for  which  it  is  the  general  partner).
Notwithstanding  anything herein to the contrary in this Section 5.3(o), (x) the
                                                         --------------
provisions  of  this Section 5.3(o) shall not apply to any Property Operator and
                     --------------
(y)  Borrower  or  any  Subsidiary  may,  from  time  to  time,  (i) make lawful
distributions  in  accordance  with  applicable  law or loans on an arm's length
basis  to its Affiliates subject to the provisions of Section 5.3(o)(viii) above
                                                      --------------------
and  Section  5.4(f),  or  (ii)  obtain loans on an arm's length basis or lawful
     ---------------
capital  contributions  in accordance with applicable law from its Affiliates to
the  extent  necessary  to satisfy its obligations as they become due; provided,
however,  that  all  such transactions are accurately reflected in the books and
records  of  Borrower  or  such  Subsidiary, as the case may be, and each of its
respective  applicable  Affiliates.
Impound  Accounts
-----------------
     .  To  the  extent  that  any  Property Operator is required to maintain an
impound  account  pursuant  to  Section  4.4 of the Master Lease, Borrower shall
cause  the  Property  Owner with respect to the Facility leased by such Property
Operator  to  direct that such impound account to be maintained with and subject
to  the  control  of  Lender,  and  shall cause the applicable Property Owner to
execute  such  documents  as  shall be requested by Lender with respect thereto.
Subordination  of  Management  Agreements
-----------------------------------------
     .  To  the  extent  that  any  management  fees are paid to Emeritus or any
Affiliate  of  Emeritus  with  respect to any Facility, Borrower shall cause, or
shall  cause  the  applicable  Subsidiary of Borrower to cause, Emeritus or such
Affiliate  of  Emeritus  to  deliver  an  agreement,  in  form  and  substance
satisfactory  to Lender, that the payment of such management fees is subordinate
to Borrower's obligations under Section 5.3(n) to make deposits into the Reserve
                                --------------
Accounts.
Board  Attendance
-----------------
     .  Borrower shall at all times give Lender notice of (in the same manner as
notice  is  given  to  directors), and permit one Person designated by Lender to
attend  as  an  observer  all  meetings of Borrower's Board of Directors and all
executive  and  other  committee  meetings  of  the Board of Directors and shall
provide  to Lender the same information concerning Borrower, and access thereto,
provided  to  members of Borrower's Board of Directors and such committees.  The
reasonable  travel expenses incurred by any such designee of Lender in attending
any  board  or  committee  meetings  shall  be  reimbursed  by  Borrower.
Reimbursement  Obligation
-------------------------
     .  From  and  after  the  Closing  Date,  no  obligation of Borrower or any
Subsidiary of Borrower shall be supported by a letter of credit unless, Borrower
or  such  Subsidiary  shall  either (i) have the direct reimbursement obligation
with respect to such letter of credit or (ii) have an intercompany reimbursement
agreement  with  the  Person  that  has the direct reimbursement obligation with
respect  to  such  letter  of  credit,  which shall in each event be in form and
substance  satisfactory  to  Lender.
Consent  to  Acquisition  of  First  Mortgage
---------------------------------------------
     .  Notwithstanding  anything  to  the  contrary  in any First Mortgage Loan
Document,  Borrower  hereby  consents,  and  shall cause any Property Owner with
respect  to  which Lender acquires the First Mortgage Loan to consent, to Lender
becoming  the  lender  under  any  First  Mortgage  Loan.
Florida  Licenses
-----------------
     .  On  or  prior  to  December  30, 2002, cause ESC-New Port Richey, LLC, a
Washington  limited  liability  company,  to  obtain  all  Health  Care  Permits
necessary  to operate the Facility described as the "La Casa Grande Facility" on
Schedule  I.
-----------
 [INTENTIONALLY  OMITTED]

..
Borrower's  Interests
---------------------
     .  Borrower  shall  own  one  hundred  percent  (100%) of the membership or
equity  interests  in  each  Property  Owner  and  ESC-Land.
Negative  Covenants
-------------------
     .  So long as any Obligation (other than an Unmatured Surviving Obligation)
shall  remain unpaid, unless Lender shall otherwise consent in writing, Borrower
will  not,  and  will  not  cause  or  permit  any  Subsidiary  of  Borrower to:
Liens
-----
     .  Directly  or  indirectly  (x)  make,  create, incur, assume or suffer to
exist  any  Lien  upon  or  with  respect to any part of its property or assets,
whether  now  owned  or  hereafter  acquired, or offer or agree to do so; or (y)
enter  into  any  contract  or  agreement  (other  than  the First Mortgage Loan
Documents)  that in any way restricts the ability of Borrower or such Subsidiary
to  make, create, incur, assume or suffer to exist any Lien upon or with respect
to  any part of its property or assets, whether now owned or hereafter acquired,
other  than  the  following:
any  Lien  created  under  any  Loan  Document;
any  Lien  for  taxes, fees, assessments or other governmental charges which are
not  delinquent  and  remain  payable  without  penalty;
any  carriers',  warehousemen's,  mechanics',  landlords',  materialmen's,
repairmen's  or  other  similar Lien arising in the ordinary course of business,
the  underlying claim with respect to which is not delinquent or remains payable
without  penalty  or  being  contested  pursuant  to  Section  5.3(e);
any  Lien  (other  than a Lien imposed by Environmental Laws or by ERISA) on the
property  of  Borrower  or any of its Subsidiaries imposed by law, or pledges or
deposits  required  by  law  pursuant  to  worker's  compensation,  unemployment
insurance  and  other  social  security  legislation;
any  easement,  defect, right-of-way, restriction and other similar encumbrances
incurred  in  the  ordinary  course  of  business  that  do not interfere in any
material  respect  with the business of the Loan Party whose asset is subject to
such  Lien;
any  Lien  (other  than  Liens  on  the  Collateral) existing on the property of
Borrower  or  its  Subsidiaries  on  the  Closing Date and set forth in Schedule
                                                                        --------
4.1(g)  securing  Indebtedness  permitted  under  Section  5.4(b)(ii);
     -                                            -------------------
any  Lien  on assets of Borrower (other than Collateral and Borrower's ownership
interest  in  the  Permitted Subsidiaries) securing Indebtedness permitted under
Section  5.4(b)(iv);  and
  -----------------
any  Lien  on  assets of any Property Operator securing such Property Operator's
obligations  under  the  Master  Lease.
