**Loan
      No.** **07-0004235**




**LOAN
      AGREEMENT**




**for
      a loan in the amount of**




**$15,930,000**




**among**




**EMERITUS
      PROPERTIES-ARKANSAS, LLC** **,**




**a
      Delaware limited liability company**




**as
      Borrower**




**and**




**GENERAL
      ELECTRIC CAPITAL CORPORATION**




**as
      Agent and a Lender**




**and**




**THE
      OTHER FINANCIAL INSTITUTIONS WHO ARE OR HEREAFTER**




**BECOME
      PARTIES TO THIS AGREEMENT**




**as
      Lenders**







**Emeritus
      Acquisition**




**Arkansas
      Portfolio**







**Dated
      as of December 1, 2005**







EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


**TABLE
      OF CONTENTS**




**Page**


ARTICLE
                  I INCORPORATION OF RECITALS, EXHIBITS AND SCHEDULES
              1Section
                  1.1
              Incorporation
                  of Recitals.
              1Section
                  1.2
              Incorporation
                  of Exhibits and Schedules.
              2Section
                  1.3
              Definitions.
              2ARTICLE
                  II LOAN TERMS
              2Section
                  2.1
              Disbursements.
              2Section
                  2.2
              Interest
                  Rate; Late Charge.
              2Section
                  2.3
              Payments.
              2Section
                  2.4
              Maturity.
              3Section
                  2.5
              Prepayment.
              3Section
                  2.6
              Application
                  of Payments.
              3Section
                  2.7
              Capital
                  Adequacy; Increased Costs; Illegality.
              4Section
                  2.8
              Sources
                  and Uses.
              4Section
                  2.9
              Defeasance.
              5Section
                  2.10
              Security.
              7ARTICLE
                  III INSURANCE, CONDEMNATION, AND IMPOUNDS
              7Section
                  3.1
              Insurance.
              7Section
                  3.2
              Use
                  and Application of Insurance Proceeds.
              10Section
                  3.3
              Condemnation
                  Awards.
              11Section
                  3.4
              Reserved.
              12Section
                  3.5
              Real
                  Estate Tax Impounds.
              12ARTICLE
                  IV LEASING MATTERS
              13Section
                  4.1
              Representations
                  and Warranties on Leases.
              13Section
                  4.2
              Approval
                  Rights.
              13Section
                  4.3
              Covenants.
              14Section
                  4.4
              Tenant
                  Estoppels.
              14Section
                  4.5
              Security
                  Deposits
              14ARTICLE
                  V REPRESENTATIONS AND WARRANTIES
              14Section
                  5.1
              Organization
                  and Power.
              14Section
                  5.2
              Guarantor.
              15Section
                  5.3
              Borrower's
                  Operating Agreement.
              15Section
                  5.4
              Corporate
                  Documents.
              15Section
                  5.5
              Validity
                  of Loan Documents.
              15Section
                  5.6
              Liabilities;
                  Litigation.
              16Section
                  5.7
              Taxes
                  and Assessments.
              16Section
                  5.8
              Other
                  Agreements; Defaults.
              16Section
                  5.9
              Compliance
                  with Law.
              16
  EX-10.86.4
            Loan Agreemnt Arizona Properties & GE Cap
 i
  
 Section
                  5.10
              Condemnation.
              17Section
                  5.11
              Access.
              17Section
                  5.12
              Flood
                  Hazard.
              17Section
                  5.13
              Property.
              17Section
                  5.14
              Location
                  of Borrower.
              18Section
                  5.15
              Margin
                  Stock.
              18Section
                  5.16
              Tax
                  Filings.
              18Section
                  5.17
              Solvency.
              18Section
                  5.18
              Full
                  and Accurate Disclosure.
              19Section
                  5.19
              Single
                  Purpose Entity.
              19Section
                  5.20
              No
                  Broker.
              19Section
                  5.21
              Reserved.
              19Section
                  5.22
              Labor
                  Disputes.
              19Section
                  5.23
              Employees.
              19Section
                  5.24
              ERISA
                  (Borrower).
              19Section
                  5.25
              Intellectual
                  Property.
              20Section
                  5.26
              Anti-Terrorism
                  and Anti-Money Laundering Compliance.
              20Section
                  5.27
              Reserved.
              21Section
                  5.28
              Master
                  Lease.
              21ARTICLE
                  VI FINANCIAL REPORTING; NOTICES
              21Section
                  6.1
              Financial
                  Statements.
              21Section
                  6.2
              Audits.
              23Section
                  6.3
              Books
                  and Records/Audits.
              23Section
                  6.4
              Notice
                  of Litigation or Default.
              24Section
                  6.5
              Bank
                  Accounts.
              24ARTICLE
                  VII COVENANTS
              25Section
                  7.1
              Inspection.
              25Section
                  7.2
              Due
                  on Sale and Encumbrance; Transfers of Interests.
              25Section
                  7.3
              Taxes;
                  Charges.
              26Section
                  7.4
              Reserved.
              26Section
                  7.5
              Operation;
                  Maintenance; Inspection.
              26Section
                  7.6
              Taxes
                  on Security.
              26Section
                  7.7
              Single
                  Purpose Entity; Legal Existence; Name, Etc.
              27Section
                  7.8
              Affiliate
                  Transactions.
              27Section
                  7.9
              Limitation
                  on Other Debt.
              27Section
                  7.10
              Further
                  Assurances.
              28Section
                  7.11
              Estoppel
                  Certificates.
              28Section
                  7.12
              Notice
                  of Certain Events.
              28Section
                  7.13
              Indemnification.
              28Section
                  7.14
              Use
                  of Proceeds, Revenues.
              29Section
                  7.15
              Payments
                  Under Master Lease.
              29Section
                  7.16
              Reserved.
              29Section
                  7.17
              Reserved.
              29Section
                  7.18
              Compliance
                  with Laws and Contractual Obligations.
              29
  EX-10.86.4
            Loan Agreemnt Arizona Properties & GE Cap
 **ii**
  
 Section
                  7.19
              Notice
                  of Money Laundering.
              30Section
                  7.20
              Anti-Terrorism
                  and Anti-Money Laundering Compliance.
              30Section
                  7.21
              Employees.
              32Section
                  7.22
              Reserved.
              32Section
                  7.23
              Representations
                  and Warranties.
              32Section
                  7.24
              Cooperation.
              32Section
                  7.25
              Master
                  Lease.
              33Section
                  7.26
              Financial
                  Covenants.
              33ARTICLE
                  VIII Health Care Matters
              33Section
                  8.1
              Healthcare
                  Laws.
              33Section
                  8.2
              Representations,
                  Warranties and Covenants Regarding Healthcare Matters.
              34Section
                  8.3
              Cooperation.
              37ARTICLE
                  IX EVENTS OF DEFAULT
              38Section
                  9.1
              Payments.
              38Section
                  9.2
              Certain
                  Covenants.
              39Section
                  9.3
              Covenants.
              39Section
                  9.4
              Representations
                  and Warranties.
              39Section
                  9.5
              Other
                  Encumbrances.
              39Section
                  9.6
              Involuntary
                  Bankruptcy or Other Proceeding.
              39Section
                  9.7
              Voluntary
                  Petitions, etc.
              40Section
                  9.8
              Default
                  Under Master Lease.
              40Section
                  9.9
              False
                  Reports.
              40Section
                  9.10
              Control.
              40Section
                  9.11
              Money
                  Laundering.
              40Section
                  9.12
              Loan
                  Documents.
              41Section
                  9.13
              Other
                  Defaults.
              41ARTICLE
                  X REMEDIES
              41Section
                  10.1
              Remedies
                  - Insolvency Events.
              41Section
                  10.2
              Remedies
                  - Other Events.
              41Section
                  10.3
              Agent's
                  Right to Perform the Obligations.
              41ARTICLE
                  XI MISCELLANEOUS
              42Section
                  11.1
              Notices.
              42Section
                  11.2
              Amendments
                  and Waivers.
              43Section
                  11.3
              Limitation
                  on Interest.
              44Section
                  11.4
              Invalid
                  Provisions.
              44Section
                  11.5
              Reimbursement
                  of Expenses; Portfolio Administration Fee.
              45Section
                  11.6
              Approvals;
                  Third Parties; Conditions.
              45Section
                  11.7
              Lender
                  Not in Control; No Partnership.
              46Section
                  11.8
              Time
                  of the Essence.
              46Section
                  11.9
              Successors
                  and Assigns.
              47Section
                  11.10
              Renewal,
                  Extension or Rearrangement.
              47Section
                  11.11
              Waivers;
                  Forbearance.
              47
  EX-10.86.4
            Loan Agreemnt Arizona Properties & GE Cap
 **iii**
  
 Section
                  11.12
              Cumulative
                  Rights.
              47Section
                  11.13
              Singular
                  and Plural.
              48Section
                  11.14
              Phrases.
              48Section
                  11.15
              Exhibits
                  and Schedules.
              48Section
                  11.16
              Titles
                  of Articles, Sections and Subsections.
              48Section
                  11.17
              Promotional
                  Material.
              48Section
                  11.18
              Survival.
              48Section
                  11.19
              WAIVER
                  OF JURY TRIAL.
              49Section
                  11.20
              Waiver
                  of Punitive or Consequential Damages.
              49Section
                  11.21
              Governing
                  Law.
              49Section
                  11.22
              Entire
                  Agreement.
              49Section
                  11.23
              Counterparts.
              50Section
                  11.24
              Venue.
              50Section
                  11.25
              Sale
                  of Loan, Participation.
              50Section
                  11.26
              Limitation
                  on Liability of Agent's and Lender's Officers, Employees,
                  etc.
              51Section
                  11.27
              Effectiveness
                  of Facsimile Documents and Signatures.
              51Section
                  11.28
              Agency.
              51






EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap
 **iv**




**LIST
      OF EXHIBITS AND SCHEDULES TO LOAN AGREEMENT**




Exhibits :




Exhibit
      A  Real
      Property


Exhibit
      B  Form
      of
      Interest Holder Agreement


Exhibit
      C  Intellectual
      Property


Exhibit
      D  Ownership
      of Borrower


Exhibit
      E  Provider
      Payment/Reimbursement Programs


Exhibit
      F  Governmental
      Approvals








Schedules :




Schedule
      2.1   Advance
      Conditions


Schedule
      2.3   Amortization
      Schedule


Schedule
      2.8   Sources
      and Uses


Schedule
      3.1   Insurance
      Exceptions


Schedule
      3.2   Allocated
      Loan Amount


Schedule
      I   Certain
      Definitions


Schedule
      II   Calculation
      of Net Operating Income








EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap
 **v**





**INDEX
      OF DEFINED TERMS**




Adjusted
                Actual Rent - Sch. II
            9
            
            Lender
            1Agent
            1
            
            Licenses
            34Anti-Money
                Laundering Laws
            21
            
            Lists
            20Anti-Money
                Laundering Measures
            21
            
            Master
                Lease
            1Anti-Terrorism
                Laws
            20
            
            Monthly
                Effective Rent - Sch. II
            9Assignment
                Agreement
            6
            
            Monthly
                Reports
            22Bankruptcy
                Party
            40
            
            Net
                Operating Income - Sch. II
            9Borrower
            1
            
            Note
            1Borrower
                Anti-Terrorism Policies
            31
            
            Occupancy
            33Borrower's
                Equity - Sch. 2.1
            4
            
            OFAC
            20BSA
            21
            
            OFAC
                Laws and Regulations
            20Charges
            26
            
            Operating
                Agreement
            15Collateral
            7
            
            Other
                Lists
            20CON
            34
            
            Permitted
                Debt
            28Defeasance
            5
            
            Prepayment
                Premium
            3Defeasance
                Deposit
            7
            
            Project
            1Designated
                Person
            20
            
            Properties
            1Executive
                Orders
            20
            
            Property
            1Expenses
                - Sch. II
            9
            
            Release
                Date
            5FIRREA
                - Sch. 2.1
            5
            
            Rent
                Proceeds
            29fiscal
                month
            22
            
            Revenue
                - Sch. II
            9Funding
                Amount
            2
            
            Scheduled
                Defeasance Payments
            6GECC
            1
            
            SDN
                List
            20Guarantor
            1
            
            Secondary
                Market Transactions
            32Healthcare
                Laws
            33
            
            Security
                Agreement
            5HIPAA
            33
            
            State
                Regulator
            30HIPAA
                Compliance Date
            34
            
            Successor
                Borrower
            6HIPAA
                Compliance Plan
            34
            
            Tax
                Impound
            12HIPAA
                Compliant
            34
            
            Taxes
            12Improvements
            1
            
            Terrorism
            8Incorporation
                Documents
            15
            
            Third-Party
                Payor Programs
            36Interest
                Holder Agreement
            30
            
            Title
                Policy - Sch. 2.1
            2Interest
                Rate
            2
            
            U.S.
                Obligations
            7Investor
                Anti-Terrorism Policies
            31
            
            U.S.
                Publicly-Traded Entity
            21Leases
                - Sch. 2.1
            3
            
            Yield
                Maintenance Amount
            7







EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap
 **vi**




**LOAN
      AGREEMENT**




This
      Loan
      Agreement is entered into as of December 1, 2005, among GENERAL ELECTRIC CAPITAL
      CORPORATION, a Delaware corporation (in its individual capacity, " **GECC** "
      and in
      its capacity as agent for the Lenders, together with its successors,
      " **Agent** "),
      the
      financial institutions other than GECC who are or hereafter become parties
      to
      this Agreement (together with GECC collectively, or individually, as the context
      may require, " **Lender** "),
      and
      EMERITUS PROPERTIES-ARKANSAS, LLC , a
      Delaware limited liability company (" **Borrower** ").




**RECITALS**




A.  Lender
      and Agent have agreed to make the Loan to Borrower subject to the terms and
      conditions contained herein. The Loan is evidenced by that certain Promissory
      Note of even date herewith in the original principal amount of Fifteen Million
      Nine Hundred Thirty Thousand and No/100 Dollars ($15,930,000.00) (the Promissory
      Note and all amendments thereto and substitutions therefor are hereinafter
      referred to collectively as the " **Note** ").
      The
      terms and provisions of the Note are hereby incorporated herein by reference
      in
      this Agreement.




B.  On
      the
      Closing Date, Borrower will be the owner of the real properties more
      particularly described on Exhibit
      A attached
      hereto (individually, a " **Property** "
      and
      collectively, the " **Properties** "),
      and
      the Improvements located thereon (collectively, the " **Improvements** "),
      including, without limitation, three assisted/independent living **** facilities.
      The Properties, together with the Improvements, are referred to herein as the
      " **Projects** ."




C.  The
      Projects are master leased to Emeritus Corporation, a Washington corporation
      (" **Guarantor** ")
      pursuant to a Master Lease of even date herewith between Borrower, as landlord
      and Guarantor, as tenant **(the "Master Lease")** .




D.  Borrower
      will use the proceeds of the Loan for the purpose of acquiring the
      Project.




E.  Borrower's
      obligations under the Loan will be evidenced and secured by, the Loan
      Documents.




NOW,
      THEREFORE, in consideration of the foregoing and the mutual conditions and
      agreements contained herein, the parties agree as follows:




**ARTICLE
      I**




**INCORPORATION
      OF RECITALS, EXHIBITS AND SCHEDULES**




Section
      1.1  Incorporation
      of Recitals.




The
      foregoing preambles and all other recitals set forth herein are made a part
      hereof by this reference.




EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap
 1


Section
      1.2  Incorporation
      of Exhibits and Schedules.




The
      Exhibits and Schedules to this Agreement are attached hereto and are
      incorporated in this Agreement and expressly made a part hereof by this
      reference.




Section
      1.3  Definitions.




All
      terms
      defined in Schedule
      I or
      otherwise in this Agreement shall, unless otherwise defined therein, have the
      same meanings when used in any other Loan Document, or any certificate or other
      document made or delivered pursuant hereto. The words "hereof", "herein", and
      "hereunder" and words of similar import when used in this Agreement shall refer
      to this Agreement as a whole.




**ARTICLE
      II**




**LOAN
      TERMS**




Section
      2.1  Disbursements.




(a)  Funding. The Loan
      shall be funded in one advance and repaid in accordance with this Agreement
      and
      the other Loan Documents. On the Closing Date, and subject to the terms,
      provisions and conditions of this Agreement (including, without limitation
      Borrower's satisfaction of the conditions to initial advance described in Schedule 2.1 attached
      hereto) and the other Loan Documents, Lender shall disburse to Borrower from
      the
      proceeds of the Loan the amount of Fifteen Million Nine Hundred Thirty Thousand
      and No/100 Dollars ($15,930,000.00) (the " **Funding
      Amount** ").




Section
      2.2  Interest
      Rate; Late Charge.




The
      outstanding principal balance of the Loan (including any amounts added to
      principal under the Loan Documents) shall bear interest at a rate of interest
      equal to six and ninety-five hundredths percent (6.95%) per annum **** (the
      " **Interest
      Rate** "). **** Interest
      shall be computed on the basis of a fraction, the denominator of which is three
      hundred sixty (360) and the numerator of which is the actual number of days
      elapsed from the date of the initial advance or the date on which the
      immediately preceding payment was due. If Borrower fails to pay any installment
      of interest or principal within five (5) days after the date on which the same
      is due, Borrower shall pay to Agent a late charge on such past-due amount,
      as
      liquidated damages and not as a penalty, equal to the greater of
      (a) interest at the Default Rate on such amount from the date when due
      until paid, and (b) five percent (5%) of such amount, but not in excess of
      the maximum amount of interest allowed by applicable law. While any Event of
      Default exists, the Loan shall bear interest at the Default Rate.




Section
      2.3  Payments.




(a)  Payments
      at Interest Rate .
      Commencing on January 1, 2006, Borrower shall pay interest in arrears on
      the first day of each month **** until
      all
      amounts due under the Loan Documents are paid in full. If the first day of
      a
      month is not a Business Day, then the




EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap
 2


applicable
      payment due hereunder shall be made on the first Business Day immediately
      following the first day of such month.




(b)  Principal
      Amortization Payments .
      Commencing on January 1, 2006, and on the first (1st) day of each month
      thereafter until the Maturity Date, Borrower shall make a monthly principal
      amortization payment in accordance with Schedule 2.3 in
      addition to the interest payments required under Section
      2.3(a) ,
      above.
      If the first day of a month is not a Business Day, then the applicable payment
      due hereunder shall be made on the first Business Day immediately following
      the
      first day of such month.




(c)  Credit
      for Payments under Master Lease .
      Agent
      acknowledges and agrees that Guarantor, in its capacity as the tenant under
      the
      Master Lease, has been directed to make its rent payments directly to Agent
      to
      be applied against the obligations of Borrower under the Loan Agreement and
      the
      other Loan Documents and that Borrower shall be deemed to have fulfilled its
      obligations under this Section
      2.3 as long
      as Agent has actually received such payments from Guarantor, in its capacity
      as
      the tenant under the Master Lease, by the date on which any payment is due
      from
      Borrower under this Section
      2.3  and such
      payments (after application to the Indebtedness as set forth in Section 2.6 herein)
      is sufficient to pay in full any amounts then due and payable under this Section 2.3 .




Section
      2.4  Maturity.




(a)  Maturity
      Date .
      The
      Loan shall mature and Borrower shall pay to Agent all outstanding principal,
      accrued and unpaid interest, and any other amounts due under the Loan Documents
      on November 30, 2012.




Section
      2.5  Prepayment.




Borrower
      may not prepay any of the outstanding principal balance of the Loan in full
      or
      in part at any time. If the Loan is accelerated for any reason other than
      casualty or condemnation, Borrower shall pay, in addition to all other amounts
      outstanding under the Loan Documents, a prepayment premium (" **Prepayment
      Premium** ")
      equal
      to one percent (1%) of the outstanding principal balance of the Loan. Defeasance
      pursuant to Section 2.9 below
      shall be available to Borrower at any time on and after December 1, 2008,
      as provided herein.




Section
      2.6  Application
      of Payments.




All
      payments received by Agent or Lender under the Loan Documents shall be applied: first ,
      to any
      fees, expenses and indemnification payments due to Agent or Lender under the
      Loan Documents; second ,
      to any
      Default Rate interest or late charges; third ,
      to
      other accrued and unpaid interest; fourth ,
      to the
      principal sum and other amounts due under the Loan Documents, and fifth to
      the **** Prepayment
      Premium.




EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap
 3


Section
      2.7  Capital
      Adequacy; Increased Costs; Illegality.




(a)  If
      Agent
      determines that any law, treaty, governmental (or quasi-governmental) rule,
      regulation, guideline or order regarding capital adequacy, reserve requirements
      or similar requirements or compliance by Lender with any request or directive
      regarding capital adequacy, reserve requirements or similar requirements
      (whether or not having the force of law), in each case, adopted after the
      Closing Date, from any central bank or other governmental authority increases
      or
      would have the effect of increasing the amount of capital, reserves or other
      funds required to be maintained by Lender and thereby reducing the rate of
      return on Lender's capital as a consequence of its obligations hereunder, then
      Borrower shall from time to time upon demand by Agent, pay to Lender, additional
      amounts sufficient to compensate Lender for such reduction. A certificate as
      to
      the amount of that reduction and showing the basis of the computation thereof
      submitted by Agent to Borrower shall, absent manifest error, be final,
      conclusive and binding for all purposes. Lender agrees that, as promptly as
      practicable after it becomes aware of any circumstances referred to above which
      would result in any such increased cost, Lender shall, to the extent not
      inconsistent with such Lender's internal policies of general application, use
      reasonable commercial efforts to minimize costs and expenses incurred by it
      and
      payable to it by Borrower pursuant to this Section
      2.7(a) .




(b)  If,
      due
      to either (i) the introduction of or any change in any law or regulation
      (or any change in the interpretation thereof) or (ii) the compliance with
      any guideline or request from any central bank or other governmental authority
      (whether or not having the force of law), in each case adopted after the Closing
      Date, there shall be any increase in the cost to Lender of agreeing to make
      or
      making, funding or maintaining the Loan, then Borrower shall from time to time,
      upon demand by Agent, pay to Lender, additional amounts sufficient to compensate
      Lender for such increased cost. A certificate as to the amount of such increased
      cost, submitted to Borrower by Agent, shall be conclusive and binding on
      Borrower for all purposes, absent manifest error. Lender agrees that, as
      promptly as practicable after it becomes aware of any circumstances referred
      to
      above which would result in any such increased cost, Lender shall, to the extent
      not inconsistent with such Lender's internal policies of general application,
      use reasonable commercial efforts to minimize costs and expenses incurred by
      it
      and payable to it by Borrower pursuant to this Section
      2.7(b) .




Section
      2.8  Sources
      and Uses.




The
      sources and uses of funds for the contemplated transaction are as described
      on Schedule
      2.8 attached
      hereto. Borrower shall deliver such information and documentation as Agent
      shall
      request to verify that the sources and uses are as indicated on Schedule
      2.8 .
      A
      reduction in the amounts necessary for any of the uses may, at Agent's election,
      shall result in an equal reduction in the amount of the Loan.




EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap
 4


Section
      2.9  Defeasance .




At
      any
      time from and after December 1, 2008, so long as no monetary default,
      material non-monetary default or Event of Default hereunder or under any of
      the
      other Loan Documents is then continuing, Borrower may obtain the release of
      the
      Projects from the lien of the Security Documents upon the satisfaction of the
      following conditions precedent (" **Defeasance** "):




(a)  not
      less
      than thirty (30) days prior written notice to Lender specifying the first day
      of
      a calendar month (or if not a Business Day, the first Business Day of such
      calendar month) (the " **Release
      Date** ")
      on
      which the Defeasance Deposit (hereinafter defined) is to be made;




(b)  the
      payment to Agent on the Release Date of interest accrued and unpaid on the
      principal balance of the Loan to and including the Release Date;




(c)  the
      payment to Agent on the Release Date of all other sums, not including scheduled
      interest or principal payments, due under the Note, the Mortgages and the other
      Loan Documents;




(d)  the
      payment to Agent on the Release Date of the Defeasance Deposit and a $2,500
      non-refundable processing fee;




(e)  the
      delivery by Borrower to Agent at Borrower's sole cost and expense
      of:




(i)  a
      security agreement in form and substance satisfactory to Lender, creating a
      first priority lien in favor of Agent on the Defeasance Deposit and the U.S.
      Obligations (hereinafter defined) purchased on behalf of Borrower with the
      Defeasance Deposit in accordance with this Section 2.9 (the
      " **Security
      Agreement** ");




(ii)  releases
      of the Projects from the lien of the Mortgages (for execution by Lender) in
      a
      form appropriate for the jurisdiction in which the Projects are located and
      otherwise acceptable to Agent;




(iii)  an
      officer's certificate of Borrower certifying that the requirements set forth
      in
      this clause (e) have been satisfied;




(iv)  an
      opinion of counsel in form and substance, and rendered by counsel, satisfactory
      to Agent, at Borrower's expense, stating, among other things, that Agent has
      a
      perfected first priority security interest in the Defeasance Deposit and the
      U.S. Obligations purchased by or on behalf of Borrower and pledged to Agent
      and
      as to enforceability of the Assignment Agreement (as hereinafter defined),
      the
      Security Agreement and other documents delivered in connection therewith, and
      if
      required by the Agent, a




EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap
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substantive
      non-consolidation opinion with respect to the Successor Borrower (as hereinafter
      defined); and




(v)  such
      other certificates, documents, opinions or instruments as Agent may reasonably
      request; and




(f)  Agent
      shall have received, at Borrower's expense, a certificate from a nationally
      or
      regionally recognized independent certified public accountant acceptable to
      Agent, in form and substance satisfactory to Lender, certifying the amount
      of
      U.S. Obligations required to be purchased with the Defeasance Deposit in order
      to generate sufficient sums to satisfy the obligations of Borrower under this
      Agreement, the Note and this Section 2.9 as and
      when such obligations become due.




In
      connection with the conditions set forth above, Borrower hereby appoints Agent
      as its agent and attorney-in-fact for the purpose of using the Defeasance
      Deposit to purchase or cause to be purchased U.S. Obligations which provide
      payments on or prior to, but as close as possible to, all successive scheduled
      Payment Dates after the Release Date upon which interest and principal payments
      are required under this Agreement and the Note, including the amounts due on
      the Maturity
      Date, and
      in
      amounts equal to the scheduled payments due on such dates under this Agreement
      and the Note plus Agent's reasonable estimate of administrative expenses and
      applicable federal income taxes associated with or to be incurred by the
      Successor Borrower during the remaining term of, and applicable to, the Loan
      (the " **Scheduled
      Defeasance Payments** ").
      Borrower, pursuant to the Security Agreement or other appropriate document,
      shall authorize and direct that the payments received from the U.S. Obligations
      may be made directly to Agent and applied to satisfy the obligations of Borrower
      under this Agreement, the Note and this Section 2.9 .




