EX-10.79.02


Emeritus
at Trace Pointe




MULTIFAMILY
NOTE




US
      $12,150,000.00
            As
      of October 1, 2009




FOR VALUE RECEIVED, the
undersigned (“Borrower”)
jointly and severally (if more than one) promises to pay to the order ofCAPMARK BANK, a Utah
industrial bank, the principal sum of Twelve Million One Hundred Fifty Thousand
and 00/100 Dollars (US $12,150,000.00), with interest accruing at the
Interest Rate on the unpaid principal balance from the Disbursement Date until
fully paid.




1.  Defined Terms.  In
addition to defined terms found elsewhere in this Note, as used in this Note,
the following definitions shall apply:




Amortization
Period:  360 months.




Business Day:  Any
day other than a Saturday, Sunday or any other day on which Lender is not open
for business.




Debt Service
Amounts:  Amounts payable under this Note, the Security
Instrument or any other Loan Document.




Default Rate:  A
rate equal to the lesser of 4 percentage points above the Interest Rate or the
maximum interest rate which may be collected from Borrower under applicable
law.




Disbursement
Date:  The date of disbursement of Loan proceeds
hereunder.




First Payment
Date:  The first day of November, 2009.




Indebtedness:  The
principal of, interest on, or any other amounts due at any time under, this
Note, the Security Instrument or any other Loan Document, including prepayment
premiums, late charges, default interest, and advances to protect the security
of the Security Instrument under Section 12 of the Security
Instrument.




Interest Rate:  The
annual rate of six and fourteen hundredths percent (6.14%).




Lender:  The holder
of this Note.




Loan:  The loan
evidenced by this Note.




Loan Term:  120
months.




Maturity Date:  The
first day of October, 2019, or any earlier date on which the unpaid principal
balance of this Note becomes due and payable by acceleration or
otherwise.




Property
Jurisdiction:  The jurisdiction in which the Land is
located.




Security
Instrument:  A multifamily mortgage, deed to secure debt or
deed of trust dated as of the date of this Note.




1


Yield Maintenance Period Term or
Prepayment Premium Period Term:  114 months.




Yield Maintenance Period End Date or
Prepayment Premium Period End Date:  The last day of March,
2019.




Event of
Default, Key Principal and other capitalized terms used but not defined in this
Note shall have the meanings given to such terms in the Security
Instrument.




2.  Address for
Payment.  All payments due under this Note shall be payable at
c/o Capmark Finance Inc., 116 Welsh Road, Horsham, Pennsylvania 19044,
Attn:  Servicing - Account Manager, or such other place as may be
designated by written notice to Borrower from or on behalf of
Lender.




3.  Payment of Principal and
Interest.  Principal and interest shall be paid as
follows:




(a)  Short Month
Interest.  If disbursement of principal is made by Lender to
Borrower on any day other than the first day of the month, interest for the
period beginning on the Disbursement Date and ending on and including the last
day of the month in which such disbursement is made shall be payable
simultaneously with the execution of this Note.




(b)  Interest
Computation.  Interest under this Note shall be computed on the
basis of (check one only):




 ̈           30/360.  A 360-day
year consisting of twelve 30-day months.




x
            Actual/360.  A
      360-day year.  The amount of each monthly payment made by
      Borrower pursuant to Paragraph 3(c) below that is allocated to interest
      will be based on the actual number of calendar days during such month and
      shall be calculated by multiplying the unpaid principal balance of this
      Note by the per annum Interest Rate, dividing the product by 360 and
      multiplying the quotient by the actual number of days elapsed during the
      month.  Borrower understands that the amount allocated to
      interest for each month will vary depending on the actual number of
      calendar days during such month.




(c)  Monthly
Installments.  Consecutive monthly installments of principal
and interest, each in the amount of Seventy Three Thousand Nine Hundred
Forty-Two and 58/100 Dollars and (US $73,942.58), shall be payable on the First
Payment Date and on the first day of every month thereafter, until the entire
unpaid principal balance evidenced by this Note is fully paid.  Any
remaining principal and interest shall be due and payable on the Maturity
Date.  The unpaid principal balance shall continue to bear interest
after the Maturity Date at the Default Rate set forth in this Note until and
including the date on which it is paid in full.




