CREDIT AGREEMENT

                                     Between

                         U.S. BANK NATIONAL ASSOCIATION

                                       and

                              EMERITUS CORPORATION


                           Dated as of March 16, 2004


<PAGE>
                                TABLE OF CONTENTS

ARTICLE  I.     DEFINITIONS     1
1.1     Terms  Defined     1
1.2     Accounting  Terms     5
1.3     Rules  of  Construction     5
1.4     Incorporation  of  Recitals  and  Exhibits     5
ARTICLE  II.     LOAN     5
2.1     Loan  Commitment     5
2.2     Use  of  Proceeds     6
2.3     Note     6
2.4     Interest  Rate     6
2.5     Repayment     6
2.6     Fundings     7
2.7     Loan  Fee     7
2.8     Resting  of  Loan     7
ARTICLE  III.     GENERAL  PROVISIONS  APPLICABLE  TO  THE  LOAN     8
3.1     Manner  of  Payment     8
3.2     Statements     8
3.3     Book  Entry  Loan  Account     8
3.4     Computations  of  Interest     8
3.5     Default  Interest     9
3.6     Maximum  Interest  Rate     9
3.7     Late  Charge     9
3.8     Prepayments     9
3.9     Extensions,  Renewals  and  Modifications     9
3.10     Increased  Costs     9
3.11     LIBOR  Rate  Loan  Provisions     10
3.12     Deposits  Unavailable  or  Interest Rate Unascertainable or Inadequate;
Impracticability     11
3.13     Changes  in  Law  Rendering  LIBOR  Rate  Loan  Unlawful     11
3.14     Discretion  of  U.S.  Bank  as  to  Manner  of  Funding     11
ARTICLE  IV.     CONDITIONS  PRECEDENT  FOR  FUNDINGS  UNDER  THE  LOAN     12
4.1     Conditions  Precedent  for  Initial  Funding     12
4.2     Conditions  Precedent  to  Each  Subsequent  Funding     14
ARTICLE  V.     AFFIRMATIVE  COVENANTS     15
5.1     Financial  Data     15
5.2     Licenses  and  Permits     16
5.3     Maintenance  of  Properties     16
5.4     Payment  of  Charges     17
5.5     Insurance     17
5.6     Maintenance  of  Records     17
5.7     Inspection     17
5.8     Hazardous  Substances     18
5.9     Corporate  Existence     19
5.10     Notice  of  Disputes  and  Other  Matters     19
5.11     Exchange  of  Note     19
5.12     Maintenance  of  Liens     20
5.13     Other  Agreements     20
5.14     After-Acquired  Collateral     20
5.15     Further  Assurances     20
ARTICLE  VI.     NEGATIVE  COVENANTS     20
6.1     Dividends  and  Distributions     20
6.2     Transactions  With  Affiliates     21
6.3     Liens     21
6.4     Advances  and  Loans     21
6.5     Consolidation,  Merger  and  Sale  of  Assets     22
6.6     Contributions  to  Capital     22
6.7     Type  of  Business     22
6.8     Change  of  State  of  Organization  or  Name     22
6.9     Change  in  Documents     23
6.10     Control     23
6.11     Pension  Plan     23
6.12     Debt  Service  Coverage  Ratio     23
ARTICLE  VII.     REPRESENTATIONS  AND  WARRANTIES     23
7.1     Corporate  Status     23
7.2     Power  and  Authority     24
7.3     No  Violation  of  Agreements     24
7.4     Recording  and  Enforceability     24
7.5     Litigation     25
7.6     Good  Title  to  Properties     25
7.7     Licenses  and  Permits     25
7.8     No  Burdensome  Agreements     25
7.9     Properties  in  Good  Condition     25
7.10     Financial  Statements     26
7.11     Outstanding  Indebtedness     26
7.12     Taxes     26
7.13     License  Fees     26
7.14     Trademarks,  Patents,  Etc.     26
7.15     Governmental  Approvals     27
7.16     Disclosure     27
7.17     Regulations  U  and  X     27
7.18     Condition  of  Property     27
7.19     Pension  Plans     27
ARTICLE  VIII.     EVENTS  OF  DEFAULT;  REMEDIES     28
8.1     Events  of  Default     28
8.2     Acceleration;  Remedies     30
ARTICLE  IX.     MISCELLANEOUS     30
9.1     Notices     30
9.2     Payment  of  Expenses     31
9.3     Setoff     32
9.4     Waiver  of  Setoff     32
9.5     Fees  and  Commissions     32
9.6     No  Waiver     32
9.7     Agreement  to  Release  Deed  of  Trust     33
9.8     Entire  Agreement  and  Amendments     34
9.9     Benefit  of  Agreement     34
9.10     Severability     34
9.11     Descriptive  Headings     34
9.12     Governing  Law     34
9.13     Consent  to  Jurisdiction,  Service  and  Venue     34
9.14     Counterparts     35
9.15     Jury  Waiver     35
9.16     Statutory  Notice     35

                                    EXHIBITS

Exhibit  A     --     Note,  Section  2.3
Exhibit  B     --     Pledge  Agreement,  Section  4.1(b)
Exhibit  C     --     Deed  of  Trust,  Section  4.1(c)
Exhibit  D     --     Indemnity  Agreement,  Section  4.1(g)
Exhibit  E     --     Board  Resolution  and  Incumbency  Certificate,  Section
4.1(n)(iii)

<PAGE>

                                CREDIT AGREEMENT

     This credit agreement is made and entered into as of the 16th day of March,
2004,  by  and  between  U.S.  BANK  NATIONAL  ASSOCIATION,  a  national banking
association  ("U.S.  Bank"),  and EMERITUS CORPORATION, a Washington corporation
("Borrower").  Words  and  phrases  with  initial  capitalized  letters have the
meanings  assigned  in  Article  I  hereof.
                                    RECITALS
     A.     Borrower  has  requested U.S. Bank to extend to Borrower a revolving
line  of  credit  in  the  amount  of  $3,000,000.
B.     U.S.  Bank  is  willing to extend such credit facility to Borrower on the
terms  and  conditions  of  this  Agreement.
NOW,  THEREFORE,  in  consideration  of  the mutual covenants and conditions set
forth  herein,  the  parties  agree  as  follows:
ARTICLE  I.     DEFINITIONS
1.1     Terms  Defined
     As  used  herein,  the  following  terms have the meanings set forth below:
"Affiliate" means a Person that now or hereafter, directly or indirectly through
one  or  more  intermediaries,  controls,  is  controlled  by or is under common
control  with  Borrower.  A  Person  shall  be  deemed to control a corporation,
limited  liability  company or partnership if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management of such
corporation,  limited  liability  company  or  partnership,  whether through the
ownership of voting securities, by contract, or otherwise.  For purposes hereof,
an Affiliate of Borrower shall specifically exclude Columbia Pacific Management,
Alterra  Healthcare  Corporation,  Holiday  Retirement Corporation and any other
entity  which  would be deemed to be an affiliate of Borrower solely as a result
of the common ownership or control thereof held by Daniel R. Baty or by entities
owned  or  controlled  by  Daniel  R.  Baty.
"Agreement"  means  this credit agreement and includes all renewals, amendments,
modifications  and  restatements  of  this  Agreement.
"Applicable  Law"  means  all  applicable provisions and requirements of all (a)
constitutions,  statutes,  ordinances, rules, regulations, standards, orders and
directives  of  any  Governmental  Bodies,  (b)  Governmental Approvals, and (c)
orders,  decisions,  decrees, judgments, injunctions and writs of all courts and
arbitrators,  whether  such  Applicable  Laws  presently exist, or are modified,
promulgated  or  implemented  after  the  date  hereof.
"Borrower"  means  Emeritus  Corporation,  a  Washington  corporation,  and  its
successors.
"Borrowing  Notice"  has  the  meaning  set  forth  in  Section  2.6(a)  hereof.
"Business  Day"  means  any  day except a Saturday, Sunday or other day on which
national  banks  in the state of Washington are authorized or required by law to
close.
"Collateral"  means  all the property, real or personal, tangible or intangible,
now owned or hereafter acquired, in which U.S. Bank has been or is to be granted
a  security interest by Borrower or any other Person, to secure the Indebtedness
of  Borrower  to  U.S.  Bank  under  this  Agreement.
"Commitment Amount" means an amount equal to $3,000,000, reduced as provided for
in  Section  9.7(c)(ii)  hereof.
"Deed  of Trust" has the meaning set forth in Section 4.1(c) hereof and includes
all  renewals,  amendments, modifications and restatements of the Deed of Trust.