Upon
      compliance with the requirements of this Section 2.9 ,
      the
      Projects shall be released from the lien of the Security Documents and the
      pledged U.S. Obligations shall be the sole source of collateral securing the
      repayment of the Loan and the Note. Any portion of the Defeasance Deposit in
      excess of the amount necessary to purchase the U.S. Obligations required by
      the
      preceding paragraph and to otherwise satisfy the Borrower's obligations under
      this Section
      2.9 shall be
      remitted to Borrower with the release of the Projects from the lien of the
      Security Documents. In connection with such release, a successor entity meeting
      Agent's then applicable single purpose entity requirements and otherwise
      acceptable to Agent, adjusted, as applicable, for the Defeasance contemplated
      by
      this Section 2.9 (the " **Successor
      Borrower** "),
      shall
      be established by Borrower subject to Agent's approval (or at Agent's option,
      by
      Agent) and Borrower shall transfer and assign all obligations, rights and duties
      under and to the Note together with the pledged U.S. Obligations to such
      Successor Borrower pursuant to an assignment and assumption agreement in form
      and substance satisfactory to Lender (the " **Assignment
      Agreement** ").
      Such
      Successor Borrower shall assume the obligations under the Note, the Security
      Agreement and the other Loan Documents and Borrower shall be relieved of its
      obligations thereunder, except (i) that Borrower shall be required to
      perform its obligations pursuant to this Section 2.9 ,
      including maintenance of the Successor Borrower, if applicable, and
      (ii) for those obligations of Borrower which expressly survive repayment of
      the Loan. Borrower




EX-10.86.4
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shall
      pay
      $1,000.00 to any such Successor Borrower as consideration for assuming the
      obligations under the Note, the Security Agreement and the other Loan Documents
      pursuant to the Assignment Agreement. Borrower shall pay all reasonable costs
      and expenses incurred by Agent and Lender in connection with this Section 2.9 ,
      including Agent's and Lender's reasonable attorneys' fees and expenses, and
      any
      administrative and tax expenses associated with or incurred by the Successor
      Borrower, which amounts shall, as set forth above, be included when calculating
      the amount of the Defeasance Deposit.




For
      purposes of this Section 2.9 ,
      the
      following terms shall have the following meanings:




(x)  The
      term
      " **Defeasance
      Deposit** "
      shall
      mean an amount equal to the Yield Maintenance Amount, any costs and expenses
      incurred or to be incurred in the purchase of U.S. Obligations necessary to
      meet
      the Scheduled Defeasance Payments (including Lender's reasonable estimate of
      administrative expenses and applicable federal, state or local income taxes
      associated with or to be incurred by the Successor Borrower during the remaining
      term of, and applicable to, the Loan) and any revenue, documentary stamp or
      intangible taxes or any other tax or charge due in connection with the transfer
      of the Note or otherwise required to accomplish the agreements of this Section 2.9 ,
      all as
      estimated by Agent.




(y)  The
      term
      " **Yield
      Maintenance Amount** "
      shall
      mean the amount estimated by Agent which will be sufficient to purchase U.S.
      Obligations providing the required Scheduled Defeasance Payments;
      and




(z)  The
      term
      " **U** . **S** . **Obligations** "
      shall
      mean " Government
      Securities "
      as
      defined in the REMIC regulations, specifically, Treasury Regulation
§ 1.860G-2(a)(8)(i), as chosen by Lender.




Section
      2.10  Security.




(a)  Collateral .
      The
      Loan and all other indebtedness and obligations under the Loan Documents shall
      be secured by the following (collectively, the " **Collateral** "):
      (a)
      the mortgaged property and other collateral as set forth in the Security
      Documents, (b) a first priority security interest in all of the membership
      interests in Borrower pledged by all members of Borrower, (c) a first
      priority security interest in all of Guarantor's personal property related
      to
      the Projects pledged by Guarantor under the Subordination, Attornment and
      Security Agreement, and (d) any other collateral or security described in
      this Agreement or the other Loan Documents.




**ARTICLE
      III**




**INSURANCE,
      CONDEMNATION, AND IMPOUNDS**




Section
      3.1  Insurance .




Borrower
      shall maintain insurance as follows:




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(a)  Property .
      Borrower shall (or shall cause Guarantor to) keep the Projects insured against
      damage by fire and the other hazards covered by a standard extended coverage
      and
      "special perils" insurance policy (including a separate policy for broad form
      boiler and machinery coverage (without exclusion for explosion)) for the full
      insurable value thereof the term "full insurable value" to mean the actual
      replacement cost of the improvements and the personal property (without taking
      into account depreciation or co-insurance), and shall maintain such other
      casualty insurance as reasonably required by Agent, including, without
      limitation, ordinance or law coverage, in amounts and in form and with
      carrier(s) approved by Agent as of the Closing Date which carrier(s), amounts
      and form shall not be changed without the prior written consent of Agent.
      Borrower shall keep the Projects insured against loss by flood if any Project
      is
      located in an area identified by the Federal Emergency Management Agency as
      an
      area having special flood hazards and in which flood insurance has been made
      available under the National Flood Insurance Act of 1968, the Flood Disaster
      Protection Act of 1973 and the National Flood Insurance Reform Act of 1994
      (and
      any successor acts thereto) in an amount at least equal to the amount approved
      by Agent as of the Closing Date. The proceeds of insurance paid on account
      of
      any damage or destruction to any Project shall be paid to Agent to be applied
      as
      provided in Section 3.2 . Notwithstanding anything contained in this Agreement to the contrary and without
      limitation of any of the provisions contained in this Article III, Borrower
      shall at all times on and after January 1, 2006 maintain ordinance or law
      coverage in amount equal to the full replacement cost of the Projects and
      otherwise in form and substance and with carriers approved by Agent in Agent's
      reasonable discretion.




(b)  Liability .
      Borrower shall maintain or shall cause Guarantor to maintain (a) commercial
      general liability insurance with respect to the Projects; (b) worker's
      compensation insurance and employer's liability insurance covering employees
      at
      the Projects employed by Guarantor (to the extent required, and in the amounts
      required by applicable laws); (c) business interruption insurance,
      including use and occupancy, rental income loss and extra expense, against
      all
      periods covered by Borrower's property insurance; (f) Umbrella liability,
      (g) builder's risk insurance, as applicable, (h) professional
      liability insurance, and (g) Terrorism insurance (subject to the
      requirements of this Section 3.1(a) ).
      All of
      the above shall be maintained at all times during the term of the Loan with
      coverages, in the amounts and forms and with limits and carrier(s) approved
      by
      Agent as of the Closing Date which carrier(s), amounts, limits and form shall
      not be changed or reduced without the prior written consent of Agent. Without
      limiting the foregoing and notwithstanding anything to the contrary contained
      in
      this Agreement, if on the Closing Date, terrorism, terrorist acts or similar
      perils (collectively, " **Terrorism** ")
      is an
      exclusion from coverage in any such insurance policy, or, if Terrorism is an
      exclusion from coverage in any such insurance policy, then Borrower shall,
      upon
      Agent's request, obtain a separate policy insuring specifically against
      Terrorism.




(c)  Other
      Insurance .
      Borrower shall maintain or shall cause Guarantor to maintain such other
      insurance with respect to the Projects as reasonably required by
      Agent.




(d)  Form
      and Quality .
      All
      insurance policies shall be endorsed in form and substance acceptable to Agent
      to name Agent as an additional insured, loss payee or




EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap
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mortgagee
      thereunder, as its interest may appear, with loss payable to Agent, without
      contribution, under a standard New York (or local equivalent) mortgagee clause.
      All such insurance policies and endorsements shall be fully paid for and contain
      such provisions and expiration dates and be in such form and issued by such
      insurance companies licensed to do business in the State where the Projects
      are
      located, with a rating of "A-IX" or better as established by Best's Rating
      Guide
      (or an equivalent rating approved in writing by Agent). Each policy shall
      provide that such policy may not be cancelled or materially changed except
      upon
      thirty (30) days' prior written notice of intention of non-renewal, cancellation
      or material change to Agent and that no act or thing done by Borrower shall
      invalidate any policy as against Agent. Borrower shall assign the policies
      or
      proofs of insurance to Agent, in such manner and form that Agent and its
      successors and assigns shall at all times have and hold the same as security
      for
      the payment of the Loan. Borrower shall deliver certificates of insurance to
      Agent evidencing the coverages required hereunder. The proceeds of insurance
      policies coming into the possession of Agent shall not be deemed trust funds,
      and Agent shall be entitled to apply such proceeds as herein provided. Borrower
      shall not maintain any separate or additional property insurance which is
      contributing in the event of loss unless it is properly endorsed and otherwise
      satisfactory to Agent in all respects.




(e)  Adjustments .
      Borrower shall give immediate written notice of any loss to the insurance
      carrier and, if such loss is reasonably expected by Borrower to exceed the
      deductible or if such loss is reasonably likely to result in a material adverse
      change, to Agent. Borrower hereby irrevocably authorizes and empowers Agent,
      as
      attorney-in-fact for Borrower coupled with an interest, to make proof of loss,
      to adjust and compromise any claim under insurance policies, to appear in and
      prosecute any action arising from such insurance policies, to collect and
      receive insurance proceeds, and to deduct therefrom Agent's expenses incurred
      in
      the collection of such proceeds. Nothing contained in this Section 3.1 ,
      however, shall require Agent to incur any expense or take any action
      hereunder.




(f)  Agent's
      Right to Purchase Insurance .
      In the
      event Borrower fails to provide Agent with evidence of the insurance coverage
      required by this Agreement, Agent may purchase insurance at Borrower's expense
      to protect Agent's interests in the Projects. This insurance may, but need
      not,
      protect Borrower's interests. The coverage purchased by Agent may not pay any
      claim made by Borrower or any claim that is made against Borrower in connection
      with the Projects. Borrower, or Agent at Borrower's request, may later cancel
      any insurance purchased by Agent, but only after providing Agent with evidence
      that Borrower has obtained insurance as required by this Agreement. If Agent
      purchases insurance for the Projects, Borrower will be responsible for the
      costs
      of that insurance, including interest and other charges imposed by Agent in
      connection with the placement of the insurance, until the effective date of
      the
      cancellation or expiration of the insurance. The costs of the insurance may
      be
      added to the outstanding principal balance of the Loan if not paid by Borrower
      within ten (10) days after receipt of a written demand for payment from Lender
      accompanied by an invoice or other reasonably supporting documentation. The
      costs of the insurance may be more than the cost of insurance Borrower is able
      to obtain on its own.




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          Loan Agreemnt Arizona Properties & GE Cap
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(g)  Borrower has
      advised Agent and Lender that, to
      the
      limited extent described on Schedule
      3.1 ,
      it is
      not in compliance as of the Effective Date with certain requirements set forth
      in Section 3.1 .
      Borrower nonetheless represents and warrants to Agent and Lender that the
      policies of insurance (including the deductible or self-insured retention
      provisions thereof) and risk management programs that Borrower and Guarantor
      have in effect as of the date hereof are, and as may be in effect at any time
      prior to the Maturity Date will be, consistent with custom, practice and prudent
      management standards in the business and industry in which Borrower and
      Guarantor are engaged. As and when insurance meeting the requirements set forth
      in Section 3.1 (to the
      extent Borrower is not in compliance with such requirements as provided in Schedule 3.1 )
      becomes
      generally available to operators of assisted living facilities owned by
      institutional operators and similar to the Facility at commercially reasonable
      rates, as determined by Agent in its reasonable judgment, Borrower shall
      purchase and maintain or shall cause Guarantor to purchase and maintain such
      insurance. Borrower's non-compliance with the requirements of Section 3.1, as
      set
      forth in Schedule
      3.1 ,
      shall
      not give rise to an Event of Default so long as (i) no other Event of
      Default then exists, (ii) such non-compliance is limited to the matters
      described on Schedule 3.1 ,
      as it
      may be amended from time to time prior to the Maturity Date with the consent
      of
      Agent and Lender in their sole discretion, (iii) the representations and
      warranties set forth in this Section 3.1(g) remain
      true, correct and complete in all respects, and (iv) Borrower is in
      compliance with the other covenants contained in this Section 3.1 .
      Notwithstanding anything to the contrary set forth herein, if any insurance
      provided by Borrower or Guarantor in accordance with Schedule
      3.1 provides
      for coverage on a "claims-made" basis, every **** "claims
      made" renewal or replacement policy shall continue to show the first date of
      claims made coverage as of the date of execution of this Loan Agreement, or
      a
      date prior hereto, as its prior acts/retroactive or continuity date.
      Furthermore, if any "claims made" policy is cancelled or non-renewed, and not
      replaced by an "occurrence" policy with "full prior acts", Borrower will
      purchase or will cause Guarantor to purchase an "Extended Reporting Provision
      Option" (i.e., tail coverage), for a term
      equal to the then remaining term of the Loan, and if any "claims made" policy
      is
      subsequently replaced by an "occurrence" policy, Borrower agrees that said
      "occurrence" policy will contain a "full prior acts" provision.




Section
      3.2  Use
      and
      Application of Insurance Proceeds.




Agent
      shall apply insurance proceeds to costs of restoring the Projects or the Loan
      as
      follows:




(a)  if
      a loss
      is less than or equal to twenty five percent (25%) of the Allocated Loan Amount
      shown on Schedule 3.2 ,
      Agent
      shall apply the insurance proceeds to restoration provided that: (a) no
      Potential Default exists, and (b) Borrower promptly commences and
      diligently pursues restoration of the affected Project;




(b)  if
      the
      loss exceeds twenty-five percent (25%) of the Allocated Loan Amount, but is
      not
      more than twenty-five percent (25%) of the replacement value of the affected
      improvements (for projects containing multiple phases or stand alone structures,
      such calculation to be based on the damaged phase or structure, not the affected
      Project or




EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap
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Projects
      as a whole), Agent shall apply the insurance proceeds to restoration provided
      that at all times during such restoration: (a) no monetary default or
      non-monetary default or Event of Default exists hereunder or under any of the
      other Loan Documents; (b) Agent determines that there are sufficient funds
      available to restore and repair the affected Project to a condition approved
      by
      Agent; (c) Agent determines that the Net Operating Income of the Projects
      during restoration plus the
      collectible proceeds of business interruption insurance plus any amounts
      specifically reserved by Guarantor for the sole purpose of funding the
      restoration will be sufficient to pay Debt Service as of the first measuring
      period occurring after the anticipated date of completion of restoration the
      Borrower will be able to satisfy the financial covenants set forth in Sections 7.26(a) and (b) ;
      (e) Agent determines that restoration and repair of the affected Project to
      a condition approved by Agent will be completed within nine (9) months after
      the
      date of loss or casualty and in any event ninety (90) days prior to the Maturity
      Date; and (f) Borrower promptly commences and is diligently pursuing
      restoration of the affected Project; or




(c)  if
      the
      conditions set forth above are not satisfied or the loss exceeds the maximum
      amount specified in Subsections (b) above, in Agent's sole discretion,
      Agent may apply any insurance proceeds it may receive to the payment of the
      Loan
      or allow all or a portion of such proceeds to be used for the restoration of
      the
      affected Project.




Insurance
      proceeds applied to restoration will be disbursed on receipt of satisfactory
      plans and specifications, contracts and subcontracts, schedules, budgets, lien
      waivers and architects' certificates, and otherwise in accordance with prudent
      commercial construction lending practices for construction loan advances,
      including, as applicable, the advance conditions under Part C of Schedule
      2.1 with
      respect to disbursement of insurance proceeds.




Section
      3.3  Condemnation
      Awards.




Borrower
      shall immediately notify Agent of the institution of any proceeding for the
      condemnation or other taking of any Project or any portion thereof. Agent may
      participate in any such proceeding and Borrower will deliver to Agent all
      instruments necessary or required by Agent to permit such participation. Where
      the amount of the compensation or award is anticipated to be in excess of
      $25,000 (the " **Award
      Threshold** ")
      Borrower shall not, without Agent's prior consent, (a) agree to any
      compensation or award, and (b) take any action or fail to take any action
      which would cause the compensation to be determined. All awards and compensation
      for the taking or purchase in lieu of condemnation of the Projects or any part
      thereof are hereby assigned to Agent as security for the obligations of Borrower
      under this Agreement, all such awards and compensation below the Award Threshold
      may be paid directly to Borrower so long as no Event of Default exists and
      restoration or repair and the continued operation of the applicable Property
      is
      economically feasible (and the condemnation or other taking did not affect
      in
      any way the Improvements) and all such awards and compensation in excess of
      the
      Award Threshold shall be paid to Agent. Borrower authorizes Agent to collect
      and
      receive such awards and compensation in excess of the Award Threshold to give
      proper receipts and acquittances therefor, and in Agent's sole discretion,
      (a)
      to apply the same (after deduction of Lender's reasonable costs and expenses,
      if
      any in collecting the same) toward the payment of the Loan in such order




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          Loan Agreemnt Arizona Properties & GE Cap
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and
      manner as Agent may elect, notwithstanding that the Loan may not then be due
      and
      payable, or (b) to make the same available to Borrower for the restoration
      or repair of the affected Project. If the net proceeds of the condemnation
      award
      are made available to Borrower for restoration or repair, such proceeds shall
      be
      disbursed upon satisfaction of and in accordance with the terms and conditions
      set forth in Section
      3.2 .
      Borrower, upon request by Agent, shall execute all instruments requested to
      confirm the assignment of the awards and compensation to Agent, free and clear
      of all liens, charges or encumbrances.




Section
      3.4  Reserved.




Section
      3.5  Real
      Estate Tax Impounds.




At
      the
      time of and in addition to the monthly installment of interest, and if
      applicable, principal due under the Note and this Loan Agreement, Borrower
      shall
      deposit with Agent or Agent's designee, monthly, a sum of money (the
      " **Tax
      Impound** ")
      equal
      to one-twelfth (1/12th) of the annual charges for real estate taxes,
      assessments, and impositions relating to the Projects (collectively, the
      " **Taxes** ").
      At or
      before the initial advance of the Loan, Borrower shall deposit with Agent or
      Agent's designee a sum of money which together with the monthly installments
      will be sufficient to make each of such payments thirty (30) days prior to
      the
      date any delinquency or penalty becomes due with respect to such payments and
      maintain a reserve equal to approximately one-sixth (1/6 th )
      of the
      annual taxes, assessments and charges in Agent's sole but reasonable estimation.
      Deposits shall be made on the basis of Agent's estimate from time to time of
      the
      charges for the current year (after giving effect to any reassessment or, at
      Agent's election, on the basis of the charges for the prior year, with
      adjustments when the charges are fixed for the then current year). All funds
      so
      deposited shall be held by Agent or Agent's designee. These sums may be
      commingled with Agent or Agent's designee's general funds and shall not be
      deemed to be held in trust for the benefit of Borrower. So long as no Event
      of
      Default exists hereunder, Agent shall credit for Borrower's account interest
      on
      such funds held by Agent or Agent's designee from time to time at the Money
      Market Rate. All interest paid on such funds shall be deemed to be a part of
      the
      Tax Impound and shall be applied in accordance with this Section
      3.5 .
      Borrower hereby grants to Agent for the benefit of Lender and Agent a security
      interest in all funds so deposited with Agent or Agent's designee for the
      purpose of securing the Loan. While an Event of Default exists, the funds
      deposited may be applied in payment of the Taxes or to the payment of the Loan
      or any other charges affecting the security of Agent, as Agent may elect, but
      no
      such application shall be deemed to have been made by operation of law or
      otherwise until actually made by Agent. Borrower shall furnish, or cause to
      be
      furnished, to Agent bills for the Taxes at least thirty (30) days prior to
      the
      date on which the Taxes first become payable. If at any time the amount on
      deposit with Agent or Agent's designee, together with amounts to be deposited
      by
      Borrower before Taxes are payable, is insufficient to pay such Taxes and
      maintain a reserve equal to approximately one-sixth (1/6 th )
      of the
      Taxes, Borrower shall deposit any deficiency with Agent or Agent's designee
      immediately upon demand. Agent shall pay such Taxes when the amount on deposit
      with Agent or Agent's designee is sufficient to pay such charges and maintain
      such reserve and Agent has received a bill for such charges. The obligation
      of
      Borrower to pay the Taxes, as set forth in the Security Documents, is not
      affected or modified by the provisions of this paragraph but




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          Loan Agreemnt Arizona Properties & GE Cap
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shall
      be
      deemed satisfied if the same are paid by Agent or Agent's designee pursuant
      to
      the provisions of this paragraph.




**ARTICLE
      IV**




**LEASING
      MATTERS**




Section
      4.1  Representations
      and Warranties on Leases.




(a)  Borrower
      represents and warrants to Agent with respect to Leases of the Projects
      that **,** to
      its
      knowledge: (i) the occupancy certificate separately delivered to Agent at
      or prior to Closing, if any, is true and correct as of the date hereof, and
      the
      Leases are valid and in and full force and effect; (ii) the Leases
      (including amendments) are in writing, and there are no oral agreements with
      respect thereto; (iii) the copies of the Leases delivered to Agent are true
      and complete; (iv) neither the landlord nor any tenant is in default under
      any of the non-residential Leases; (v) Borrower has no knowledge of any
      notice of termination or default with respect to any non-residential Lease;
      (vi) Borrower has not assigned or pledged any of the Leases, the rents or
      any interests therein, except to Agent; (vii) no non-residential tenant or
      other party has an option to purchase all or any portion of any Project;
      (viii) no tenant has the right to terminate its Lease prior to expiration
      of the stated term of such Lease (unless due to casualty or condemnation of
      the
      Project); and (ix) except for the prepayment of rent made by Audrey Kozis
      as shown on the rent roll, no tenant has prepaid more than one month's rent
      in
      advance (except for bona fide security deposits not in excess of an amount
      equal
      to two month's rent).




(b)  The
      Projects shall at all times be master leased to Guarantor pursuant to the Master
      Lease. The Master Lease shall, at all times during the term of the Loan, be
      subordinated to the lien of the Mortgages pursuant to the terms of the
      Subordination, Attornment and Security Agreement.




Section
      4.2  Approval
      Rights.




(a)  Borrower
      shall not and shall not permit Guarantor to, without Agent's prior written
      consent, enter into or amend (in any material respect) any Lease or other rental
      or occupancy agreement or concession agreement with respect to the Projects
      except as expressly permitted hereunder.




(b)  Borrower
      shall have the right to enter into or to permit Guarantor to amend and/or modify
      non-residential Leases without Agent's consent provided (i) the economic terms
      of the Lease conform to those of the market, (ii) the form of the
      non-residential Lease is that of the standard lease form approved by Agent,
      with
      no material modifications, (iii) the initial term is not longer than one (1)
      year or if longer such Lease shall be terminable by Guarantor as landlord upon
      not greater than 30 days prior written notice to the applicable tenant, and
      (iv) such Lease is not a Material Non-Residential Lease.




(c)  Borrower
      and Guarantor shall have the right to enter into or amend any residential Lease
      which has a term of no more than one (1) month and all such residential




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Leases
      shall be at market rates on the form previously approved by Agent without any
      material modifications.




Section
      4.3  Covenants.




Borrower
      shall or shall cause Guarantor to: (a)  perform the obligations which
      Borrower or Guarantor is required to perform under the Leases; (b) enforce
      the material obligations to be performed by the tenants under the Leases;
      (c) promptly furnish to Agent any notice of default or termination received
      by Borrower or Guarantor from any non-residential tenant, and any notice of
      default or termination given by Borrower or Guarantor to any non-residential
      tenant; (d) not collect any rents for more than one month in advance of the
      time when the same shall become due, except for bona fide security deposits
      not
      in excess of an amount equal to two months rent; (e) not enter into any
      ground lease or master lease of any part of any Project other than the Master
      Lease; (f) not further assign or encumber any Lease; (g) not, except
      with Agent's prior written consent, cancel or accept surrender or termination
      of
      any Material Non-Residential Lease; and (h) not, except with Agent's prior
      written consent, modify or amend any Material Non-Residential Lease, and any
      action in violation of clauses (e), (f), (g), and (h) of this Section 4.3 shall be
      void at the election of Agent. Borrower will not suffer or permit any breach
      or
      default to occur in any of Borrower's or Guarantor's obligations under any
      of
      the Leases nor suffer or permit the same to terminate by reason of any failure
      of Borrower to meet any requirement of any Lease.




Section
      4.4  Tenant
      Estoppels.




At
      Agent's request, Borrower shall obtain and furnish to Agent, written estoppels
      in form and substance satisfactory to Agent, executed by non-residential tenants
      under Leases in the Projects and confirming the term, rent, and other provisions
      and matters relating to the non-residential Leases.




Section
      4.5  Security
      Deposits




Neither
      Borrower nor Guarantor has collected or is in receipt of any security deposit
      from any tenant of any Project, except as described on the occupancy summary
      previously provided to Agent at or prior to closing. All resident trust funds
      shall be held in separate personal allowance funds (not commingled) for the
      sole
      use of the applicable resident, and such funds shall be recorded on each
      Facility's financial records as independent accounts.




**ARTICLE
      V**




**REPRESENTATIONS
      AND WARRANTIES**




Borrower
      represents and warrants to Agent that:




Section
      5.1  Organization
      and Power.




Each
      of
      Borrower and Guarantor is duly organized, validly existing and in good standing
      under the laws of the state of its formation or existence, and is in compliance




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with
      legal requirements applicable to doing business in the state of its formation.
      Each of Borrower and Guarantor is in good standing under the laws of and is
      in
      compliance with legal requirements applicable to doing business in the state
      where each Project is located. Borrower is not a "foreign person" within the
      meaning of § 1445(f)(3) of the Internal Revenue Code.




Section
      5.2  Guarantor .




(a)  Guarantor's
      principal place of business is at 3131 Elliott Avenue, Suite 500, Seattle,
      Washington 98121. Guarantor is the sole member of Borrower and owns one hundred
      percent (100%) of the membership interests in Borrower free and clear of all
      liens, claims, and encumbrances. Guarantor has full right, power and authority
      to execute the Loan Documents on its own behalf and on behalf of
      Borrower.




(b)  Authority/Baty .
      Guarantor shall have authority to make all material business decisions
      (including a sale or refinance) for Borrower during the term of the Loan. Daniel
      Baty is the chairman of the board of directors of Guarantor.




Section
      5.3  Borrower's Operating
      Agreement.




A
      true
      and complete copy of the operating agreement creating Borrower and any and
      all
      amendments thereto (collectively, the " **Operating
      Agreement** ")
      has
      been furnished to Agent. The Operating Agreement constitutes the entire
      agreement among the members of Borrower and is binding upon and enforceable
      against each of the members in accordance with its terms. There are no other
      agreements, oral or written, among any of the members relating to Borrower.
      No
      breach exists under the Operating Agreement and no condition exists which,
      with
      the giving of notice or the passage of time would constitute a breach under
      the
      Operating Agreement.




Section
      5.4  Corporate
      Documents .




A
      true
      and complete copy of the articles of incorporation and by-laws of Guarantor
      (collectively, the " **Incorporation
      Documents** ")
      have
      been furnished to Agent. The Incorporation Documents were duly executed and
      delivered, are in full force and effect, and binding upon and enforceable in
      accordance with their terms.




Section
      5.5  Validity
      of Loan Documents.