Limitation  on  Indebtedness
----------------------------
     .  Directly  or  indirectly  create,  incur,  assume,  guarantee, suffer to
exist,  or otherwise become or remain directly or indirectly liable with respect
to,  any  Indebtedness,  except:
Indebtedness  incurred  pursuant  to  the  Loan  Documents;
Indebtedness  existing  on  the Closing Date and set forth in Part A of Schedule
                                                                        --------
4.1(f) and extensions, renewals and replacements thereof made in compliance with
  ----
the  terms  of  this  Agreement;
Contingent  Obligations  permitted  pursuant  to  Section  5.4(c);
                                                  ---------------
Indebtedness of Borrower which is a reimbursement obligation with respect to any
Permitted  Letter  of  Credit;
Indebtedness  of  Borrower  or  the applicable Subsidiary set forth on Part B or
Part  C  of  Schedule  4.1(f);  and
             ----------------
additional Indebtedness of Borrower in an aggregate outstanding principal amount
outstanding  at  any  one  time  not  in  excess  of  $50,000.
Notwithstanding anything to the contrary contained in this Section 5.4(b), prior
                                                           --------------
to  seeking  any  Indebtedness  not  outstanding on the Closing Date (other than
Indebtedness  permitted  pursuant  to Section 5.4(b)(iv)), Borrower will or will
                                      -------------------
cause  the  applicable  Subsidiary  to  first  offer to Lender an opportunity to
provide  such  Indebtedness  pursuant  to  the  provisions  of  Section  2.6.
                                                                ------------
Limitation  on  Contingent  Obligations
---------------------------------------
     .  Directly  or  indirectly  create,  incur,  assume,  guarantee, suffer to
exist,  or otherwise become or remain directly or indirectly liable with respect
to,  any  Contingent  Obligations,  except:
Contingent  Obligations  incurred  pursuant  to  the  Loan  Documents;
Contingent  Obligations  existing  on the Closing Date and set forth in Schedule
                                                                        --------
5.4(c)(ii)  and extensions, renewals and replacements thereof made in compliance
  --------
with  the  terms  of  this  Agreement;  and
endorsements  of  checks  for  collection  or  deposit in the ordinary course of
business.
Restricted  Payments
--------------------
     .  Directly or indirectly (x) declare or make any dividend payment or other
distribution  of  assets, properties, cash, rights, obligations or securities on
account  of any shares of any class of its capital stock, or purchase, redeem or
otherwise  acquire  for  value  any  shares of any class of capital stock or any
warrants,  rights  or  options  to  acquire  any  such  shares, now or hereafter
outstanding; or (y) enter into any agreement (other than the First Mortgage Loan
Documents)  restricting the ability of Borrower or any Subsidiary of Borrower to
declare  or  make  any  dividend  payment  or  other  distribution  of  assets,
properties,  cash,  rights,  obligations or securities to its stockholders or to
make  any  loan or advance to Borrower or another Subsidiary of Borrower, except
that:
Borrower  may  declare  and  make  any  dividend payments or other distributions
payable solely by Borrower in common stock of Borrower or in warrants, rights or
options  to  acquire  such  common  stock;
any  Subsidiary  of  Borrower may declare and make any dividend payment or other
distribution  payable  solely  to  Borrower  or any other wholly-owned direct or
indirect  Subsidiary  of  Borrower;
on  any  Distribution Date, Borrower may declare or make any dividend payment or
other  distribution  of  cash to Emeritus; provided that (x) all payments of any
kind and all deposits into any Reserve Account required under the Loan Documents
on or prior to such Distribution Date shall have been made and (y) no Default or
Event  of  Default  has  occurred  and  is  continuing;  and
     (iv)     IF  THE  CONDITION  IN  SECTION 5.3(U) IS SATISFIED, THENafter the
Interim  Florida  Period,  Borrower  may  dividend  or  otherwise distribute its
ownership  interest  in  the  New  Florida  Property  Owners  to  Emeritus.
Consolidation,  Merger,  Sale  of  Assets
-----------------------------------------
..  Wind  up, liquidate or dissolve its affairs, or enter into any transaction of
merger  or  consolidation  or  to  directly  or  indirectly sell, assign, lease,
convey,  transfer  or  otherwise  dispose  of  (whether  in  one  or a series of
transactions)  all or any portion of its assets, business or property (including
accounts  and  notes  receivable  (with  or  without  recourse)  and  equipment
sale-leaseback  transactions)  or  enter  into  any  agreement  to do any of the
foregoing  except  Property  Owners  may  enter  into  the  First  Mortgage Loan
Documents  and,  IF  THE CONDITION IN SECTION 5.3(U) IS SATISFIED, THEN Borrower
may liquidate or dissolve the New Florida Property Owners in accordance with the
provisions  of  its  governing  documents.
Loans  and  Investments
-----------------------
     .  Directly or indirectly purchase, acquire, carry or maintain (or make any
commitment  to  purchase,  acquire, carry or maintain) any capital stock, equity
interest,  Indebtedness,  obligations or other securities of or any interest in,
any  Person  or  any  business or assets or make any advance, loan, extension of
credit  or  capital  contribution  to  or  any  other  investment  in any Person
including  any  Affiliates  of  Borrower,  except  for:
investments  in  cash or Cash Equivalents provided that Property Owners may only
                                          --------
invest  in  Cash  Equivalents described in clause (i) of the definition thereof;
investments  on  the  Closing  Date  by  Borrower in the Permitted Subsidiaries;
other  investments  by  Borrower  or  any  other  Subsidiary  of  Borrower in an
aggregate  amount  not  to  exceed  at  any  time  $20,000;  and
Borrower  may  make  loans to Affiliates of Emeritus; provided that (i) any such
loan  is  in  the  ordinary course of business and on terms no less favorable to
Borrower  than  Borrower  would  obtain in a comparable arm's-length transaction
with  a  Person  not  an  Affiliate;  and  (ii)  any  such loan must comply with
applicable  law  and  with  the provisions of Section 5.3(o) and Section 5.4(n).