"Debt  Service Coverage Ratio" means the ratio of (a) EBITDA (EBITDA for a given
period  means  net  income, plus interest expense, plus income tax expense, plus
depreciation  expense  plus  amortization  expense  plus other non-cash expenses
approved  for inclusion by U.S. Bank) minus cash taxes, minus cash dividends and
minus  cash  paid to redeem or repurchase any stock of Borrower for the previous
four  rolling  fiscal quarters to (b) the sum of all required principal payments
on  long  term debt plus interest expense (on short and long term debt) plus the
sum  of  all  payments  on  capital  leases  over  the  last four rolling fiscal
quarters.
"Default"  means  any condition or event that constitutes an Event of Default or
that,  with the giving of notice or lapse of time or both would, unless cured or
waived,  become  an  Event  of  Default.
"ERISA"  means  the  Employee Retirement Income Security Act of 1974, as amended
from  time  to  time.
"Event  of  Default"  has  the  meaning  set  forth  in  Section  8.1  hereof.
"Funding"  means  any  disbursement  of  the  proceeds  of  the  Loan.
"Governmental  Approval" means any authorization, consent, approval, certificate
of compliance, license, permit or exemption from, contract with, registration or
filing with, or report or notice to, any Governmental Body required or permitted
by  Applicable  Law.
"Governmental  Body" means the government of the United States, any state or any
foreign  country,  or any governmental or regulatory official, body, department,
bureau,  subdivision, agency, commission, court, arbitrator or authority, or any
instrumentality  thereof,  whether  federal,  state,  or  local.
"Hazardous Materials" means oil or petrochemical products, PCB's, asbestos, urea
formaldehyde,  flammable  explosives,  radioactive  materials, hazardous wastes,
toxic substances or related materials, including, but not limited to, substances
defined  as  or included in the definition of "hazardous substances," "hazardous
wastes,"  "hazardous  materials"  or  "toxic  substances"  under  any  Hazardous
Materials  Laws.
"Hazardous  Materials  Claims"  means (a) enforcement, cleanup, removal or other
regulatory  actions instituted, completed or threatened by any Governmental Body
pursuant  to  any  applicable  Hazardous  Materials  Laws and (b) claims made or
threatened  by  any  third  party  against  Borrower or its property relating to
damage, contribution, cost recovery, compensation, loss or injury resulting from
Hazardous  Materials.
"Hazardous  Materials  Laws"  means  all Applicable Laws pertaining to Hazardous
Materials.
"Indebtedness"  means  all  items  that  in  accordance  with generally accepted
accounting  principles  would  be  included  in determining total liabilities as
shown  on  the  liabilities  side  of  the  balance  sheet  as  of the date that
"Indebtedness" is to be determined and in any event includes liabilities secured
by  any  mortgage,  deed of trust, pledge, lien or security interest on property
owned  or  acquired,  whether  or not such a liability has been assumed, and the
guaranties,  endorsements  (other  than for collection in the ordinary course of
business)  and  other  contingent  obligations with regard to the obligations of
other  Persons.
"Indemnity  Agreement"  has  the  meaning set forth in Section 4.1(g) hereof and
includes  all  replacements,  amendments,  and  modifications  of  the Indemnity
Agreement.
"Interest  Differential"  means  that  sum  equal  to the greater of zero or the
financial  loss  incurred  by U.S. Bank resulting from prepayment, calculated as
the  difference between the amount of interest U.S. Bank would have earned (from
like  investments  in  the  Money  Markets as of the first day of the LIBOR Rate
Loan)  had prepayment not occurred and the interest U.S. Bank will actually earn
(from  like  investments in the Money Markets as of the date of prepayment) as a
result  of  the  redeployment  of  funds  from  the  prepayment.
"LIBOR  Rate  Loan"  has  the  meaning  set  forth  in  Section  2.4  hereof.
"Loan  Documents"  means  this  Agreement,  the  Note,  the  Deed  of Trust, the
Indemnity  Agreement  and  the  Pledge  Agreement,  together  with  all  other
agreements,  instruments  and  documents  arising  out  of  or  relating to this
Agreement  or  the  Loan, and includes all renewals, replacements and amendments
thereof.
"Loan  Period" means the period commencing on the advance date of the applicable
LIBOR Rate Loan and ending on the numerically corresponding day 1, 2 or 3 months
thereafter  matching  the  interest  rate  term  selected by Borrower; provided,
however,  (a) if any Loan Period would otherwise end on a day which is not a New
York Banking Day, then the Loan Period shall end on the next succeeding New York
Banking  Day  unless  the  next succeeding New York Banking Day falls in another
calendar  month,  in  which  case  the  Loan Period shall end on the immediately
preceding New York Banking Day; or (b) if any Loan Period begins on the last New
York  Banking  Day  of  a  calendar  month  (or  on  a day for which there is no
numerically  corresponding  day  in  the  calendar  month at the end of the Loan
Period),  then the Loan Period shall end on the last New York Banking Day of the
calendar  month  at  the  end  of  such  Loan  Period.
"Loan"  has  the  meaning  set  forth  in  Section  2.1  hereof and includes all
renewals,  replacements  and  amendments  of  the  Loan.
     "Maturity  Date"  has  the  meaning  set  forth  in  Section 2.5(b) hereof.
     "Money  Markets"  refers to one or more wholesale funding markets available
to  and  selected  by  U.S.  Bank, including negotiable certificates of deposit,
commercial  paper, eurodollar deposits, bank notes, federal funds, interest rate
swaps  or  others.
"New  York Banking Day" means any day (other than a Saturday or Sunday) on which
commercial  banks  are  open  for  business  in  New  York,  New  York.
"Note"  has  the  meaning  set  forth  in  Section  2.3  hereof and includes all
renewals,  amendments,  modifications  and  restatements  of  the  Note.
"Obligations"  has  the  meaning  set  forth  in  Section  9.3  hereof.
"Participant"  means  any  financial  institution  to  which  U.S.  Bank sells a
participation  in  the  Loan.
"Person"  means  any  individual,  partnership, limited liability company, joint
venture,  firm,  corporation,  association,  trust  or  other  enterprise or any
Governmental  Body.
"Plan"  means  an  employee  pension  benefit  plan  that is covered by ERISA or
subject  to  the  minimum  funding  standards  under Section 412 of the Internal
Revenue  Code  of 1986 and is either (a) maintained by Borrower or any Affiliate
for  employees  of  Borrower  or  any  Affiliate or (b) maintained pursuant to a
collective  bargaining  agreement or any other arrangement under which more than
one  employer makes contributions and to which Borrower or any Affiliate is then
making  or  accruing  an  obligation  to  make  contributions  or has within the
preceding  five  plan  years  made  contributions.
"Pledge  Agreement"  has  the  meaning  set  forth  in Section 4.1(b) hereof and
includes  all renewals, amendments, modifications and restatements of the Pledge
Agreement.
"Prime  Rate  Loan"  has  the  meaning  set  forth  in  Section  2.4  hereof.
"Scottsdale  Property"  has  the  meaning  set  forth  in  Section  9.7  hereof.
"Setoff"  has  the  meaning  set  forth  in  Section  9.3  hereof.
"Subsidiary"  a  corporation,  partnership,  limited  liability company or other
entity  of  which  shares  of stock or other ownership interests having ordinary
voting  power  (other  than  stock or such other ownership interests having such
power  only  by reason of the happening of a contingency) to elect a majority of
the  board  of  directors  or  other  managers of such corporation, partnership,
limited  liability  company  or  other entity are at the time owned by Borrower.
"U.S.  Bank"  means  U.S.  Bank  National  Association,  a  national  banking
association,  and  its  successors  and  assigns.
1.2     Accounting  Terms
     Unless  otherwise  specified herein, all accounting terms used herein shall
be  interpreted,  all  accounting determinations hereunder shall be made and all
financial  statements  required  to  be delivered hereunder shall be prepared in
accordance  with  generally accepted accounting principles consistently applied.
1.3     Rules  of  Construction
     Unless  the context otherwise requires, the following rules of construction
apply  to  the  Loan  Documents:
(a)     Words  in  the singular include the plural and in the plural include the
singular.
(b)     In  the  event  of  any  inconsistency  between  the  provisions of this
Agreement  and the provisions of any of the other Loan Documents, the provisions
of  this  Agreement  govern.
1.4     Incorporation  of  Recitals  and  Exhibits
     The  foregoing  recitals are incorporated into this Agreement by reference.
All  references  to  "Exhibits"  contained  herein  are  references  to exhibits
attached  hereto,  the  terms and conditions of which are made a part hereof for
all  purposes.
ARTICLE  II.     LOAN
2.1     Loan  Commitment
     Subject  to  and  upon  the  terms  and  conditions set forth herein and in
reliance  upon  the  representations,  warranties,  and  covenants  of  Borrower
contained  herein  or  made  pursuant  hereto,  U.S.  Bank will make Fundings to
Borrower  from  time to time during the period ending on June 30, 2004, but such
Fundings  shall  not  exceed,  in the aggregate principal amount at any one time
outstanding, the Commitment Amount (the "Loan").  Borrower may borrow, repay and
reborrow  hereunder  either  the  full  amount  of  the  Loan or any lesser sum.