The
      execution, delivery and performance by Borrower and Guarantor of the Loan
      Documents to which it or they are a party: (a) are duly authorized and do
      not require the consent or approval of any other party or governmental authority
      which has not been obtained; and (b) will not violate any law or result in
      the imposition of any lien, charge or encumbrance upon the assets of any such
      party, except as contemplated by the Loan Documents. The Loan Documents
      constitute the legal, valid and binding obligations of Borrower and Guarantor,
      enforceable in accordance with their respective terms, subject to applicable
      bankruptcy, insolvency, or similar laws generally affecting the enforcement
      of
      creditors' rights.




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Section
      5.6  Liabilities;
      Litigation.




(a)  The
      financial statements delivered by Borrower and Guarantor are true and correct
      with no significant change since the date of preparation. Except as disclosed
      in
      such financial statements, there are no liabilities (fixed or contingent)
      affecting the Projects, Borrower or Guarantor. Except as disclosed in such
      financial statements, there is no litigation, administrative proceeding,
      investigation or other legal action (including any proceeding under any state
      or
      federal bankruptcy or insolvency law) pending or, to the knowledge of Borrower,
      threatened, against the Projects, Borrower or Guarantor which if adversely
      determined would reasonably be expected to have a material adverse effect on
      such party, the Projects or the Loan.




(b)  Neither
      Borrower nor Guarantor is contemplating either the filing of a petition by
      it
      under state or federal bankruptcy or insolvency laws or the liquidation of
      all
      or a major portion of its assets or property, and neither Borrower nor Guarantor
      has knowledge of any Person contemplating the filing of any such petition
      against it.




Section
      5.7  Taxes
      and Assessments.




There
      are
      no unpaid or outstanding real estate or other taxes or assessments on or against
      the Projects or any part thereof, except general real estate taxes not due
      or
      payable. Copies of the current general real estate tax bills with respect to
      the
      Projects have been delivered to Agent. The Projects are comprised of one or
      more
      parcels, each of which constitutes a separate tax lot and none of which
      constitutes a portion of any other tax lot. Except as disclosed in the Title
      Policy, there are no pending or, to Borrower's best knowledge, proposed, special
      or other assessments for public improvements or otherwise affecting the
      Projects, nor are there any contemplated improvements to the Projects that
      may
      result in such special or other assessments.




Section
      5.8  Other
      Agreements; Defaults.




Except
      with respect to the Ofczarzak Judgment, which judgment is currently under
      appeal, neither the Borrower nor Guarantor is a party to any agreement or
      instrument or subject to any court order, injunction, permit, or restriction
      which would reasonably be expected to adversely affect the Projects or the
      business, operations, or condition (financial or otherwise) of Borrower or
      Guarantor. Neither Borrower nor Guarantor is in violation of any agreement
      which
      violation would reasonably be expected to have a material adverse effect on
      the
      Projects, Borrower, or Guarantor or Borrower's or Guarantor's business,
      properties, or assets, operations or condition, financial or
      otherwise.




Section
      5.9  Compliance
      with Law.




Borrower
      has all requisite licenses, permits, franchises, qualifications, certificates
      of
      occupancy or other governmental authorizations to own, and Guarantor has all
      requisite licenses, permits, franchises, qualifications, certificates of
      occupancy or other governmental authorizations to lease and operate, the
      Projects and carry on its business, and




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the
      Projects are in compliance with all applicable legal requirements and, to the
      best of Borrower's knowledge, are free of structural defects, and all building
      systems contained therein are in good working order, subject to ordinary wear
      and tear. Except for the Project located in Russellville, Arkansas which Project
      constitutes a legal non-conforming use, no Project constitutes, in whole or
      in
      part, a legally non-conforming use under applicable legal
      requirements.




Section
      5.10  Condemnation.




No
      condemnation has been commenced or, to Borrower's knowledge, is contemplated
      with respect to all or any portion of any Project or for the relocation of
      roadways providing access to any Project.




Section
      5.11  Access.




The
      Projects have adequate rights of access to public ways and are served by
      adequate water, sewer, sanitary sewer and storm drain facilities. All public
      utilities necessary or convenient to the full use and enjoyment of the Projects
      are located in the public right-of-way abutting the Projects, and all such
      utilities are connected so as to serve the Projects without passing over other
      property, except to the extent such other property is subject to a perpetual
      easement for such utility benefiting the applicable Project. All roads necessary
      for the full utilization of the Projects for their current purpose have been
      completed and dedicated to public use and accepted by all governmental
      authorities.




Section
      5.12  Flood
      Hazard.




No
      Project is situated in an area designated as having special flood hazards as
      defined by the Flood Disaster Protection Act of 1973, as amended, or as a
      wetlands by any governmental entity having jurisdiction over the
      Projects.




Section
      5.13  Property.




A
      fee
      interest in the Projects is, or contemporaneously with the initial funding
      of
      the Loan will be, owned by Borrower free and clear of all liens, claims,
      encumbrances, covenants, conditions and restrictions, security interests and
      claims of others, except only such exceptions to title as have been approved
      by
      Agent. To the best of Borrower's knowledge, the Projects are in compliance
      with
      all zoning requirements, building codes, subdivision improvement agreements,
      declarations, ground leases, and all covenants, conditions and restrictions
      of
      record. Except as set forth in the exceptions to title approved by Agent, the
      zoning and subdivision approval of the Projects and the right and ability to,
      use or operate the Projects are not in any way dependent on or related to any
      real estate other than the Properties where the same are to be made. Except
      as
      previously disclosed to Agent in writing, to the best of Borrower's knowledge,
      as of the date hereof, (i) there are no, nor are there any alleged or asserted,
      violations of law, regulations, ordinances, codes, permits, licenses,
      declarations, ground leases, covenants, conditions, or restrictions of record,
      or other agreements relating to the Projects, or any part thereof, (ii) the
      Projects are in good condition




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and
      repair with no deferred maintenance and are free from damage caused by fire
      or
      other casualty, (iii) there is no latent or patent structural or other
      significant defect or deficiency in the Projects, (iv) design and as-built
      conditions of the Projects are such that no drainage or surface or other water
      will drain across or rest upon either the Projects or land of others except
      in
      areas designated for such purpose and for which a benefiting or burdening
      easement has been established, and (v) none of the Improvements on the Projects
      create an encroachment over, across or upon any of the Projects' boundary lines,
      rights of way or easements, and no buildings or other improvements on adjoining
      land create such an encroachment.




Section
      5.14  Location
      of Borrower.




Borrower's
      principal place of business and chief executive offices are located at the
      address stated in Section 11.1 .




Section
      5.15  Margin
      Stock.




No
      part
      of proceeds of the Loan will be used for purchasing or acquiring any "margin
      stock" within the meaning of Regulations T, U or X of the Board of Governors
      of
      the Federal Reserve System.




Section
      5.16  Tax
      Filings.




Borrower
      and Guarantor have filed (or have obtained effective extensions for filing)
      all
      federal, state and local tax returns required to be filed and have paid or
      made
      adequate provision for the payment of all federal, state and local taxes,
      charges and assessments payable by Borrower and Guarantor,
      respectively.




Section
      5.17  Solvency.




After
      giving effect to the Loan, the fair saleable value of Borrower's assets exceeds
      and will, immediately following the making of the Loan, exceed Borrower's total
      liabilities, including, without limitation, subordinated, unliquidated, disputed
      and contingent liabilities. The fair saleable value of Borrower's assets is
      and
      will, immediately following the making of the Loan, be greater than Borrower's
      probable liabilities, including the maximum amount of its contingent liabilities
      on its Debts as such Debts become absolute and matured. Borrower's assets do
      not
      constitute and, immediately following the making of the Loan will not
      constitute, unreasonably small capital to carry out its business as conducted
      or
      as proposed to be conducted. Borrower does not intend to, nor believes that
      it
      will, incur Debts and liabilities (including contingent liabilities and other
      commitments) beyond its ability to pay such Debts as they mature (taking into
      account the timing and amounts of cash to be received by Borrower and the
      amounts to be payable on or in respect of obligations of such
      Borrower).




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Section
      5.18  Full
      and Accurate Disclosure.




No
      statement of fact made by or on behalf of Borrower or Guarantor in this
      Agreement or in any of the other Loan Documents contains any untrue statement
      of
      a material fact or omits to state any material fact necessary to make statements
      contained herein or therein not misleading. There is no fact presently known
      to
      Borrower which has not been disclosed to Agent which adversely affects, nor
      as
      far as Borrower can reasonably foresee, would reasonably be expected to
      adversely affect, the Projects or the business, operations or condition
      (financial or otherwise) of Borrower or Guarantor.




Section
      5.19  Single
      Purpose Entity.




Borrower
      is and has at all times since its formation been a Single Purpose
      Entity.




Section
      5.20  No
      Broker .




No
      brokerage commission or finder's fee is owing to any broker or finder arising
      out of any actions or activity of Borrower in connection with the
      Loan.




Section
      5.21  Reserved.




Section
      5.22  Labor
      Disputes.




To
      the
      best of Borrower's knowledge, there are no strikes, boycotts, or labor disputes
      pending which would reasonably be expected to have a material adverse effect
      on
      the operation of the Projects.




Section
      5.23  Employees.




Borrower
      has no employees **.**




Section
      5.24  ERISA
      (Borrower) .




Borrower
      is not an "employee benefit plan" as defined in Section 3(3) of ERISA, or a
      "governmental plan" within the meaning of Section 3(32) of ERISA;
      (b) Borrower is not subject to state statutes regulating investments and
      fiduciary obligations with respect to governmental plans; (c) the assets of
      Borrower do not constitute "plan assets" of one or more plans within the meaning
      of 29 C.F.R. Section 2510.3-101; and (d) one or more of the following
      circumstances is true: (i) Equity interests in Borrower are publicly offered
      securities, within the meaning of 29 C.F.R. Section 2510.3-101(b)(2) or are
      securities issued by an investment company registered under the Investment
      Company Act of 1940; (ii) Less than twenty-five percent (25%) of the value
      of
      any class of equity interests in Borrower are held by "benefit plan investors"
      within the meaning of 29 C.F.R. Section 2510.3-101(f)(2); or (iii) Borrower
      qualifies as an "operating company", a "venture capital operating company",
      or a
      "real estate operating company" within the meaning of 29 C.F.R. Section
      2510.3-101(c), (d) or (e). Borrower shall deliver to Agent such certifications
      and/or other




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evidence
      periodically requested by Agent, in its reasonable discretion, to verify these
      representations and warranties. Failure to deliver these certifications or
      evidence, breach of these representations and warranties, or consummation of
      any
      transaction which would cause the Loan Documents or any exercise of Agent's
      or
      Lender's rights under the Loan Documents to (1) constitute a non-exempt
      prohibited transaction under ERISA or (2) violate ERISA or any state statute
      regulating governmental plans (collectively, a " **Violation** "),
      which
      failure continues for thirty (30) days after written notice, shall be an Event
      of Default. Notwithstanding anything in the Loan Documents to the contrary,
      no
      sale, assignment, or transfer of any direct or indirect right, title, or
      interest in Borrower or the Projects (including creation of a junior lien,
      encumbrance or leasehold interest) shall be permitted which would negate
      Borrower's representations in this section or cause a Violation. At least
      fifteen (15) days before consummation of any of the foregoing, Borrower shall
      obtain from the proposed transferee or lienholder (1) a certification to Agent
      that the representations and warranties of this subparagraph will be true after
      consummation and (2) an agreement to comply with this section.




Section
      5.25  Intellectual
      Property.




Except
      as
      set forth on Exhibit C ,
      Borrower has no interest in any trademarks, copyrights, patents or other
      intellectual property with respect to the Projects.




Section
      5.26  Anti-Terrorism
      and Anti-Money Laundering Compliance.




(a)  Compliance
      with Anti-Terrorism Laws .
      Borrower represents and warrants to Agent that it is not, and, after making
      due
      inquiry, that no Person who owns a controlling interest in or otherwise controls
      Borrower is, (i) listed on the Specially Designated Nationals and Blocked
      Persons List (the " **SDN
      List** ")
      maintained by the Office of Foreign Assets Control (" **OFAC** "),
      Department of the Treasury, and/or on any other similar list (" **Other
      Lists** "
      and,
      collectively with the SDN List, the " **Lists** ")
      maintained by the OFAC pursuant to any authorizing statute, Executive Order
      or
      regulation (collectively, " **OFAC
      Laws and Regulations** ");
      or
      (ii) a Person (a " **Designated
      Person** ")
      either
      (A) included within the term "designated national" as defined in the Cuban
      Assets Control Regulations, 31 C.F.R. Part 515, or (B) designated under
      Sections 1(a), 1(b), 1(c) or 1(d) of Executive Order No. 13224, 66 Fed. Reg.
      49079 (published September 25, 2001) or similarly designated under any related
      enabling legislation or any other similar Executive Orders (collectively, the
      " **Executive
      Orders** "). **** The
      OFAC
      Laws and Regulations and the Executive Orders are collectively referred to
      in
      this Amendment as the " **Anti-Terrorism
      Laws** ".
      Borrower represents and warrants that it requires, and has taken reasonable
      measures to ensure compliance with the requirement, that no Person who owns
      any
      other direct interest in Borrower is or shall be listed on any of the Lists
      or
      is or shall be a Designated Person.




(b)  Funds
      Invested in Borrower .
      Borrower represents and warrants that it has taken reasonable measures
      appropriate to the circumstances (and in any event as required by law), with
      respect to each holder of a direct or indirect interest in Borrower, to assure
      that funds invested by such holders in Borrower are derived from legal sources
      (" **Anti-Money
      Laundering Measures** "). **** The
      Anti-Money Laundering Measures have been undertaken in




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accordance
      with the Bank Secrecy Act, 31 U.S.C. §§ 5311 *et
      seq.* (" **BSA** "),
      and
      all applicable laws, regulations and government guidance on BSA compliance
      and
      on the prevention and detection of money laundering violations under 18 U.S.C.
      §§ 1956 and 1957 (collectively with the BSA, " **Anti-Money
      Laundering Laws** ").




(c)  No
      Violation of Anti-Money Laundering Laws .
      Borrower represents and warrants to Agent, to its actual knowledge after making
      due inquiry, that neither Borrower nor Guarantor (i) is under investigation
      by
      any governmental authority for, or has been charged with, or convicted of,
      money
      laundering under 18 U.S.C. §§ 1956 and 1957, drug trafficking, terrorist-related
      activities or other money laundering predicate crimes, or any violation of
      the
      BSA, (ii) has been assessed civil penalties under any Anti-Money Laundering
      Laws, or (iii) has had any of its funds seized or forfeited in an action under
      any Anti-Money Laundering Laws.




(d)  Borrower
      Compliance with Anti-Money Laundering Laws .
      Borrower represents and warrants to Agent that it has taken reasonable measures
      appropriate to the circumstances (in any event as required by law), to ensure
      that Borrower is in compliance with all current and future Anti-Money Laundering
      Laws and laws, regulations and government guidance for the prevention of
      terrorism, terrorist financing and drug trafficking.




(e)  U.S.
      Publicly-Traded Entity .
      This Section
      5.26 shall
      not apply to any Person to the extent that such Person's interest in the
      Borrower is through a U.S. Publicly-Traded Entity. As used in this Agreement,
      " **U.S.
      Publicly-Traded Entity** "
      means a
      Person (other than an individual) whose securities are listed on a national
      securities exchange, or quoted on an automated quotation system, in the United
      States, or a wholly-owned subsidiary of such a Person.




Section
      5.27  Reserved.




Section
      5.28  Master
      Lease.




A
      true,
      correct and complete copy of the Master Lease, together with all amendments
      thereto, has been delivered to Agent; and the Master Lease, and all amendments
      thereto is in full force and effect as of the Closing Date.




**ARTICLE
      VI**




**FINANCIAL
      REPORTING** **;
      NOTICES**




Section
      6.1  Financial
      Statements.




Borrower
      shall furnish to Agent and shall cause Guarantor to furnish to Agent such
      financial statements and other financial information as Agent may from time
      to
      time reasonably request. All such financial statements shall show all material
      contingent liabilities and shall accurately and fairly present the results
      of
      operations and the financial condition of Borrower at the dates and for the
      period indicated and shall be sufficient to permit Agent to calculate Debt
      Service Coverage Ratio, Project Yield and Net Operating




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Income.
      Without limitation of the foregoing, Borrower shall furnish to Agent and shall
      cause Guarantor to furnish to Agent the following statements:




(a)  Monthly
      Reports .




(i)  Borrower
      shall deliver or cause to be delivered to Agent on or prior to the last day
      of
      each fiscal month used by Guarantor in preparing financial reports (each, a
      " **fiscal
      month** ")
      the
      following reports in respect of the Projects:




(A)  For
      the
      preceding fiscal month, statements of the operations of the Projects (including
      a current occupancy report, operating statement, delinquency report and a
      schedule of delinquency of receipts and payments) as of the last day of each
      fiscal month;




(B)  For
      the
      preceding fiscal month and fiscal year-to-date (i) a cash summary detailing
      all cash activity and reconciling beginning and end cash balances, and
      (ii) aged accounts receivable and accounts payable;




(C)  For
      the
      preceding fiscal month, statements of Net Operating Income.




(ii)  Upon
      request by Agent, Borrower shall deliver or cause to be delivered to Agent
      the
      following (together with the foregoing, such reports are hereinafter
      collectively referred to as the " **Monthly
      Reports** "):




(A)  A
      true,
      correct and complete copy of the check register showing all paid invoices,
      indicating date paid, amount paid and check number ;




(B)  A
      true,
      correct and complete copy of the cash disbursements journal; and




(C)  Evidence
      of the timely payment of all taxes and insurance premiums.




(iii)  The
      Monthly Reports shall (a) be certified by the chief financial
      representative or other authorized accounting officer of Borrower as true,
      correct and complete, (b) be derived from the books and records maintained
      by Borrower and/or Guarantor at the Projects, and (c) be accompanied with
      copies of supporting documentation to the extent that Agent shall request.
      Notwithstanding anything contained in clause (a)(i) above to the contrary,
      any Monthly Reports for a fiscal month that coincides with the end of
      Guarantor's fiscal quarter shall be delivered to Lender within forty-five (45)
      days after the end of each such fiscal quarter.




(iv)  Each
      financial statement, report or other information required to be delivered or
      caused to be delivered by Borrower and/or Guarantor to Agent under




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this
      Agreement and required hereunder to be certified by the chief financial
      representative of Borrower shall also certify that: (a) all of the
      covenants set forth in Article
      VII are
      fully performed; provided, however, as to the financial covenants set forth
      in Section
      7.26 such
      certification shall only be required to be made upon delivery of the applicable
      financial statements corresponding to such period of determination, and
      (b) the representations and warranties set forth in this Loan Agreement,
      the Security Documents and in the Subordination, Attornment and Security
      Agreement are and remain true, correct and complete except as disclosed in
      writing in the certificate. Each financial statement, report or other
      information required to be delivered by Borrower to Agent under this Agreement
      shall show all material contingent liabilities, shall be prepared in accordance
      with sound accounting practices and shall accurately and fairly present the
      results of operations and the financial condition of the person(s) referred
      to
      therein as of the dates and for the period indicated.




(b)  Annual
      Statements .
      Within
      ninety (90) days after the end of each fiscal year, Borrower shall deliver
      or
      cause to be delivered to Agent a balance sheet and financial statements of
      Borrower and Guarantor, which, in the case of Guarantor, shall show, if Agent
      requests, Guarantor's other real estate holdings, including income and expenses,
      debt service requirements and occupancy thereof, certified as true and correct
      in all respects, and prepared in accordance with sound accounting practices
      and
      fairly presenting the financial condition(s) of Borrower or Guarantor, as
      applicable, as of the date(s) indicated.




Section
      6.2  Audits .




If
      Borrower fails to furnish or cause to be furnished promptly any report required
      by Section
      6.1 ,
      or if
      Agent reasonably deems such reports to be unacceptable or unreliable, Agent
      may
      elect (in addition to exercising any other right and remedy) to conduct an
      audit
      of all books and records of Borrower and Guarantor which in any way pertain
      to
      the Projects and to prepare such reports. Such audit shall be made and such
      reports shall be prepared by an independent firm of certified public accountants
      to be selected by Agent or another auditor of Agent's choice (which may be
      an
      affiliate of Agent). Borrower shall pay all reasonable expenses of the audit
      and
      other services, which expenses shall be immediately due and payable with
      interest thereon at the Default Rate.




Section
      6.3  Books
      and Records/Audits .




Borrower
      shall keep and maintain or cause to be kept and maintained at all times at
      the
      Projects or at Borrower's/Guarantor's principal place of business, or such
      other
      place as Agent may approve in writing, complete and accurate books of accounts
      and records adequate to reflect the results of the operation of the Projects
      (including computations of Net Operating Income) and to provide the financial
      statements required to be provided to Agent pursuant to Section
      6.1 above
      and copies of all written contracts, correspondence, reports of Agent's
      independent consultant, if any, and other documents affecting the Projects.
      Agent and its designated agents shall have the right to inspect and copy any
      of
      the foregoing. Additionally, Agent may audit and determine, in Agent's sole
      and
      absolute discretion, the




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accuracy
      of Borrower's records and computations. The costs and expenses of the audit
      shall be paid by Borrower if the audit discloses a monetary variance in any
      financial information or computation (including the computation of Net Operating
      Income) equal to or greater than the greater of: (i) five percent (5%); or
      (ii) Five Thousand and No/100 Dollars ($5,000.00) more than any computation
      submitted by Borrower.




Section
      6.4  Notice
      of Litigation or Default.




Borrower
      shall promptly provide Agent with:




(a)  written
      notice of any litigation, arbitration, or other proceeding or governmental
      investigation (including any survey results or inspection reports from any
      Governmental Authority) pending or, to Borrower's or Guarantor's knowledge,
      threatened against or relating to Borrower, Guarantor or the Projects (but
      with
      respect to matters affecting only Guarantor (and not affecting the Projects
      in
      any respect), only such matters which would reasonably be expected to have
      a
      material adverse effect on the financial condition of Guarantor ); provided,
      that with respect to any such litigation, arbitration or other proceeding
      relating solely to (i) a monetary claim of less than $100,000 (and less than
      $500,000 in the aggregate) which is covered in its entirety by insurance (and
      as
      to which the insurance carrier has not refused coverage) and (ii) a monetary
      claim of less than $50,000 (and less than $200,000 in the aggregate) with
      respect to a breach of contract claim or an employee claim for unpaid wages,
      Borrower shall not be required to provide notice (written or otherwise) of
      such
      claim in accordance with the terms of this Section
      6.4 .




(b)  a
      copy of
      all notices of default and violations of laws, regulations, codes, ordinances
      and the like (including, without limitation, notices of default or violation
      under any license or permit necessary for the operation of the Projects) not
      otherwise covered by Section
      6.4(a) which
      are received by Borrower or Guarantor, relating to Borrower, Guarantor (but
      with
      respect to matters affecting only Guarantor (and not affecting the Projects
      in
      any respect) only such matters which would reasonably be expected to have a
      material adverse effect on the financial condition of Guarantor or the Projects
      or result in a material adverse change;




(c)  a
      copy of
      all notices of default and other material correspondence sent to or received
      from Guarantor under Master Lease;




(d)  a
      copy of
      all notices sent or received by Borrower or Guarantor pursuant to that certain
      Plat and Bill of Assurance dated August 1, 1975, recorded as Document
      Number 13-C, Page 504; and




(e)  a
      copy of
      all notices of default and other material correspondence sent to or received
      from a tenant under a Lease.




Section
      6.5  Bank
      Accounts.




Borrower
      shall cause Guarantor to, provide Agent with the following information with
      respect to each of the accounts from which payments will be made to Agent




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pursuant
      to the Loan Documents: (i) bank name; (ii) bank's ABA number; (iii) bank
      account number; and (iv) the name in which the bank account is
      held.




**ARTICLE
      VII**




**COVENANTS**




Borrower
      covenants and agrees with Agent as follows:




Section
      7.1  Inspection .




Subject
      to the rights of tenants under the Leases and applicable federal and state
      law
      (including laws governing the confidentiality of resident records), Agent and
      its authorized agents may enter upon and inspect the Projects at all reasonable
      times upon notice given orally or in writing to Borrower. Agent, at Borrower's
      expense, shall retain one or more independent consultants to periodically
      inspect the Projects and all documents, drawings, plans, and consultants'
      reports relating thereto.




Section
      7.2  Due
      on
      Sale and Encumbrance; Transfers of Interests.




Without
      the prior written consent of Agent, Borrower shall not nor shall
      Guarantor:




(i)  except
      as
      otherwise permitted herein or by the Assignment of Membership Interests create,
      or permit the creation of, any new direct or indirect ownership interest in
      Borrower, or




(ii)  transfer,
      or permit the transfer of (A) all or any part of any Project, or any
      interest therein (other than Leases permitted hereunder), or (B) except as
      otherwise permitted herein or by the Assignment of Membership **** Interests
      any direct or indirect **** ownership
      interest in Borrower (including any interest in the profits, losses or cash
      distributions in any way relating to the Projects or Borrower), or




(iii)  encumber,
      alienate, grant a Lien on, or grant any other interest in, any Project or any
      part thereof (other than Leases permitted hereunder ) or take or fail to take
      any other action which would result in a Lien against any Project or the
      interest of Borrower in any Project or any ownership interest in Borrower,
      whether voluntarily or involuntarily except Liens in favor of Agent for the
      benefit of Lender and Agent or Liens for purchase money indebtedness expressly
      permitted pursuant to Section 7.9 herein or Liens which are being duly contested
      by Borrower in accordance with the terms hereof, or




(iv)  enter
      into any easement or other agreement granting rights in or restricting the
      use
      or development of any Project.




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Section
      7.3  Taxes;
      Charges.




To
      the
      extent not paid by Agent from the Tax Impound, Borrower shall pay before any
      fine, penalty, interest or cost may be added thereto, and shall not enter into
      any agreement to defer, any Taxes that may become a Lien upon the Projects
      or
      become payable during the term of the Loan, and will promptly furnish Agent
      with
      evidence of such payment. Borrower shall not suffer or permit the joint
      assessment of any Project with any other real property constituting a separate
      tax lot or with any other real or personal property. Borrower shall pay or
      cause
      to be paid when due all Taxes, claims and demands of mechanics, materialmen,
      laborers and others which, if unpaid, might result in a Lien on the Projects
      (collectively, the " **Charges** ");
      however, Borrower and Guarantor may contest, in good faith by appropriate
      proceedings, the amount or validity of any such Charges or Liens so long as
      (a) Borrower and Guarantor have given prior written notice to Agent of the
      intent to so contest or object to any such Charges or Liens, (b) such contest
      stays the enforcement or collection of the Charges or any Lien created,
      (c) Borrower provides Agent with a bond or other security satisfactory to
      Agent (which may include an endorsement to Agent's Title Policy insuring against
      such claim, demand or lien) assuring the discharge of Borrower's and/or
      Guarantor's obligations for such claims, demands or lien, including interest
      and
      penalties, and (d) Borrower and Guarantor are diligently contesting the
      same by appropriate legal proceedings in good faith and at their own expense
      and
      concludes such contest prior to the tenth (10th) day preceding the earlier
      to
      occur of the Maturity Date or the date on which any Project is scheduled to
      be
      sold for non-payment.