                                              --------------     --------------
Conduct  of  Business
---------------------
     .  Engage  in  any  business  other  than  the  following:
for  Borrower,  the  business  of  (x)  acquiring  and  holding shares of stock,
partnership  interests  or membership interests (as applicable) in the Permitted
Subsidiaries; (y) guaranteeing the obligations of the Property Owners identified
on  Schedule  I for the benefit of the First Mortgage Lenders identified on such
    -----------
schedule;  and  (z)  any  other  business  incidental  thereto;
for  each  of  the  Property  Owners, the business of owning the Fee Estate with
respect  to  the  Facility  set  forth  opposite  such  Property Owner's name on
Schedule  I;  and  with respect to the Florida Licensees for the Interim Florida
       ----
Period,  the  business  of  operating  the  Florida  Facilities;  and
for  ESC-Land,  the  business  of  owning  the  Additional  Properties.
Transactions  With  Affiliates
------------------------------
     .  Enter  or  agree  to  enter  into  any transaction with any Affiliate of
Emeritus  except  in  the  ordinary  course  of  business and upon terms no less
favorable  to Borrower or such Subsidiary than Borrower or such Subsidiary would
obtain  in a comparable arm's-length transaction with a Person not an Affiliate.
Amendments  to  Corporate  Documents
------------------------------------
     .  Amend,  modify  or  otherwise  change  the  certificate  or  articles of
incorporation,  bylaws  or  other  organizational  document  of  Borrower or any
Permitted  Subsidiary.
Health  Care  Permits  and  Approvals
-------------------------------------
     .  Engage,  or permit any Property Operator to engage, in any activity that
(i)  constitutes or, with the passage of time, notice or both, would result in a
material  default  under  or violation of, any such Health Care Permit necessary
for  the  lawful  conduct of its business or operations; or (ii) constitutes or,
with  the  passage  of  time,  notice  or  both, would result in the loss by any
Facility  owned,  leased,  managed  or  operated by any Property Operator of the
right  to  participate  in, and receive payment under, the appropriate Medicare,
Medicaid  and  related  reimbursement  programs,  and any similar state or local
government-sponsored  program,  to  the  extent  that such Property Operator has
decided  to  participate  in any such program, and to receive reimbursement from
private and commercial payers and health maintenance organizations to the extent
applicable  thereto.
Accounting  Changes
-------------------
     .  Permit any change in the fiscal year of Borrower or any Subsidiary or in
any of the accounting procedures maintained by Borrower or such Subsidiary as of
the  Closing Date (other than changes required as a result of a change in GAAP).
Amendment  to  and  Refinancing  of  First  Mortgages.
-----------------------------------------------------
Without  the  prior  written consent of Lender (which consent may be withheld or
granted  in  Lender's sole and absolute discretion), neither Borrower nor any of
its  Subsidiaries will (x) agree to any amendment to, or waive any of its rights
under,  any  First Mortgage Loan Document or (y) submit a written request to any
Initial  Facility  Mortgagee  for  any  additional disbursements under the First
Mortgage  Documents.
Without  limiting  Lender's approval rights as set forth in clause (i), in order
to  accommodate  Borrower's  desire  for  a  prompt approval of any transactions
contemplated  to  refinance  a First Mortgage Loan (each a "Proposed Refinancing
                                                            --------------------
Transaction"),  Lender  hereby  agrees  that  it  will (x) respond to Borrower's
  ---------
written  request  for  approval  of a Proposed Refinancing Transaction within 10
  ---
Business Days after receipt by Lender of such written request and of each of the
  -
following:  (A)  a summary of, or a term sheet reflecting, the material terms of
the Proposed Refinancing Transaction; and (B) all other information requested by
Lender  with  respect  to such Proposed Refinancing Transaction or the lender or
lenders with respect to such Proposed Refinancing Transaction and (y) respond to
Borrower's  written  request  for  approval  of  the  agreement  or documents or
documents  proposed  to be entered into by Borrower or any Affiliate of Borrower
into in connection with such Proposed Refinancing Transaction within 10 Business
Days  after  receipt  by  Lender  of  such  written  request  and of each of the
following:  (A)  copies  of all the agreements or documents (including, for each
First  Mortgage  Loan, an Intercreditor Agreement acceptable to Lender) proposed
to  be  entered into by Borrower or any Affiliate of Borrower into in connection
with  such  Proposed  Refinancing  Transaction  and  (B)  all  other information
requested by Lender with respect to such Proposed Refinancing Transaction or the
lender  or  lenders  with  respect  to  such  Proposed  Refinancing Transaction.
Borrower  specifically  acknowledges  that (A) Borrower may not request approval
from  Lender  of any Proposed Refinancing Transaction that would, on a pro forma
basis,  cause  Borrower to fail to comply with any of the covenants contained in
Section  5.1  of  this  Agreement  and  (B)  Lender's  response to a request for
 -----------
approval  of  a Proposed Refinancing Transaction may include conditions that are
 ------
required  to  be  met  in  order for Lender to approve such Proposed Refinancing
Transaction.  If  any  request  for  approval  provided pursuant to this Section
                                                                         -------
5.4(l)(ii) contains a clear statement indicating that the request will be deemed
    ------
approved if no response is received from Lender within 10 Business Days, then if
Lender  fails  to  respond  to  Borrower's written request with such 10 Business
Days, Lender shall be deemed to have approved a Proposed Refinancing Transaction
or  the  agreements  or documents proposed to be entered into by Borrower or any
Affiliate  of  Borrower  into  in  connection  with  such  Proposed  Refinancing
Transaction,  as  the  case  may  be.