(d)  Payments Before Due
Date.  Any regularly scheduled monthly installment of principal
and interest that is received by Lender before the date it is due shall be
deemed to have been received on the due date solely for the purpose of
calculating interest due.




(e)  Accrued
Interest.  Any accrued interest remaining past due for 30 days
or more shall be added to and become part of the unpaid principal balance and
shall bear interest at the rate or rates specified in this Note.  Any
reference herein to “accrued interest” shall refer to accrued interest which has
not become part of the unpaid principal balance.  Any amount added to
principal pursuant to the Loan Documents shall bear interest at the applicable
rate or rates




2


specified
in this Note and shall be payable with such interest upon demand by Lender and
absent such demand, as provided in this Note for the payment of principal and
interest.




4.  Application of
Payments.If at any time Lender receives, from Borrower or
otherwise, any amount applicable to the Indebtedness which is less than all
amounts due and payable at such time, Lender may apply that payment to amounts
then due and payable in any manner and in any order determined by Lender, in
Lender’s discretion.  Borrower agrees that neither Lender’s acceptance
of a payment from Borrower in an amount that is less than all amounts then due
and payable nor Lender’s application of such payment shall constitute or be
deemed to constitute either a waiver of the unpaid amounts or an accord and
satisfaction.




5.  Security.The
Indebtedness is secured, among other things, by the Security Instrument, and
reference is made to the Security Instrument for other rights of Lender
concerning the collateral for the Indebtedness.




6.  Acceleration.If an
Event of Default has occurred and is continuing, the entire unpaid principal
balance, any accrued interest, the prepayment premium payable under Paragraph
10, if any, and all other amounts payable under this Note and any other Loan
Document shall at once become due and payable, at the option of Lender, without
any prior notice to Borrower.  Lender may exercise this option to
accelerate regardless of any prior forbearance.




7.  Late Charge.If any
monthly installment due hereunder is not received by Lender on or before the
15th day of each month or if any other amount payable under this Note or under
the Security Instrument or any other Loan Document is not received by Lender
within 15 days after the date such amount is due, counting from and including
the date such amount is due, Borrower shall pay to Lender, immediately and
without demand by Lender, a late charge equal to 5 percent of such monthly
installment or other amount due.  Borrower acknowledges that its
failure to make timely payments will cause Lender to incur additional expenses
in servicing and processing the Loan and that it is extremely difficult and
impractical to determine those additional expenses.  Borrower agrees
that the late charge payable pursuant to this Paragraph represents a fair and
reasonable estimate, taking into account all circumstances existing on the date
of this Note, of the additional expenses Lender will incur by reason of such
late payment.  The late charge is payable in addition to, and not in
lieu of, any interest payable at the Default Rate pursuant to Paragraph
8.




8.  Default Rate.So
long as any monthly installment or any other payment due under this Note remains
past due for 30 days or more, interest under this Note shall accrue on the
unpaid principal balance from the earlier of the due date of the first unpaid
monthly installment or other payment due, as applicable, at the Default
Rate.  If the unpaid principal balance and all accrued interest are
not paid in full on the Maturity Date, the unpaid principal balance and all
accrued interest shall bear interest from the Maturity Date at the Default
Rate.  Borrower also acknowledges that its failure to make timely
payments will cause Lender to incur additional expenses in servicing and
processing the Loan, that, during the time that any monthly installment or
payment under this Note is delinquent for more than 30 days, Lender will incur
additional costs and expenses arising from its loss of the use of the money due
and from the adverse impact on Lender’s ability to meet its other obligations
and to take advantage of other investment opportunities, and that it is
extremely difficult and impractical to determine those additional costs and
expenses.  Borrower also acknowledges that, during the time that any
monthly installment or other payment due under this Note is delinquent for more
than 30 days, Lender’s risk of nonpayment of this Note will be materially
increased and Lender is entitled to be compensated for such increased
risk.  Borrower agrees that the increase in the rate of interest
payable under this Note to the Default Rate represents a fair and reasonable
estimate, taking into account all circumstances existing on the date of this
Note, of the additional costs and expenses Lender will




3


incur by
reason of the Borrower’s delinquent payment and the additional compensation
Lender is entitled to receive for the increased risks of nonpayment associated
with a delinquent loan.