Section
      7.4  Reserved.




Section
      7.5  Operation;
      Maintenance; Inspection.




Borrower
      shall observe and comply with (or cause observance and compliance with) all
      legal requirements applicable to the ownership, use and operation of the
      Projects. Borrower shall maintain (or cause to be maintained) the Projects
      in
      good condition, ordinary wear and tear excepted, and promptly after receipt
      or
      all necessary permits and approvals, including any approvals which Borrower
      is
      required to obtain from Agent or Lender under the terms of this Agreement or
      any
      of the other Loan Documents, repair any damage or casualty.




Section
      7.6  Taxes
      on Security.




Borrower
      shall pay all taxes, charges, filing, registration and recording fees, excises
      and levies payable with respect to the Note or the Liens created or secured
      by
      the Loan Documents, other than income, franchise and doing business taxes
      imposed on Agent or Lender and other than taxes, charges and fees which are
      being duly contested by Borrower in accordance with the terms of this Agreement
      or any of the other Loan Documents. If there shall be enacted any law (1)
      deducting the Loan from the value of the Projects for the purpose of taxation,
      (2) affecting any Lien on the Projects, or (3) changing existing laws of
      taxation of mortgages, deeds of trust, security deeds, or debts secured by
      real
      property, or changing the manner of collecting any such taxes, Borrower shall
      promptly pay to Agent, on




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demand,
      all taxes, costs and charges for which Agent or Lender is or may be liable
      as a
      result thereof; however, if such payment would be prohibited by law or would
      render the Loan usurious, then instead of collecting such payment, Lender may
      declare all amounts owing under the Loan Documents to be immediately due and
      payable.




Section
      7.7  Single
      Purpose Entity; Legal Existence; Name, Etc.




Borrower
      shall preserve and keep in full force and effect its existence as a Single
      Purpose Entity, entity status, franchises, rights and privileges under the
      laws
      of the state of its formation, and all qualifications, licenses and permits
      applicable to the ownership of the Projects and Guarantor shall preserve and
      keep in full force and effect its entity status, franchises, rights and
      privileges under the laws of the state of its formation and all qualifications,
      licenses and permits applicable to the use and operation of the Projects.
      Borrower shall not, nor shall Guarantor cause or permit Borrower to, wind up,
      liquidate, dissolve, reorganize, merge, or consolidate with or into, or convey,
      sell, assign, transfer, lease, or otherwise dispose of all or substantially
      all
      of its assets, or acquire all or substantially all of the assets of the business
      of any Person, or permit any subsidiary or Affiliate of Borrower to do so.
      Guarantor shall not wind up, liquidate, dissolve, convey, sell, assign,
      transfer, lease or otherwise dispose of all or substantially all of its assets.
      Borrower will not amend or terminate or permit the amendment or termination
      of
      Borrower's membership agreement without the prior written consent of Agent
      which
      consent shall not, in the case of an amendment, be unreasonably withheld if
      such
      amendment is not reasonably anticipated to affect Borrower's ability to perform
      its obligations hereunder or under the other Loan Documents. Borrower shall
      conduct business only in its own name or in the names of the Projects. Neither
      Borrower nor Guarantor shall change its name, identity, or organizational
      structure, the location of its chief executive office or principal place of
      business or its state of organization unless Borrower or Guarantor, as
      applicable, (a) shall have given prior written notice to Agent of such change,
      and (b) shall have taken all actions necessary or requested by Agent to file
      or
      amend any financing statement or continuation statement to assure perfection
      and
      continuation of perfection of security interests under the Loan Documents.
      Borrower shall maintain its status as a Special Purpose Entity.




Section
      7.8  Affiliate
      Transactions.




Without
      the prior written consent of Agent, Borrower shall not engage in any transaction
      affecting the Projects with an Affiliate of Borrower other than agreements
      which
      are (i) terminable by Borrower upon thirty (30) days prior written notice
      (ii) on an arms-length basis and (iii) on terms which are no less
      favorable to Borrower than it could secure from an unrelated third
      party.




Section
      7.9  Limitation
      on Other Debt.




Borrower
      shall not, without the prior written consent of Agent, incur any
      Debt, **** except
      for trade payables in the ordinary course of business, the Contingent Payment
      provided for in the Acquisition Document related to the Willow Brook Retirement
      Community; provided, such Contingent Payment shall not exceed $200,000 and
      shall
      be




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unsecured,
      and up to $250,000 in the aggregate for purchase money debt to purchase and,
      capital leases of, vehicles, equipment and other capital items to be used solely
      in connection with the operation of such Project (purchase money debt not to
      exceed in the aggregate $180,000 may be secured by automobiles and ordinary
      office equipment used in connection with the Projects) and which are reasonably
      related to the operation of assisted living facilities/independent living
      facilities (the " **Permitted
      Debt** ").
      Notwithstanding the foregoing, the amount of secured indebtedness incurred
      by
      Borrower pursuant to this Section 7.9 and
      Guarantor (in its capacity as tenant under the Master Lease) pursuant to the
      terms of the Subordination Agreement shall not at any time in the aggregate
      exceed $180,000.




Section
      7.10  Further
      Assurances.




Borrower
      shall promptly (a) cure any defects in the execution and delivery of the
      Loan Documents, and (b) execute and deliver, or cause to be executed and
      delivered, all such other documents, agreements and instruments as Agent may
      reasonably request to further evidence and more fully describe the collateral
      for the Loan, to correct any omissions in the Loan Documents, to perfect,
      protect or preserve any liens created under any of the Loan Documents, or to
      make any recordings, file any notices, or obtain any consents, as may be
      necessary or appropriate in connection therewith.




Section
      7.11  Estoppel
      Certificates.




Borrower,
      within ten (10) days after request, shall furnish to Agent a written statement,
      duly acknowledged, setting forth the amount due on the Loan, the terms of
      payment of the Loan, the date to which interest has been paid, whether any
      offsets or defenses exist against the Loan and, if any are alleged to exist,
      the
      nature thereof in detail, and such other matters as Agent reasonably may
      request.




Section
      7.12  Notice
      of Certain Events.




Borrower
      shall promptly notify Agent of (a) any Potential Default or Event of
      Default known to Borrower, together with a detailed statement of the steps
      being
      taken to cure such Potential Default or Event of Default; (b) any notice of
      default received by Borrower under other obligations relating to Projects or
      otherwise material to Borrower's business, including any notices of violations
      of any laws, regulations, codes or ordinances; and in the case of clause (b)
      promptly provide Agent with copies of such notices referred to
      therein.




Section
      7.13  Indemnification.




Borrower
      shall indemnify, defend and hold Agent and Lenders harmless from and against
      any
      and all losses, liabilities, claims, damages, expenses, obligations, penalties,
      actions, judgments, suits, costs or disbursements of any kind or nature
      whatsoever, including the reasonable fees and expenses of Agent's and Lender's
      counsel, in connection with (a) any inspection, review or testing of or
      with respect to the Projects conducted by Agent or Lender




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in
      accordance with the terms of this Agreement, (b) any investigative,
      administrative, mediation, arbitration, or judicial proceeding, in which Agent
      or a Lender is designated a party thereto, commenced or threatened at any time
      (including after the repayment of the Loan) in any way related to the execution,
      delivery or performance of any Loan Document or to the Projects, (c) any
      proceeding instituted by any Person claiming a Lien against any of the Projects,
      and (d) any brokerage commissions or finder's fees claimed by any broker or
      other party in connection with the Loan, the Projects, or any of the
      transactions contemplated in the Loan Documents, including those arising from
      the joint, concurrent, or comparative negligence of Agent or Lender, except
      to
      the extent any of the foregoing is caused by an indemnitee's gross negligence
      or
      willful misconduct.




Section
      7.14  Use
      of
      Proceeds, Revenues .




Borrower
      shall use the proceeds of the Loan for proper business purposes. No portion
      of
      the proceeds of the Loan shall be used by Borrower in any manner that might
      cause the borrowing or the application of such proceeds to violate Regulation
      U,
      Regulation T or Regulation X or any other regulation of the Board of Governors
      of the Federal Reserve System or to violate the Securities Act of 1933 or the
      Securities Exchange Act of 1934. Except as otherwise specifically provided
      in
      the Loan Documents, proceeds from the Projects, if any, received by Borrower
      shall be applied to the Indebtedness then due and payable, operating
      expenses **** or
      other
      approved Project capital improvements, repairs or replacements before
      distribution by Borrower to Guarantor.




Section
      7.15  Payments
      Under Master Lease .




Borrower
      shall cause all rent payments by Guarantor under the Master Lease to be made
      directly to Agent, pursuant to the terms of the Subordination, Non-Disturbance
      and Security Agreement.






To
      the
      extent that any such funds are not sent directly to Agent as required under
      this Section 7.15 but are
      received by Borrower, such amounts shall be held in trust for the benefit of
      Agent and remitted to Agent within two (2) Business Days after receipt by
      Borrower. All amounts from time to time held by Agent pursuant to this Section 7.15 are
      hereinafter referred to as " **Rent
      Proceeds** ."
      Agent
      may apply all such Rent Proceeds toward the Indebtedness then due and payable
      in
      such order as Agent shall determine.




Section
      7.16  Reserved.




Section
      7.17  Reserved.




Section
      7.18  Compliance
      with Laws and Contractual Obligations.




(a)  Borrower
      will comply with and will cause Guarantor to comply with (i) the
      requirements of all applicable laws, rules, regulations and orders of any
      governmental authority (including, without limitation, laws, rules, regulations
      and orders relating to all building, zoning, density, land use, covenants,
      conditions and restrictions, subdivision requirements, taxes, employer and
      employee contributions, securities, employee retirement




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          Loan Agreemnt Arizona Properties & GE Cap
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and
      welfare benefits, environmental protection matters, employee health and safety,
      quality and safety standards, accreditation standards and requirements of the
      applicable state department of health or other applicable state regulatory
      agency (each a " **State
      Regulator** "),
      quality and adequacy of medical care, distribution of pharmaceuticals, rate
      setting, equipment, personnel, operating policies, additions to facilities
      and
      services and fee splitting) as are now in effect and which may be imposed upon
      Borrower or Guarantor or the maintenance, use or operation of the Projects
      or
      the provision of services to the occupants of the Projects where the failure
      to
      so comply would reasonably be expected to result in a Material Regulatory
      Violation or a material adverse change, and (ii) the obligations, covenants
      and conditions contained in all other material contractual obligations of
      Borrower and of Guarantor, but in the case of Guarantor only with respect to
      the
      operation of the Projects; and




(b)  Borrower
      will maintain or obtain and will cause Guarantor to maintain or obtain, all
      licenses, qualifications and permits now held or hereafter required to be held
      by Borrower or Guarantor for which the loss, suspension, revocation or failure
      to obtain or renew, would reasonably be expected to have a material adverse
      effect upon the financial condition of Borrower or the ability to operate the
      Projects in compliance with the requirements of the Loan Documents and as they
      have been operated prior to the date hereof or are then operated in accordance
      with the terms hereof.




Section
      7.19  Notice
      of Money Laundering.




If
      a
      tenant under any Lease is charged with crimes involving money laundering or
      predicate crimes to money laundering, and such charges are not dismissed without
      further investigation within thirty (30) days, then Borrower shall give notice
      of such charges to Agent's and upon Agent's request, Borrower shall exclude
      from
      the debt service rents from said tenant or resident.




Section
      7.20  Anti-Terrorism
      and Anti-Money Laundering Compliance.




(a)  Compliance
      with Anti-Terrorism Laws .
      Borrower covenants to Agent and Lender that it shall not be, and, after making
      due inquiry, that no Person who owns a controlling interest in or otherwise
      controls Borrower shall be (i) listed on the Lists; or (ii) a Designated Person.
      Borrower also shall require, and shall take reasonable measures to ensure
      compliance with the requirement, that no Person who owns any other direct
      interest in Borrower shall be listed on any of the Lists or is or shall be
      a
      Designated Person.




(b)  Compliance
      by Interest Holders .
      Borrower shall require each Person that proposes to become a partner, member
      or
      shareholder in Borrower after the date hereof and that is not a U.S.
      Publicly-Traded Entity to sign, and to deliver to Borrower (and Borrower shall
      deliver to Agent), (i) an Interest Holder Certification and Agreement,
      substantially in the form attached as Exhibit
      B (" **Interest
      Holder Agreement** ")
      and
      (ii) **** if
      requested by Agent, Borrower shall deliver to Agent a schedule of the name,
      legal domicile address and (for entities) place of organization of each holder
      of a direct or indirect legal or beneficial interest in Borrower.




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(c)  Anti-Terrorism
      Policies .
      Borrower agrees to adopt and maintain adequate policies, procedures and controls
      to ensure that it is in compliance with all applicable Anti-Terrorism Laws
      and
      related government guidance (such policies, procedures and controls are
      collectively referred to in this Agreement as " **Borrower
      Anti-Terrorism Policies** ").
      Borrower further agree to make the Borrower Anti-Terrorism Policies, and the
      respective policies, procedures and controls for Persons who are or are to
      become partners, members or shareholders in Borrower (such policies, procedures
      and controls are collectively referred to as " **Investor
      Anti-Terrorism Policies** "),
      together with the information collected thereby concerning Borrower and such
      partners, members or shareholders (but not information about indirect members
      that do not have the power to direct the management or policies of Borrower,
      whether through the ownership of voting stock, agreement or otherwise),
      available to Agent for review and inspection by Agent from time to time during
      normal business hours and upon reasonable prior notice, and Borrower agrees
      to
      deliver copies of the same to Agent from time to time upon request. Agent and
      Lender will keep the Borrower Anti-Terrorism Policies and the Investor
      Anti-Terrorism Policies, and the information collected thereby, confidential
      subject to customary exceptions for legal process, auditors, regulators, or
      as
      otherwise reasonably required by Agent and Lender for enforcement of its rights
      and/or in connection with reasonable business us in the management,
      administration and disposition of its assets and investments. Borrower consents
      to the disclosure to U.S. regulators and law enforcement authorities by Agent
      or
      Lender or any of their affiliates or agents of such information about Borrower
      and the owners of direct and indirect interests in Borrower that Agent or Lender
      reasonably deems necessary to comply with applicable Anti-Terrorism Laws and
      Anti-Money Laundering Laws.




(d)  Funds
      Invested in Borrower .
      Borrower covenants that it will take Anti-Money Laundering Measures in
      accordance with Anti-Money Laundering Laws with respect to each holder of a
      direct or indirect interest in any Borrower.




(e)  Borrower
      Compliance with Anti-Money Laundering Laws .
      Borrower covenants to Agent and Lender that it shall take reasonable measures
      appropriate to the circumstances (in any event as required by law), to ensure
      that Borrower is in compliance with all current and future Anti-Money Laundering
      Laws and laws, regulations and government guidance for the prevention of
      terrorism, terrorist financing and drug trafficking.




(f)  Notification
      of Agent; Quarantine Steps .
      Borrower shall immediately notify Agent if Borrower obtains actual knowledge
      that any holder of a direct or indirect interest in Borrower, or any director,
      manager or officer of any of such holder, (i) has been listed on any of the
      Lists, (ii) has become a Designated Person, (iii) is under investigation by
      any
      governmental authority for, or has been charged with or convicted of, money
      laundering drug trafficking, terrorist-related activities or other money
      laundering predicate crimes, or any violation of the BSA, (iv) has been assessed
      civil penalties under any Anti-Money Laundering Laws, or (v) has had funds
      seized or forfeited in an action under any Anti-Money Laundering
      Laws.




(g)  Exception .
      This Section
      7.20 shall
      not apply to any Person to the extent that such Person's interest in the
      Borrower is through a U.S. Publicly-Traded Entity.




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Section
      7.21  Employees.




Borrower
      shall not have any employees while any portion of the Loan is
      outstanding.




Section
      7.22  Reserved.




Section
      7.23  Representations
      and Warranties.




Borrower
      will cause all representations and warranties set forth in this Agreement to
      remain true and correct at all times during the term of this Agreement and
      while
      any portion of the Loan remains outstanding.




Section
      7.24  Cooperation.




Borrower
      acknowledges that Lender and its successors and assigns may (a) sell,
      transfer or assign this Agreement, the Note and the other Loan Documents to
      one
      or more investors as a whole loan, in a rated or unrated public offering or
      private placement, (b) participate the Loan to one or more investors in a
      rated or unrated public offering or private placement, (c) deposit the Loan
      Documents with a trust, which trust may sell certificates to investors
      evidencing an ownership interest in the trust assets in a rated or unrated
      public offering or private placement, or (d) otherwise sell the Loan or interest
      therein to investors in a rated or unrated public offering or private placement
      (the transactions referred to in clauses (a) through (d) are hereinafter
      referred to as " **Secondary
      Market Transactions** ").
      Borrower shall cooperate in good faith with Agent and Lender in effecting any
      such Secondary Market Transaction and shall cooperate in good faith to implement
      all requirements reasonably imposed by the participants involved in any
      Secondary Market Transaction (including without limitation, an institutional
      purchaser, participant or investor) including, without limitation, all
      structural or other changes to the Loan, modifications to any documents
      evidencing or securing the Loan, delivery of opinions of counsel reasonably
      acceptable to such other purchasers, participants or investors may reasonably
      require; provided , however ,
      that
      Borrower shall not be required to modify any documents evidencing or securing
      the Loan which would (i) modify the interest rate payable under the Note, (ii)
      modify the stated maturity of the Note, (iii) modify the amortization of
      principal of the Note, (iv) modify or conflict with any other material terms
      or
      covenants of the Loan, (v) conflict with the Master Lease, (vi) increase
      the Borrower's or Guarantor's liability or obligations under the Loan Documents
      or (vii) reduce the Borrower's or Guarantor's rights under the Loan Documents,
      including, but not limited to, Borrower's right to defease the Loan on the
      terms
      set forth in Section
      2.9 .
      Borrower shall provide such information and documents relating to Borrower,
      Guarantor and the Projects. Borrower acknowledges that certain information
      regarding the Loan, Guarantor and the Projects may be included in a private
      placement memorandum, prospectus or other disclosure documents.




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Section
      7.25  Master
      Lease.




Borrower
      shall not, without Agent's prior written consent, amend or terminate the Master
      Lease.




Section
      7.26  Financial
      Covenants.




(a)  Commencing
      on December 31, 2005, and as of the last day of each calendar quarter
      thereafter, the average daily occupancy for the Projects taken as a whole for
      the immediately preceding three (3) month period shall be greater than ninety
      percent (90%) of the average daily occupancy at the Projects taken as a whole
      for the three (3) month period immediately preceding the Closing. " **Occupancy** "
      under
      this Section 7.26
      (a) shall
      mean beds occupied by a resident at any Project and paying at least applicable
      Medicare, Medicaid or insurance reimbursable dates.




(b)  Commencing
      on December 31, 2005, and as of the last day of each calendar quarter
      thereafter, through and including June 30, 2006, the Debt Service Coverage
      Ratio (as determined by Agent) shall equal or exceed 1.15:1.00 and the Project
      Yield (as determined by Agent) shall equal or exceed nine and one-half percent
      (9.5%). Commencing on September 30, 2006, and as of the last day of each
      calendar quarter thereafter through and including December 31, 2006, the
      Debt Service Coverage Ratio (as determined by Agent) shall equal or exceed
      1.20:1.0 and the Project Yield (as determined by Agent) shall equal or exceed
      ten percent (10%). Commencing on March 31, 2007, and as of the last day of
      each calendar quarter thereafter during the term of the Loan, Debt Service
      Coverage Ratio (as determined by Agent) shall equal or exceed 1.25:1.00 and
      Project Yield (as determined by Agent) shall equal or exceed ten and one-half
      percent (10.5%).




**ARTICLE
      VIII**




**Health
      Care Matters**




Section
      8.1  Healthcare
      Laws.




(a)  Without
      limiting the generality of any other provision of this Agreement, Borrower
      and
      Guarantor and their respective employees and contractors (other than contracted
      agencies) in the exercise of their duties on behalf of Borrower and Guarantor
      (with respect to its operation of the Projects) shall be in compliance with
      all
      applicable Laws relating to patient healthcare and/or patient healthcare
      information, including without limitation the Health Insurance Portability
      and
      Accountability Act of 1996, as amended, and the rules and regulations
      promulgated thereunder (" **HIPAA** ")
      (collectively, " **Healthcare
      Laws** ")).
      Borrower and Guarantor maintain in all material respects all records required
      to
      be maintained by any Governmental Authority or otherwise with respect to the
      operations at the Projects under the Healthcare Laws and to Borrower's actual
      knowledge there are no presently existing circumstances which would result
      or
      would reasonably be expected to result in material violations with respect
      to
      the operations at the Projects of the Healthcare Laws. Borrower and Guarantor
      have and will maintain all Governmental Approvals




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necessary
      under applicable Laws to own and/or operate the Projects, as applicable
      (including such Governmental Approvals as are required under such the Healthcare
      Laws).




(b)  If
      (i) Borrower or Guarantor is a "covered entity" within the meaning of HIPAA
      or (ii)  Borrower and Guarantor (with respect to its operation of the
      Project) is subject to the "Administrative Simplification" provisions of HIPAA,
      then such Person(s) (x) have undertaken or will promptly undertake all necessary
      surveys, audits, inventories, reviews, analyses and/or assessments (including
      any necessary risk assessments) of all areas of its business and operations
      required by HIPAA and/or that would reasonably be expected to be adversely
      affected by the failure of such Person(s) to be HIPAA Compliant (as defined
      below); (y) has developed or will promptly develop a detailed plan and time
      line
      for becoming HIPAA Compliant (a " **HIPAA
      Compliance Plan** ");
      and
      (z) has implemented or will implement those provisions of such HIPAA Compliance
      Plan in all material respects necessary to ensure that such Person(s) are or
      become HIPAA Compliant. For purposes hereof, " **HIPAA
      Compliant** "
      shall
      mean that Borrower and Guarantor, as applicable (A) are or will be in compliance
      with each of the applicable requirements of the so-called "Administrative
      Simplification" provisions of HIPAA on and as of each date that any part
      thereof, or any final rule or regulation thereunder, becomes effective in
      accordance with its or their terms, as the case may be (each such date, a
      " **HIPAA
      Compliance Date** ")
      if and
      to the extent Borrower or Guarantor are subjected to such provisions, rules
      or
      regulations, and (B) are not and would not reasonably be expected to
      become, as of any date following any such HIPAA Compliance Date, the subject
      of
      any civil or criminal penalty, process, claim, action or proceeding, or any
      administrative or other regulatory review, survey, process or proceeding (other
      than routine surveys or reviews conducted by any government health plan or
      other
      accreditation entity) that would reasonably be expected to result in any of
      the
      foregoing or that would reasonably be expected to adversely affect Borrower's
      or
      Guarantor's business, operations, assets, properties or condition (financial
      or
      otherwise), in connection with any actual or potential violation by Borrower
      or
      Guarantor of the then effective provisions of HIPAA.




(c)  If
      required under applicable Law, Borrower and/or Guarantor has and shall maintain
      in full force and effect a valid certificate of need (" **CON** ")
      or
      similar certificate, license, or approval issued by the State Regulator for
      the
      requisite number of beds and units in the Projects (as shown on Exhibit
      A attached
      hereto), and a provider agreement or other required documentation of approved
      provider status for each provider payment or reimbursement program listed in Exhibit E hereto,
      if applicable. All required Government Approvals necessary for operation of
      the
      Projects are listed on Exhibit F hereto
      (collectively with the CON, if applicable, the " **Licenses** ").
      Borrower and/or Guarantor shall operate the Projects in a manner such that
      the
      Licenses shall remain in full force and effect. True and complete copies of
      the
      Licenses have been delivered to Agent.




Section
      8.2  Representations,
      Warranties and Covenants Regarding Healthcare Matters.




Borrower
      represents, warrants, covenants and agrees with Agent and Lenders
      that:




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(a)  Borrower,
      together with Guarantor, is using and operating the Projects as an assisted
      living and/or independent senior housing having the number of beds/units as
      set
      forth in Exhibit
      A attached
      hereto (as modified from time to time with Agent's consent).




(b)  All
      Licenses necessary or desirable for using and operating the Projects for the
      uses described in Section
      8.2(a) above
      are held by Guarantor in the name of Guarantor, as required under applicable
      law, and are in full force and effect, including, if applicable, the
      CON.




(c)  The
      Licenses:




(i)  Are
      not
      now and will not be pledged by Borrower or Guarantor as collateral security
      for
      any loan or indebtedness, other than the Loan;




(ii)  Are
      held
      free and will remain free from restrictions (which for purposes hereof shall
      include if any such licenses are provisional or probationary in any way) or
      known conflicts which would materially impair the use or operation of the
      Projects for the uses described in Section
      8.2(a) above;
      and




(iii)  Guarantor
      shall at all times during the term of the Loan operate the Projects in
      compliance with applicable Laws in order to maintain the Licenses free from
      restrictions (which for purposes hereof shall include if any such licenses
      are
      provisional or probationary in any way) which would materially impair the use
      or
      operation of the Projects for the uses described in Section
      8.2(a) .




(d)  Borrower
      or Guarantor shall not do (or suffer to be done) any of the
      following:




(i)  Rescind,
      withdraw, revoke, amend, modify, supplement, or otherwise alter the nature,
      tenor or scope of the Licenses for the Projects without Agent's
      consent;




(ii)  Amend
      or
      otherwise change the Projects' authorized units/beds capacity and/or the number
      of units/beds approved by the State Regulator; provided that Borrower may (if
      permitted by applicable law) combine units at a Project so long as the number
      of
      total units at each Project is at least 90% of the total number of units at
      such
      Project as of the Closing;




(iii)  Replace
      or transfer all or any part of the Projects' units or beds to another site
      or
      location; or




(iv)  Voluntarily
      transfer or encourage the transfer of any resident of any Project to any other
      facility, unless such transfer is at the request of the resident or is for
      reasons relating to the health, required level of medical care or safety of
      the
      resident to be transferred, other residents in the applicable Project or the
      employees of the applicable Project or is for reasons of non
      payment.




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(e)  If
      and
      when Borrower or Guarantor participates in Medicare, Medicaid, Blue Cross and/or
      Blue Shield, and any other private commercial insurance managed care and
      employee assistance program (such programs, the " **Third-Party
      Payor Programs** "),
      Borrower shall give Agent prompt written notice thereof and such information
      with respect thereto as Agent may reasonably request, and the Projects will
      remain in material compliance with all applicable requirements for participation
      in any such Third Party Payor Programs, including the Medicare and Medicaid
      Patient Protection Act of 1987, as it may be amended. The Projects are and
      will
      remain in conformance in all material respects with all insurance, reimbursement
      and cost reporting requirements and, if applicable, have a current provider
      agreement that is in full force and effect under Medicare and Medicaid;
      provided, however, to the extent a Project is not certified to participate
      in
      any Third Party Payor Program as of the Closing and thereafter Borrower or
      Guarantor elects to participate therein, nothing herein shall thereafter
      preclude Borrower or Guarantor from voluntarily withdrawing from participation
      in such Third Party Payor Programs.