Sale  and  Leaseback  Transactions
----------------------------------
     .  Directly  or  indirectly  become,  or  permit any of its Subsidiaries to
directly  or  indirectly  become or remain liable as lessee or as a guarantor or
other  surety  with respect to any lease of any property (whether real, personal
or mixed), whether now owned or hereafter acquired, (i) which Borrower or any of
its  Subsidiaries has sold or transferred or is to sell or transfer to any other
Person  (including  Borrower or any of its Affiliates) or (ii) which Borrower or
any of its Subsidiaries intends to use for substantially the same purpose as any
other property which has been or is to be sold or transferred by such Loan Party
to  any  Person (including Borrower or any of its Affiliates) in connection with
such  lease.
Separateness  Covenants.
-----------------------
amend,  modify  or  otherwise change its charter, bylaws or other organizational
documents in any material term or manner, or in a manner which adversely affects
the  existence  of  Borrower  or  any  such Subsidiary, as the case may be, as a
single  purpose  entity  without  the  prior  written  consent  of  Lender;
permit any shareholder or other equity holder of Borrower or any such Subsidiary
to amend, modify or otherwise change the charter, bylaws or other organizational
documents  of  Borrower  or  any  such  Subsidiary,  as  the case may be, in any
material term or manner, or in a manner which adversely affects the existence of
Borrower  or any such Subsidiary, as the case may be, as a single purpose entity
without  the  prior  written  consent  of  Lender;
to  the  full  extent  permitted  by  law,  liquidate or dissolve (or suffer any
liquidation  or  dissolution),  or  enter  into  any  transaction  of  merger or
consolidation,  or acquire by purchase or otherwise all or substantially all the
business or assets of, or any stock or other beneficial ownership of, any entity
(other  than  the  Permitted  Subsidiaries) without the prior written consent of
Lender;
guarantee,  pledge  its  assets  for  the  benefit  of, hold its credit as being
available  to satisfy, or otherwise become liable, on or in connection with, any
obligation  of  any  other  person  (other than as permitted pursuant to Section
                                                                         -------
5.4(c)(i)  or  (ii))  without  the  prior  written  consent  of  Lender;
    -----      ----
without  the  prior  written  consent  of  Lender,  own any asset other than (x)
incidental  personal  property  necessary  for compliance with the provisions of
Section  5.3(o)  and  this  Section 5.4(n) and (y) (A) for the Borrower, (I) the
   ------------             --------------
shares of stock, partnership interests and membership interests in the Permitted
Subsidiaries;  and (II) incidental personal property necessary for the ownership
of  the  shares  of stock, partnership interests and membership interests in the
Permitted Subsidiaries; (B) for any Property Owners, the Fee Estate with respect
to  the Facility set forth opposite such Property Owner's name on Schedule I and
                                                                  ----------
other  property designated as being owned by such Property Owner pursuant to the
Master  Lease,  and  (C)  for  ESC-Land,  the  Additional  Properties;
engage,  either  directly or indirectly, in any business other than the business
permitted  pursuant  to  Section  5.4(g) for Borrower or such Subsidiary, as the
                         ---------------
case  may  be,  without  the  prior  written  consent  of  Lender;
incur  any  debt,  secured  or  unsecured,  direct  or  contingent  (including
guaranteeing  any obligation) without the prior written consent of Lender (other
than  accounts  payable  incurred  in  the  ordinary  course of business and the
Indebtedness  permitted  pursuant  to  Section  5.4(b));
                                       ---------------
make  any  loans  or  advances  to  any  other  person  or entity, including the
Permitted  Subsidiaries,  other  than  loans  or  advances permitted pursuant to
Section  5.4(f);
     ----------
commingle the funds and other assets of Borrower or such Subsidiary, as the case
may  be,  with  those  of  the  Permitted Subsidiaries, any shareholder or other
equity  holder,  Affiliate  or  any  other  Person;
hold  itself  out  to  be  responsible for the debts or obligations of any other
Person;
do  any  act  which would make it impossible for Borrower or such Subsidiary, as
the  case  may  be,  to  carry  on  the  ordinary  business  of Borrower or such
Subsidiary,  as  the  case  may  be;  and
hold  title  to  the  assets of Borrower or such Subsidiary, as the case may be,
other  than  in  the  name  of  Borrower or such Subsidiary, as the case may be.
Notwithstanding  anything  herein  to  the  contrary in this Section 5.4(n), (x)
                                                             --------------
Borrower or any Subsidiary may, from time to time, (i) make lawful distributions
in  accordance  with  applicable  law  or  loans on an arm's length basis to its
Affiliates  subject  to  the  provisions of Section 5.3(o)(viii), or (ii) obtain
                                            --------------------
loans  on  an  arm's  length basis or lawful capital contributions in accordance
with  applicable  law from its Affiliates to the extent necessary to satisfy its
obligations  as  they  become due; provided, however, that all such transactions
are  accurately  reflected  in  the  books  and  records  of  Borrower  or  such
Subsidiary,  as  the  case  may  be,  and  each  of  its  respective  applicable
Affiliates.
Tax  Status
-----------
     .  No  election  shall  be  made with respect to any Property Owner to have
such  Property  Owner  or  ESC-Land  treated  as  an  association  taxable  as a
corporation  for  tax  purposes.
REIT  Protections.