2.2     Use  of  Proceeds
     The  proceeds  of the Loan shall be used by Borrower for funding short-term
and  seasonal  operating  cash  needs.
2.3     Note
     The  Loan  shall  be  evidenced  by  a promissory note in the form attached
hereto  as  Exhibit  A  (the  "Note").
2.4     Interest  Rate
     Interest  on  each  Funding  under  the  Loan  shall  accrue  at one of the
following  per annum rates selected by Borrower (i) upon notice to U.S. Bank (or
in  the  event no other selection is made by Borrower), 1.0% plus the prime rate
announced  by  U.S.  Bank  from  time  to time, as and when such rate changes (a
"Prime  Rate  Loan");  or (ii) upon a minimum of two New York Banking Days prior
notice,  3.5%  plus  the  1,  2  or  3 month LIBOR rate quoted by U.S. Bank from
Telerate  Page  3750  or any successor thereto (which shall be the LIBOR rate in
effect two New York Banking Days prior to commencement of the advance), adjusted
for  any  reserve  requirement and any subsequent costs arising from a change in
government  regulation  (a  "LIBOR  Rate Loan").  In the event Borrower does not
timely  select  another  interest rate option at least two New York Banking Days
before  the  end  of the Loan Period for a LIBOR Rate Loan, U.S. Bank may at any
time  after  the  end  of the Loan Period convert the LIBOR Rate Loan to a Prime
Rate  Loan,  but  until such conversion, the funds advanced under the LIBOR Rate
Loan  shall continue to accrue interest at the same rate as the interest rate in
effect  for  such LIBOR Rate Loan prior to the end of the Loan Period.  No LIBOR
Rate Loan may extend beyond the Maturity Date.  In any event, if the Loan Period
for  a  LIBOR  Rate  Loan should happen to extend beyond the Maturity Date, such
loan  must  be  prepaid  on  the Maturity Date.  U.S. Bank's internal records of
applicable  interest  rates  shall  be  determinative in the absence of manifest
error.  Each LIBOR Rate Loan shall be in a minimum principal amount of $100,000.
The  aggregate  number  of  LIBOR  Rate  Loans in effect at any one time may not
exceed  three.  If  a  LIBOR  Rate  Loan is prepaid prior to the end of the Loan
Period  for  such loan, whether voluntarily or because prepayment is required on
the Maturity Date or due to acceleration of the Loan upon an Event of Default or
otherwise,  Borrower  agrees  to  pay  all  of  U.S.  Bank's costs, expenses and
Interest  Differential (as determined by U.S. Bank) incurred as a result of such
prepayment.  Because  of the short-term nature of this facility, Borrower agrees
that  the  Interest  Differential  shall not be discounted to its present value.
Any prepayment of a LIBOR Rate Loan shall be in an amount equal to the remaining
entire  principal  balance  of  such  loan.
2.5     Repayment
     (a)     Interest  is  payable beginning June 10, 2004, and on the same date
of each consecutive month thereafter (except that if a given month does not have
such a date, the last day of such month), plus a final interest payment with the
final  payment  of  principal.
(b)     Principal  is  payable  on  June  30,  2004  (the  "Maturity  Date").
2.6     Fundings
     (a)     U.S.  Bank  is hereby authorized by Borrower to make Fundings under
the  Loan  upon  receipt for each Funding of an oral or written request therefor
(including written requests communicated by facsimile) ("Borrowing Notice") from
the  Director  of  Financial  Services,  the  Chief  Financial Officer, the Cash
Manager  and/or the Director of Real Estate Finance of Borrower, each of whom is
authorized  to  request Fundings and direct the disposition of any such Fundings
until written notice by Borrower of the revocation of such authority is received
by U.S. Bank.  Any such Funding shall be conclusively presumed to have been made
to  or  for  the benefit of Borrower when made in accordance with such a request
and direction for disposition or when such Funding is deposited to the credit of
the  account of Borrower with U.S. Bank or is transmitted to any other bank with
directions  to  credit  the  same  to  the  account  of  Borrower  at such bank,
regardless  of  whether  persons  other  than those authorized hereunder to make
requests  for  Fundings  have  authority  to  draw  against  any  such  account.
(b)     Borrower  acknowledges  that  U.S.  Bank  cannot  effectively  determine
whether  a  particular  request for a Funding is valid, authorized or authentic.
It  is  nevertheless  important  to Borrower that it has the privilege of making
requests  for  Fundings in accordance with Section 2.6(a) hereof.  Therefore, to
induce U.S. Bank to lend funds in response to such requests and in consideration
for  U.S.  Bank's  agreement  to  receive  and consider such requests, except as
otherwise  specifically  provided  herein,  Borrower  assumes  all  risk  of the
validity,  authenticity  and  authorization of such requests, whether or not the
individual making such requests has authority to request Fundings and whether or
not  the  aggregate  sum  owing exceeds the maximum principal amount referred to
above.  Absent  gross  negligence  or willful misconduct, U.S. Bank shall not be
responsible under principles of contract, tort or otherwise for the amount of an
unauthorized  or invalid Funding; rather, Borrower agrees to repay any sums with
interest  as  provided  herein.
2.7     Loan  Fee
     Concurrently  with the execution of this Agreement, Borrower shall pay U.S.
Bank  a  nonrefundable  fee  for  the  Loan  in  the  amount  of  $3,750.
2.8     Resting  of  Loan
     Notwithstanding  any  provision  of  this  Agreement  to  the contrary, the
outstanding  principal  balance of the Loan shall be $-0- for not fewer than (a)
30 days (consecutive or non-consecutive) during the period from the date of this
Agreement  through  the  Maturity  Date,  and  (b)  60  days  (consecutive  or
non-consecutive)  during  each  one  year  period commencing July 1, 2004.  This
provision  shall  not  be  construed  to constitute a commitment of U.S. Bank to
extend  the  commitment  period  or  Maturity  Date  of  the  Loan.
ARTICLE  III.     GENERAL  PROVISIONS  APPLICABLE  TO  THE  LOAN
3.1     Manner  of  Payment
     All  sums  payable  to  U.S.  Bank pursuant to this Agreement shall be paid
directly  to  U.S.  Bank in immediately available United States funds.  Whenever
any payment to be made hereunder or on the Note becomes due and payable on a day
that  is  not  a  Business  Day, such payment may be made on the next succeeding
Business  Day  and  such  extension  of  time  shall in such case be included in
computing  interest  on  such payment.  U.S. Bank is hereby authorized to deduct
any  and  all payments required hereunder from Borrower's accounts at U.S. Bank.
3.2     Statements
     U.S.  Bank shall send Borrower statements of all amounts due hereunder; the
statements shall be considered correct and conclusively binding, absent manifest
error,  on Borrower unless Borrower notifies U.S. Bank to the contrary within 30
days of receipt of any statement that Borrower claims to be incorrect.  Borrower
agrees that accounting entries made by U.S. Bank with respect to Borrower's loan
accounts  shall constitute evidence of all Fundings made under and payments made
on  the  Loan.  Without limiting the methods by which U.S. Bank may otherwise be
entitled by Applicable Law to make demand for payment of the Loan upon Borrower,
Borrower  agrees that any statement, invoice or payment notice from U.S. Bank to
Borrower  with  respect  to  any principal or interest obligation of Borrower to
U.S.  Bank  shall  be  deemed  to be a demand for payment in accordance with the
terms  of  such  statement,  invoice  or payment notice.  Under no circumstances
shall a demand by U.S. Bank for partial payment of principal or interest or both
be  construed  as  a  waiver  by U.S. Bank of its right thereafter to demand and
receive  payment  (in  part  or  in full) of any remaining principal or interest
obligation.
3.3     Book  Entry  Loan  Account
     U.S.  Bank  shall establish a book entry loan account for the Loan in which
U.S.  Bank will make debit entries of all Fundings pursuant to the terms of this
Agreement.  U.S.  Bank  will  also  record  in  the  applicable loan account, in
accordance  with  customary  banking  practices, all interest and other charges,
expenses  and other items properly chargeable to Borrower, if any, together with
all  payments  made  by  Borrower  on  account  of the Indebtedness evidenced by
Borrower's  respective  loan  accounts  and  all  other  sums  credited  to  the
respective  loan  accounts.  The  debit  balance  of  Borrower's respective loan
accounts  shall  reflect the amount of Borrower's Indebtedness to U.S. Bank from
time  to  time  by  reason  of  advances,  charges,  payments  or  credits.
3.4     Computations  of  Interest
     All  computations  of  interest  shall  be  based on a 360-day year for the
actual  number  of  days  elapsed.