(f)  If
      and to
      the extent Borrower or Guarantor at any time during the term of the Loan elects
      to participate in any Third Party Payor Programs with respect to any Project,
      neither Borrower nor Guarantor shall, other than in the normal course of
      business, change the term of any such Third-Party Payor Programs, or their
      normal billing payment or reimbursement policies and procedures with respect
      thereto (including the amount and timing of finance charges, fees and
      write-offs). All Medicaid, Medicare and private insurance cost reports and
      financial reports submitted by Borrower or Guarantor will be materially accurate
      and complete and have not been and will not be misleading in any material
      respects. If and to the extent Borrower or Guarantor at any time during the
      terms of the Loan elects to participate in any Third Party Payor Programs with
      respect to any Project, neither Borrower nor Guarantor shall permit any
      revocation, suspension, termination, probation, restriction, limitation or
      non-renewal with respect thereto, except as expressly permitted by the terms
      of
      Section 8.2(e) above.




(g)  To
      Borrower's actual knowledge, none of Borrower, the Projects or Guarantor is
      subject of any proceeding by any Governmental Authority, and no notice of any
      violation has been issued by a Governmental Authority that would, directly
      or
      indirectly, or with the passage of time:




(i)  Have
      a
      material adverse impact on Borrower's or Guarantor's ability to accept and/or
      retain patients or residents at, or operate, the Projects for their current
      use
      or result in the imposition of a fine, a sanction, or a lower reimbursement
      rate
      for services rendered to eligible patients or residents;




(ii)  Modify,
      limit or annul or result in the transfer, suspension, revocation or imposition
      of probationary use of any of the Licenses; or




(iii)  If
      applicable, affect Borrower's or Guarantor's continued participation at the
      Projects in the Medicaid or Medicare programs or any other of the Third-Party
      Payor Programs, or any successor programs thereto, at then current rate
      certifications.




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(h)  To
      Borrower's actual knowledge, the Projects have not received a "Level 1" (or
      equivalent) violation, and no statement of charges or deficiencies has been
      made
      or penalty enforcement action has been undertaken against any Project by any
      Governmental Authority during the last five calendar years.




(i)  The
      Projects do not currently participate in Medicare, Medicaid or any other Third
      Party Payor Programs. Borrower or Guarantor is not a participant in any federal
      program whereby any Governmental Authority may have the right to recover funds
      by reason of the advance of federal funds, including those authorized under
      the
      Hill-Burton Act (42 U.S.C. 291, *et
      seq.* ),
      as it
      may be amended.




(j)  Neither
      Borrower nor Guarantor will enter into any patient or resident care agreements
      with patients or residents of the Projects which deviate in any material adverse
      respect from the form agreements which have been delivered to and approved
      by
      Agent pursuant to Section 4.2 of this
      Loan Agreement.




(k)  In
      the
      event the Master Lease is terminated or in the event of foreclosure or other
      acquisition of any Project by Agent or its designee or any purchaser at a
      foreclosure sale or by acceptance of a deed in lieu of foreclosure, Borrower,
      Agent, any subsequent tenant or any subsequent purchaser need not under the
      Healthcare Laws in effect as of the Closing obtain a CON prior to applying
      for
      and receiving Medicare or Medicaid payments provided that neither the services
      offered at the Projects nor the number of beds operated would be changed, it
      being understood and agreed that no representation or warranty is being made
      as
      to the requirements for a CON under the Healthcare Laws in effect at the time
      such termination, foreclosure or acquisition occurs.




(l)  All
      patient or resident records at the Projects, including patient or resident
      trust
      fund accounts, are to Borrower's actual knowledge, true and correct in all
      material respects, and all such records of the Projects maintained or developed
      by Borrower or Guarantor will be true and correct in all material
      respects.




Section
      8.3  Cooperation.




(a)  Upon
      the
      request of Agent during the continuance of an Event of Default hereunder or
      under the other Loan Documents provided that Agent has elected as a result
      of
      such Event of Default to exercise its remedies on default, including its remedy
      to take possession of the Projects or to seek to have a receiver appointed
      to
      assume operational responsibility for the Projects, Borrower shall, and shall
      cause Guarantor to, complete, execute and deliver to Agent any applications,
      notices, documentation, and other information reasonably necessary or desirable,
      in Agent's reasonable judgment, to permit Agent or its designee (including
      a
      receiver) to obtain, maintain or renew any one or more of the Licenses for
      the
      Projects (or, to the extent permitted by applicable Laws, to become the owner
      of
      the existing Licenses for the Project) and to the extent permitted by applicable
      Laws to obtain any other provider agreements or Governmental Approvals then
      necessary or desirable for the operation of the Projects by Agent or its
      designee for their then current use (including, without limitation, any
      applications for change of ownership of the existing Licenses).




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(b)  In
      furtherance and not in limitation of the foregoing, to the extent permitted
      by
      applicable Laws, (i) Agent is hereby authorized (without the consent of
      Borrower or Guarantor) to submit any such applications, notices, documentation
      or other information which Borrower caused to be delivered to Agent in
      accordance with the above provisions to the applicable Governmental Authorities,
      or to take such other steps as Agent may deem advisable to obtain, maintain
      or
      renew any License or other Governmental Approvals in connection with the
      operation of the Projects by Agent or its designee (including a receiver) for
      their then current use, and Borrower agrees to cooperate and to cause Guarantor
      to cooperate with Agent in connection with the same and (ii) Borrower, upon
      demand by Agent, shall take, and shall cause Guarantor to take, any action
      which
      is reasonably necessary or desirable, in Agent's reasonable judgment, to permit
      Agent or its designee (including a receiver) to use, operate and maintain the
      Projects for their current use.




(c)  If
      Borrower fails to comply with the provisions of this Section
      8.3 for any
      reason whatsoever, Borrower hereby irrevocably appoints Agent and its designee
      as Borrower's attorney-in-fact, with full power of substitution, to take any
      action and execute any documents and instruments which are reasonably necessary
      or desirable, in Agent's reasonable judgment, to permit Agent or its designee
      (including a receiver) to undertake Borrower's obligations under this Section
      8.3 ,
      including obtaining any Licenses or Governmental Approvals then required for
      the
      operation of the Projects by Agent or its designee (including a receiver) for
      their current use. The foregoing power of attorney is coupled with an interest
      and is irrevocable and Agent may exercise its rights thereunder in addition
      to
      any other remedies which Agent may have against Borrower or Guarantor as a
      result of Borrower's breach of the obligations contained in this Section
      8.3 .




(d)  In
      the
      event of the exercise by Agent of the rights granted to it under this Section
      8.3, Borrower shall not be deemed to be in default of its obligations or
      representations under this Agreement with respect to the maintenance of the
      Licenses, provider agreements or other Governmental Approvals in its name or
      in
      Guarantor's name nor shall Borrower or Guarantor have any liability or
      responsibility to any third party for any matters arising from or related to
      the
      operation of the Projects by Agent or its designee (including a receiver) once
      the Licenses, provider agreements or other Governmental Approvals have been
      issued in the name of Agent or its designee (including a receiver).




**ARTICLE
      IX**




**EVENTS
      OF DEFAULT**




Each
      of
      the following shall constitute an Event of Default:




Section
      9.1  Payments.




Failure
      of Borrower to pay within five (5) days after the date when due any of the
      payment obligations of Borrower due under the Loan Documents, or Borrower's
      failure to pay the Loan at the Maturity Date, whether by acceleration or
      otherwise.




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Section
      9.2  Certain
      Covenants.




Borrower's
      failure to (a) maintain insurance as required under Section 3.1 of this
      Agreement; (b) permit inspections as required by Section 7.1 ;
      (c) strictly comply with the provisions of Section
      7.2 ;
      (d) maintain its status as a Single Purpose Entity as required by Section 7.7 ;
      (e) strictly comply with the provisions of Section 7.15 (payments under Master Lease), Section
      7.21 (employees), Section
      7.25 (Master
      Lease), Section 7.26 (financial covenants), Section
      8.1(c) (licenses and other matters), and Sections 8.2(b) and (c) (licenses).




Section
      9.3  Covenants.




Borrower's
      failure to perform or observe any of the agreements and covenants contained
      in
      this Agreement or in any of the other Loan Documents, and the continuance of
      such failure for thirty (30) days after notice by Agent to Borrower; however,
      subject to any shorter period for curing any failure by Borrower as specified
      in
      any of the other Loan Documents, Borrower shall have an additional thirty (30)
      days to cure such failure if (a) such failure does not involve the failure
      to make payments on a monetary obligation; (b) such failure cannot
      reasonably be cured within such thirty (30) day cure period; (c) Borrower
      commenced to cure such failure promptly after written notice thereof and is
      diligently undertaking to cure such default, and (d) Borrower has provided
      Agent with security reasonably satisfactory to Agent against any interruption
      of
      payment or impairment of collateral as a result of such continuing failure;
      provided that the notice and cure provisions of this Section 9.3do not
      apply to the Events of Default described in any other section of thisArticle
      IX.




Section
      9.4  Representations
      and Warranties.




Any
      representation or warranty made in any Loan Document proves to be untrue in
      any
      material respect when made or deemed made.




Section
      9.5  Other
      Encumbrances.




Any
      default under any document or instrument, other than the Loan Documents,
      evidencing or creating in the aggregate any Debt of the Borrower in excess
      of
      $5,000 or evidencing or creating a Lien on the Projects or any part thereof,
      unless such lien is being duly contested in accordance with the express
      provisions of the Loan Documents.




Section
      9.6  Involuntary
      Bankruptcy or Other Proceeding.




Commencement
      of an involuntary case or other proceeding against Borrower or
      Guarantor **** (each,
      a
      " **Bankruptcy
      Party** ")
      which
      seeks liquidation, reorganization or other relief with respect to it or its
      debts or other liabilities under any bankruptcy, insolvency or other similar
      law
      now or hereafter in effect or seeks the appointment of a trustee, receiver,
      liquidator, custodian or other similar official of it or any of its property,
      and such involuntary case or other proceeding shall remain undismissed or
      unstayed for a period of sixty (60) days; or an order for relief against a
      Bankruptcy Party shall be entered in any such case under the Federal Bankruptcy
      Code.




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Section
      9.7  Voluntary
      Petitions, etc.




Commencement
      by a Bankruptcy Party of a voluntary case or other proceeding seeking
      liquidation, reorganization or other relief with respect to itself or its Debts
      or other liabilities under any bankruptcy, insolvency or other similar law
      or
      seeking the appointment of a trustee, receiver, liquidator, custodian or other
      similar official for it or any of its property, or consent by a Bankruptcy
      Party
      to any such relief or to the appointment of or taking possession by any such
      official in an involuntary case or other proceeding commenced against it, or
      the
      making by a Bankruptcy Party of a general assignment for the benefit of
      creditors, or the failure by a Bankruptcy Party, or the admission by a
      Bankruptcy Party in writing of its inability to pay its debts generally as
      they
      become due, or any action by a Bankruptcy Party to authorize or effect any
      of
      the foregoing.




Section
      9.8  Default
      Under Master Lease.




The
      termination of the Master Lease without Lender's prior written consent or the
      occurrence of a default and the expiration of any cure period applicable thereto
      under the Master Lease.




Section
      9.9  False
      Reports.




Any
      statement, report or certificate made or delivered to Agent by Borrower or
      Guarantor is not materially true and complete when made or
      delivered.




Section
      9.10  Control.




Guarantor
      ceases at any time to, directly or indirectly, control the day-to-day management
      of Borrower.




Section
      9.11  Money
      Laundering.




(a)  Borrower
      or Guarantor is listed on the Lists or (i) is convicted or (ii) pleads *nolo
      contendere* to
      charges involving money laundering or predicate crimes to money laundering.




(b)  Borrower
      or Guarantor is charged with crimes involving money laundering or predicate
      crimes to money laundering, and Borrower or such other party does not, within
      thirty (30) days, obtaining the dismissal of such charges without further
      investigation.




(c)  If
      a
      tenant under any Lease, Borrower or Guarantor is listed on the Lists or
      (i) is convicted, or (ii) pleads *nolo
      contendere* to
      charges involving money laundering or predicate crimes to money laundering,
      and
      proceeds from the rents of such tenant are used to pay debt service and Borrower
      fails to give Agent such representations and verifications as Agent shall
      reasonably request that such rents are not being used to pay debt
      service.




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Section
      9.12  Loan
      Documents.




The
      occurrence of a default under any of the other Loan Documents, which continues
      uncured beyond any applicable notice and grace periods provided under such
      Loan
      Document, or the occurrence of an "Event of Default" as defined in any other
      Loan Document.




Section
      9.13  Other
      Defaults.




The
      occurrence of a default under any other material contract or agreement to which
      Borrower is a party which continues uncured beyond any applicable notice and
      grace period provided under said contract or agreement and such default is
      declared and is not cured within the greater of thirty (30) days thereafter
      or
      the time, if any, specified therefor in any agreement governing the
      same.




**ARTICLE
      X**




**REMEDIES**




Section
      10.1  Remedies
      - Insolvency Events.




Upon
      the
      occurrence of any Event of Default described in Section 9.7 or
      9 .8 ,
      the
      obligations of Lender to advance amounts hereunder shall immediately terminate,
      and all amounts due under the Loan Documents immediately shall become due and
      payable, all without written notice and without presentment, demand, protest,
      notice of protest or dishonor, notice of intent to accelerate the maturity
      thereof, notice of acceleration of the maturity thereof, or any other notice
      of
      default of any kind, all of which are hereby expressly waived by Borrower;
      however, if the Bankruptcy Party under Section 9.7 or 9.8 is other
      than Borrower, then all amounts due under the Loan Documents shall become
      immediately due and payable at Lender's election, in Agent's sole
      discretion.




Section
      10.2  Remedies
      - Other Events.




Except
      as
      set forth in Section 10.1 above,
      while any Event of Default exists, Agent may (a) by written notice to Borrower,
      declare the entire Loan to be immediately due and payable without presentment,
      demand, protest, notice of protest or dishonor, notice of intent to accelerate
      the maturity thereof, notice of acceleration of the maturity thereof, or other
      notice of default of any kind, all of which are hereby expressly waived by
      Borrower, (b) terminate the obligation, if any, of Lender to advance amounts
      hereunder, and (c) exercise all rights and remedies therefore under the Loan
      Documents and at law or in equity.




Section
      10.3  Agent's
      Right to Perform the Obligations.




If
      Borrower shall fail, refuse or neglect to make any payment or perform any act
      required by the Loan Documents, then while any Event of Default exists, and
      without notice to or demand upon Borrower and without waiving or releasing
      any
      other right, remedy or recourse Agent or Lender may have because of such Event
      of Default, Agent may (but shall not be obligated to) make such payment or
      perform such act for the account of and at




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the
      expense of Borrower, and shall have the right to enter upon the Projects for
      such purpose and to take all such action thereon and with respect to the
      Projects as it may deem necessary or appropriate. If Agent shall elect to pay
      any sum due with reference to the Projects, Agent may do so in reliance on
      any
      bill, statement or assessment procured from the appropriate governmental
      authority or other issuer thereof without inquiring into the accuracy or
      validity thereof. Similarly, in making any payments to protect the security
      intended to be created by the Loan Documents, Agent shall not be bound to
      inquire into the validity of any apparent or threatened adverse title, lien,
      encumbrance, claim or charge before making an advance for the purpose of
      preventing or removing the same. Additionally, if any Hazardous Materials (as
      defined in the Environmental Indemnity) affect or threaten to affect the
      Projects, Agent may (but shall not be obligated to) give such notices and take
      such actions as it deems necessary or advisable in order to abate the discharge
      of any Hazardous Materials or remove the Hazardous Materials. In exercising
      any
      rights under the Loan Documents or taking any actions provided for therein,
      Agent may act through its employees, agents or independent contractors as
      authorized by Agent. Borrower shall indemnify Agent and Lender for all losses,
      expenses, damages, claims and causes of action, including reasonable attorneys'
      fees, incurred or accruing by reason of any acts performed by Agent or Lender
      pursuant to the provisions of this Section 10.3 ,
      including those arising from the joint, concurrent, or comparative negligence
      of
      Agent or Lender, except as a result of Agent or Lender's gross negligence or
      willful misconduct. All reasonable sums paid by Agent or Lender pursuant to
      this Section 10.3 ,
      and all
      other reasonable sums expended by Agent or Lender to which they shall be
      entitled to be indemnified, together with interest thereon at the Default Rate
      from the date of such payment or expenditure until paid, shall constitute
      additions to the Loan, shall be secured by the Loan Documents and shall be
      paid
      by Borrower to Agent upon demand.




**ARTICLE
      XI**




**MISCELLANEOUS**




Section
      11.1  Notices.




Any
      notice required or permitted to be given under this Agreement shall be in
      writing and either shall be mailed by certified mail, postage prepaid, return
      receipt requested, or sent by overnight air courier service, or personally
      delivered to a representative of the receiving party, or sent by telecopy
      (provided an identical notice is also sent simultaneously by mail, overnight
      courier, or personal delivery as otherwise provided in this Section 11.1 ).
      All
      such communications shall be mailed, sent or delivered, addressed to the party
      for whom it is intended at its address set forth below.




If
      to
      Borrower:  Emeritus
      Properties-Arkansas, LLC




c/o
      Emeritus Corporation




3131
      Elliott Avenue, Suite 500




Seattle,
      Washington 98121




Attention:  Raymond
      R. Brandstrom, CFO




Facsimile:  (206)
      301-4500




EX-10.86.4
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With
      a
      copy to:  The
      Nathanson Group PLLC




1520
      Fourth Avenue, Sixth
      Floor




Seattle,
      Washington
      98101




Attention:  Randi
      S.
      Nathanson, Esq.




Facsimile:  (206)
      623-1738




If
      to
      Agent:  General
      Electric Capital Corporation




Loan
      No. 07-0004235




2
      Bethesda Metro Center, Suite
      600




Bethesda,
      Maryland
      20814




Attention:  Manager,
      Portfolio Management Group




Facsimile:  (301)
      347-3150




With
      a
      copy to:  General
      Electric Capital Corporation




Loan
      No. 07-0004235




500
      West Monroe
      Street




Chicago,
      Illinois
      60661




Attention:  John
      Cobb




Facsimile:  (866)
      252-2015




And
      a
      copy to:  GE
      Commercial Finance, Healthcare Financial Services




Loan
      No. 07-0004235




4314
      Shoalwood
      Avenue




Austin,
      Texas 78756




Attention:  Diana
      Pennington, Senior Vice President,




Chief
      Counsel, Real
      Estate




Facsimile:  (866)
      221-0433




Notices
      shall be deemed given (1) when actually delivered, (2) on the first Business
      Day
      after deposit with an overnight air courier service for delivery on the next
      Business Day, or (3) on the third Business Day after deposit in the United
      States mail, postage prepaid, in each case to the address of the intended
      addressee and any communication so delivered in person shall be deemed to be
      given when receipted for, or actually received by, Agent or Borrower, as the
      case may be. If given by telecopy, a notice shall be deemed given and received
      when the telecopy is transmitted to the party's telecopy number specified above,
      if confirmation of complete receipt is received by the transmitting party during
      normal business hours or on the next Business Day if not confirmed during normal
      business hours, and an identical notice is also sent simultaneously by overnight
      courier or personal delivery as otherwise provided in this Section 11.1 .
      Either
      party may designate a change of address by written notice to the other by giving
      at least ten (10) days prior written notice of such change of
      address.




Section
      11.2  Amendments
      and Waivers.




No
      amendment or waiver of any provision of the Loan Documents shall be effective
      unless in writing and signed by the party against whom enforcement is
      sought.




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Section
      11.3  Limitation
      on Interest.




It
      is the
      intention of the parties hereto to conform strictly to applicable usury laws.
      Accordingly, all agreements between Borrower, Agent and Lender with respect
      to
      the Loan are hereby expressly limited so that in no event, whether by reason
      of
      acceleration of maturity or otherwise, shall the amount paid or agreed to be
      paid to Lender or charged by Lender for the use, forbearance or detention of
      the
      money to be lent hereunder or otherwise, exceed the maximum amount allowed
      by
      law. If the Loan would be usurious under applicable law, then, notwithstanding
      anything to the contrary in the Loan Documents: (a) the aggregate of all
      consideration which constitutes interest under applicable law that is contracted
      for, taken, reserved, charged or received under the Loan Documents shall under
      no circumstances exceed the maximum amount of interest allowed by applicable
      law, and any excess shall be credited on the Note the holder thereof (or, if
      the
      Note has been paid in full, refunded to Borrower); and (b) if maturity is
      accelerated by reason of an election by Agent or Lender, or in the event of
      any
      prepayment, then any consideration which constitutes interest may never include
      more than the maximum amount allowed by applicable law. In such case, excess
      interest, if any, provided for in the Loan Documents or otherwise, to the extent
      permitted by applicable law, shall be amortized, prorated, allocated and spread
      from the date of advance until payment in full so that the actual rate of
      interest is uniform through the term hereof. If such amortization, proration,
      allocation and spreading is not permitted under applicable law, then such excess
      interest shall be cancelled automatically as of the date of such acceleration
      or
      prepayment and, if theretofore paid, shall be credited on the Note (or, if
      the
      Note has been paid in full, refunded to Borrower). The terms and provisions
      of
      this Section 11.3 shall
      control and supersede every other provision of the Loan Documents. The Loan
      Documents are contracts made under and shall be construed in accordance with
      and
      governed by the laws of the State of Illinois, except that (1) if at any
      time the laws of the United States of America permit Lender to contract for,
      take, reserve, charge or receive a higher rate of interest than is allowed
      by
      the laws of the State of Illinois (whether such federal laws directly so provide
      or refer to the law of any state), then such federal laws shall to such extent
      govern as to the rate of interest which Lender may contract for, take, reserve,
      charge or receive under the Loan Documents and (2) to the extent otherwise
      specified in any of the Loan Documents.




Section
      11.4  Invalid
      Provisions.




If
      any
      provision of any Loan Document is held to be illegal, invalid or unenforceable,
      such provision shall be fully severable; the Loan Documents shall be construed
      and enforced as if such illegal, invalid or unenforceable provision had never
      comprised a part thereof; the remaining provisions thereof shall remain in
      full
      effect and shall not be affected by the illegal, invalid, or unenforceable
      provision or by its severance therefrom; and in lieu of such illegal, invalid
      or
      unenforceable provision there shall be added automatically as a part of such
      Loan Document a provision as similar in terms to such illegal, invalid or
      unenforceable provision as may be possible to be legal, valid and
      enforceable.




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Section
      11.5  Reimbursement
      of Expenses; Portfolio Administration Fee.




(a)  Borrower
      shall pay all expenses incurred by Agent and Lenders in connection with the
      Loan, including, without limitation, (i) reasonable out-of-pocket costs and
      expenses of Agent and Lender in connection with (a) the negotiation,
      preparation, execution and delivery of the Loan Documents and the documents
      and
      instruments referred to therein; (b) due diligence with respect to the
      Collateral and the creation, perfection or protection of Agent's liens on the
      Collateral (including, without limitation, fees and expenses for title and
      lien
      searches, premiums for title insurance and endorsements thereto, amended or
      replacement Security Documents, Uniform Commercial Code financing statements
      or
      other collateral security instruments, title insurance premiums and filing
      and
      recording fees, third party due diligence expenses for the Projects plus travel
      expenses, accounting firm fees, costs of the appraisals and Site Assessments
      (and the environmental consultant), the engineering reports, audit costs and
      costs and fees incurred in connection with arranging, setting up, servicing
      any
      pledged accounts or similar collateral); (c) the negotiation, preparation,
      execution and delivery of any amendment, waiver, restructuring, workout or
      consent relating to any of the Loan Documents, (d) the settlement of any dispute
      regarding condemnation and casualty awards and (e) the preservation of rights
      under and enforcement of the Loan Documents and the documents and instruments
      referred to therein, including any communications or discussions relating to
      any
      action that Borrower shall from time to time request Agent to take, as well
      as
      any restructuring or rescheduling of the Loan, (ii) the reasonable fees,
      expenses and other charges of counsel to Agent and the Lender in connection
      with
      all of the foregoing, (iii) all reasonable fees and expenses of any servicer
      appointed by Agent to service and administer the Loan and its counsel, and
      (iv)
      Agent's or Lender's reasonable travel and other out-of-pocket expenses in
      connection with site visits to the Projects. Borrower shall, upon request,
      promptly reimburse Agent and Lender for all reasonable amounts expended,
      advanced or incurred by Agent and Lender to collect the Note, or to enforce
      the
      rights of Agent and Lender under this Agreement or any other Loan Document,
      or
      to defend or assert the rights and claims of Agent and Lender under the Loan
      Documents or with respect to the Projects (by litigation or other proceedings),
      which amounts will include all reasonable court costs, attorneys' fees and
      expenses, fees of auditors and accountants, and investigation expenses as may
      be
      incurred by Agent and Lender in connection with any such matters (whether or
      not
      litigation is instituted), together with interest at the Default Rate on each
      such amount from the date of disbursement until the date of reimbursement to
      Agent, all of which shall constitute part of the Loan and shall be secured
      by
      the Loan Documents.




(b)  Borrower
      shall also pay to Agent on the first (1st) day of each month during the term
      of
      the Loan, in addition to all other amounts due under the Loan Documents, the
      sum
      of Three Hundred and No/100 Dollars ($300.00), which Agent shall apply against
      the cost of the administration of the Loan.




Section
      11.6  Approvals;
      Third Parties; Conditions.




All
      approval rights retained or exercised by Agent with respect to leases,
      contracts, plans, studies and other matters are solely to facilitate Lender's
      credit underwriting,




EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap
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and
      shall
      not be deemed or construed as a determination that Agent or Lender has passed
      on
      the adequacy thereof for any other purpose and may not be relied upon by
      Borrower or any other Person. This Agreement is for the sole and exclusive
      use
      of Agent, Lender and Borrower and may not be enforced, nor relied upon, by
      any
      Person other than Agent, Lender and Borrower. All conditions of the obligations
      of Agent or Lender hereunder, including the obligation to make advances, are
      imposed solely and exclusively for the benefit of Agent and Lender, and their
      respective successors and assigns, and no other Person shall have standing
      to
      require satisfaction of such conditions or be entitled to assume that Lender
      will refuse to make advances in the absence of strict compliance with any or
      all
      of such conditions, and no other Person shall, under any circumstances, be
      deemed to be a beneficiary of such conditions, any and all of which may be
      freely waived in whole or in part by Agent or Lender, as applicable, at any
      time
      in Agent's or Lender's sole discretion.




Section
      11.7  Lender
      Not in Control; No Partnership.