-----------------
     (a)     Notwithstanding  anything  else  to the contrary in this Agreement,
unless  Lender shall otherwise consent in writing (which consent may be withheld
in  Lender's sole and absolute discretion), Borrower shall not permit any of the
Property  Owners  or  ESC-Land  to:
own or acquire any stock, loan or other debt or equity securities of or make any
advance  to  another  issuer  (including  an  Affiliate  of  Borrower  or  any
Subsidiary);
enter  into any lease which is not approved by Lender or provide any services to
any  lessee;
enter  into any lease which provides for the rental of personal property, except
a lease which provide for the rental of both personal property and real property
and  in which the personal property accounts for less than 10% of the total rent
(as  determined  pursuant  to  Section  856(d)(1)  of  the  Code);
derive  income in any calendar year other than from rent or interest on any bank
time deposits, in either case which is not based on net income or profits of the
lessee  or  bank,  as the case may be, which would cause the aggregate amount of
such  income  earned  by  all  Property  Owners  to  exceed $100,000 during such
calendar  year;  provided  that  during  the Interim Florida Period, the Florida
Licensee  may  derive  income from the operation of the La Casa Grande Facility;
own  any  assets  other  than  the  Facilities,  cash,  bank  time  deposits and
receivables  such  as  rent,  which  arise  in the ordinary course of its rental
business;  provided that during the Interim Florida Period, the Florida Licensee
may  own  property  related  to the operation of the La Casa Grande Facility; or
sell,  dispose, convey or otherwise transfer any of its properties (or interests
therein)  in  a  manner that fails to satisfy the requirements of the prohibited
transaction  safe-harbor  set  forth  in  Section  857(b)(6)(C) of the Code with
respect  to  Lender  and as if Lender became the owner of such properties at the
time  the  Loan  was  made.
     (b)     Borrower  shall,  promptly upon Lender's request, make available to
Lender  all data and information in the possession of Borrower or any Subsidiary
relating to Borrower, any Subsidiary or any of their respective assets, which is
determined  by  Lender to be necessary or helpful to monitor its compliance with
the  REIT  income  and  asset tests and other legal requirements relating to the
status  of  Lender  as  a  REIT.
(c)     Notwithstanding  anything  to  the contrary herein, while Borrower shall
not  be  required  independently  to  determine  whether  any  transaction  or
arrangement  would  adversely  affect  Lender's  ability to qualify as a REIT or
would result in a Property Owner or ESC-Land holding any assets other than "real
estate  assets"  as  defined  in  Section  856(c)(5)(B)  of  the Code ("Non-REIT
                                                                        --------
Assets")  or  generating income which would not qualify under Sections 856(c)(3)
of  the  Code  ("Non-REIT  Income"),  if  Borrower  or any Subsidiary has actual
                 ----------------
knowledge,  or  is  otherwise  informed  by  Lender  in the exercise of Lender's
reasonable  judgment,  that  a  transaction or arrangement could have an adverse
effect  on  Lender's  ability to qualify as a REIT or could result in a Property
Owner  or  ESC-Land  holding  Non-REIT Assets or generating Non-REIT Income, the
Borrower  or  any Subsidiary, as applicable, shall take such actions (or refrain
from  taking such actions) as are required to protect Lender's REIT status or to
avoid  a  Property  Owner's or ESC-Land's receipt of such Non-REIT Income and/or
its  ownership  of  such  Non-REIT  Assets  (as  the  case  may  be).

                                EVENTS OF DEFAULT
Events  of  Default
-------------------
     .  If  any  of  the  following  events  (each  such occurrence an "Event of
                                                                        --------
Default,"  and  collectively,  the  "Events  of  Default")  shall  occur:
      -                              -------------------
Non-Payment  of  Principal,  Interest  or  Other  Amounts
---------------------------------------------------------
     .  Borrower  or  any  other  Loan  Party shall fail to pay (i) when due any
principal  of  the  Loan,  (ii) within 5 days of the date when due, any interest
thereon  or  (iii)  within 5 days of the date when due, any other amount payable
under  this  Agreement  or  any  other  Loan  Document;
First  Mortgage  Loan  Documents
--------------------------------
     .  Any  breach,  default or event of default shall occur and any applicable
grace  period  shall  have  passed, or any event shall occur or condition exist,
under  any  First Mortgage Loan Document if the effect thereof is to accelerate,
or  permit the holder or holders of the First Mortgage Loan with respect to such
First  Mortgage  Loan  Document  to  accelerate  such  First  Mortgage  Loan;
[Intentionally  Omitted]
     .
Representations  and  Warranties
--------------------------------
     .  Any  representation  or  warranty  made  by  any  Loan Party under or in
connection  with  any  Loan  Document  shall prove to have been incorrect in any
material  respect  when  made;
Financial  and  Negative  Covenants
-----------------------------------
     .  Borrower  shall  fail  to  perform  or  observe  any  term,  covenant or
agreement  contained  in  Sections  5.1 (Financial Covenants), 5.2(j) (Notice of
                          -------------                        ------
Default),  5.3(m)  (Operating  Account),  5.3(n)  (Reserve  Accounts),  5.3(o)
           ------                         ------                        ------
(Separateness  Covenants),  or  5.4  (Negative  Covenants)  of  this  Agreement;
                                ---
Reporting  and  Affirmative  Covenants
--------------------------------------
     .  Borrower  shall  fail  to  perform  or  observe  any  term,  covenant or
agreement  contained  in  Sections 5.2 (Reporting Covenants) (other than Section
                          ------------                                   -------
5.2(j)),  5.3(c)  (Insurance),  5.3(e) (Payment of Obligations), 5.3(h) (Further
  ----    ------                ------                           ------
Assurances),  5.3(i)  (Disclosure  Updates), 5.3(j) (Environmental Laws), 5.3(k)
              ------                         ------                       ------
(Health  Care  Permits and Approvals), or 5.3(l) (Compliance with ERISA) if such
                                          ------
failure  shall  remain  unremedied  for  5  days  after  such  failure;
Other  Covenants
----------------
     .  Borrower  or  any  Loan Party shall fail to perform or observe any term,
covenant  or  agreement  contained  in  this  Agreement or any other Transaction
Document  (other  than a default under subsection (a), (b), (c), (d), (e) or (f)
of  this  Section 6.1) if such failure shall remain unremedied for 30 days after
          -----------
the  earlier  of  (i)  the date Borrower or such Loan Party obtains knowledge of
such  failure  or  (ii)  the  date  Borrower receives notice from Lender of such
failure;  provided,  however  that  if such failure cannot with due diligence be
cured  within  a  period  of  30 days, such failure shall not be deemed to be an
Event  of Default if Lessee proceeds promptly and with due diligence to cure the
failure  and diligently completes the curing thereof; provided, however, that in
no  event  shall  such failure remain unremedied for more than 60 days after the
earlier  of  (i)  the date Borrower or such Loan Party obtains knowledge of such
failure  or  (ii) the date Borrower receives notice from Lender of such failure.