3.5     Default  Interest
     Upon  the  occurrence  and  during the continuance of any Event of Default,
U.S.  Bank  may, at its option, raise the interest rate charged on the Loan to a
rate  of  up  to the then-applicable interest rate plus 4 percent per annum from
the date of the occurrence of the Event of Default until the Event of Default is
cured or waived by U.S. Bank or, absent cure or waiver, until the Loan is repaid
in  full.
3.6     Maximum  Interest  Rate
     Notwithstanding  any  provision  contained herein or in the Note, the total
liability  of  Borrower  for payment of interest pursuant hereto, including late
charges, shall not exceed the maximum amount of interest permitted by Applicable
Law  to  be charged, collected or received from Borrower; and if any payments by
Borrower  include  interest  in  excess  of that maximum amount, U.S. Bank shall
apply  the excess first to reduce the unpaid balance of the Loan, then to reduce
the  balance of any other Indebtedness of Borrower to U.S. Bank.  If there is no
such  Indebtedness,  the  excess  shall  be  returned  to  Borrower.
3.7     Late  Charge
     If any payment of principal or interest required under the Loan is past due
for  a  period in excess of 10 days, Borrower will be charged a late charge of 5
percent  of  the  delinquent  payment or $5, whichever is greater, for each such
late  payment.
3.8     Prepayments
     Borrower shall have the right, at any time, to prepay the whole or any part
of  any Prime Rate Loan without prepayment charges concurrently with any regular
monthly  payment of interest.  Borrower may not prepay all or any portion of any
LIBOR  Rate  Loan  whether  voluntarily,  by  acceleration  or  otherwise unless
concurrently  with  such  prepayment  Borrower pays U.S. Bank all amounts due in
accordance  with Section 2.4.  All prepayments shall be applied first to accrued
interest  on  the Loan and then to the outstanding principal balance of the Loan
in  the  inverse  order  of  maturity.
3.9     Extensions,  Renewals  and  Modifications
     Any  extensions,  renewals, and modifications of the Loan shall be governed
by  the  terms  and  conditions  of  this Agreement and the other Loan Documents
unless  otherwise  agreed  to  in  writing  by  U.S.  Bank  and  Borrower.
3.10     Increased  Costs
     If,  as  a result of any law, rule, regulation, treaty or directive, or any
change therein or in the interpretation or administration thereof, or compliance
by  U.S.  Bank with any request or directive (whether or not having the force of
law)  from  any  court,  central  bank,  governmental  authority,  agency  or
instrumentality,  or  comparable  agency:
(a)     Any  tax,  duty  or  other  charge  to  the  Loan is imposed thereunder,
modified or deemed applicable, or the basis of taxation of payments to U.S. Bank
of interest or principal of the Loan or of the commitment fees (other than taxes
imposed  on the overall net income of U.S. Bank by the jurisdiction in which has
its  principal  office)  is  changed;
(b)     Any  reserve, special deposit, special assessment or similar requirement
against  assets of, deposits with, or for the account of, or credit extended by,
U.S.  Bank  is  imposed,  modified  or  deemed  applicable;
(c)     Any  increase  in  the  amount  of  capital  required  or expected to be
maintained  by  U.S.  Bank  or  any  person  or  entity controlling U.S. Bank is
imposed,  modified  or  deemed  applicable;  or
(d)     Any  other  condition  affecting the Loan is imposed on U.S. Bank or the
relevant  funding  markets;
and  U.S.  Bank  determines  that,  by  reason thereof, the cost to U.S. Bank of
making or maintaining the Loan is increased, or the amount of any sum receivable
by  U.S.  Bank  hereunder  or  under  the  Note  is  reduced;
then,  Borrower shall pay to U.S. Bank upon a written reasonably detailed demand
----
such  additional  amount  or  amounts  as  will  compensate  U.S.  Bank  (or the
controlling  person  or entity in the instance of (c) above) for such additional
costs  or  reduction  (provided that U.S. Bank has not been compensated for such
additional  cost or reduction in the calculation of the rate applicable to LIBOR
Rate  Loans).  Determinations  by U.S. Bank for purposes of this Section 3.10 of
the  additional  amounts required to compensate U.S. Bank shall be conclusive in
the  absence  of manifest error.  In determining such amounts, U.S. Bank may use
any  reasonable  averaging,  attribution  and  allocation  methods.
3.11     LIBOR  Rate  Loan  Provisions
     (a)     Borrower may obtain LIBOR rate quotes from U.S. Bank between 8 a.m.
and  12  noon  (Seattle,  Washington  time)  on  any  New  York  Banking  Day.
(b)     Notwithstanding  any  other  term  of  this  Agreement, Borrower may not
select  the  LIBOR  rate  if  an  Event of Default hereunder has occurred and is
continuing.
(c)     Nothing  contained  in  this Agreement, including without limitation the
determination  of any Loan Period for a LIBOR Rate Loan or U.S. Bank's quotation
of  any LIBOR rate, shall be construed to prejudice U.S. Bank's right to decline
to  make  any  requested Funding provided that U.S. Bank acts in accordance with
the  provisions  of  this  Agreement.
3.12     Deposits  Unavailable  or  Interest Rate Unascertainable or Inadequate;
Impracticability
     If  U.S.  Bank  determines  (which  determination  shall  be conclusive and
binding  on  the  parties  hereto  absent  manifest  error)  that:
(a)     Deposits  of  the  necessary amount for the relevant Loan Period for any
LIBOR  Rate Loan are not available to U.S. Bank in the relevant markets or that,
by  reason of circumstances affecting such market, adequate and reasonable means
do  not  exist  for  ascertaining  the  LIBOR  rate;
(b)     The  LIBOR  rate will not adequately and fairly reflect the cost to U.S.
Bank  of  making  or  funding the LIBOR Rate Loan for a relevant Loan Period; or
(c)     The  making or funding of LIBOR Rate Loans has become impracticable as a
result  of  any  event  occurring after the date of this Agreement which, in the
opinion  of  U.S. Bank, materially and adversely affects such LIBOR Rate Loan or
U.S.  Bank's  commitment  to  make  such LIBOR Rate Loan or the relevant market;
U.S.  Bank shall promptly give notice of such determination to Borrower, and (i)
any  notice  of  a  new LIBOR Rate Loan previously given by Borrower and not yet
borrowed  or converted shall be deemed to be a notice to make a Prime Rate Loan,
and  (ii)  Borrower  shall be obligated to either prepay in full any outstanding
LIBOR  Rate  Loan on the expiration date of the current Loan Period with respect
thereto  or  convert  any  such  LIBOR  Rate  Loan  to a Prime Rate Loan on such
expiration  date.
3.13     Changes  in  Law  Rendering  LIBOR  Rate  Loan  Unlawful
     If at any time due to the adoption of any law, rule, regulation, treaty, or
directive,  or  any  change  therein  or in the interpretation or administration
thereof  by  any  court,  central  bank,  governmental  authority,  agency,  or
instrumentality,  or  comparable  agency  charged  with  the  interpretation  or
administration  thereof,  or for any other reason arising subsequent to the date
of  this Agreement, it shall become unlawful or impossible for U.S. Bank to make
or  fund  any LIBOR Rate Loan, the obligation of U.S. Bank to provide such LIBOR
Rate  Loan  shall,  upon the happening of such event, forthwith be suspended for
the  duration of such illegality or impossibility.  If any such event shall make
it  unlawful  or  impossible  for  U.S.  Bank  to  continue  any LIBOR Rate Loan
previously  made  by  it  hereunder, U.S. Bank shall, upon the happening of such
event,  notify  Borrower  thereof  in  writing,  and Borrower shall, at the time
notified  by  U.S.  Bank, either convert each such unlawful LIBOR Rate Loan to a
Prime  Rate  Loan  or  repay such LIBOR Rate Loan in full, together with accrued
interest  thereon,  subject  to  the  provisions  of  Section  2.4.
3.14     Discretion  of  U.S.  Bank  as  to  Manner  of  Funding
     Notwithstanding  any provision of this Agreement to the contrary, U.S. Bank
shall  be  entitled  to  fund and maintain its funding of all or any part of the
Loan in any manner it elects; it being understood, however, that for purposes of
this  Agreement,  all determinations hereunder shall be made as if U.S. Bank had
actually  funded  and maintained each LIBOR Rate Loan during the Loan Period for
such  LIBOR  Rate  Loan  through  the  purchase  of  deposits  having  a  term
corresponding  to  such  Loan  Period  and bearing an interest rate equal to the
LIBOR rate for such Loan Period (whether or not U.S. Bank shall have granted any
participations  in  such  LIBOR  Rate  Loan).