None
      of
      the covenants or other provisions contained in this Agreement shall, or shall
      be
      deemed to, give Agent or Lender the right or power to exercise control over
      the
      affairs or management of Borrower, the power of Agent and Lender being limited
      to the right to exercise the remedies referred to in the Loan Documents. The
      relationship between Borrower, on the one hand, and Agent and Lender, on the
      other hand, is, and at all times shall remain, solely that of debtor and
      creditor. No covenant or provision of the Loan Documents is intended, nor shall
      it be deemed or construed, to create a partnership, joint venture, agency or
      common interest in profits or income between Agent and Lender, on the one hand,
      and Borrower, on the other hand, or to create an equity in the Projects in
      Lender or Agent. Neither Agent nor Lender either undertakes or assumes any
      responsibility or duty to Borrower or to any other person with respect to the
      Projects or the Loan, except as expressly provided in the Loan Documents; and
      notwithstanding any other provision of the Loan Documents (a) Neither Agent
      nor Lender is nor shall be construed as, a partner, joint venturer, alter ego,
      manager, controlling person or other business associate or participant of any
      kind of Borrower or its stockholders, members, or partners and neither Agent
      nor
      Lender intends to ever assume such status; (b) Neither Agent nor Lender
      shall in any event be liable for any Debts, expenses or losses incurred or
      sustained by Borrower; and (c) Neither Agent nor Lender shall be deemed
      responsible for or a participant in any acts, omissions or decisions of Borrower
      or its stockholders, members, or partners. Agent, and Lender, on the one hand,
      and Borrower, on the other hand, disclaim any intention to create any
      partnership, joint venture, agency or common interest in profits or income
      between Agent and Lender, on the one hand, and Borrower, on the other hand,
      or
      to create an equity in the Projects in Agent or Lender, or any sharing of
      liabilities, losses, costs or expenses.




Section
      11.8  Time
      of the Essence.




Time
      is
      of the essence with respect to this Agreement.




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          Loan Agreemnt Arizona Properties & GE Cap
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Section
      11.9  Successors
      and Assigns.




This
      Agreement shall be binding upon and inure to the benefit of Agent, Lender and
      Borrower and the respective successors and assigns of Agent, Lender and
      Borrower, provided that, except as expressly provided herein, neither Borrower
      nor Guarantor shall, without the prior written consent of Agent, assign any
      rights, duties or obligations hereunder.




Section
      11.10  Renewal,
      Extension or Rearrangement.




All
      provisions of the Loan Documents shall apply with equal effect to each and
      all
      promissory notes and amendments thereof hereinafter executed which in whole
      or
      in part represent a renewal, extension, increase or rearrangement of the Loan.
      For portfolio management purposes, Agent and Lender may elect to divide the
      Loan
      into two or more separate loans evidenced by separate promissory notes so long
      as the payment and other obligations of Borrower are not effectively increased
      or otherwise modified. Borrower agrees to cooperate with Agent and to execute
      such documents as Agent reasonably may request to effect such division of the
      Loan.




Section
      11.11  Waivers;
      Forbearance.




No
      advance of Loan proceeds hereunder shall constitute a waiver of any of the
      conditions to Lender's obligation to make advances nor, in the event Borrower
      is
      unable to satisfy any such condition, shall any such advance have the effect
      of
      precluding Lender or Agent from thereafter requiring such condition to be
      satisfied prior to any future advance to which such condition otherwise applies.
      No course of dealing on the part of Agent or Lender, or their respective
      officers, employees, consultants or agents, nor any failure or delay by Agent
      or
      Lender with respect to exercising any right, power or privilege of Agent or
      Lender under any of the Loan Documents, shall operate as a waiver thereof.
      Any
      forbearance by Agent or Lender in exercising any right or remedy under any
      of
      the Loan Documents, or otherwise afforded by applicable law, shall not be a
      waiver of or preclude the exercise of any right or remedy. Agent's acceptance
      of
      payment of any sum secured by any of the Loan Documents after the due date
      of
      such payment shall not be a waiver of Agent's or Lender's right to either
      require prompt payment when due of all other sums so secured or to declare
      a
      Potential Default for failure to make prompt payment. The procurement of
      insurance or the payment of taxes or other liens or charges by Agent or Lender
      shall not be a waiver of Agent's or Lender's right to accelerate the maturity
      of
      the Loan, nor shall Agent's or Lender's receipt of any awards, proceeds, or
      damages under this Agreement or the Security Documents operate to cure or waive
      Borrower's or Guarantor's **** Potential
      Default in payment of sums secured by any of the Loan Documents.




Section
      11.12  Cumulative
      Rights.




Rights
      and remedies of Agent and Lender under the Loan Documents shall be cumulative,
      and the exercise or partial exercise of any such right or remedy shall not
      preclude the exercise of any other right or remedy.




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Section
      11.13  Singular
      and Plural.




Words
      used in this Agreement and the other Loan Documents in the singular, where
      the
      context so permits, shall be deemed to include the plural and vice versa. The
      definitions of words in the singular in this Agreement and the other Loan
      Documents shall apply to such words when used in the plural where the context
      so
      permits and vice versa.




Section
      11.14  Phrases.




When
      used
      in this Agreement and the other Loan Documents, the phrase "including" shall
      mean "including, but not limited to," the phrase "satisfactory to Agent" or
      "satisfactory to Lender" shall mean "in form and substance satisfactory to
      Agent
      in all respects" or "in form and substance satisfactory to Lender in all
      respects" (as applicable), the phrase "with Agent's consent", "with Agent's
      approval", "with Lender's consent" or "with Lender's approval" shall mean such
      consent or approval at Agent's or Lender's discretion (as applicable), and,
      unless otherwise specifically provided to the contrary herein, the phrase
      "acceptable to Agent" or "acceptable to Lender" shall mean "acceptable to Agent
      at Agent's sole discretion" or "acceptable to Lender at Lender's sole
      discretion" (as applicable).




Section
      11.15  Exhibits
      and Schedules.




The
      exhibits and schedules attached to this Agreement are incorporated herein and
      shall be considered a part of this Agreement for the purposes stated
      herein.




Section
      11.16  Titles
      of Articles, Sections and Subsections.




All
      titles or headings to articles, sections, subsections or other divisions of
      this
      Agreement and the other Loan Documents or the exhibits hereto and thereto are
      only for the convenience of the parties and shall not be construed to have
      any
      effect or meaning with respect to the other content of such articles, sections,
      subsections or other divisions, such other content being controlling as to
      the
      agreement between the parties hereto.




Section
      11.17  Promotional
      Material.




Borrower
      authorizes Agent and Lender to issue press releases, advertisements and other
      promotional materials in connection with Lender's own promotional and marketing
      activities, and describing the Loan in general terms and Lender's and Agents
      participation in the Loan; provided, however, Agent and Lender shall be required
      to secure Borrower's approval of such materials prior to the issuance or
      distribution thereof, which approval shall not be unreasonably withheld. All
      references to Lender or Agent contained in any press release, advertisement
      or
      promotional material issued by Borrower or Affiliate of Borrower shall be
      approved in writing by Agent in advance of issuance.




Section
      11.18  Survival.




All
      of
      the representations, warranties, covenants, and indemnities hereunder, and
      under
      the indemnification provisions of the other Loan Documents shall survive the




EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap
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repayment
      in full of the Loan and the release of the liens evidencing or securing the
      Loan, and shall survive the transfer (by sale, foreclosure, conveyance in lieu
      of foreclosure or otherwise) of any or all right, title and interest in and
      to
      the Projects to any party, whether or not an Affiliate of Borrower.




Section
      11.19  WAIVER
      OF JURY TRIAL.




TO
      THE
      MAXIMUM EXTENT PERMITTED BY LAW, BORROWER, AGENT AND LENDER HEREBY KNOWINGLY,
      VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT
      OF
      ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
      AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
      DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF ANY PARTY OR ANY
      EXERCISE BY ANY PARTY OF THEIR RESPECTIVE RIGHTS UNDER THE LOAN DOCUMENTS OR
      IN
      ANY WAY RELATING TO THE LOAN OR THE PROJECTS (INCLUDING, WITHOUT LIMITATION,
      ANY
      ACTION TO RESCIND OR CANCEL THIS AGREEMENT, AND ANY CLAIM OR DEFENSE ASSERTING
      THAT THIS AGREEMENT WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE).
      THIS WAIVER IS A MATERIAL INDUCEMENT FOR LENDER AND BORROWER TO ENTER THIS
      AGREEMENT.




Section
      11.20  Waiver
      of Punitive or Consequential Damages.




Neither
      Agent, Lender nor Borrower shall be responsible or liable to the other or to
      any
      other Person for any punitive, exemplary or consequential damages which may
      be
      alleged as a result of the Loan or the transaction contemplated hereby,
      including any breach or other Potential Default by any party
      hereto.




Section
      11.21  Governing
      Law.




The
      laws
      of the State of Illinois and of the United States of America shall govern the
      rights and duties of the parties hereto and the validity, construction,
      enforcement and interpretation of the Loan Documents, except to the extent
      otherwise specified in any of the Loan Documents.




Section
      11.22  Entire
      Agreement.




This
      Agreement and the other Loan Documents embody the entire agreement and
      understanding between Agent, Lender and Borrower and supersede all prior
      agreements and understandings between such parties relating to the subject
      matter hereof and thereof. Accordingly, the Loan Documents may not be
      contradicted by evidence of prior, contemporaneous, or subsequent oral
      agreements of the parties. There are no unwritten oral agreements among the
      parties. If any conflict or inconsistency exists between the Commitment and
      this
      Agreement or any of the other Loan Documents, the terms of this Agreement and
      the other Loan Documents shall control.




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Section
      11.23  Counterparts.




This
      Agreement may be executed in multiple counterparts, each of which shall
      constitute an original, but all of which shall constitute one
      document.




Section
      11.24  Venue.




BORROWER
      HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN
      THE COUNTY OF COOK, STATE OF ILLINOIS AND IRREVOCABLY AGREES THAT, SUBJECT
      TO
      AGENT OR LENDER'S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR
      RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN
      SUCH COURTS. BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF
      THE
      AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. BORROWER HEREBY
      WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE
      OF PROCESS MAY BE MADE UPON BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN
      RECEIPT REQUESTED, ADDRESSED TO BORROWER, AT THE ADDRESS SET FORTH IN THIS
      AGREEMENT.




Section
      11.25  Sale
      of Loan, Participation.




Lender
      or
      Agent, at any time and without the consent of Borrower or Guarantor, may grant
      participations in or sell, transfer, assign and convey all or any portion of
      its
      right, title and interest in and to the Loan, this Agreement and the other
      Loan
      Documents, any guaranties given in connection with the Loan and any collateral
      given to secure the Loan. Subject to the limitations of applicable Laws,
      including, but not limited to, Laws governing the rights of the residents of
      the
      Projects and the confidentiality of the records of those residents, Agent and
      Lender shall have the right (but shall be under no obligation) to make available
      to any party for the purpose of granting participations in or selling,
      transferring, assigning or conveying all or any part of the Loan (including
      any
      governmental agency or authority and any prospective bidder at any foreclosure
      sale of any Project) any and all information which Agent or Lender may have
      with
      respect to the Projects and Borrower, whether provided by Borrower, Guarantor
      or
      any third party or obtained as a result of any environmental assessments.
      Borrower and Guarantor agree that, absent gross negligence or willful
      misconduct, Agent and Lender shall have no liability whatsoever as a result
      of
      delivering any such information to any third party, and Borrower and Guarantor,
      on behalf of themselves and their successors and assigns, hereby release and
      discharge Agent and Lender from any and all liability, claims, damages, or
      causes of action, arising out of, connected with or incidental to the delivery
      of any such information to any third party absent gross negligence or willful
      misconduct.




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          Loan Agreemnt Arizona Properties & GE Cap
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Section
      11.26  Limitation
      on Liability of Agent's and Lender's Officers, Employees, etc.




Any
      obligation or liability whatsoever of Agent or Lender which may arise at any
      time under this Agreement or any other Loan Document shall be satisfied, if
      at
      all, out of the Agent's or Lender's assets only. No such obligation or liability
      shall be personally binding upon, nor shall resort for the enforcement thereof
      be had to, the property of any of Agent's or Lender's shareholders, directors,
      officers, employees or agents, regardless of whether such obligation or
      liability is in the nature of contract, tort or otherwise.




Section
      11.27  Effectiveness
      of Facsimile Documents and Signatures.




The
      Loan
      Documents may be transmitted and/or signed by facsimile. The effectiveness
      of
      any such documents and signatures shall, subject to applicable law, have the
      same force and effect as manually signed originals and shall be binding on
      all
      parties to the Loan Documents. Agent may also require that any such documents
      and signatures be confirmed by a manually signed original thereof; provided,
      however, that the failure to request or deliver the same shall not limit the
      effectiveness of any facsimile document or signature.




Section
      11.28  Agency.




Both
      GECC
      and the other Lenders agree that GECC shall act as agent for each Lender in
      all
      dealings with Borrower and Guarantor under or in connection with this Loan
      Agreement and each of the other Loan Documents, including without limitation,
      granting any consents or waivers, taking any enforcements actions, sending
      or
      receiving notices, dealing with collateral, granting releases, accepting
      payments or otherwise. Borrower and Guarantor may rely without question upon
      any
      document signed by GECC as agent for each Lender hereunder or under any other
      Loan Documents. References to "Lender" in this Agreement and in the other Loan
      Documents shall refer to each of GECC and the other financial institutions
      who
      are or hereafter become parties to this Agreement as Lenders, individually,
      or
      to all of GECC and the other financial institutions who are or hereafter become
      parties to this Agreement, collectively, as the context may require; provided
      any and all grants of security interests to a Lender under this Agreement or
      any
      other Loan Document shall be deemed to be a grant to GECC as agent for each
      Lender.









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          Loan Agreemnt Arizona Properties & GE Cap
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EXECUTED
        as of the date first written above.
  
 **LENDER**:
                
                
                
                **GENERAL
                  ELECTRIC CAPITAL CORPORATION**,
                  a
                  Delaware corporation
                
                
                
                
                
                By:
                  /s/ Jim McMahon
                
                Name:
                  Jim McMahon
                
                Its:
                  Vice President
 
 
 **BORROWER**:
                
                
                
                **EMERITUS
                  PROPERTIES-ARKANSAS, LLC**,
                  a
                  Delaware limited liability companyBy:
              EMERITUS
                  CORPORATION, a Washington corporation, its sole memberBy:
                  /s/ Raymond R. Brandstrom
                Name:
                  Raymond R. Brandstrom
                Its:
                  Vice President of Finance
 
 
 **AGENT**:
                
                **GENERAL
                  ELECTRIC CAPITAL CORPORATION**,
                  a
                  Delaware corporation
                
                
                
                By:
                  /s/ Jim McMahon
                Name:
                  Jim McMahon
                Its:
                  Vice President







Signature
            Page to Loan Agreement
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


**EXHIBIT
      A-1**




**The
      Project**










Name
                of Facility:
            Trillium
                ParkAddress
                of Land:
            1160
                Hogan Lane, Conway, ArkansasMaster
                Tenant:
            Emeritus
                CorporationNumber
                of Independent/Assisted Living Beds/Units:
            80
                units (independent living and assisted living)Number
                of Parking Spaces:
            56
                regular, 2 handicappedLegal
                Description of Land:
            See
                Attached








EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


TRILLIUM
      PARK


LEGAL
      DESCRIPTION





Lot
      1,
      Glenwood Place Phase 2, to the City of Conway, Arkansas as shown on plat of
      record in plat book I, page 98, records of Faulkner County,
      Arkansas.











EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


**EXHIBIT
      A-2**




**The
      Project**







Name
                of Facility:
            Willow
                Brook Retirement CommunityAddress
                of Land:
            5501
                Duncan Road, Fort Smith, ArkansasMaster
                Tenant:
            Emeritus
                CorporationNumber
                of Independent/Assisted Living Beds/Units:
            93
                units (retirement and residential care)Number
                of Parking Spaces:
            48
                regular, 4 handicappedLegal
                Description of Land:
            See
                Attached








EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


WILLOWBROOK


LEGAL
      DESCRIPTION





Lot
      1,
      Camlu Addition to the City of Fort Smith, Arkansas, according to plat filed
      May
      14, 1990.











EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


**EXHIBIT
      A-3**




**The
      Project**










Name
                of Facility:
            WildflowerAddress
                of Land:
            240
                S. Ingelwood Avenue, Russellville, ArkansasMaster
                Tenant:
            Emeritus
                CorporationNumber
                of Independent/Assisted Living Beds/Units:
            80
                units (retirement and residential care)Number
                of Parking Spaces:
            58
                regular, 2 handicappedLegal
                Description of Land:
            See
                Attached








EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


WILDFLOWER


LEGAL
      DESCRIPTION





A
      part of
      the NE 1 /4
      of the
      SW 1 /4
      of
      Section 6, Township 7 North, Range 20 West, Russellville, Pope County, Arkansas,
      more particularly described as follows: Commencing at the Southeast Corner
      of
      said NE 1 /4
      of the
      SW 1 /4;
      thence S 89° 59' 41" West, 38.80 feet to a point on the West right of way of
      South Inglewood Avenue; thence N 0° 13' 30" East, along said right of way, 91.14
      feet to the Point of Beginning; thence S 89° 59' 41" West, 599.99 feet to the SE
      Corner of Lot 16, Craigwood Square Office Park to the City of Russellville,
      Arkansas; thence N 13° 15' 00" East, along the East line of Lots 16 and 15 of
      said Craigwood Square Office Park, 311.24 feet; thence N 47° 14' 34" East, along
      the Southerly line of Lots 15, 14, and 13 of said Craigwood Square Office Park,
      243.66 feet; thence South 90° 00' 00" East, 183.87 feet to a point on the
      Southerly line of Lot 4 of said Craigwood Square Office Park; thence S 66° 30'
      04" East, along said Southerly line, 183.89 feet to the SE Corner of said Lot
      4
      and a point on the West Right-of-Way of South Inglewood Avenue; thence S 00° 24'
      04" West, along said Right-of-Way 395.00 feet to the Point of
      Beginning.





And,





A
      part of
      Lot 4, Craigwood Square Office Park to the City of Russellville, Arkansas,
      more
      particularly described as: Commencing at the Southeast Corner of said NE 1⁄4 of
      the SW 1⁄4 ; thence South 89°59' 41" West, 38.80 feet to a point on the West
      Right-of-Way line of South Inglewood Avenue; thence North 00° 13' 30" East,
      along said Right of Way line, 91.14 feet to a point; thence along said
      Right-of-Way line North 00° 24' 04" East 395.00 feet to the Point of Beginning;
      thence North 66° 30' 04" West 183.89 feet; thence South 89° 46' 26" East 169.15
      feet to a point located on said West Right-of-Way line of South Inglewood
      Avenue; thence along said West Right-of-Way line South 00° 24' 04" West 72.81
      feet to the Point of Beginning.











EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


**EXHIBIT
      B**









**Interest
      Holder Certificate and Agreement**







To:  General
      Electric Capital Corporation, as Agent


500
      West
      Monroe Street


Suite
      1500


Chicago,
      Illinois 60661








Date: ***_________________***





Re:
            Loan
                Agreement dated as of ___________ ____, 20__ among
                _______________________ ("Borrower"),
                and General Electric Capital Corporation, a Delaware corporation,
                as Agent
                and, in its individual capacity as a Lender, "GECC",
                and the other financial institutions who are or become parties to
                said
                Loan Agreement as lenders (collectively with GECC, the "Lender"),
                (as it may be amended from time to time, the "Loan
                Agreement")




To
      induce
      Agent and Lender to enter into the Loan Agreement with Borrower, and for other
      good and valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, the undersigned represents, warrants, covenants and agrees for
      the
      benefit of Agent and Lender as follows:




1.  The
      undersigned [ **members** ] **** [ **partners** ]
      (collectively, " Owners "
      and in
      their individual capacity, " Owner ")
      represent and warrant to Agent and Lender that the Owners own, in the aggregate,
      100% of the direct ownership interests in Borrower, and that neither Borrower
      nor any Owner is or shall be and, after due inquiry, that no Person who owns
      a
      controlling interest in or otherwise controls Borrower or any Owner, is or
      shall
      be, (a) listed on the Specially Designated Nationals and Blocked Persons List
      (the " SDN
      List ")
      maintained by the Office of Foreign Assets Control (" OFAC "),
      Department of the Treasury, and/or on any other similar publicly-available
      United States government list (" Other
      Lists "
      and,
      collectively with the SDN List, the " Lists ")
      maintained by the OFAC pursuant to any authorizing statute, Executive Order
      or
      regulation (collectively, " OFAC
      Laws and Regulations ");
      or
      (b) a Person (a " Designated
      Person ")
      either
      (i) included within the term "designated national" as defined in the Cuban
      Assets Control Regulations, 31 C.F.R. Part 515, or (ii) designated under
      Sections 1(a), 1(b), 1(c) or 1(d) of Executive Order No. 13224, 66 Fed. Reg.
      49,079 (published September 25, ** 2001),
      or
      similarly designated under any related enabling legislation or any other similar
      Executive Orders (collectively, the " Executive
      Orders ").
      The
      OFAC Laws and Regulations and the Executive Orders are collectively referred
      to
      in this Agreement as the " Anti
      Terrorism Laws ".
      Each
      Owner and Borrower shall be required, and shall take reasonable measures to
      ensure compliance with such requirement, that no Person who owns any other
      direct interest in any Owner or Borrower is or shall be listed on any of the
      Lists or is or shall be a Designated Person. This




Exhibit
          B-
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


Section
      1
      shall not apply to any Person to the extent that such Person's interest in
      Borrower is through a U.S. Publicly-Traded Entity. As used in this Agreement
      " U.S.
      Publicly-Traded Entity "
      means a
      Person (other than an individual) whose securities are listed on a national
      securities exchange, or quoted on an automated quotation system, in the United
      States, or a wholly-owned subsidiary of such a Person. From time to time upon
      the written request of Agent, each Owner shall deliver to Borrower a schedule
      of
      the name, legal domicile address and (for entities) place of organization of
      each holder of a controlling ownership interest in such Owner.




2.  Each
      Owner represents and warrants that all evidence of identity provided by it
      to
      Borrower is genuine and that all related information is accurate and that it
      has
      acquired, or is acquiring, and shall hold, its interest in Borrower for its
      own
      account, risk and beneficial interest and without the obligation or intention
      to
      sell, distribute, assign or transfer all or a portion of such interest to any
      other Person.




3.  Each
      Owner represents and warrants that it has taken, and agrees that it shall
      continue to take, reasonable measures appropriate to the circumstances (and
      in
      any event as required by law), with respect to each holder of a controlling
      ownership interest in such Owner and Borrower, to assure that funds invested
      by
      such holders in Borrower are derived from legal sources (the " Anti
      Money Laundering Measures ").
      The
      Anti Money Laundering Measures have been and shall be undertaken in accordance
      with the Bank Secrecy Act, 31 U.S.C. §§ 5311 *et
      seq.* ("BSA"),
      to the extent applicable and all applicable laws, regulations and government
      guidance on BSA compliance and on the prevention and detection of money
      laundering violations under 18 U.S.C. §§ 1956 and 1957 (collectively,
      " Anti
      Money Laundering  Laws ").




4.  Each
      Owner represents and warrants, to its knowledge after making due inquiry, that
      neither it nor any holder of a controlling ownership interest in any Owner
      or in
      Borrower (a) is under investigation by any governmental authority for, or has
      been charged with, or convicted of, money laundering under 18 U.S.C.
§§ 1956 and 1957, drug trafficking, terrorist related activities, other
      money laundering predicate crimes or any violation of the BSA, (b) has been
      assessed civil penalties under Anti Money Laundering Laws, or (c) has had its
      funds seized or forfeited in an action under any Anti Money Laundering
      Laws.




5.  Each
      Owner shall immediately notify Agent if such Owner obtains actual knowledge
      that
      Borrower, any Owner, or any holder of a direct or indirect interest in Borrower
      or any Owner, or any director, manager or officer of any of them, (a) has been
      listed on any of the Lists, (b) has become a Designated Person, (c) is under
      investigation by any governmental authority for, or has been charged with or
      convicted of, money laundering, drug trafficking, terrorist related activities,
      other money laundering predicate crimes, or any violation of the BSA, (d) has
      been assessed civil penalties under any Anti Money Laundering Laws, or (e)
      has
      had funds seized or forfeited in an action under any Anti Money Laundering
      Laws.




6.  Each
      Owner acknowledges and agrees that if any of the representations or warranties
      of the undersigned set forth herein are false, misleading or incorrect in any




Exhibit
          B-2
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


material
      respect as of the date made, Agent, in addition to all of its other rights
      and
      remedies, may declare that an Event of Default exists under the Loan Agreement.
      Each Owner agrees to notify Borrower and Agent promptly of any change in facts
      or circumstances that causes any of the representations or warranties contained
      herein to the untrue.




7.  Each
      Owner represents and warrants that it has taken, and agrees that it shall
      continue to take, reasonable measures, appropriate to the circumstances (and
      in
      any event as required by law), to ensure that it and Borrower are and shall
      be
      in compliance with all current and future applicable Anti-Money Laundering
      Laws,
      and other applicable laws, regulations and government guidance for the
      prevention of terrorism, terrorist financing and drug trafficking.




8.  In
      addition to the representations, warranties and covenants regarding full
      compliance with Anti-Terrorism Laws and Anti-Money Laundering Laws, each Owner
      represents and warranties that it is, and agrees that it shall remain, in
      compliance in all material respects with all other laws and requirements
      applicable to it, its business and its assets, the violation of which would
      have
      a material adverse effect on its ability to perform its obligations under the
      Borrower's operating agreement or on the Borrower's ability to perform its
      obligations under the Loan Agreement.




9.  Each
      Owner shall cause to be made, all payments owed by Borrower to Agent by check
      or
      wire transfer drawn on an account owned by Borrower, or by an Owner or another
      Person approved in writing in advance by Agent, and maintained at a banking
      institution organized under the laws of the United States or one of its
      constituent States, or at a federally regulated U.S. branch or agency of a
      foreign bank, or at a federally regulated securities broker dealer.




10.  If
      the
      applicable Anti-Money Laundering Measures do not provide, in Agent's reasonable
      determination, adequate means to assure that Persons that are listed on any
      of
      the Lists, or that are Designated Persons, or whose funds are not derived from
      legal sources, are excluded from becoming or being direct or indirect investors
      in any Owner or Borrower, Agent shall notify Borrower of its determination
      in
      accordance with the notice provisions in the Loan Agreement. If such inadequate
      Anti-Money Laundering Measures are not modified in a commercially reasonable
      manner to Agent's reasonable satisfaction within thirty (30) days following
      notice to Borrower of Agent's determination, each of the undersigned
      acknowledges that Agent, in addition to all of its other rights and remedies,
      may declare that an Event of Default exists.