9.  Limits on Personal
Liability.




(a)  Except as
otherwise provided in this Paragraph 9, Borrower shall have no personal
liability under this Note, the Security Instrument or any other Loan Document
for the repayment of the Indebtedness or for the performance of any other
obligations of Borrower under the Loan Documents, and Lender’s only recourse for
the satisfaction of the Indebtedness and the performance of such obligations
shall be Lender’s exercise of its rights and remedies with respect to the
Mortgaged Property (as such term is defined in the Security Instrument) and any
other collateral held by Lender as security for the
Indebtedness.  This limitation on Borrower’s liability shall not limit
or impair Lender’s enforcement of its rights against any guarantor of the
Indebtedness or any guarantor of any obligations of Borrower.




(b)  Borrower
shall be personally liable to Lender for the repayment of a portion of the
Indebtedness equal to any loss or damage suffered by Lender as a result
of:




(1)  failure
of Borrower to pay to Lender upon demand after an Event of Default, all Rents to
which Lender is entitled under Section 3(a) of the Security Instrument and the
amount of all security deposits collected by Borrower from tenants then in
residence;




(2)  failure
of Borrower to apply all insurance proceeds and condemnation proceeds as
required by the Security Instrument;




(3)  failure
of Borrower to comply with Section 14(d) or (e) of the Security Instrument
relating to the delivery of books and records, statements, schedules and
reports;




(4)  fraud or
written material misrepresentation by Borrower, Key Principal or any officer,
director, partner, member or employee of Borrower in connection with the
application for or creation of the Indebtedness or any request for any action or
consent by Lender;




(5)  failure
to apply Rents, first, to the payment of reasonable operating expenses (other
than Property management fees that are not currently payable pursuant to the
terms of an Assignment of Management Agreement or any other agreement with
Lender executed in connection with the Loan) and then to Debt Service Amounts,
except that Borrower will not be personally liable (i) to the extent that
Borrower lacks the legal right to direct the disbursement of such sums because
of a bankruptcy, receivership or similar judicial proceeding, or (ii) with
respect to Rents that are distributed in any calendar year if Borrower has paid
all operating expenses and Debt Service Amounts for that calendar
year;




(6)  failure
by Borrower to comply with the provisions of Section 17(a) of the Security
Instrument.




(c)  Borrower
shall become personally liable to Lender for the repayment of all of the
Indebtedness upon the occurrence of any of the following Events of
Default:




(1)  Borrower’s
acquisition of any property or operation of any business not permitted by
Section 33 of the Security Instrument;




4


(2)  a
Transfer that is an Event of Default under Section 21 of the Security
Instrument; or




(3)  the
occurrence of a Bankruptcy Event (but only if the Bankruptcy Event occurs with
the consent, encouragement or active participation of Borrower, Key Principal or
any Borrower Affiliate).




(d)  To the
extent that Borrower has personal liability under this Paragraph 9, Lender may
exercise its rights against Borrower personally without regard to whether Lender
has exercised any rights against the Mortgaged Property or any other security,
or pursued any rights against any guarantor, or pursued any other rights
available to Lender under this Note, the Security Instrument, any other Loan
Document or applicable law. For purposes of this Paragraph 9, the term “Mortgaged Property” shall not
include any funds that (1) have been applied by Borrower as required or
permitted by the Security Instrument prior to the occurrence of an Event of
Default, or (2) Borrower was unable to apply as required or permitted by the
Security Instrument because of a bankruptcy, receivership, or similar judicial
proceeding.