ARTICLE  IV.     CONDITIONS  PRECEDENT  FOR  FUNDINGS  UNDER  THE  LOAN
4.1     Conditions  Precedent  for  Initial  Funding
     U.S.  Bank shall not be required to make the initial Funding under the Loan
unless or until the following conditions have been fulfilled to the satisfaction
of  U.S.  Bank:
(a)     U.S. Bank shall have received this Agreement and the Note, duly executed
and  delivered  by  the  respective  parties  thereto.
(b)     U.S.  Bank shall have received, duly executed and delivered by Borrower,
a  pledge  agreement  in  the  form  attached  hereto  as  Exhibit  B  ("Pledge
Agreement"),  granting  to  U.S.  Bank  a  first priority and exclusive security
interest in all of Borrower's membership interest in Senior Healthcare Partners,
LLC,  a  Colorado  limited  liability  company, now owned or hereafter acquired,
together with a Control Agreement in form and substance acceptable to U.S. Bank,
duly executed and delivered by Borrower and Senior Healthcare Partners, LLC.  In
addition,  Borrower  shall  use  diligent  efforts  to  provide to U.S. Bank, as
expeditiously  as  possible,  a  consent  to  such  pledge in form and substance
acceptable  to  U.S.  Bank, duly executed and delivered by all members of Senior
Healthcare  Partners,  LLC.
(c)     U.S.  Bank shall have received, duly executed and delivered by Borrower,
a  deed  of trust, assignment of leases and rents, and security agreement in the
form  attached  hereto  as  Exhibit C ("Deed of Trust"), granting to U.S. Bank a
first priority and exclusive security interest in Borrower's fee interest in the
Scottsdale  Property  and  legally  described  therein.
(d)     U.S.  Bank  shall  have received such documents deemed necessary by U.S.
Bank  to  perfect  the  security interest granted to U.S. Bank, together with an
Article  9  certificate in a form designated by U.S. Bank, all duly executed and
delivered  by  Borrower.
(e)     U.S. Bank shall have received, reviewed, and approved a FIRREA-compliant
appraisal  for  the real property encumbered by the Deed of Trust, provided that
such  requirement  is  not  required  to  be satisfied by Borrower until 60 days
following  the  initial  Funding.
(f)     U.S.  Bank  shall  have  received a supplement to the February 17, 2004,
preliminary  commitment  for  title  insurance  No. 03002252, issued by Fidelity
National  Title Insurance Company, dated as of the estimated date of the initial
Funding,  stating  that the title company is ready, able and willing to issue to
U.S.  Bank,  without  condition,  change  or exception other than the exceptions
standard  to  such  policy,  an  American Land Title Association (ALTA) extended
coverage  mortgagee's  policy of title insurance insuring the validity and first
priority  of  the  lien of the Deed of Trust against the real property described
therein,  in  the  amount of $3,000,000, and with such endorsements as U.S. Bank
deems  necessary,  in its reasonable discretion, including endorsements ALTA 100
(compliance  with covenants), 102.5 (foundation), 103.7 (abuts a public street),
116 (address), 116.1 (survey), a variable interest rate endorsement, a revolving
line  endorsement,  a  contiguity endorsement, a subdivision endorsement, and an
environmental  lien  endorsement,  as  well  as  an  endorsement  removing  the
creditor's rights exclusion if and to the extent such endorsements are available
in  Arizona.  All  title  exceptions  shall be subject to U.S. Bank's reasonable
approval.  The  title  insurance  policy  shall  insure  that  the real property
described  in  the  Deed  of  Trust  is  free  of  the  possibility of any prior
mechanics'  or  materialmen's  liens, and that all taxes and assessments on such
property  or  any  part thereof which are due and payable on the date of closing
have  been  paid.
(g)     U.S.  Bank shall have received, duly executed and delivered by Borrower,
an  indemnity agreement in the form attached hereto as Exhibit D (the "Indemnity
Agreement"),  pursuant  to  which Borrower agrees to indemnify U.S. Bank against
certain  claims  more  particularly  described  therein.
(h)     U.S.  Bank shall have received and approved a flood hazard determination
with  respect to the real property encumbered by the Deed of Trust.  If the real
property  described in the Deed of Trust is located in an area designated by the
Department  of  Housing  and  Urban  Development as a special flood hazard area,
Borrower  must  purchase  a  flood  insurance  policy  as  required by the Flood
Disaster  Protection Act of 1973.  The policy shall name U.S. Bank as loss payee
on  a  Form  438-BFU  or  acceptable  equivalent  attached  to  the  policy.
(i)     U.S.  Bank  shall  have  received  and  approved  an  environmental
questionnaire with respect to the real property encumbered by the Deed of Trust.
(j)     U.S.  Bank  shall  have  received  and  approved a Phase I Environmental
Report  reasonably  acceptable  to U.S. Bank and from a geotechnical engineer or
other  person  reasonably  acceptable  to  U.S.  Bank  verifying  that,  after
investigation  into  the  prior  uses  of the property encumbered by the Deed of
Trust,  there  is  no material possibility that such property is contaminated by
Hazardous  Materials, or that Hazardous Materials have been generated, stored or
disposed  of  on,  under  or  around such property in an unlawful or potentially
dangerous manner.  If the Phase I Environmental Report does not indicate to U.S.
Bank's  satisfaction  that  there is no material possibility of contamination by
Hazardous Materials, then Borrower shall provide a Phase II Environmental Report
reasonably  acceptable  to  U.S.  Bank and from a geotechnical engineer or other
person  reasonably acceptable to U.S. Bank verifying to U.S. Bank's satisfaction
after  due  inspection  and  tests  of such property, that there is no Hazardous
Materials located on, under or around such property which poses a possibility of
contamination  of  the  property  encumbered  by  the  Deed  of  Trust.
(k)     U.S.  Bank  shall  have  received and approved an ADA questionnaire with
respect  to  the  real  property  encumbered  by  the  Deed  of  Trust.
(l)     No  Default  or Event of Default hereunder shall exist, and after having
given  effect  to  the  requested  Funding, no Default or Event of Default shall
exist.
(m)     All  representations  and  warranties  of  Borrower  contained herein or
otherwise  made  in  writing in connection herewith shall be true and correct in
all  material  respects  with the same effect as though such representations and
warranties  had  been  made  on  and  as  of  the  date  of the initial Funding.
(n)     All  corporate proceedings of Borrower shall be satisfactory in form and
substance  to  U.S.  Bank, and U.S. Bank shall have received all information and
copies  of  all  documents, including records of all corporate proceedings, that
U.S.  Bank  has  requested  in  connection  therewith,  such  documents  where
appropriate  to  be  certified  by  proper corporate authorities or Governmental
Bodies.  Borrower  shall provide U.S. Bank with the following documents prior to
or  upon  the  execution  of  this  Agreement:
     (i)     Copies  of  the  articles  of incorporation and bylaws of Borrower,
together  with  all  amendments  thereto,  certified  by Borrower to be true and
complete;
     (ii)     A  certificate  of  authority  for  Borrower  in  the  state  of
Washington, dated within 30 days of the date of the execution of this Agreement;
and
     (iii)     A  certified  resolution  of  the  directors  of  Borrower  and
incumbency  certificate  in  the  form  attached  hereto  as  Exhibit  E.
     (o)     U.S.  Bank  shall  have  received such evidence deemed necessary by
U.S. Bank that U.S. Bank's security interests in the Collateral constitute first
priority  and exclusive security interests, except as otherwise provided herein.
(p)     U.S.  Bank  shall have received a Borrowing Notice from Borrower for the
initial  Funding  requested  under  the  Loan.
(q)     U.S.  Bank  shall  have  received insurance certificates and lender loss
payable  endorsements  on  casualty/property  loss insurance with respect to the
Scottsdale  Property.
4.2     Conditions  Precedent  to  Each  Subsequent  Funding
     The  obligation  of U.S. Bank to make any Funding subsequent to the initial
Funding  hereunder  is  subject  to the fulfillment, to the satisfaction of U.S.
Bank,  of  the  following:
(a)     The  conditions  set  forth  in  Section  4.1  hereof  shall  have  been
previously satisfied, and U.S. Bank shall have received evidence satisfactory to
U.S.  Bank  of  satisfaction  thereof;
(b)     U.S.  Bank  shall  have  received  a Borrowing Notice for each requested
Funding  under  the  Loan;
(c)     There  shall  be  executed  and  delivered  to  U.S.  Bank  such further
instruments,  agreements and documents, as may be reasonably necessary or proper
in  the opinion of U.S. Bank to confirm the obligations of Borrower to U.S. Bank
hereunder,  the grant of security therefor and the proper use of the proceeds of
all  Fundings;
(d)     The  representations  and  warranties  of Borrower in Article VII hereof
shall  be  true on the date of each Funding with the same force and effect as if
made  on  and  as  of  that  date;
(e)     No  Default  or  Event  of  Default  shall exist, and after having given
effect to the requested Funding, no Default or Event of Default shall exist; and
(f)     To  the extent not previously delivered, all other documents, agreements
and instruments from or with respect to Borrower or any other Person that may be
called  for  hereunder  shall  be  duly  executed  and  delivered  to U.S. Bank,
including,  but not limited to, all documents, agreements and instruments deemed
necessary  by  U.S. Bank to perfect its security interest in Collateral acquired
after  the  date  of  this  Agreement.  For  the purposes of this Agreement, the
waiver of delivery of any document, agreement or instrument from or with respect
to  Borrower  or  any  other Person does not constitute a continuing waiver with
respect  to  the  obligation to fulfill the conditions precedent to each Funding
hereunder.