Bankruptcy
----------
     .  Borrower  or  any  other Loan Party shall generally not pay its debts as
such  debts become due, or shall admit in writing its inability to pay its debts
generally,  or  shall make a general assignment for the benefit of creditors; or
any  proceeding  shall  be  instituted  by  or against any Loan Party seeking to
adjudicate  it  a  bankrupt  or  insolvent,  or seeking liquidation, winding up,
reorganization,  arrangement,  adjustment, protection, relief, or composition of
it  or  its  debts  under  any  law  relating  to  bankruptcy,  insolvency  or
reorganization or relief of debtors, or seeking the entry of an order for relief
or  the  appointment of a receiver, trustee, custodian or other similar official
for  it or for any substantial part of its property and, in the case of any such
proceeding  instituted  against  it  (but not instituted by it), either (i) such
proceeding shall remain undismissed or unstayed for a period of 60 days; or (ii)
any  of  the  actions sought in such proceeding (including the entry of an order
for  relief  against,  or  the  appointment of a receiver, trustee, custodian or
other  similar  official  for,  it  or for any substantial part of its property)
shall  occur; or any Loan Party shall take any corporate action to authorize any
of  the  actions  set  forth  above  in  this  Section  6.1(h);
                                               ---------------
Judgments
---------
     .  Any judgment or order for the payment of money shall be rendered against
any  Loan Party and either (i) enforcement proceedings shall have been commenced
by  any creditor upon such judgment or order and not stayed for any period of 30
consecutive  days;  or  (ii)  there  shall  be any period of 30 consecutive days
during  which  a  stay  of enforcement of such judgment or order, by reason of a
pending  appeal  or  otherwise,  shall  not  be  in  effect;
Transaction  Documents
----------------------
     .  Any  Transaction  Document  shall  cease  to be in full force and effect
after delivery thereof, or any Loan Party or Property Operator shall so state in
writing;
Collateral  Documents
---------------------
     .  The  Collateral  Documents,  after  delivery  thereof  pursuant  to this
Agreement  or  any of the other Loan Documents, shall for any reason (other than
pursuant  to the terms thereof) cease to create a valid and enforceable security
interest  in, or the Lien created thereby shall not be duly perfected as to, any
Collateral  purported  to  be  covered  thereby;
ERISA
-----
     .  (i)  An  ERISA  Event  shall  occur  with  respect  to a Pension Plan or
Multi-Employer Plan which has resulted or could reasonably be expected to result
in  liability  of Borrower or any ERISA Affiliate under Title IV of ERISA to the
Pension  Plan,  Multi-Employer  Plan  or  the PBGC; (ii) the aggregate amount of
Unfunded Pension Liability among all Pension Plans at any time exceeds $100,000;
or  (iii)  Borrower or any ERISA Affiliate shall fail to pay when due, after the
expiration  of any applicable grace period, any installment payment with respect
to  its  withdrawal liability under Section 4201 of ERISA under a Multi-Employer
Plan;
Other  Indebtedness
-------------------
     .  Borrower  or  any  of  its  Subsidiaries  shall fail to pay when due any
principal  of  or premium or interest on Indebtedness having an unpaid principal
balance  of $1,000,000 or more; or any breach, default or event of default shall
occur  and  any  applicable  grace  period shall have passed, or any event shall
occur  or  condition  exist, under any Indebtedness if the effect thereof, is to
accelerate  or  permit  the holder or holders of such Indebtedness to accelerate
the  maturity  thereof;  or
Leases
------
     .  Any  breach, default or event of default shall occur, or any event shall
occur  or  condition  exist,  under  any Master Lease Document or any HCPI Lease
Document;  or  the  Master  Lease  or the HCPI Lease shall be terminated for any
reason,
then,  and  in any such event, Lender may declare the Note, all interest thereon
and  all  other  amounts payable under any Loan Document to be forthwith due and
payable, whereupon the Note, all such interest and all such amounts shall become
and  be  forthwith  due  and  payable  (without  presentment, demand, protest or
further  notice  of  any  kind,  all  of  which  are  hereby expressly waived by
Borrower);  provided,  however,  that  in  the event of an Event of Default with
respect  to  Borrower  under Section 6.1(g), the Note, all such interest and all
                             --------------
such  amounts  shall  automatically  become  and  be  due  and  payable (without
presentment,  demand, protest or any notice of any kind, all of which are hereby
expressly  waived  by  Borrower).
Rights  Not  Exclusive
----------------------
     .  The  rights  provided for in this Agreement and the other Loan Documents
are  cumulative  and are not exclusive of any other rights, powers or privileges
or  remedies  provided  by  law  or  in  equity,  or under any other instrument,
document  or  agreement.

                                  MISCELLANEOUS
Collateral  Matters
-------------------
     .  Lender  is  hereby  irrevocably authorized (but shall not be obligated),
without  the necessity of any notice to or further consent from any Person, from
time  to  time  to  take any action with respect to any Collateral or Collateral
Documents  which  may  be necessary or appropriate to perfect and keep perfected
the  Liens  created  in  favor  of  Lender pursuant to the Collateral Documents.
Amendments
----------
     .  No  amendment or waiver of any provision of this Agreement or the Notes,
nor  consent  to  any  departure  by  Borrower  therefrom, shall in any event be
effective  unless  the  same  shall be in writing and signed by Lender, and then
such  waiver or consent shall be effective only in the specific instance and for
the  specific  purpose  for  which  given.
