PROMISSORY
NOTE




$1,950,000.00 Seattle,
Washington


October
1, 2009




FOR VALUE
RECEIVED, EMERITUS CORPORATION, a Washington corporation ("Borrower"), promises
to pay, in lawful money of the United States of America, to the order of B.F.
Limited Partnership LP ("Lender"), at 1910 Fairview Avenue E., Suite 500,Seattle, WA 98102, or such other place
either within or without the State of Washington as Lender may designate in
writing from time to time, the principal sum of  One Million Nine
Hundred Fifty Thousand and no/100 Dollars ($1,950,000.00), or so much thereof as
has been advanced, with interest on the unpaid principal balance at the rates
provided below.





1.  Interest and
Payments.




(a)  Interest
Rate.  From the date of the first advance, the principal
balance shall bear interest at the rate of six percent (6.00%) per
annum.  Interest shall be calculated based on the actual number of
days elapsed in a 365-day year.




(b)  Payments.  Borrower
shall make consecutive monthly payments of all accrued interest on Note
commencing November 1, 2009 and then on the first day of each month thereafter
throughout the term hereof.  If not sooner paid according to the terms
hereof, the entire principal balance of this Note and all unpaid accrued
interest thereon shall be due and payable in full on October 1, 2014 (the
“Maturity Date”).




2.  PREPAYMENT.




The
principal and interest under this Note may be prepaid in whole or in part at any
time without penalty or fee.  Any partial prepayment shall not extend,
postpone or change the due dates of the installment payments required by
Paragraph 2(b) above or change the Maturity Date.




3.  LATE
CHARGE.




If any
monthly payment is not made within ten (10) days of the due date, Borrower shall
pay to Lender on demand a late charge equal to five percent (5%) of the amount
of the payment to defray the overhead expenses of Lender incident to the delay;
provided, however, such late charge shall not apply to any payment due on the
Maturity Date.




4.  EVENTS OF
DEFAULT.




The
failure to make any payment under this Note shall be an Event of
Default.




5.  QUALIFIED
OFFERING.




In the
event the sole member of Borrower, Emeritus Corporation, a Washington
corporation (“Emeritus”), consummates a Qualified Offering, the Maturity Date of
the Note shall be accelerated to the date that is five (five) days after the
closing of the Qualified Offering (the “Accelerated Maturity
Date”).







1





(a)  For
purposes of this Section 5, a “Qualified Offering” shall mean the issuance and
sale by Emeritus, in a single offering, of equity or debt securities (which
includes common stock, preferred stock, convertible preferred stock, debt
securities, convertible debt securities or warrants), which results in aggregate
gross proceeds to Emeritus equal to or in excess of $100,000,000.




(b)  Notwithstanding
any conflicting provision of this Note, a Qualified Offering is notan Event of Default under
this Note.




6.  REMEDIES; DEFAULT
INTEREST.




Upon an
Event of Default, Lender may declare the entire principal balance and all
accrued interest under this Note immediately due and payable.  Whether
or not Lender exercises such option to accelerate, the entire principal balance,
all accrued interest, and all other amounts payable hereunder shall bear
interest from the date of such Event of Default at the lesser of (a) a per annum
default rate ("Default Rate") of Twelve percent (12%) per annum, or (b) the
highest rate permitted by applicable law.  Such default interest shall
be payable on demand.  Lender's failure to exercise any right or
remedy shall not be a waiver of the right to exercise the same.




7.  COLLECTION
EXPENSES.




Borrower
shall reimburse Lender on demand for all reasonable legal fees and other costs
and expenses incurred in collecting or enforcing this Note.  Such
fees, costs and expenses shall include those incurred with or without suit and
in any appeal, any petition for review, any arbitration or mediation, any action
contesting or seeking to restrain, enjoin, stay or postpone the exercise of any
remedy of Lender, any post-judgment collection proceedings, any probate
proceedings, any state or federal bankruptcy or insolvency or receivership
proceedings, and in connection with all negotiations, documentation, and other
actions relating to any workout, compromise, settlement or satisfaction of any
of the indebtedness evidenced by this Note.  All such costs, expenses
and fees shall bear interest from the date of disbursement at the Default
Rate.




8.  WAIVERS.




Borrower
waives all notices required by law, including without limitation presentment and
demand for payment, protest, and notice of demand, protest, dishonor and
nonpayment.




9.  ASSIGNMENT OF NOTE BY
LENDER.




The term
"Lender" shall include any subsequent holder of this Note.  Lender may
assign its interest in the Note in whole or in part.







2





10.  MISCELLANEOUS.




(a)  Borrower
warrants and represents that all funds advanced under this Note shall be applied
to and are intended solely for business or commercial purposes, and none of such
funds will be used for personal, family or household purposes.




(b)  This Note
shall be construed, enforced and otherwise governed by the laws of the State of
Washington.




(c)  All
notices, requests, demands, and other communications called for by this Note
shall be in writing and shall be deemed to have been given if delivered or
mailed first-class, postage prepaid:




If to
Borrower,
to:                                Emeritus
Corporation


Attn:
Mendelsohn, Senior Vice President, Corporate Development


3131
Elliott Avenue, Suite 500


Seattle,
Washington 98121-1031





If to
Lender,
to:                                B.F.
Limited Partnership LP


1910
Fairview Avenue E., Suite 500


Seattle,
WA 98102





(d)  Time is
of the essence of this Note and of the payments and performances
hereunder.




NOTICE:  ORAL
AGREEMENTS, PROMISES, OR COMMITMENTS TO:  (1) LOAN MONEY,
(2) EXTEND CREDIT, (3) MODIFY OR AMEND ANY TERMS OF THE NOTE,
(4) RELEASE ANY GUARANTOR, (5) FORBEAR FROM ENFORCING REPAYMENT OF THE
LOAN OR THE EXERCISE OF ANY REMEDY UNDER THE NOTE, OR (6) MAKE ANY OTHER
FINANCIAL ACCOMMODATION PERTAINING TO THE LOAN ARE ALL UNENFORCEABLE UNDER
WASHINGTON LAW.




BORROWER




EMERITUS
CORPORATION









By: /s/
Eric Mendelsohn


Eric
Mendelsohn


Its:
Senior Vice President of Corporate Development




Address:
3131 Elliott Avenue, Suite 500, Seattle, Washington 98121-1031




















3