ARTICLE  V.     AFFIRMATIVE  COVENANTS
     Borrower  hereby  covenants and agrees that so long as this Agreement is in
effect,  and  until  the  Loan,  together  with  interest thereon, and all other
obligations  incurred  hereunder  is  paid or satisfied in full, Borrower shall:
5.1     Financial  Data
     Keep  its books of account in accordance with generally accepted accounting
principles,  consistently  applied,  and  furnish  to  U.S.  Bank:
(a)     As  soon  as practicable and in any event within 45 days after the close
of each fiscal quarter of Borrower, the following unaudited financial statements
of  Borrower  for  each  such quarter, all in reasonable detail and certified by
Borrower  to be true and correct:  balance sheet and statement of income.  There
shall  be  included  in such financial statements a calculation of the financial
covenants  provided  for  in  Article  VI  hereof.
(b)     As  soon as practicable and in any event within 120 days after the close
of each fiscal year of Borrower, the following financial statements of Borrower,
setting  forth  the  corresponding  figures  for  the  previous  fiscal  year in
comparative  form  where  appropriate,  all  in  reasonable  detail  and audited
(without  any  qualification  or  exception deemed material by U.S. Bank) by the
independent  certified  public  accountant engaged by Borrower as of the date of
this  Agreement  or such other independent certified public accountants selected
by  Borrower  and satisfactory to U.S. Bank:  balance sheet, statement of income
and  statement  of  cash flows.  Borrower shall provide U.S. Bank with a copy of
its independent certified public accountants' management letter or other similar
report  or  correspondence  to  Borrower.
(c)     As  soon  as practicable and in any event within 45 days after the close
of  each  fiscal  quarter  of Borrower, certificates signed by Borrower, stating
that  during  such  period no Default or Event of Default existed or if any such
Default  or  Event of Default existed, specifying the nature thereof, the period
of existence thereof and what action Borrower proposes to take or has taken with
respect thereto, and that during such period Borrower was in compliance with all
of  the  financial  covenants  set forth in Article VI hereof; and promptly upon
Borrower  becoming aware of the occurrence of any Default or Event of Default, a
certificate  signed  by  Borrower,  specifying the nature thereof, the period of
existence  thereof  and  what action Borrower proposes to take or has taken with
respect  thereto.
(d)     As  soon as practicable and in any event within three days after the end
of  each  week,  an  occupancy  report  for  all  facilities owned or managed by
Borrower or its Affiliates for each such week in a form and in such detail as is
acceptable  to  U.S.  Bank.
(e)     As  soon  as  practicable  and  in  any  event within 120 days after the
beginning  of  each  fiscal  year,  a  projection of the financial operations of
Borrower  (including  an operating budget and cash budget) in a form and in such
detail  as  is  acceptable  to  U.S.  Bank.
(f)     Upon  request  by  U.S.  Bank,  copies  of  all  reports relative to the
operations  of  Borrower  and  its  Affiliates filed with any Governmental Body.
(g)     With  reasonable  promptness,  such  other  information  regarding  the
business,  operations  and financial condition of Borrower and its Affiliates as
U.S.  Bank  may  from  time  to  time  reasonably  request.
5.2     Licenses  and  Permits
     Maintain  all  Governmental  Approvals  and  all  related or other material
agreements  necessary  for Borrower to operate its business, as it now exists or
as  it  may be modified or expanded.  Borrower will at all times comply with all
Applicable Laws relating to the operations, facilities or activities of Borrower
where the failure to comply with the same could reasonably be expected to have a
material  adverse  affect  on  Borrower.
5.3     Maintenance  of  Properties
     Keep  Borrower's  properties  in  good repair and in good working order and
condition,  in  a  manner consistent with past practices; from time to time make
all  appropriate  and  proper  repairs,  renewals,  replacements,  additions and
improvements  thereto;  and  keep all equipment that may now or in the future be
subject  to  compliance  with  any  Applicable  Laws  in  compliance  with  such
Applicable  Laws  where the failure to so comply could reasonably be expected to
have  a  material  adverse  affect  on  Borrower.
5.4     Payment  of  Charges
     Duly  pay and discharge all material (a) taxes, assessments, levies and any
other  charges  of  Governmental  Bodies  imposed  on or against Borrower or its
property  or  assets, or upon any property leased by Borrower, prior to the date
on  which  penalties  attached  thereto, unless and to the extent only that such
taxes,  assessments,  levies and any other charges of Governmental Bodies, after
written  notice  thereof  having been given to U.S. Bank, are being contested in
good  faith  and  by  appropriate  proceedings; (b) claims allowed by Applicable
Laws,  whether  for  labor, materials, rentals or anything else, which could, if
unpaid,  become  a  lien  or  charge  upon  Borrower's property or assets or the
outstanding  capital  stock  of  Borrower  or adversely affect the facilities or
operations  of Borrower (unless and to the extent only that the validity thereof
is  being  contested  in good faith and by appropriate proceedings after written
notice  thereof has been given to U.S. Bank); (c) trade bills in accordance with
the  terms  thereof; and (d) other Indebtedness heretofore or hereafter incurred
or assumed by Borrower, unless such Indebtedness be renewed or extended.  In the
event any charge is being contested by Borrower as allowed above, Borrower shall
establish  adequate  reserves  against possible liability therefor if and to the
extent  required  by  generally  accepted  accounting  principles.
5.5     Insurance
     Maintain  insurance  upon  the real and personal property encumbered by the
Deed  of  Trust  which  complies  with the requirements of the Deed of Trust and
shall cause the insurer issuing such policy to certify to U.S. Bank that if such
insurance  is  proposed  to  be  canceled  or  materially changed for any reason
whatsoever,  such  insurer will promptly notify U.S. Bank, and such cancellation
or  change  shall  not be effective as to U.S. Bank for 30 days after receipt by
U.S.  Bank  of  such  notice,  unless  the  effect of the change is to extend or
increase  coverage  under  the  policy.
5.6     Maintenance  of  Records
     Keep at all times books of account and other records in which entries which
are  true  and  correct in all material respects will be made of all dealings or
transactions  in  relation  to  the  business  and  affairs  of  Borrower.
5.7     Inspection
     Allow  any  representative  of  U.S.  Bank  to visit and inspect any of the
properties  of  Borrower,  to examine the books of account and other records and
files of Borrower, to make copies thereof, and to discuss the affairs, business,
finances  and  accounts of Borrower with its officers and employees, all at such
reasonable  times  and  on reasonable advance notice as U.S. Bank may reasonably
determine to be necessary to monitor the Loan and the Borrower's compliance with
the  terms  of  this  Agreement  and  the  other  Loan Documents.  This right of
inspection  shall  specifically  include  U.S.  Bank's  collateral and financial
examinations  but  shall  be  subject  to  all  applicable  laws  governing  the
confidentiality  of  patient  and  employee  records.
5.8     Hazardous  Substances
     (a)     Borrower  hereby  covenants  and  agrees  that  so  long  as  any
Indebtedness  of  Borrower  to  U.S.  Bank  is  outstanding:
     (i)     Borrower  will not permit its property or any portion thereof to be
a site for the storage, use, generation, manufacture, disposal or transportation
of  Hazardous  Materials  in  violation  of  Hazardous  Materials  Laws;
     (ii)     Borrower will not permit any Hazardous Materials to be disposed of
off  its  property  other  than  in  properly  licensed  disposal  sites;
     (iii)     Borrower,  at  Borrower's  sole  cost  and expense, will keep and
maintain  its property and each portion thereof in compliance with and shall not
cause or knowingly permit its property or any portion thereof to be in violation
of  any  Hazardous  Materials  Laws;  and
     (iv)     Borrower  will  promptly  after obtaining actual knowledge thereof
advise  U.S.  Bank  in  writing  of  any  Hazardous  Material  Claim.