10.  Voluntary
and Involuntary Prepayments.




(a)  A
prepayment premium shall be payable in connection with any prepayment made under
this Note as provided below:




(1)  Borrower
may voluntarily prepay all (but not less than all) of the unpaid principal
balance of this Note only on the last calendar day of a calendar month (the
“Last Day of the Month”)
and only if Borrower has complied with all of the following:




(i)
            Borrower
      must give Lender at least 30 days (if given via U.S. Postal Service) or 20
      days (if given via facsimile, email or overnight courier), but not more
      than 60 days, prior written notice of Borrower’s intention to make a
      prepayment (the “Prepayment
      Notice”).  The Prepayment Notice shall be given in
      writing (via facsimile, email, U.S. Postal Service or overnight courier)
      and addressed to Lender.  The Prepayment Notice shall include,
      at a minimum, the Business Day upon which Borrower intends to make the
      prepayment (the “Intended
      Prepayment Date”).




(ii)
            Borrower
      acknowledges that the Lender is not required to accept any voluntary
      prepayment of this Note on any day other than the Last Day of the Month
      even (A) if Borrower has given a Prepayment Notice with an Intended
      Prepayment Date other than the Last Day of the Month or (B) if the Last
      Day of the Month is not a Business Day.  Therefore, even if
      Lender accepts a voluntary prepayment on any day other than the Last Day
      of the Month, for all purposes (including the accrual of interest and the
      calculation of the prepayment premium), any prepayment received by Lender
      on any day other than the Last Day of the Month shall be deemed to have
      been received by Lender on the Last Day of the Month and any prepayment
      calculation will include interest to and including the Last Day of the
      Month in which such prepayment occurs.  If the Last Day of the
      Month is not a Business Day, then the Borrower must make the payment on
      the Business Day immediately preceding the Last Day of the
      Month.




(iii)
            Any
      prepayment shall be made by paying (A) the amount of principal being
      prepaid, (B) all accrued interest (calculated to
  the




5


Last Day
of the Month), (C) all other sums due Lender at the time of such prepayment, and
(D) the prepayment premium calculated pursuant to
Schedule A.




(iv)
            If,
      for any reason, Borrower fails to prepay this Note (A) within five (5)
      Business Days after the Intended Prepayment Date or (B) if the prepayment
      occurs in a month other than the month stated in the original Prepayment
      Notice, then Lender shall have the right, but not the obligation, to
      recalculate the prepayment premium based upon the date that Borrower
      actually prepays this Note and to make such calculation as described in
      Schedule A attached hereto.  For purposes of such recalculation,
      such new prepayment date shall be deemed the “Intended Prepayment
      Date.”




(2)  Upon
Lender’s exercise of any right of acceleration under this Note, Borrower shall
pay to Lender, in addition to the entire unpaid principal balance of this Note
outstanding at the time of the acceleration, (i) all accrued interest and all
other sums due Lender under this Note and the other Loan Documents, and
(ii) the prepayment premium calculated pursuant to Schedule A.




(3)  Any
application by Lender of any collateral or other security to the repayment of
any portion of the unpaid principal balance of this Note prior to the Maturity
Date and in the absence of acceleration shall be deemed to be a partial
prepayment by Borrower, requiring the payment to Lender by Borrower of a
prepayment premium.




(b)  Notwithstanding
the provisions of Paragraph 10(a), no prepayment premium shall be payable (1)
with respect to any prepayment occurring as a result of the application of any
insurance proceeds or condemnation award under the Security Instrument, or (2)
as provided in subparagraph (c) of Schedule A.




(c)  Schedule
A is hereby incorporated by reference into this Note.




(d)  Any
required prepayment of less than the entire unpaid principal balance of this
Note shall not extend or postpone the due date of any subsequent monthly
installments or change the amount of such installments, unless Lender agrees
otherwise in writing.