Notices
-------
     .  Any notice, consent, approval, demand or other communication required or
permitted  to  be  given  hereunder  (a  "notice") must be in writing and may be
served  personally  or  by  U.S.  Mail.  If  served  by  U.S.  Mail, it shall be
addressed  as  follows:
If  to  Borrower:          Emeritus  Realty  Corporation
3131  Elliott  Avenue,  Suite  500
Seattle,  Washington  98121
Attn:     Mr.  Ray  Brandstrom
Fax:     (206)  ____________
with  a  copy  to:          The  Nathanson  Group
1520  Fourth  Avenue,  Sixth  Floor
Seattle,  Washington  98101
Attn:     Jim  Spencer,  Esq.
Fax:     (206)  623-1738
If  to  Lender:          Health  Care  Property  Investors,  Inc.
4675  MacArthur  Court,  Suite  900
Newport  Beach,  California  92660
Attn:     Legal  Department
Fax:     (949)  221-0607
with  a  copy  to:          Latham  &  Watkins
650  Town  Center  Drive,  Suite  2000
Costa  Mesa,  California  92626
Attn:     David  C.  Meckler,  Esq.
Fax:     (714)  755-8290

Any  notice  which  is  personally  served  shall  be effective upon the date of
service;  any  notice  given  by U.S. Mail shall be deemed effectively given, if
deposited in the United States Mail, registered or certified with return receipt
requested,  postage  prepaid  and  addressed  as  provided above, on the date of
receipt,  refusal  or  non-delivery indicated on the return receipt.  In lieu of
notice  by  U.S.  Mail,  either  party  may  send  notices  by facsimile or by a
nationally  recognized overnight courier service which provides written proof of
delivery  (such  as  U.P.S.  or  Federal Express).  Any notice sent by facsimile
shall  be  effective upon confirmation of receipt in legible form, provided that
an  original of such facsimile is also sent to the intended addressee by another
method  approved  in  this  Section  7.3,  and  any  notice sent by a nationally
                            ------------
recognized  overnight  courier shall be effective on the date of delivery to the
party  at  its  address  specified  above as set forth in the courier's delivery
receipt.  Either  party  may,  by  notice  to the other from time to time in the
manner  herein  provided,  specify  a  different  address  for  notice purposes.
No  Waiver;  Remedies
---------------------
     .  No  failure  on  the  part  of  Lender  to  exercise,  and  no  delay in
exercising, any right under any Loan Document shall operate as a waiver thereof;
nor shall any single or partial exercise of any such right preclude any other or
further  exercise  thereof  or  the  exercise  of any other right.  The remedies
herein  provided  are  cumulative  and not exclusive of any remedies provided by
law.
Costs,  Expenses  and  Taxes.
----------------------------
General  Costs  and  Expenses
-----------------------------
     .  Borrower  agrees  to  pay on demand all reasonable costs and expenses of
Lender  in connection with the preparation, execution, delivery, administration,
modification  and amendment of the Transaction Documents and the other documents
to  be  delivered  under  the  Transaction  Documents,  including  the  fees and
out-of-pocket  expenses  of  counsel  for  Lender actually incurred with respect
thereto  and  with  respect  to  advising  Lender  as  to  its  rights  and
responsibilities  under  the  Loan Documents.  Borrower further agrees to pay on
demand  all  costs  and  expenses,  if any (including counsel fees and expenses)
actually incurred, in connection with the enforcement by Lender (whether through
negotiations,  legal  proceedings  or  otherwise)  of the Loan Documents and the
other documents to be delivered under the Loan Documents, including counsel fees
and  expenses  actually  incurred  in  connection with the enforcement of rights
under  this  Section 7.5.  In addition, Borrower shall pay any and all stamp and
             -----------
other  taxes  payable  or  determined  to  be  payable  in  connection  with the
execution,  delivery,  filing  and recording of the Loan Documents and the other
documents  to  be  delivered under the Loan Documents, and agrees to save Lender
harmless  from  and against any and all liabilities with respect to or resulting
from  any  delay  in  paying  or  omission  to  pay  such  taxes.
Survival
--------
     .  The provisions of this Section 7.5 shall survive the termination of this
                               -----------
Agreement  and  the  repayment  of  the  Loan.
Right  of  Set-off
------------------
     .  Lender  is  hereby  authorized at any time and from time to time, to the
fullest  extent  permitted  by  law,  to  set off and apply any and all deposits
(general  or special, time or demand, provisional or final) at any time held and
other  indebtedness  at  any  time  owing  by Lender to or for the credit or the
account  of  Borrower  against any and all of the obligations of Borrower now or
hereafter  existing  under any Transaction Document, whether or not Lender shall
have  made  any  demand  under  this  Agreement  or  such Note and although such
obligations  may  be unmatured.  The rights of Lender under this Section 7.6 are
                                                                 -----------
in  addition  to  other  rights and remedies (including other rights of set-off)
which  Lender  may  have.
Indemnity.
---------
Indemnity
---------
     .  Borrower  shall  pay,  indemnify, defend and hold Lender and each of its
directors,  officers,  employees,  attorneys  or  agents  (each, an "Indemnified
                                                                     -----------
Person")  harmless (to the fullest extent permitted by law) from and against any
     -
and  all  claims,  demands,  suits,  actions,  investigations,  proceedings  and
damages,  and all attorney's fees and disbursements and other costs and expenses
actually  incurred  in  connection  therewith (as and when they are incurred and
whether  or  not suit is brought), at any time asserted against, imposed upon or
incurred  by  any of them in connection with or as a result of or related to the
execution,  delivery,  enforcement,  performance  and  administration  of  this
Agreement  and any other Loan Documents or the transactions contemplated herein,
and  with respect to any investigation, litigation or proceeding related to this
Agreement,  any  other  Loan  Document  or  the  Loan or the use of the proceeds
thereof  (whether  or  not  any  Indemnified Person is a party thereto) any act,
omission,  event  or  circumstance  in  any  manner  related  thereto  (all  the
foregoing,  collectively,  the  "Indemnified  Liabilities").