     (b)     Borrower  agrees to indemnify U.S. Bank and hold U.S. Bank harmless
from  and  against  any  and  all  claims,  demands,  damages,  losses,  liens,
liabilities,  penalties,  fines,  lawsuits  and  other proceedings and costs and
expenses  (including reasonable attorneys' fees), arising directly or indirectly
from  or  out  of  or  in  any  way  connected  with  (i)  the  accuracy  of the
representations  contained  in  Section  7.18 hereof; (ii) any activities on its
property  during  Borrower's  ownership,  possession  or control of its property
which  directly  or  indirectly  results  in  its property or any other property
becoming contaminated with Hazardous Materials; (iii) the discovery of Hazardous
Materials  on  its  property;  (iv)  the cleanup of Hazardous Materials from its
property;  and  (v)  the  discovery  of  Hazardous  Materials  or the cleanup of
Hazardous Materials from adjacent or other property that has become contaminated
as  a  result  of  any activity on Borrower's property.  As between Borrower and
U.S.  Bank,  Borrower  acknowledges  that  it will be solely responsible for all
costs  and  expenses  relating  to  the  cleanup of Hazardous Materials from its
property  or  from  any other properties that become contaminated with Hazardous
Materials  as  a  result  of activities on or the contamination of its property.
(c)     Borrower's  obligations  under  this  Section  5.8 are unconditional and
shall  not  be  limited  by  any  nonrecourse  or other limitations of liability
provided  for  in  the  Loan  Documents.  The  representations,  warranties  and
covenants  of  Borrower  set  forth  in this Section 5.8 and Section 7.18 hereof
(including,  but  not  limited  to, the indemnity provided for in Section 5.8(b)
hereof)  shall  survive the closing and repayment of the Loan to U.S. Bank; and,
to  the  extent permitted by Applicable Laws and Hazardous Materials Laws, shall
survive  the  transfer  of  its  property  by  foreclosure  proceedings (whether
judicial  or  nonjudicial),  deed in lieu of foreclosure or otherwise.  Borrower
acknowledges  and  agrees  that  its  covenants  and  obligations  hereunder are
separate  and  distinct  from  its  obligations  under  the  Loan  and  the Loan
Documents.  Notwithstanding  any provision of this Agreement or any of the other
Loan  Documents to the contrary, the provisions of this Section 5.8 shall not be
secured  by  the  Deed  of  Trust.
5.9     Corporate  Existence
     Maintain  and  preserve  the  corporate  existence  of  Borrower.
5.10     Notice  of  Disputes  and  Other  Matters
     Promptly  give  written  notice  to  U.S.  Bank  of:
(a)     Any  citation,  order to show cause or other legal process or order that
could  reasonably  be expected to have a material adverse effect on Borrower and
directing  Borrower  to  become  a  party  to  or to appear at any proceeding or
hearing  by  or  before  any  Governmental Body that has granted to Borrower any
Governmental Approval, and include with such notice a copy of any such citation,
order  to  show  cause,  or  other  legal  process  or  order;
(b)     Any  (i)  refusal,  denial,  threatened  denial  or  failure  by  any
Governmental  Body  to  grant,  issue, renew or extend any material Governmental
Approval;  (ii)  proposed  or  actual  revocation,  termination  or modification
(whether  favorable or adverse) of any Governmental Approval by any Governmental
Body;  (iii) dispute or other action with regard to any Governmental Approval by
any  Governmental Body; (iv) notice from any Governmental Body of the imposition
of any material fines or penalties or forfeitures; or (v) threats or notice with
respect  to  any  of  the foregoing or with respect to any proceeding or hearing
that could reasonably be expected to result in any of the foregoing and that, in
each  instance  described  in  the foregoing clauses (i) through (v), if decided
adversely  to  Borrower, could reasonably be expected to have a material adverse
affect  on  Borrower;
(c)     Any  dispute  concerning or any threatened nonrenewal or modification of
any  material  lease  for real or personal property to which Borrower is a party
which,  if decided adversely to Borrower, could reasonably be expected to have a
material  adverse  affect  on  Borrower;  or
(d)     Any actions, proceedings or claims of which Borrower has notice that may
be  commenced  or  asserted  against  Borrower  in  which the amount involved is
$1,000,000 or more and is not fully covered by insurance or which, if not solely
a  claim  for  monetary damages and if adversely determined, could reasonably be
expected  to  have  a  material  adverse  affect  on  Borrower.
5.11     Exchange  of  Note
     Upon  receipt of a written notice of loss, theft, destruction or mutilation
of  a  Note,  and  upon  surrendering  such  Note for cancellation if mutilated,
execute  and  deliver  a  new Note or a Note of like tenor in lieu of such lost,
stolen,  destroyed  or mutilated Note.  Any Note issued pursuant to this Section
5.11  shall  be  dated  so  that  neither gain nor loss of interest shall result
therefrom.
5.12     Maintenance  of  Liens
     At  all  times  maintain the liens and security interests provided under or
pursuant  to  this  Agreement  as  valid  and perfected first liens and security
interests  on  the property and assets intended to be covered thereby.  Borrower
shall take all action reasonably requested by U.S. Bank necessary to assure that
U.S.  Bank  has  valid  and  exclusive  liens  and  security  interests  in  all
Collateral.
5.13     Other  Agreements
     Comply  with all covenants and agreements set forth in or required pursuant
to any of the other Loan Documents as and when required or within any applicable
cure  period.
5.14     After-Acquired  Collateral
     Upon  request  by  U.S.  Bank, execute and deliver to U.S. Bank appropriate
instruments in order to effectuate the proper granting and perfection of a first
priority  security  interest  in  or  assignment  of  all property to U.S. Bank,
whether  personal,  real  or mixed, hereafter acquired by Borrower, concurrently
with  the  acquisition  thereof.
5.15     Further  Assurances
     Within  ten days of request by U.S. Bank, duly execute and deliver or cause
to  be  duly  executed  and  delivered  to  U.S.  Bank such further instruments,
agreements  and documents and do or cause to be done such further acts as may be
reasonably  necessary  or  proper  in the opinion of U.S. Bank to carry out more
effectively  the  provisions  and  purpose  of this Agreement and the other Loan
Documents.
ARTICLE  VI.     NEGATIVE  COVENANTS
     Borrower  covenants  and agrees that until the Loan, together with interest
thereon,  and  all other obligations incurred hereunder are paid or satisfied in
full,  Borrower  shall  not,  without  the  prior  written consent of U.S. Bank:
6.1     Dividends  and  Distributions
     During  the continuation of any Default or Event of Default, declare or pay
any  cash  distributions or dividends or return any capital to any of Borrower's
shareholders;  authorize  or  make  any  distribution,  payment  or  delivery of
property  or cash to any of Borrower's shareholders; redeem, retire, purchase or
otherwise  acquire,  directly  or  indirectly,  for consideration, any shares or
other interests of Borrower now or hereafter outstanding; or set aside any funds
for  any  of the foregoing purposes.  Notwithstanding the foregoing, Borrower is
permitted  to  (a)  issue  stock dividends; (b) pay its employees cash and other
compensation for services rendered by such employees and reimburse employees for
out-of-pocket  expenses incurred on behalf of Borrower; and (c) provide up to 25
percent  of  the  cash  consideration  for  the  purchase  of  stock acquired by
employees  pursuant  to  Borrower's  stock  purchase  plan.
6.2     Transactions  With  Affiliates
     Other  than an arm's-length transaction, (i) enter into any transaction, in
which an Affiliate of Borrower shall have any interest; or (ii) make any payment
or  agree  to make any payment to any such Affiliate; or (iii) transfer or agree
to  transfer  ownership or possession of any of its business or assets, tangible
or  intangible, real, personal or mixed, to any Affiliate.  For purposes of this
Section 6.2 only, the Persons referred to in the last sentence of the definition
of  the  term  "Affiliate"  shall  be  considered  to  be  Affiliates.
6.3     Liens
     Contract,  create,  incur,  assume or suffer to exist any mortgage, pledge,
lien  or other charge or encumbrance of any kind (including, but not limited to,
the  charge  upon  property  purchased  under  conditional  sales or other title
retention  agreements)  upon  or  grant  any  interest  in  Borrower's ownership
interest  in  Alterra  Healthcare  Corporation.
6.4     Advances  and  Loans
     Lend  money,  make  credit  available (other than in the ordinary course of
business  to  customers)  or  lend  property  or  the use thereof to any Person;
purchase or repurchase the stock or Indebtedness or all or a substantial part of
the  assets or properties of any Person; guarantee, assume, endorse or otherwise
become  responsible  for (directly or indirectly or by any instrument having the
effect  of  assuring  any  Person's  payment,  performance,  or  capability) the
Indebtedness,  performance,  obligations,  stock  or dividends of any Person; or
agree  to  do  any  of  the  foregoing;  but  Borrower  may  endorse  negotiable
instruments  for  deposit  or  collection  in  the  ordinary course of business.