(e)  Borrower
recognizes that any prepayment of the unpaid principal balance of this Note,
whether voluntary or involuntary or resulting from a default by Borrower, will
result in Lender’s incurring loss, including reinvestment loss, additional
expense and frustration or impairment of Lender’s ability to meet its
commitments to third parties.  Borrower agrees to pay to Lender upon
demand damages for the detriment caused by any prepayment, and agrees that it is
extremely difficult and impractical to ascertain the extent of such
damages.  Borrower therefore acknowledges and agrees that the formula
for calculating prepayment premiums set forth on Schedule A represents a
reasonable estimate of the damages Lender will incur because of a
prepayment.




(f)  Borrower
further acknowledges that the prepayment premium provisions of this Note are a
material part of the consideration for the loan evidenced by this Note, and
acknowledges that the terms of this Note are in other respects more favorable to
Borrower as a result of the Borrower’s voluntary agreement to the prepayment
premium provisions.




11.  Costs and
Expenses.Borrower shall pay on demand all expenses and costs,
including fees and out-of-pocket expenses of attorneys and expert witnesses and
costs of investigation, incurred by Lender as a result of any default under this
Note or in connection with




6


efforts
to collect any amount due under this Note, or to enforce the provisions of any
of the other Loan Documents, including those incurred in post-judgment
collection efforts and in any bankruptcy proceeding (including any action for
relief from the automatic stay of any bankruptcy proceeding) or judicial or
non-judicial foreclosure proceeding.




12.  Forbearance.  Any
forbearance by Lender in exercising any right or remedy under this Note, the
Security Instrument, or any other Loan Document or otherwise afforded by
applicable law, shall not be a waiver of or preclude the exercise of that or any
other right or remedy.  The acceptance by Lender of any payment after
the due date of such payment, or in an amount which is less than the required
payment, shall not be a waiver of Lender’s right to require prompt payment when
due of all other payments or to exercise any right or remedy with respect to any
failure to make prompt payment.  Enforcement by Lender of any security
for Borrower’s obligations under this Note shall not constitute an election by
Lender of remedies so as to preclude the exercise of any other right or remedy
available to Lender.




13.  Waivers.Presentment,
demand, notice of dishonor, protest, notice of acceleration, notice of intent to
demand or accelerate payment or maturity, presentment for payment, notice of
nonpayment, grace, and diligence in collecting the Indebtedness are waived by
Borrower, Key Principal, and all endorsers and guarantors of this Note and all
other third party obligors.




14.  Loan
Charges.  Borrower agrees to pay an effective rate of interest
equal to the sum of the Interest Rate provided for in this Note and any
additional rate of interest resulting from any other charges of interest or in
the nature of interest paid or to be paid in connection with the loan evidenced
by this Note and any other fees or amounts to be paid by Borrower pursuant to
any of the other Loan Documents.  Neither this Note nor any of the
other Loan Documents shall be construed to create a contract for the use,
forbearance or detention of money requiring payment of interest at a rate
greater than the maximum interest rate permitted to be charged under applicable
law.  If any applicable law limiting the amount of interest or other
charges permitted to be collected from Borrower in connection with the
Loan  is interpreted so that any interest or other charge provided for
in any Loan Document, whether considered separately or together with other
charges provided for in any other Loan Document, violates that law, and Borrower
is entitled to the benefit of that law, that interest or charge is hereby
reduced to the extent necessary to eliminate that violation.  The
amounts, if any, previously paid to Lender in excess of the permitted amounts
shall be applied by Lender to reduce the unpaid principal balance of this
Note.  For the purpose of determining whether any applicable law
limiting the amount of interest or other charges permitted to be collected from
Borrower has been violated, all Indebtedness that constitutes interest, as well
as all other charges made in connection with the Indebtedness that constitute
interest, shall be deemed to be allocated and spread ratably over the stated
term of the Note.  Unless otherwise required by applicable law, such
allocation and spreading shall be effected in such a manner that the rate of
interest so computed is uniform throughout the stated term of the
Note.




15.  Commercial
Purpose.Borrower represents that the Indebtedness is being
incurred by Borrower solely for the purpose of carrying on a business or
commercial enterprise, and not for personal, family or household
purposes.