                                 ------------------------
Limitation
----------
     .  Borrower  shall  have no obligation to any Indemnified Person under this
Section  7.7 with respect to any Indemnified Liability that a court of competent
 -----------
jurisdiction  finally  determines  to have resulted from the gross negligence or
willful  misconduct  of  such  Indemnified  Person.
Survival
--------
     .  The provisions of this Section 7.7 shall survive the termination of this
                               -----------
Agreement  and  the  repayment  of  the  Loan.
Binding  Effect
---------------
     .  This  Agreement  shall become effective when it shall have been executed
by  Borrower  and  Lender  and thereafter shall be binding upon and inure to the
benefit  of  Borrower  and  Lender  and their respective successors and assigns,
except that (x) Borrower shall not have the right to assign its rights hereunder
or  any  interest  herein  without  the  prior  written consent of Lender (which
consent may be withheld or granted in Lender's sole and absolute discretion) and
(y) so long as no Event of Default has occurred, Lender shall not have the right
to  assign its rights hereunder or any interest herein to a Person that competes
directly  with  Borrower or any Subsidiary of Borrower without the prior written
consent of Borrower (which consent may be withheld or granted in Borrower's sole
and  absolute  discretion).
GOVERNING  LAW
--------------
     .  THIS  AGREEMENT  AND  THE  NOTE  SHALL  BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE  WITH,  THE  LAWS  OF  THE  STATE  OF  NEW YORK.  ANY LEGAL ACTION OR
PROCEEDING  WITH  RESPECT  TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK,
AND  BY  EXECUTION  AND  DELIVERY OF THIS AGREEMENT, EACH OF BORROWER AND LENDER
CONSENTS,  FOR  ITSELF  AND  IN  RESPECT OF ITS PROPERTY, TO THE JURISDICTION OF
THOSE  COURTS.  EACH  OF  BORROWER  AND LENDER IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING  ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR  PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED  HERETO.  SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS MAY BE MADE
BY  ANY  MEANS  PERMITTED  BY  NEW  YORK  LAW.
WAIVER  OF  JURY  TRIAL
-----------------------
     .  BORROWER  AND LENDER WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF
ANY  CLAIM  OR  CAUSE  OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS
AGREEMENT,  THE  OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY
OF  THE  PARTIES  AGAINST  ANY  OTHER  PARTY OR PARTIES, WHETHER WITH RESPECT TO
CONTRACT  CLAIMS,  TORT  CLAIMS,  OR OTHERWISE, AND AGREE THAT ANY SUCH CLAIM OR
CAUSE  OF  ACTION  SHALL  BE  TRIED  BY  A  COURT TRIAL WITHOUT A JURY.  WITHOUT
LIMITING  THE  FOREGOING, EACH PARTY FURTHER AGREES THAT ITS RIGHT TO A TRIAL BY
JURY  IS  HEREBY WAIVED AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH
SEEKS,  IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS
AGREEMENT  OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.  THIS
WAIVER  SHALL  APPLY  TO  ANY  SUBSEQUENT  AMENDMENTS,  RENEWALS, SUPPLEMENTS OR
MODIFICATIONS  TO  THIS  AGREEMENT  AND  THE  OTHER  LOAN  DOCUMENTS.
Confidentiality
---------------
     .  Lender  agrees that material, non-public information regarding Borrower,
its  Subsidiaries,  operations,  assets,  and existing and contemplated business
plans  shall  be  treated  by  Lender in a confidential manner, and shall not be
disclosed  by  it to Persons who are not parties to this Agreement, except:  (i)
to  counsel for and other advisors, accountants, and auditors to Lender; (ii) as
may be required by statute, decision, or judicial or administrative order, rule,
or  regulation; (iii) as may be agreed to in advance by Borrower; (iv) as to any
such  information  that  is  generally  available  to  the  public;  and  (v) in
connection  with any assignment, prospective assignment, sale, prospective sale,
participation  or  prospective  participation  of  Lender's interests hereunder.
Limitation  of  Liability
-------------------------
     .  No  claim  may  be  made by Borrower, any Subsidiary of Borrower, or any
Lender or the Affiliates, directors, officers, employees, attorneys or agents of
any  of  them  for  any  special, indirect, consequential or punitive damages in
respect  of  any  claim  for breach of contract or any other theory of liability
arising  out of or related to the transactions contemplated by this Agreement or
the  other Loan Documents, or any act, omission or event occurring in connection
therewith,  and Borrower, each Subsidiary of Borrower, and Lender hereby waives,
releases  and  agrees not to sue upon any claim for any such damages, whether or
not  now  accrued  and  whether or not known or suspected to exist in its favor.
Entire  Agreement
-----------------
     .  This  Agreement,  together  with  the other Loan Documents, embodies the
entire  Agreement  and  understanding between Borrower and Lender and supersedes
all  prior  or  contemporaneous  agreements  and understandings of such persons,
verbal  or  written,  relating  to  the  subject  matter  hereof  and  thereof.
Execution  in  Counterparts
---------------------------
     .  This  Agreement  may  be  executed  in any number of counterparts and by
different  parties  hereto  in  separate  counterparts,  each  of  which when so
executed shall be deemed to be an original and all of which taken together shall
constitute  one  and  the  same  agreement.
                     (remainder of page intentionally blank)
<PAGE>

                                       S-1

     IN  WITNESS  WHEREOF, the parties hereto have caused this Loan Agreement to
be  executed  by  their respective officers thereunto duly authorized, as of the
date  first  above  written.
EMERITUS  REALTY  CORPORATION,  a  Nevada  corporation,  as  Borrower
By:     /s/  Raymond  R.  Brandstrom
        ----------------------------
     Name:     Raymond  R.  Brandstrom
               -----------------------
     Title:     Vice  President  of  Finance
                ----------------------------

HEALTH  CARE  PROPERTY  INVESTORS,  INC.,  a  Maryland  corporation,  as  Lender
By:     /s/  Edward  J.  Henning
        ------------------------
     Name:     Edward  J.  Henning
               -------------------
     Title:     Senior  Vice  President
                -----------------------