11.  No
      transfer of any direct interest in Borrower or of any controlling ownership
      interest in Owner shall be effective unless and until the transferor has
      provided a written certification to Borrower that, after making due inquiry,
      (a) the transferee or any Person who owns a controlling interest in, or
      otherwise controls, the transferee is not listed on any of the Lists and is
      not
      a Designated Person, and the transferee has taken reasonable measures to assure
      that no holder of any other controlling ownership interest in the transferee
      is
      so listed or is so designated; provided, however, that none of the foregoing
      shall apply to any Person




Exhibit
          B-3
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


which
      is,
      or to the extent that such interest is through, a U.S. Publicly-Traded Entity,
      and (b) the funds for investment in Owner or Borrower are derived from
      legal sources.




12.  Each
      Owner acknowledges and agrees that if at any time Borrower or Agent reasonably
      believes that such Owner has breached its representations and warranties or
      its
      agreements set forth herein, Borrower has the right or may be obligated to
      block
      such Owner's investment in Borrower, to prohibit additional investments, to
      segregate the assets constituting such Owner's the investment in accordance
      with
      applicable Anti-Terrorism Laws, to decline any redemption request or to redeem
      the Investor's investment. Each Owner further acknowledges that it will have
      no
      claim against Borrower, Lender or Agent or any of their respective affiliates
      or
      agents for any form of damages as a result of any of the foregoing
      actions.




13.  Each
      Owner shall require each Person that proposes to become a holder of any direct
      interest in Borrower or of any controlling ownership interest in Owner to sign
      an agreement substantially in the form of this Agreement and to deliver the
      same
      to Borrower.




14.  Capitalized
      terms used in this Agreement and not defined in this Agreement shall have the
      meanings assigned to them in the Loan Agreement. Any notice sent to Agent under
      this Agreement shall be sent in accordance with the notice provisions set forth
      in the Loan Agreement.




15.  The
      undersigned acknowledges that (a) Lender is relying on this Agreement and
      its rights hereunder in entering into the Loan Agreement and in advancing
      proceeds of the Loan, and (b) any terms hereof applying to more than one of
      the undersigned are made on a joint and several basis hereunder. This Agreement
      may be executed in counterparts.




Exhibit
          B-4
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


IN
      WITNESS WHEREOF, each of the undersigned have executed and delivered this
      Agreement as of the date set forth above.







OWNER :








Exhibit
              B-5
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


**EXHIBIT
      C**




**INTELLECTUAL
      PROPERTY**




None
      but
      Guarantor holds or has applied for registration of the following service marks,
      some of all of which may be used by Guarantor and/or Borrower in connection
      with
      the ownership and operation of the Projects:





**MARK**
            **STATUS**
            **REG.
                NO.**
            **REG.
                DATE**
            **APP.
                NO.**EMERITUS
            Registered
            2333116
            March
                21, 2000
            75725728EMERITUS
                ASSISTED LIVING COMMUNITIES SUPPORT ALZHEIMER'S EDUCATION & AWARENESS
                & Design
            Pending
            
            
            78530077EMERITUS
                SIGNATURE SERVICES
            Registered
            2840150
            May
                11, 2004
            78191071FLEXASSIST
            Registered
            2041109
            February
                25, 1997
            74614956JOIN
                THEIR JOURNEY
            Registered
            2979178
            July
                26, 2005
            78292378KINGSLEY
                PLACE
            Registered
            2283749
            October
                5, 1999
            75304451LOYALTON
            Registered
            2443087
            April
                10, 2001
            75534864THE
                START OF SOMETHING WONDERFUL
            Registered
            2249729
            June
                1, 1999
            75503469











EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


**EXHIBIT
      D**




**OWNERSHIP
      OF BORROWER**







Guarantor
      is the sole member of Borrower and accordingly owns 100% of the membership
      interests in Borrower.








EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


**EXHIBIT
      E**




**PROVIDER
      PAYMENT/REIMBURSEMENT PROGRAMS**







NONE








EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


**EXHIBIT
      F**




**GOVERNMENTAL
      APPROVALS**







Willow
      Brook, Fort Smith





·
            Elevator
                Certificate of Operation issued by the Arkansas Department of
                Labor


·
            Elevator
                Certificate of Operation issued by the Arkansas Department of
                Labor


·
            Mechanical
                Room Certificate issued by the Arkansas Department of
                Labor


·
            Mechanical
                Room Certificate issued by the Arkansas Department of
                Labor


·
            Mechanical
                Room Certificate issued by the Arkansas Department of
                Labor


·
            Mechanical
                Room Certificate issued by the Arkansas Department of
                Labor


·
            Mechanical
                Room Certificate issued by the Arkansas Department of
                Labor


·
            Business
                Permit issued by the City of Fort Smith,
                Arkansas


·
            Food
                Permit issued by the Arkansas Department of
                Health


·
            Residential
                Care Facility License issued by the Arkansas Department of Human
                Services





Wildflower,
      Russellville





·
            Boiler
                Room Certificate issued by the Arkansas Department of
                Labor


·
            Boiler
                Room Certificate issued by the Arkansas Department of
                Labor


·
            Boiler
                Room Certificate issued by the Arkansas Department of
                Labor


·
            Boiler
                Room Certificate issued by the Arkansas Department of
                Labor


·
            Boiler
                Room Certificate issued by the Arkansas Department of
                Labor


·
            Elevator
                Certificate of Operation issued by the Arkansas Department of
                Labor


·
            Elevator
                Certificate of Operation issued by the Arkansas Department of
                Labor


·
            Business
                Permit issued by the City of Russellville,
                Arkansas


·
            Residential
                Care Facility License issued by the Arkansas Department of Human
                Services





Trillium
      Park, Conway





·
            Mechanical
                Room Certificate issued by the Arkansas Department of
                Labor


·
            Mechanical
                Room Certificate issued by the Arkansas Department of
                Labor


·
            Mechanical
                Room Certificate issued by the Arkansas Department of
                Labor


·
            Assisted
                Living I Facility License issued by the Arkansas Department of Human
                Services








EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


**SCHEDULE
      2.1**




**ADVANCE
      CONDITIONS**




Part
      A -
      Conditions to Initial Advance


Part
      B -
      Application of Insurance Proceeds





**PART
      A**




**CONDITIONS
      TO INITIAL ADVANCE**




The
      initial advance of the Loan shall be subject to the terms of the Term Sheet,
      and
      Agent's receipt, review, approval and/or confirmation of the following items
      set
      forth in Part A of this Schedule
      2.1 ,
      at
      Borrower's cost and expense, each in form and content satisfactory to Agent
      in
      its sole discretion:




1.  Loan
      Documents .
      The
      following Loan Documents:




(a)
            the
                Loan Agreement executed by Borrower




(b)
            Promissory
                Note




(c)
            the
                Security Documents executed by
                Borrower




(d)
            such
                Uniform Commercial Code financing statements as Agent may
                require




(e)
            an
                Environmental Indemnity Agreement executed by Borrower and
                Guarantor




(f)
            the
                Business Associate Agreement executed by Borrower and
                Guarantor.




(g)
            a
                Payment and Performance Guaranty executed by
                Guarantor




(h)
            the
                Assignment of Membership Interests




(i)
            the
                Subordination, Attornment and Security Agreement ("**Subordination
                Agreement**")




2.
            Loan
                Origination Fee.
                The loan origination fee of $159,300, which fee shall be non-refundable
                and shall be deemed fully earned upon receipt.




3.
            Title
                Insurance Policies.
                An ALTA (or equivalent) mortgagee policy or policies of title insurance
                in
                the maximum amount of the Loan, with reinsurance and endorsements
                as Agent
                may require, containing no exceptions to title (printed or otherwise)
                which are unacceptable to Agent, and insuring that the applicable
                Security
                Documents are a first-priority Lien on the Projects and related collateral
                (the "**Title
                Policy**").




Schedule
            2.1-1
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


4.
            Organizational
                and Authority Documents.
                Certified copies of all documents evidencing the formation, organization,
                valid existence, good standing, and due authorization of and for
                Borrower
                and Guarantor for the execution, delivery, and performance of the
                Loan
                Documents by Borrower and Guarantor, as
                applicable.




5.
            Legal
                Opinions.
                Legal opinions issued by counsel for Borrower and Guarantor, opining
                as to
                the due organization, valid existence and good standing of Borrower
                and
                Guarantor, and the due authorization, execution, delivery, enforceability
                and validity of the Loan Documents with respect to Borrower and Guarantor;
                that the Loan, as reflected in the Loan Documents is not usurious;
                and as
                to such other matters as Agent and Agent's counsel reasonably may
                specify.




6.
            Searches.
                Current Uniform Commercial Code, tax, judgment lien and litigation
                searches for Borrower, Guarantor and the immediately preceding owners
                of
                the Projects.




7.
            Insurance.
                Evidence of insurance as required by this Agreement, and conforming
                in all
                respects to the requirements of
                Agent.




8.
            Survey.
                Three (3) originals of a current "as-built" survey of the Projects,
                dated
                or updated to a date not earlier than forty-five (45) days prior
                to the
                Closing Date, prepared by a registered land surveyor in accordance
                with
                the American Land Title Association/ American Congress on Surveying
                and
                Mapping Standards and containing Agent's approved form of certification
                in
                favor of Agent and the title insurer. The surveyor shall certify
                that no
                portion of any Project is in a flood hazard area as identified by
                the
                Secretary of Housing and Urban Development (or, if any portion of
                any
                Project is in such a flood hazard area, then the survey shall certify
                to
                the hazard designation of the affected portion of the property,)
                and shall
                conform to Agent's current survey requirements. The survey shall
                be
                sufficient for the title insurer to remove the general survey
                exception.




9.
            Property
                Condition Report.
                A
                current engineering report or architect's certificate with respect
                to the
                Projects, covering, among other matters, inspection of heating and
                cooling
                systems, roof and structural details and showing no failure of compliance
                with building plans and specifications, applicable legal requirements
                (including requirements of the Americans with Disabilities Act) and
                fire,
                safety and health standards. As requested by Agent, such report shall
                also
                include an assessment of each Project's tolerance for earthquake
                and
                seismic activity.




10.
            Environmental
                Reports.
                A
                current Site Assessment for each
                Project.




Schedule
            2.1-2
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


11.
            Occupancy
                Summary.
                A
                current occupancy summary of the Projects, certified by Borrower
                or the
                current owner of the Projects. Such occupancy summary shall include
                the
                following information: (a) tenant names and, if applicable, guarantor
                names but only to the extent such names can be disclosed by Borrower
                without violating applicable Laws governing the confidentiality of
                resident records/information including, but not limited to, HIPAA;
                (b) unit/suite numbers; (c) for non-residential tenants, area of
                each demised premises and total area of the Projects (stated in net
                rentable square feet); (d) rental rate (including escalations)
                (stated in gross amount and in amount per net rentable square foot
                per
                year); (e) for non-residential tenants, lease term (commencement,
                expiration and renewal options); (f) for non-residential tenants,
                expense pass-throughs; (g) for non-residential tenants,
                cancellation/termination provisions; (h) security deposit; and
                (i) for non-residential tenants, material operating covenants and
                co-tenancy clauses. All leases of, subleases of and occupancy agreements
                affecting the Projects or any part thereof now existing or hereafter
                executed (including all patient and resident care agreements and
                service
                agreements which include an occupancy agreement) and all amendments,
                modifications or supplements thereto ("**Leases**")
                shall be in form and substance, with tenants and for uses acceptable
                to
                Agent; provided, however, this requirement shall be met with respect
                to
                residential tenants provided Borrower uses the form of residential
                Lease
                submitted to, and approved by, Agent prior to the Closing Date without
                material modification, other than modifications made in accordance
                with
                statutory, regulatory or other legal requirements; and, provided,
                further,
                with respect to non-residential tenants (excluding the tenant under
                the
                Master Lease) to whom Borrower or the tenant under the Master Lease
                has
                leased less than 500 square feet, no such approval shall be required.
                On
                the Closing Date: (a) all Leases shall be in full force and effect;
                and
                (b) Borrower shall have submitted a revised and recertified occupancy
                summary.




12.
            Master
                Lease.
                A
                copy of the Master Lease, certified by Borrower as being true, correct
                and
                complete.




13.
            Tax
                Impounds.
                Borrower's deposit with Agent of the amount required by Agent to
                impound
                for Taxes and to fund any other required escrows or reserves.




14.
            Compliance
                With Laws.
                Evidence that the Projects and the operation thereof comply with
                all legal
                requirements, including that all requisite certificates of occupancy,
                building permits, and other licenses, certificates, approvals or
                consents
                required of any governmental authority have been issued without variance
                or condition and that there is no litigation, action, citation, injunctive
                proceedings, or like matter pending or threatened with respect to
                the
                validity of such matters. If




Schedule
          2.1 -3
 
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


title
      insurance with respect to the Projects described in item 3 above does not
      include a Zoning 3.1 (with parking) endorsement because such an endorsement
      is
      not available in the State where the applicable Project is located, then
      Borrower shall furnish to Agent a zoning letter from the applicable municipal
      agency with respect to the Projects. Borrower shall, upon request of Agent,
      furnish Agent with utility letters from applicable service
      providers.




15.
            No
                Casualty or Condemnation.
                No condemnation or adverse zoning or usage change proceeding shall
                have
                occurred or shall have been threatened against any Project; the Projects
                shall not have suffered any significant damage by fire or other casualty
                which has not been repaired; no law, regulation, ordinance, moratorium,
                injunctive proceeding, restriction, litigation, action, citation
                or
                similar proceeding or matter shall have been enacted, adopted, or
                threatened by any governmental authority, which would, in Agent's
                reasonable judgment, result in a Material Adverse
                Change.




16.
            Audit
                Requirement.
                The annualized Net Operating Income of the Projects equals or exceeds
                $1,580,000 for the six month period ending August 31,
                2005.




17.
            Borrower's
                Equity.
                Borrower's cash investment in the Projects is at least $2,170,000
                ("**Borrower's
                Equity**").




18.
            Broker's
                Fees.
                All fees and commissions payable to real estate brokers, mortgage
                brokers,
                or any other brokers or agents in connection with the Loan or the
                acquisition of the Projects have been paid, such evidence to be
                accompanied by any waivers or indemnifications deemed necessary by
                Agent.




19.
            Costs
                and Expenses.
                Payment of Agent's costs and expenses in underwriting, documenting,
                and
                closing the transaction, including fees and expenses of Agent's inspecting
                engineers, consultants and counsel.




20.
            Representations
                and Warranties.
                The representations and warranties contained in this Loan Agreement
                and in
                all other Loan Documents are true and correct in all material
                respects.




21.
            No
                Defaults.
                No Potential Default or Event of Default or default under any of
                the Loan
                Documents shall have occurred or
                exist.




22.
            Appraisal.
                Agent shall obtain an appraisal report for the Projects, in form
                and
                content acceptable to Agent, prepared by an independent MAI appraiser
                in
                accordance with the Financial Institutions Reform, Recovery and
                Enforcement Act ("**FIRREA**")
                and the regulations promulgated pursuant to such
                act.




Schedule
          2.1-4


23.
            Acquisition
                Documents.
                Agent shall have reviewed and approved the purchase contracts for
                the
                Projects and the closing statements with respect thereto (the
                "**Acquisition
                Documents**").




24.
            Agent
                shall have received such other items as Agent may reasonably
                require.




**PART
      B**




**APPLICATION
      OF INSURANCE PROCEEDS**




Insurance
      proceeds applied to restoration will be advanced in accordance with Section
      3.2 and on
      the following terms and conditions:




1.  Each
      request for such an advance shall specify the amount requested, shall be on
      forms satisfactory to Agent, and shall be accompanied by appropriate invoices,
      bills paid affidavits, lien waivers, title updates, endorsements to the title
      insurance, and other documents as may be required by Agent. Such advances may
      be
      made, at Agent's election, either: (a) in reimbursement for expenses paid
      by Borrower, or (b) for payment of expenses incurred and invoiced but not
      yet paid by Borrower, or (c) with respect to non-residential tenant
      restorations, by funding allowances for tenant improvements undertaken to be
      constructed by non-residential tenants and completed in accordance with Leases.
      Agent, at its option and without further direction from Borrower, may disburse
      any restorations advance to the Person to whom payment is due or through an
      escrow satisfactory to Agent. Borrower hereby irrevocably directs and authorizes
      Agent to so advance the insurance proceeds. Agent may, at Borrower's expense,
      conduct an audit, inspection, or review of the Projects to confirm the amount
      of
      the requested restoration advance.




2.  Borrower
      shall have submitted and Agent shall have approved, which approval shall not
      be
      unreasonably withheld, (a) the restorations to be completed, (b) the
      plans and specifications for such restorations, which plans and specifications
      may not be changed in any material respect without Agent's prior written
      consent, which consent shall not be unreasonably withheld and (c) if
      requested by Agent, each contract or subcontract for an amount in excess of
      Fifty Thousand Dollars ($50,000) for the performance of labor or the furnishing
      of materials for such restorations.




3.  Borrower
      shall have submitted and Agent shall have approved the time schedule for
      completing the restorations, which approval shall not be unreasonably withheld.
      After Agent's approval of a detailed budget, such budget may not be changed
      in
      any material respect without Agent's prior written consent, which consent shall
      not be unreasonably withheld. If the estimated cost of such restorations exceeds
      the unadvanced portion of the amount allocated for such restorations in the
      approved budget, then Borrower shall comply with the requirements of Section
      9
      hereof.




4.  All
      restorations constructed by Borrower prior to the date a restorations advance
      is
      requested shall be completed to the satisfaction of Agent and Agent's engineer




Schedule
          2.1 - 5
 
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


and
      in
      accordance with the plans and budget for such restorations, as approved by
      Agent
      in accordance with the terms hereof, and all legal
      requirements.




5.  Borrower
      shall not use any portion of any restorations advance for payment of any other
      cost except as specifically set forth in a request for advance approved by
      Agent
      in writing.




6.  Each
      restorations advance, except for a final restorations advance, shall be in
      the
      amount of actual costs incurred less ten
      percent (10%) of such costs as retainage to be advanced as part of a final
      restorations advance.




7.  Agent
      shall not under any circumstances be obligated to make any restorations advance
      after nine (9) months after the casualty or ninety (90) days prior to the
      Maturity Date.




8.  No
      funds
      will be advanced for materials stored at the Projects unless Borrower furnishes
      Agent satisfactory evidence that such materials are properly stored and secured
      at the Projects.




9.  Borrower
      shall have delivered evidence satisfactory to Agent, in its sole discretion,
      that the amount remaining to be disbursed for such restorations is sufficient
      to
      complete the restorations or, if insufficient, Borrower shall have deposited
      with Agent funds necessary to complete the restorations (Borrower's deposit
      to
      be disbursed before any balance of the additional advance).







Schedule
            2.1 - 6
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


**SCHEDULE
      2.3**




**AMORTIZATION
      SCHEDULE**




**Emeritus**
            
            First
                Payment Date
            1/1/2006
            
            Payment
            $112,082.33
            ($112,082.33)Original
                Balance
            $15,930,000
            
            Coupon
            6.95000%
            300Maturity
                Date
            11/30/2012
            
            Int
                Conv
            Actual/360





**Period**
            **Date**
            **Days**
            **Ending
                Balance**
            **Payment**
            **Interest**
            **Principal**
            **Prepayment**
            **Balloon
                Amount**0
            12/1/2005
            
            15,930,000.001
            1/1/2006
            31
            15,913,254.30
            112,082.33
            95,336.63
            16,745.71
            0.00
            0.002
            2/1/2006
            31
            15,896,408.37
            112,082.33
            95,236.41
            16,845.92
            0.00
            0.003
            3/1/2006
            28
            15,870,254.96
            112,082.33
            85,928.92
            26,153.41
            0.00
            0.004
            4/1/2006
            31
            15,853,151.70
            112,082.33
            94,979.07
            17,103.26
            0.00
            0.005
            5/1/2006
            30
            15,832,885.54
            112,082.33
            91,816.17
            20,266.16
            0.00
            0.006
            6/1/2006
            31
            15,815,558.63
            112,082.33
            94,755.42
            17,326.91
            0.00
            0.007
            7/1/2006
            30
            15,795,074.74
            112,082.33
            91,598.44
            20,483.89
            0.00
            0.008
            8/1/2006
            31
            15,777,521.55
            112,082.33
            94,529.13
            17,553.20
            0.00
            0.009
            9/1/2006
            31
            15,759,863.30
            112,082.33
            94,424.08
            17,658.25
            0.00
            0.0010
            10/1/2006
            30
            15,739,056.85
            112,082.33
            91,275.87
            20,806.46
            0.00
            0.0011
            11/1/2006
            31
            15,721,168.40
            112,082.33
            94,193.88
            17,888.45
            0.00
            0.0012
            12/1/2006
            30
            15,700,137.84
            112,082.33
            91,051.77
            21,030.56
            0.00
            0.0013
            1/1/2007
            31
            15,682,016.47
            112,082.33
            93,960.96
            18,121.37
            0.00
            0.0014
            2/1/2007
            31
            15,663,786.65
            112,082.33
            93,852.51
            18,229.82
            0.00
            0.0015
            3/1/2007
            28
            15,636,375.79
            112,082.33
            84,671.47
            27,410.86
            0.00
            0.0016
            4/1/2007
            31
            15,617,872.83
            112,082.33
            93,579.37
            18,502.96
            0.00
            0.0017
            5/1/2007
            30
            15,596,244.01
            112,082.33
            90,453.51
            21,628.82
            0.00
            0.0018
            6/1/2007
            31
            15,577,500.87
            112,082.33
            93,339.19
            18,743.14
            0.00
            0.0019
            7/1/2007
            30
            15,555,638.23
            112,082.33
            90,219.69
            21,862.64
            0.00
            0.0020
            8/1/2007
            31
            15,536,652.08
            112,082.33
            93,096.17
            18,986.16
            0.00
            0.0021
            9/1/2007
            31
            15,517,552.29
            112,082.33
            92,982.55
            19,099.78
            0.00
            0.0022
            10/1/2007
            30
            15,495,342.45
            112,082.33
            89,872.49
            22,209.84
            0.00
            0.0023
            11/1/2007
            31
            15,475,995.44
            112,082.33
            92,735.32
            19,347.01
            0.00
            0.0024
            12/1/2007
            30
            15,453,544.92
            112,082.33
            89,631.81
            22,450.52
            0.00
            0.0025
            1/1/2008
            31
            15,433,947.76
            112,082.33
            92,485.17
            19,597.16
            0.00
            0.00


Schedule
          2.3 - 1
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


**Period**
            **Date**
            **Days**
            **Ending
                Balance**
            **Payment**
            **Interest**
            **Principal**
            **Prepayment**
            **Balloon
                Amount**




26
            2/1/2008
            31
            15,414,233.32
            112,082.33
            92,367.89
            19,714.44
            0.00
            0.0027
            3/1/2008
            29
            15,388,449.29
            112,082.33
            86,298.30
            25,784.03
            0.00
            0.0028
            4/1/2008
            31
            15,368,462.56
            112,082.33
            92,095.59
            19,986.74
            0.00
            0.0029
            5/1/2008
            30
            15,345,389.24
            112,082.33
            89,009.01
            23,073.32
            0.00
            0.0030
            6/1/2008
            31
            15,325,144.80
            112,082.33
            91,837.89
            20,244.44
            0.00
            0.0031
            7/1/2008
            30
            15,301,820.60
            112,082.33
            88,758.13
            23,324.20
            0.00
            0.0032
            8/1/2008
            31
            15,281,315.42
            112,082.33
            91,577.15
            20,505.18
            0.00
            0.0033
            9/1/2008
            31
            15,260,687.52
            112,082.33
            91,454.43
            20,627.90
            0.00
            0.0034
            10/1/2008
            30
            15,236,990.00
            112,082.33
            88,384.82
            23,697.51
            0.00
            0.0035
            11/1/2008
            31
            15,216,096.82
            112,082.33
            91,189.15
            20,893.18
            0.00
            0.0036
            12/1/2008
            30
            15,192,141.05
            112,082.33
            88,126.56
            23,955.77
            0.00
            0.0037
            1/1/2009
            31
            15,170,979.47
            112,082.33
            90,920.74
            21,161.59
            0.00
            0.0038
            2/1/2009
            31
            15,149,691.24
            112,082.33
            90,794.10
            21,288.23
            0.00
            0.0039
            3/1/2009
            28
            15,119,501.40
            112,082.33
            81,892.50
            30,189.83
            0.00
            0.0040
            4/1/2009
            31
            15,097,905.09
            112,082.33
            90,486.02
            21,596.31
            0.00
            0.0041
            5/1/2009
            30
            15,073,264.79
            112,082.33
            87,442.03
            24,640.30
            0.00
            0.0042
            6/1/2009
            31
            15,051,391.77
            112,082.33
            90,209.30
            21,873.03
            0.00
            0.0043
            7/1/2009
            30
            15,026,482.08
            112,082.33
            87,172.64
            24,909.69
            0.00
            0.0044
            8/1/2009
            31
            15,004,329.07
            112,082.33
            89,929.32
            22,153.01
            0.00
            0.0045
            9/1/2009
            31
            14,982,043.48
            112,082.33
            89,796.74
            22,285.59
            0.00
            0.0046
            10/1/2009
            30
            14,956,732.16
            112,082.33
            86,771.00
            25,311.33
            0.00
            0.0047
            11/1/2009
            31
            14,934,161.71
            112,082.33
            89,511.89
            22,570.44
            0.00
            0.0048
            12/1/2009
            30
            14,908,573.07
            112,082.33
            86,493.69
            25,588.64
            0.00
            0.0049
            1/1/2010
            31
            14,885,714.41
            112,082.33
            89,223.67
            22,858.66
            0.00
            0.0050
            2/1/2010
            31
            14,862,718.94
            112,082.33
            89,086.87
            22,995.46
            0.00
            0.0051
            3/1/2010
            28
            14,830,977.87
            112,082.33
            80,341.25
            31,741.08
            0.00
            0.0052
            4/1/2010
            31
            14,807,654.82
            112,082.33
            88,759.28
            23,323.05
            0.00
            0.0053
            5/1/2010
            30
            14,781,333.49
            112,082.33
            85,761.00
            26,321.33
            0.00
            0.0054
            6/1/2010
            31
            14,757,713.33
            112,082.33
            88,462.18
            23,620.15
            0.00
            0.0055
            7/1/2010
            30
            14,731,102.76
            112,082.33
            85,471.76
            26,610.57
            0.00
            0.0056
            8/1/2010
            31
            14,707,181.99
            112,082.33
            88,161.56
            23,920.77
            0.00
            0.0057
            9/1/2010
            31
            14,683,118.06
            112,082.33
            88,018.40
            24,063.93
            0.00
            0.0058
            10/1/2010
            30
            14,656,075.45
            112,082.33
            85,039.73
            27,042.60
            0.00
            0.0059
            11/1/2010
            31
            14,631,705.66
            112,082.33
            87,712.54
            24,369.79
            0.00
            0.0060
            12/1/2010
            30
            14,604,365.30
            112,082.33
            84,741.96
            27,340.37
            0.00
            0.0061
            1/1/2011
            31
            14,579,686.04
            112,082.33
            87,403.07
            24,679.26
            0.00
            0.00


Schedule
          2.3 - 2
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


**Period**
            **Date**
            **Days**
            **Ending
                Balance**
            **Payment**
            **Interest**
            **Principal**
            **Prepayment**
            **Balloon
                Amount**




62
            2/1/2011
            31
            14,554,859.08
            112,082.33
            87,255.37
            24,826.96
            0.00
            0.0063
            3/1/2011
            28
            14,521,453.85
            112,082.33
            78,677.10
            33,405.23
            0.00
            0.0064
            4/1/2011
            31
            14,496,278.38
            112,082.33
            86,906.87
            25,175.46
            0.00
            0.0065
            5/1/2011
            30
            14,468,153.67
            112,082.33
            83,957.61
            28,124.72
            0.00
            0.0066
            6/1/2011
            31
            14,442,659.22
            112,082.33
            86,587.88
            25,494.45
            0.00
            0.0067
            7/1/2011
            30
            14,414,223.95
            112,082.33
            83,647.07
            28,435.26
            0.00
            0.0068
            8/1/2011
            31
            14,388,406.75
            112,082.33
            86,265.13
            25,817.20
            0.00
            0.0069
            9/1/2011
            31
            14,362,435.04
            112,082.33
            86,110.62
            25,971.71
            0.00
            0.0070
            10/1/2011
            30
            14,333,535.14
            112,082.33
            83,182.44
            28,899.89
            0.00
            0.0071
            11/1/2011
            31
            14,307,235.04
            112,082.33
            85,782.23
            26,300.10
            0.00
            0.0072
            12/1/2011
            30
            14,278,015.45
            112,082.33
            82,862.74
            29,219.59
            0.00
            0.0073
            1/1/2012
            31
            14,251,383.07
            112,082.33
            85,449.96
            26,632.37
            0.00
            0.0074
            2/1/2012
            31
            14,224,591.31
            112,082.33
            85,290.57
            26,791.76
            0.00
            0.0075
            3/1/2012
            29
            14,192,146.94
            112,082.33
            79,637.95
            32,444.38
            0.00
            0.0076
            4/1/2012
            31
            14,165,000.66
            112,082.33
            84,936.06
            27,146.27
            0.00
            0.0077
            5/1/2012
            30
            14,134,957.30
            112,082.33
            82,038.96
            30,043.37
            0.00
            0.0078
            6/1/2012
            31
            14,107,468.76
            112,082.33
            84,593.79
            27,488.54
            0.00
            0.0079
            7/1/2012
            30
            14,077,092.19
            112,082.33
            81,705.76
            30,376.57
            0.00
            0.0080
            8/1/2012
            31
            14,049,257.34
            112,082.33
            84,247.49
            27,834.84
            0.00
            0.0081
            9/1/2012
            31
            14,021,255.92
            112,082.33
            84,080.90
            28,001.43
            0.00
            0.0082
            10/1/2012
            30
            13,990,380.03
            112,082.33
            81,206.44
            30,875.89
            0.00
            0.0083
            11/1/2012
            31
            13,962,026.23
            112,082.33
            83,728.54
            28,353.79
            0.00
            0.0084
            ########
            29
            0.00
            112,082.33
            78,167.96
            33,914.37
            13,928,111.86
            13,962,026.23








Schedule
            2.3 - 3
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


**SCHEDULE
      2.8**




**SOURCES
      AND USES**









SOURCES
            USESBorrower's
                Equity:$2,170,000
            Purchase
                Price:$17,700,000Loan:$15,930,000
            Closing
                Costs:$
                240,700Application
                Fee:$
                159,300Total:$18,100,000
            Total:$18,100,000








Schedule
            2.8 - 1
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


**SCHEDULE
      3.1**




**INSURANCE
      EXCEPTIONS**







1.
            Borrower
                does not maintain a separate boiler and machinery policy. Rather
                such
                coverage is included within Borrower's property insurance
                policy.