16.  Counting of
Days.Except where otherwise specifically provided, any
reference in this Note to a period of “days” means calendar days, not Business
Days.




17.  Governing Law.This
Note shall be governed by the law of the jurisdiction in which the Land is
located.




18.  Captions.The
captions of the paragraphs of this Note are for convenience only and shall be
disregarded in construing this Note.




7


19.  Notices.  All
notices, demands and other communications required or permitted to be given by
Lender to Borrower pursuant to this Note shall be given in accordance with
Section 31 of the Security Instrument.




20.  Consent to Jurisdiction and
Venue.Borrower and Key Principal each agrees that any
controversy arising under or in relation to this Note shall be litigated
exclusively in the Property Jurisdiction.  The state and federal
courts and authorities with jurisdiction in the Property Jurisdiction shall have
exclusive jurisdiction over all controversies which shall arise under or in
relation to this Note.  Borrower and Key Principal each irrevocably
consents to service, jurisdiction, and venue of such courts for any such
litigation and waives any other venue to which it might be entitled by virtue of
domicile, habitual residence or otherwise.




21.  WAIVER
OF TRIAL BY JURY.  BORROWER, KEY PRINCIPAL AND LENDER EACH (A) AGREES
NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE
OR THE RELATIONSHIP BETWEEN THE PARTIES AS LENDER, KEY PRINCIPAL AND BORROWER
THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY
WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN
THE FUTURE.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN
BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL
COUNSEL.




ATTACHED
SCHEDULES.The following Schedules are attached to this
Note:




X
            
            Schedule
      A
            Prepayment
      Premium (required)X
            
            Schedule
      B
            Modifications
      to Multifamily Note




IN WITNESS WHEREOF, Borrower
has signed and delivered this Note or has caused this Note to be signed and
delivered by its duly authorized representative.




8


BORROWER:





EMERITRACE LLC, a
      Delaware limited liability company





By:  Summerville
      Senior Living, Inc., a Delaware corporation, its
      Member/Manager











By: /s/
Eric Mendelsohn


Eric
Mendelsohn


Senior
Vice President of Corporate Development








9








PAY TO
THE ORDER OF CAPMARK FINANCE INC., WITHOUT RECOURSE.





CAPMARK BANK, a Utah
      industrial bank











By: /s/
Max W. Foore


Max W.
Foore


Authorized
Signer


10


PAY TO
THE ORDER OF FANNIE MAE, WITHOUT RECOURSE.





CAPMARK FINANCE INC., a
      California corporation











By: /s/
Max W. Foore


Max W.
Foore


Vice
President








Fannie
Mae Commitment Number:  860433





11


ACKNOWLEDGMENT
AND AGREEMENT OF KEY PRINCIPAL TO


PERSONAL
LIABILITY FOR EXCEPTIONS TO NON-RECOURSE LIABILITY




Key
Principal, who has an economic interest in Borrower or who will otherwise obtain
a material financial benefit from the Loan, hereby absolutely, unconditionally
and irrevocably agrees to pay to Lender, or its assigns, on demand, all amounts
for which Borrower is personally liable under Paragraph 9 of the Multifamily
Note to which this Acknowledgment is attached (the “Note”).  The
obligations of Key Principal shall survive any foreclosure proceeding, any
foreclosure sale, any delivery of any deed in lieu of foreclosure, and any
release of record of the Security Instrument.  Lender may pursue its
remedies against Key Principal without first exhausting its remedies against the
Borrower or the Mortgaged Property. All capitalized terms used but not defined
in this Acknowledgment shall have the meanings given to such terms in the
Security Instrument.  As used in this Acknowledgment, the term “Key
Principal” (each if more than one) shall mean only those individuals or entities
that execute this Acknowledgment.




The
obligations of Key Principal shall be performed without demand by Lender and
shall be unconditional irrespective of the genuineness, validity, or
enforceability of the Note, or any other Loan Document, and without regard to
any other circumstance which might otherwise constitute a legal or equitable
discharge of a surety or a guarantor.  Key Principal hereby waives the
benefit of all principles or provisions of law, which are or might be in
conflict with the terms of this Acknowledgment, and agrees that Key Principal’s
obligations shall not be affected by any circumstances which might otherwise
constitute a legal or equitable discharge of a surety or a
guarantor.  Key Principal hereby waives the benefits of any right of
discharge and all other rights under any and all statutes or other laws relating
to guarantors or sureties, to the fullest extent permitted by law, diligence in
collecting the Indebtedness, presentment, demand for payment, protest, all
notices with respect to the Note including this Acknowledgment, which may be
required by statute, rule of law or otherwise to preserve Lender’s rights
against Key Principal under this Acknowledgment, including notice of acceptance,
notice of any amendment of the Loan Documents, notice of the occurrence of any
default or Event of Default, notice of intent to accelerate, notice of
acceleration, notice of dishonor, notice of foreclosure, notice of protest,
notice of the incurring by Borrower of any obligation or indebtedness and all
rights to require Lender to (a) proceed against Borrower, (b) proceed against
any general partner of Borrower, (c) proceed against or exhaust any collateral
held by Lender to secure the repayment of the Indebtedness, or (d) if Borrower
is a partnership, pursue any other remedy it may have against Borrower, or any
general partner of Borrower.




At any
time without notice to Key Principal, and without affecting the liability of Key
Principal hereunder, (a) the time for payment of the principal of or interest on
the Indebtedness may be extended or the Indebtedness may be renewed in whole or
in part; (b) the time for Borrower’s performance of or compliance with any
covenant or agreement contained in the Note, or any other Loan Document, whether
presently existing or hereinafter entered into, may be extended or such
performance or compliance may be waived; (c) the maturity of the Indebtedness
may be accelerated as provided in the Note or any other Loan Document; (d) the
Note or any other Loan Document may be modified or amended by Lender and
Borrower in any respect, including an increase in the principal amount; and (e)
any security for the Indebtedness may be modified, exchanged, surrendered or
otherwise dealt with or additional security may be pledged or mortgaged for the
Indebtedness.




Key
Principal acknowledges that Key Principal has received a copy of the Note and
all other Loan Documents.  Neither this Acknowledgment nor any of its
provisions may be waived, modified, amended, discharged, or terminated except by
an agreement in writing signed by the party against which the enforcement of the
waiver, modification, amendment, discharge, or termination is sought, and then
only to the extent set forth in that agreement.  Key Principal agrees
to notify Lender (in the manner for giving notices provided in Section 31 of the
Security




12


Instrument)
of any change of Key Principal’s address within 10 Business Days after such
change of address occurs.  Any notices to Key Principal shall be given
in the manner provided in Section 31 of the Security Instrument.  Key
Principal agrees to be bound by Paragraphs 20 and 21 of the Note.




THIS ACKNOWLEDGMENT IS AN INSTRUMENT
SEPARATE FROM, AND NOT A PART OF, THE NOTE.  BY SIGNING THIS
ACKNOWLEDGMENT, KEY PRINCIPAL DOES NOT INTEND TO BECOME AN ACCOMMODATION PARTY
TO, OR AN ENDORSER OF, THE NOTE.




IN WITNESS WHEREOF, Key
Principal has signed and delivered this Acknowledgment or has caused this
Acknowledgment to be signed and delivered by its duly authorized
representative.