2.
            Borrower
                only maintains terrorism insurance with respect to property damage
                and not
                with respect to the type of claims covered under its general liability
                insurance policy. Further, Borrower anticipates that if and when
                the
                federal legislation which requires insurers to provide terrorism
                insurance
                expires and such insurance is no longer required and/or subsidized
                by the
                federal government that the same will either not be available or
                not be
                available on commercially reasonable terms and thus, subject to the
                immediately following sentence, will not be maintained by the Borrower.
                Notwithstanding anything contained in thisSchedule 3.1or
                anywhere in this Loan Agreement, terrorism coverage in amounts and
                with a
                carrier acceptable to Lender in its sole discretion if such terrorism
                coverage (i) is customarily obtained by owners of property similar to
                the Projects in use, character and geographic location, and (ii) is
                readily available at a cost, which in Agent's opinion, is commercially
                reasonable.




3.
            The
                Professional Liability Insurance is carried by an unrated captive
                insurance carrier in such amounts and against such risks as is customarily
                maintained by similar businesses and by operators of similar assisted
                living facilities in the same geographic area;provided,however,
                that Borrower contribute (or cause Master Tenant to contribute) to
                its
                established insurance captive on an annual basis an amount equal
                to the
                greatest of: (a) the amount required by any applicable insurance
                rules, regulations or laws existing now or hereafter under the
                jurisdiction in which the captive has been organized, and (b) the
                amounts
                required pursuant to the Master
                Lease.















Schedule
            3.1 - 1
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


**SCHEDULE
      3.2**




**ALLOCATED
      LOAN AMOUNT**










**Property**
            
            **Allocation
                Loan Amount****Trillium**
            
            $5,220,000**Wildflower**
            
            $5,940,000**Willow
                Brook**
            
            $4,770,000








Schedule
            5.29 - 1
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


**SCHEDULE
      I**





**CERTAIN
      DEFINITIONS**





As
      used
      herein, the following terms have the meanings indicated:




" **Acquisition
      Documents** "
      has the
      meaning assigned to such term in Schedule 2.1.




" **Affiliate** "
      means
      (a) any entity, including, but not limited to, any corporation, general or
      limited partnership, joint venture, limited liability company or limited
      liability partnership, which Borrower or Guarantor, directly or indirectly,
      controls, (b) any trust as to which Borrower is the trustee or beneficiary,
      (c) any Person which controls, directly or indirectly, Guarantor,
      including, but not limited to, any director or executive officer of Guarantor,
      (d) any Person related by birth, adoption or marriage to any director or
      executive officer of Guarantor, or (e) Guarantor; provided, however, an
      Affiliate shall not include any entity, other than Borrower or Guarantor, which
      is an Affiliate solely as a result of the fact that such entity and Guarantor
      are both controlled by Dan Baty or by an Affiliate of Dan Baty.




" **Agent** "
      has the
      meaning assigned to such term in the introductory paragraph of this
      Agreement.




" **Agreement** "
      means
      this Loan Agreement, as amended from time to time.




" **Anti-Money
      Laundering Laws** "
      has the
      meaning assigned to such term in Sections
      5.26(b) .




" **Anti-Money
      Laundering Measures** "
      has the
      meaning assigned to such term in Section
      5.26(b) .




" **Anti-Terrorism
      Laws** "
      has the
      meaning assigned to such term in Section
      5.26(a) .




" **Assignment
      Agreement** "
      has the
      meaning assigned to such term in Section 2.9.




" **Assignment
      of Membership Interests** "
      shall
      mean that certain Assignment of Membership Interests executed by Guarantor
      with
      respect to the membership interests in Borrower.




" **Bankruptcy
      Party** "
      shall
      have the meaning assigned to such term in Section
      9.7 .




" **Borrower** "
      has the
      meaning assigned to such terms in the introductory paragraph of this
      Agreement.




Schedule
          I - 1
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


" **Borrower
      Anti-Terrorism Policies** "
      has the
      meaning assigned to such term in Section
      7.20(c) .




" **Borrower's
      Equity** "
      has the
      meaning assigned to such term in Part A of Schedule 2.1 .




" **Business
      Associate Agreement** "
      has the
      meaning assigned to such term in Part A of Schedule
      2.1 .




" **Business
      Day** "
      means a
      day other than a Saturday, a Sunday, or a legal holiday on which national banks
      located in the City of Chicago are not open for general banking
      business.




" **BSA** "
      has the
      meaning assigned to such term in Section
      5.26(b) .




" **Closing**  **Date** "
      shall
      be the date on which the Loan is closed and the Initial Funding Amount is
      funded.




" **Collateral** "
      has the
      meaning assigned to such term in Section
      2.10 .




" **Collateral
      Assignments** "
      has the
      meaning assigned to such term in Part A of Schedule
      2.1 .




" **CON** "
      has the
      meaning assigned to such term in Section 8.1(c) .




" **Control** "
      or
      " **controls** ":
      When
      used with respect to any specified Person means the power to direct the
      management and policies of such Person, directly or indirectly, whether through
      the ownership of voting securities or other beneficial interests, by contract
      or
      otherwise; and the terms "Controlling" and "Controlled" have the meaning
      correlative to the foregoing.




" **Debt** "
      means,
      for any Person, without duplication, the aggregate of: (a) all indebtedness
      of such Person for borrowed money, for amounts drawn under a letter of credit,
      or for the deferred purchase price of property for which such Person or its
      assets is liable, (b) all unfunded amounts under a loan agreement, letter
      of credit, or other credit facility for which such Person would be liable,
      if
      such amounts were advanced under the credit facility, (c) all amounts
      required to be paid by such Person as a guaranteed payment to partners or a
      preferred or special dividend, including any mandatory redemption of shares
      or
      interests, (d) all indebtedness guaranteed by such Person, directly or
      indirectly, (e) all obligations under leases that constitute capital leases
      for which such Person is liable, and (f) all obligations of such Person
      under interest rate swaps, caps, floors, collars and other interest hedge
      agreements, in each case whether such Person is liable contingently or
      otherwise, as obligor, guarantor or otherwise, or in respect of which
      obligations such Person otherwise assures a creditor against loss.




Schedule
          I - 2
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


" **Debt
      Service** "
      means
      the aggregate interest, principal, and other payments due under the Loan, and
      on
      any other outstanding permitted Debt relating to the Projects (if any) for
      the
      period of time for which calculated.




" **Debt
      Service Coverage Ratio** "
      means
      the ratio of (i) Net Operating Income (calculated in accordance with Schedule
      II attached
      hereto) from the Projects **,** taken
      as
      a whole, for a particular period, to (ii) payments of interest due on the Loan
      for the same period plus principal amortization due during the same
      period.




" **Default
      Rate** "
      means
      the lesser of (a) the maximum rate of interest allowed by applicable law,
      and (b) five percent (5%) per annum in excess of the Interest
      Rate.




" **Defeasance** "
      has the
      meaning assigned to such term in Section 2.9.




" **Defeasance
      Deposit** "
      has the
      meaning assigned to such term in Section 2.9.




" **Designated
      Person** "
      has the
      meaning assigned to such term in Section
      5.26(a) .




" **Event
      of Default** "
      has the
      meaning assigned to such term in Article IX .




" **Executive
      Orders** "
      has the
      meaning assigned to such term in Section
      5.26(a) .




" **Expenses** ""
      has
      the meaning assigned to such term in Schedule
      II .




" **Federal
      Bankruptcy Code** "
      shall
      mean Chapter 11 of Title II of the United States Code (11 U.S.C. § 101, *et
      seq* .),
      as
      amended.




" **FIRREA** "
      has the
      meaning assigned to such term in Part A of Schedule 2.1 .




" **Funding
      Amount** "
      has the
      meaning assigned to such term in Section
      2.1(a).




" **GECC** "
      has the
      meaning assigned to such term in the introductory paragraph of this
      Agreement.




" **Governmental
      Approvals** "
      means,
      collectively, all consents, licenses and permits and all other authorizations
      or
      approvals required from any Governmental Authority to operate the
      Projects.




" **Governmental
      Authority** "
      means
      any federal, state, county or municipal government or political subdivision
      thereof, any governmental or quasi-governmental agency, authority, board,
      bureau, commission, department, instrumentality or public body (including,
      without limitation, the State Regulator), or any court, administrative tribunal,
      or public body, including but not limited to all such authorities relating
      to
      the quality and adequacy of medical care, distribution of pharmaceuticals,
      rate
      setting, equipment, personnel, operating policies, additions to facilities
      and
      services and fee splitting.




" **Guarantor** " **** has
      the
      meaning assigned to such term in Recital C.




Schedule
          I - 3
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


" **Guaranty** "
      means
      that certain Guaranty of Payment and Performance of even date herewith executed
      by Guarantor in favor of Agent.




" **Hazardous
      Materials** "
      has the
      definition given to such term in the Environmental Indemnity.




" **HIPAA** "
      has the
      meaning assigned to such term in Section 8.1(a) .




" **HIPAA
      Compliance Plan** "
      has the
      meaning assigned to such term in Section 8.1(b) .




" **HIPAA
      Compliance Date** "
      has the
      meaning assigned to such term in Section 8.1(b) .




" **HIPAA
      Compliant** "
      has the
      meaning assigned to such term in Section 8.1(b).




" **Healthcare
      Laws** "
      has the
      meaning assigned to such term in Section
      8.1(a) .




" **Improvements** "
      has the
      meaning assigned to such term in Recital
      B.




" **Indebtedness** "
      means
      all payment obligations of Borrower or Guarantor to Agent and/or Lender under
      the Loan or any of the Loan Documents.




" **Insurance
      Impound** "
      has the
      meaning assigned to such term in Section
      3.4 .




" **Interest
      Rate** "
      has the
      meaning assigned to such term in Section
      2.2 .




" **Interest
      Holder Agreement** "
      has the
      meaning assigned to such term in Section
      7.20(b) .




" **Investor
      Anti-Terrorism Policies** "
      has the
      meaning assigned to such term in Section 7.20(c) .




" **Laws** "
      means,
      collectively, all federal, state and local laws, statutes, codes, ordinances,
      orders, rules and regulations and guidances and judicial opinions or
      presidential authority in the applicable jurisdiction, including but not limited
      to quality and safety standards, accreditation standards and requirements of
      the
      State Regulator, each as it may be amended from time to time.




" **Leases** "
      has the
      meaning assigned to such term in Part A of Schedule 2.1 .




" **Licenses** "
      has the
      meaning assigned to such term in Section
      8.1(c) .




" **Lien** "
      means
      any interest, or claim thereof, in the Projects securing an obligation owed
      to,
      or a claim by, any Person other than the owner of the Projects, whether such
      interest is based on common law, statute or contract, including the lien or
      security interest arising from a deed of trust, mortgage, assignment,
      encumbrance, pledge, security agreement, conditional sale or trust receipt
      or a
      lease, consignment or bailment for security




Schedule
          I - 4
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


purposes.
      The term " **Lien** "
      shall
      include reservations, exceptions, encroachments, easements, rights of way,
      covenants, conditions, restrictions, leases and other title exceptions and
      encumbrances affecting the Projects.




" **Lists** "
      has the
      meaning assigned to such term in Section
      5.26(a) .




" **Loan** "
      means
      the loan to be made by Lender to Borrower under this Agreement and all other
      amounts payable under the Loan Documents, including the Prepayment
      Premium.




" **Loan
      Documents** "
      means:
      (a) this Agreement, (b) the Note, (c) the Guaranty, (d) any
      letter of credit provided to Agent in connection with the Loan, (e) the
      Security Documents, (f) the Environmental Indemnity Agreement,
      (g) Uniform Commercial Code financing statements, (h) such assignments
      of management agreements, contracts and other rights as may be required under
      the Commitment or otherwise requested by Agent, (i) all other
      documents evidencing, securing, governing or otherwise pertaining to the Loan,
      and (j) all amendments, modifications, renewals, substitutions and
      replacements of any of the foregoing.




" **Material
      Adverse Change** "
      or
      " **material
      adverse change** "
      means,
      in Agent's reasonable discretion, the business prospects, operations or
      financial condition of Borrower or Guarantor, as applicable, or the Projects,
      taken as a whole, has changed in a manner which would reasonably be expected
      to
      impair the value of Agent's and Lender's security for the Loan, prevent timely
      repayment of the Loan or otherwise prevent Guarantor or Borrower, as applicable,
      from timely performing any of its material obligations under the Loan
      Documents.




" **Material
      Non-Residential Lease** "
      means
      any non-residential Lease of space at a Project with respect to which base
      rent
      is equal to or greater than $2,500/month or $30,000/per annum.




" **Material
      Regulatory Violation** "
      means
      any of the following: (i) revocation of any license, permit, approval or
      other Governmental Approval (including, without limitation, any CON) required
      for the lawful operation of the Projects, or (ii) other circumstances under
      which (a) a Borrower or Guarantor is, or in Lender's judgment is reasonably
      likely to be required by a determination of any Governmental Authority to cease
      or suspend operation of any Project or (b) any then existing certification
      of Guarantor or the Borrower under any Third Party Payor Program in which
      Guarantor or Borrower or any Project then participates, is, or in Agent's
      judgment is reasonably likely to be terminated, in whole or in part, prior
      to
      the expiration of the term thereof, (iii) any Project receives a
      Level 4/immediate jeopardy finding that is not removed, as determined by
      the applicable surveying agency, within ten (10) days from the date the
      immediate jeopardy designation went into effect, (iv) any Project is at any
      time assessed material fines or penalties (whether monetary (e.g. fines or
      penalties in an aggregate amount in excess of $2,500) or non-monetary) by any
      Governmental Authority having jurisdiction over Guarantor, Borrower or such
      Project, (v) any Project continues to have a substandard quality of care
      designation for a




Schedule
          I -5
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


consecutive
        period of ten days (10) days after receipt by Guarantor or Borrower of notice
        from the Governmental Authority or any other Person of the original substandard
        quality of care determination; or (vi) the commencement of any
        State
        or Federal remedy imposing a ban on new admissions or denying payment for
        new
        admissions that is not removed within thirty (30) days of that remedy going
        into
        effect.




" **Maturity
      Date** "
      means
      the (a) November 30, 2012, or (b) any earlier date on which the entire
      Loan is required to be paid in full, whether at maturity, by acceleration or
      otherwise, under this Agreement or any of the other Loan Documents, or any
      later
      date to which the same may be extended in accordance with the terms of the
      Loan
      Agreement.




" **Master
      Lease** "
      has the
      meaning assigned to such term in Recital C.




" **Money
      Market Rate** "
      has the
      meaning assigned to such term in Section
      3.4 .




" **Monthly
      Reports** "
      has the
      meaning assigned to such term in Section
      6.1(a) .




" **Net
      Operating Income** "
      has the
      meaning assigned to such term in Schedule II .




" **Note** "
      has the
      meaning assigned to such term in Recital
      A .




" **OFAC** "
      has the
      meaning assigned to such term in Section 5.26(a) .




" **OFAC
      Laws and Regulations** "
      has the
      meaning assigned to such term in Section
      5.26(a) .




" **Ofczarzak
      Judgment** "
      means
      the judgment entered in respect of that certain matter captioned Leo
      Ofczarzak and David Neidzielski on behalf of Florence Ofczarzak, Deceased vs.
      Emeritus Corporation, Emeritus IV, LP and HB-ESC V, LP d/b/a Kingsley
      Place at Oakwell Farms ,
      filed
      in district court of the 4th judicial district in and for Bexar County, Texas
      as
      Cause No. 2003-C1-13504.




" **Operating
      Agreement** "
      has the
      meaning assigned to such term in Section 5.3 .




" **Other
      Lists** "
      has the
      meaning assigned to such term in Section
      5.26(a) .




" **Permitted
      Debt** "
      has the
      meaning assigned to such term in Section
      7.9 .




" **Person** "
      means
      any individual, corporation, partnership, joint venture, association, joint
      stock company, trust, trustee, estate, limited liability company, limited
      partnership, limited liability, partnership, limited partnership, unincorporated
      organization, real estate investment trust, government or any agency or
      political subdivision thereof, or any other form of entity.




Schedule
          I - 6
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


" **Potential
      Default** "
      means
      the occurrence of any event or condition which, with the giving of notice,
      the
      passage of time, or both, would constitute an Event of Default.




**Prepayment
      Premium** "
      has the
      meaning assigned to such term in Section 2.5 .




" **Projects** "
      has the
      meanings assigned to such terms in Recital
      B .




" **Project
      Yield** "
      means
      the ratio, expressed as a percentage, of (a) annualized Net Operating
      Income from the Projects, taken as a whole, as determined by Agent for a
      particular period, to (b) the outstanding principal balance of the
      Loan.




" **Property** "
      has the
      meaning assigned to such term in Recital
      B .




" **Regulatory
      Action** "
      has the
      meaning assigned to such term in Section
      9.3 .




" **Release
      Date** "
      has the
      meaning assigned to such term in Section 2.9(a).




" **Repayment
      Date** "
      means
      the date upon which the entire principal balance of the Loan and all interest
      thereon and other sums due pursuant to the Loan
      Documents ,
      including, without limitation, the Prepayment Premium, in any, have been paid
      in
      full.




" **Revenue** "
      has the
      meaning assigned to such term in Schedule
      II .




" **Scheduled
      Defeasance Payments** "
      has the
      meaning assigned to such term in Section 2.9.




" **Security
      Agreement** "
      has the
      meaning assigned to such term in Section 2.9(e).




" **Security
      Deposits** "
      means
      any security deposit from any tenant or occupant of the Projects collected
      or
      held by Borrower or Guarantor.




" **Security
      Documents** "
      means
      those certain first priority Mortgages, Assignment of Rents and Security
      Agreements (or documents of similar title) executed by Borrower for the benefit
      of Agent, encumbering the Projects.




" **Single
      Purpose Entity** "
      means a
      Person (other than an individual, a government, or any agency or political
      subdivision thereof), which exists solely for the purpose of owning and
      operating the Projects, conducts business only in its own name or in the name
      of
      the Projects, does not engage in any business or have any assets unrelated
      to
      the Projects, does not have any Debt other than as permitted by this Agreement,
      has its own separate books, records, and accounts (with no commingling of
      assets) holds itself out as being a Person separate and apart from any other
      Person, and observes corporate, partnership or limited liability company, as
      the
      case may be, formalities independent of any other Person, and which otherwise
      constitutes a single purpose entity as determined by Agent. Without limiting
      the
      foregoing, a Single Purpose Entity (i)  does not hold, directly or
      indirectly, any ownership interest (legal or equitable) in any real or personal
      property other than the interest




Schedule
          I - 7
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


which
      it
      owns in its respective Project and (ii) is not a shareholder or partner or
      member of any other entity.




" **Site
      Assessment** "
      means
      collectively, those certain Property Condition Reports for the Projects each
      dated September 2, 2005, Project Numbers D5418, D5417 and
      D5419.




" **SND
      List** "
      has the
      meaning assigned to such term in Section
      5.26(a) .




" **State
      Regulator** "
      has the
      meaning assigned to such term in Section
      7.18(a) .




" **Successor
      Borrower** "
      has the
      meaning assigned to such term in Section 2.9.




" **Taxes** "
      has the
      meaning assigned to such term in Section
      3.5 .




" **Tax
      Impound** "
      has the
      meaning assigned to such term in Section
      3.5 .




" **Tenant** "
      means
      any tenant or occupant of the Projects under a Lease.




" **Term
      Sheet** "
      means
      that certain term Sheet dated September 12, 2005, addressed to William
      Shorter and signed by Chris Taylor.




" **Terrorism** "
      has the
      meaning assigned to such term in Section
      3.1(b) .




" **Third
      Party Payor Programs** "
      has the
      meaning assigned to such term in Section
      8.2(f) .




" **Title
      Company** "
      means
      Chicago Title Insurance Company or such other national title insurance company
      approved by Agent and Lender in their sole and absolute discretion.




" **Title
      Policy** "
      has the
      meaning assigned to such term in Schedule
      2.1 Part
      A.




" **U.S.
      Obligations** "
      has the
      meaning assigned to such term in Section 2.9.




" **U.S.
      Publicly-Traded Entity** "
      has the
      meaning assigned to such term in Section
      5.26(a) .




" **Violation** "
      has the
      meaning assigned to such term in Section
      5.24 .




" **Yield
      Maintenance Amount** "
      has the
      meaning assigned to such term in Section 2.9.







Schedule
            I - 8
 EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap


**SCHEDULE
      II**









**CALCULATION
      OF NET OPERATING INCOME**




" **Net
      Operating Income** "
      means
      annualized Revenue less Expenses, all as reasonably determined by Agent's audit (or otherwise reasonably
      estimated by Agent) and at Borrower's expense.




" **Revenue** "
      for a
      period means the lesser of (i) annualized Adjusted Actual Rent for such period
      or (ii) annualized Monthly Effective Rent, excluding in each case, rent payable
      under the Master Lease. In determining Revenue, the occupancy factor utilized
      shall be the lesser of (a) actual occupancy of the Projects, ignoring for this
      purpose the Master Lease, or (b) an assumed ninety-five percent (95%) occupancy
      rate.




" **Adjusted
      Actual Rent** "
      means
      (a) all amounts collected by or on behalf of Guarantor, in its capacity as
      the
      operator of the Projects under the terms of the Master Lease from tenants of
      the
      Projects, taken as a whole (excluding amounts due to Borrower under the Master
      Lease for the period in question (and if none specified, then for the most
      current **** twelve
      (12) months, excluding **** nonrecurring
      income and non-property related income (as determined by Agent in its reasonable
      discretion) and income from tenants (i) that are thirty (30) or more days
      delinquent, (ii) that are in bankruptcy (even if current), (iii) non-residential
      tenants whose leases terminate within six (6) months (as adjusted for space
      re-leased upon terms acceptable to Agent in its reasonable discretion) and
      (iv) that have been delinquent two (2) or more times during the past twelve
      (12) months, and (b) other revenue for such period not to exceed ten
      percent (10%) of the amounts included in clause (a) above for laundry, vending,
      parking and other occupancy payments (but excluding late fees and interest
      income) based upon collections for such period.




" **Monthly
      Effective Rent** "
      means
      an amount equal to (x) total rent due over the term of the Leases with respect
      to the Projects, taken as a whole (excluding rent due under the Master Lease) less any
      payments or concessions which Agent, in its reasonable discretion, deems to
      be a
      rent concession, divided
      by (y) the
      total number of months in the Leases with respect to the Projects taken as
      a
      whole.




" **Expenses** "
      means
      actual and customary operating expenses, whether incurred by Borrower or by
      Guarantor in its capacity as the operator of the Projects, related to the
      Projects, taken as a whole, on a stabilized accrual basis for the previous
      twelve (12) month period (as reasonably adjusted by Agent), including: (i)
      recurring expenses (e.g., tenant improvements, leasing commissions, **** carpeting
      replacement, appliance and drapery replacement and such others as determined
      by
      Agent in its reasonable discretion), (ii) real estate taxes, (iii) management
      fees (whether paid or not) in an amount not less than five percent (5%) of
      effective gross income, and (iv) a replacement reserve (whether reserved or
      not)
      of not less than Three Hundred Fifty and No/100 Dollars ($350.00) per
      unit.







EX-10.86.4
          Loan Agreemnt Arizona Properties & GE Cap