13


KEY
PRINCIPAL:





EMERITUS CORPORATION, a
      Washington corporation











By:
      /s/ Eric Mendelsohn


Eric
      Mendelsohn


Senior
      Vice President of Corporate
Development





Address:
            3131
      Elliott Avenue, Suite 500


Seattle,
      Washington 98121














14


SCHEDULE
A




PREPAYMENT
PREMIUM




Any
prepayment premium payable under Paragraph 10 of this Note shall be computed as
follows:




(a)
            If
      the prepayment is made at any time after the date of this Note and before
      the Yield Maintenance Period End Date, the prepayment premium shall be the
      greater of:




(i)
            1%
      of the amount of principal being prepaid;
or




(ii)
            The
      product obtained by multiplying:




(A)
            the
      amount of principal being prepaid,




by




(B)
            the
      difference obtained by subtracting from the Interest Rate on this Note the
      Yield Rate (as defined below), on the twenty-fifth Business Day preceding
      (x) the Intended Prepayment Date, or (y) the date Lender accelerates the
      Loan or otherwise accepts a prepayment pursuant to Paragraph 10(a)(3) of
      this Note,




by




(C)
            the
      present value factor calculated using the following
    formula:




1 - (1 + r)-n/12


r


r
=           Yield
Rate


n
      =
            the
      number of months remaining between (1) either of the
      following:  (x) in the case of a voluntary prepayment, the Last
      Day of the Month during which the prepayment is made, or (y) in any other
      case, the date on which Lender accelerates the unpaid principal balance of
      this Note and (2) the Yield Maintenance Period End
  Date





For
purposes of this clause (ii), the “Yield Rate” means the yield
calculated by interpolating the yields for the immediately shorter and longer
term U.S. “Treasury constant maturities” (as reported in the Federal Reserve
Statistical Release H.15 Selected Interest Rates (the "Fed Release") under the
heading "U.S. government securities") closest to the remaining term of the Yield
Maintenance Period Term, as follows (rounded to three decimal
places):





A
- 1


[(a-b)/(x-y)
x(z-y)]+b





a
      =
            the
      yield for the longer U.S. Treasury constant
  maturity


b =
            the
      yield for the shorter U.S. Treasury constant
  maturity


x =
            the
      term of the longer U.S. Treasury constant
  maturity


y =
            the
      term of the shorter U.S. Treasury constant
  maturity


z =
            “n”
      (as defined in the present value factor calculation above) divided by
      12.





Notwithstanding
any provision to the contrary, if “z” equals a term reported
under the U.S. “Treasury constant maturities” subheading in the Fed Release, the
yield for such term shall be used, and interpolation shall not be
necessary.  If publication of the Fed Release is discontinued by the
Federal Reserve Board, Lender shall determine the Yield Rate from another source
selected by Lender.  Any determination of the Yield Rate by Lender
will be binding absent manifest error.]




(b)
            If
      the prepayment is made on or after the Yield Maintenance Period End Date
      but before the last calendar day of the 4th month prior to the month in
      which  the Maturity Date occurs, the prepayment premium shall be
      1% of the amount of principal being
prepaid.




(c)
            Notwithstanding
      the provisions of Paragraph 10(a) of this Note, no prepayment premium
      shall be payable with respect to any prepayment made on or after the last
      calendar day of the 4th month prior to the month in which the Maturity
      Date occurs.




A
- 2











__/s/
EM___________


Borrower Initials


A
- 3


SCHEDULE
B




MODIFICATIONS
TO MULTIFAMILY NOTE


(Seniors
Housing)








The
following modifications are made to the text of the Note that precedes this
Schedule:




1.
            Section
      9(b)(3) of the Note is hereby amended to read as
  follows:




"Failure
of Borrower to comply with Sections 14(d), 14(e), or 14(g) of the Instrument
relating to the delivery of books and records, statements, schedules, and
reports."




2.
            Section
      9(b) of the Note is hereby amended to delete the word "or" immediately
      preceding paragraph (5) thereof and to insert a semi-colon in lieu of the
      period and the word "or", and add the following paragraph (6) at the end
      thereof:




"or (6)
Borrower's failure to cause the renewal, continuation, extension or maintenance
of all Licenses required to legally operate the Mortgaged Property as a Seniors
Housing Facility, as defined in the Instrument."




3.
            All
      capitalized terms used in this Schedule not specifically defined herein
      shall have the meanings set forth in the text of the Note that precedes
      this Schedule.




B
- 1




















/s/
EM


Borrower Initials


B
- 2