Notwithstanding  the  foregoing,  Borrower  is  permitted  to  (a) make loans to
Subsidiaries,  provided that prior to funding any loan to a Subsidiary such that
the  aggregate  outstanding principal balance of all loans from Borrower to such
Subsidiary  would  exceed $10,000,000, such Subsidiary shall execute and deliver
to  U.S. Bank a guaranty of the obligations of Borrower under this Agreement and
the  Loan,  which  guaranty shall be in a form designated by U.S. Bank; (b) make
loans  to  Persons  who  are not Subsidiaries, provided that (i) the borrower in
each  such  loan  is  in the senior housing or senior care business and (ii) the
outstanding  principal balance of all such loans shall not exceed $10,000,000 in
the  aggregate at any time; (c) acquire the assets or ownership interests of any
Person  in  the  senior  housing  or  senior  care  business,  provided that the
consideration  paid  by  Borrower  for  such  acquisition is (i) stock issued by
Borrower to the seller or (ii) cash obtained by Borrower from the issue of stock
by  Borrower  in  contemplation  of  such acquisition; (d) acquire the assets or
ownership interests of any Person in the senior housing or senior care business,
provided  that  (i)  the  cash  consideration  paid by Borrower for acquisitions
(other  than cash described in clause (c)(ii) above) does not exceed $10,000,000
during any 12-month period or (ii) in the event that the case consideration paid
by Borrower for acquisitions (other than cash described in clause (c)(ii) above)
is  to  exceed $10,000,000 during any 12-month period, Borrower provides to U.S.
Bank  evidence  reasonably  deemed  sufficient by U.S. Bank reflecting pro forma
compliance  with the Debt Service Coverage Ratio, (e) guarantee the indebtedness
of  its  Subsidiaries  (f)  make short term extensions of credit in the ordinary
course  of  its  business for the benefit of facilities that Borrower manages or
leases,  and  (g)  enter into agreements to consummate any transaction permitted
pursuant  to  clauses  (a)  through  (f).
6.5     Consolidation,  Merger  and  Sale  of  Assets
     Wind  up,  liquidate  or  dissolve  Borrower's  affairs  or  enter into any
transaction  of  merger  or consolidation with any Person unless Borrower is the
surviving  Person;  convey,  sell, lease or otherwise dispose of (or agree to do
any  of  the  foregoing  at any time) any of its material licenses, contracts or
permits;  sell  all  or a substantial part of its property or assets or sell any
part  of  its  property  or assets necessary or desirable for the conduct of its
business  as now generally conducted or as proposed to be conducted; or sell any
of  its  notes  receivable,  installment  or  conditional  sales  agreements, or
accounts  receivable.  Notwithstanding  the  foregoing, Borrower is permitted to
(a)  enter  into sale and leaseback transactions of its real property facilities
on  an  arm's  length basis, (b) sell the Scottsdale Property in accordance with
the  provisions  of  Section  9.7  hereof,  (c)  consummate  the  sale  or other
disposition  of  other assets, provided that Borrower may not sell or dispose of
assets  during any 12-month period that generated in excess of 10 percent of the
EBITDA  of  Borrower  during  such  12-month  period.
6.6     Contributions  to  Capital
     Contribute to the capital of any Person cash in an amount or other property
with  fair  market  value  in  excess  of $10,000,000, in aggregate, unless such
Person first executes and delivers to U.S. Bank a guaranty of the obligations of
Borrower  under  this  Agreement and the Loan in a form designated by U.S. Bank.
6.7     Type  of  Business
     Enter  into  any  business  which  is  substantially  different from or not
connected  with  the business in which Borrower is presently engaged or make any
substantial  change  in  the  nature  of  its  business  or  operations.
6.8     Change  of  State  of  Organization  or  Name
     Change  (a)  the state of organization of Borrower, (b) the chief executive
office  of  Borrower,  (c)  Borrower's  name,  or (d) the location of any of the
Collateral;  or  adopt  or  use  any trade name without in each of the instances
described  in the foregoing clauses (a) through (d), (x) prior written notice to
U.S. Bank and (y) the execution, delivery and filing (and payment of filing fees
and taxes) of all such documents as may be necessary or advisable in the opinion
of U.S. Bank to continue to perfect and protect the liens and security interests
in  the  Collateral.
6.9     Change  in  Documents
     Amend,  supplement,  terminate  or  otherwise  modify in any way Borrower's
articles  of  incorporation, contracts or other documents delivered to U.S. Bank
hereunder  or  executed in connection herewith in a manner that could reasonably
be  expected  to  adversely  affect  the  ability  of  Borrower  to  fulfill its
obligations  under  this  Agreement  or  under  the  other  Loan  Documents.
6.10     Control
     Enter into any agreement (other than employment agreements) with any Person
that  confers  upon  such  Person  the right or authority to control or direct a
major  portion  of  the  business  or  assets  of  Borrower.
6.11     Pension  Plan
     Terminate  or  partially  terminate  any  Plan  now  existing  or hereafter
established  for  Borrower  or  its  Affiliates  or  withdraw from participation
therein  under  circumstances  that  result  or  would reasonably be expected to
result  in  a material liability to the Pension Benefit Guaranty Corporation, to
the  fund  by  which  the  Plan  is  funded,  or  to  the  employees  (or  their
beneficiaries)  for whom the Plan is or shall be maintained; or permit any other
event  or  circumstance to occur that results or would reasonably be expected to
result  in a material liability to the Pension Benefit Guaranty Corporation or a
material  violation  of  ERISA.
6.12     Debt  Service  Coverage  Ratio
     Permit  the Debt Service Coverage Ratio calculated at the end of any fiscal
quarter  of  Borrower  with reference to the prior four quarters to be less than
1.00:1.00.
ARTICLE  VII.     REPRESENTATIONS  AND  WARRANTIES
     In  order  to induce U.S. Bank to enter into this Agreement and to make the
Loan  as  herein  provided, Borrower hereby makes the following representations,
covenants  and warranties, all of which shall survive the execution and delivery
of  this  Agreement  and  shall  not  be affected or waived by any inspection or
examination  made  by  or  on  behalf  of  U.S.  Bank:
7.1     Corporate  Status
     Borrower  is a corporation organized and validly existing under the laws of
the  state  of  Washington.  Borrower  has  the  power  and authority to own its
property  and  assets  and  to  transact  the business in which it is engaged or
presently  proposes  to  engage.  Borrower  is  qualified  to do business in all
states except where the failure to be qualified would not reasonably be expected
to  have  a  material  adverse  affect  on  Borrower.
7.2     Power  and  Authority
     Borrower  has  the  power  to  execute, deliver and carry out the terms and
provisions  of  this  Agreement and each of the Loan Documents and has taken all
necessary  action  to  authorize the execution, delivery and performance of this
Agreement  and the other Loan Documents, the borrowings hereunder and the making
and delivery of the Note and all other Loan Documents delivered hereunder.  This
Agreement  constitutes  and  the  Note  and other Loan Documents and instruments
issued  or  to be issued hereunder, when executed and delivered pursuant hereto,
constitute  or  will  constitute  the  authorized,  valid  and  legally  binding
obligations  of  Borrower  enforceable in accordance with their respective terms
except  as  such  enforceability  may  be  limited  by creditors rights laws and
general  principles  of  equity.
7.3     No  Violation  of  Agreements
     Borrower is not in default under any material provision of any agreement to
which it is a party or in violation of any Applicable Laws where such default or
violation  could  reasonably  be  expected  to have a material adverse affect on
Borrower.  The  execution  and  delivery  of this Agreement, the Note, the other
Loan  Documents  and  the instruments incidental hereto; the consummation of the
transactions  herein  or therein contemplated; and compliance with the terms and
provisions  hereof  or thereof (a) will not violate any material Applicable Law,
(b)  will  not  conflict or be inconsistent with, result in any breach of any of
the material terms, covenants, conditions or provisions of, constitute a default
under,  or result in the creation or imposition of (or the obligation to impose)
any  lien,  charge or encumbrance upon any of the property or assets of Borrower
pursuant  to  the terms of any material Governmental Approval, mortgage, deed of
trust,  lease,  agreement  or  other instrument to which Borrower is a party, by
which  Borrower  may  be bound or to which Borrower may be subject, and (c) will
not  violate any of the provisions of the articles of incorporation of Borrower.
No  Governmental  Approval is necessary (x) for the execution of this Agreement,
the  making  of  the Note or the assumption and performance of this Agreement or
the Note by Borrower or (y) for the consummation by Borrower of the transactions
contemplated  by this Agreement, including, but not limited to, the grant of the
security  interests  to  U.S.  Bank.
7.4     Recording  and  Enforceability
     Neither the articles of incorporation, bylaws or other applicable corporate
documents  of Borrower nor other agreements to which Borrower is a party require
recording,  filing,  registration, notice or other similar action by Borrower in
order to insure the legality, validity, binding effect or enforceability against
Borrower  of  this Agreement, the Note or other Loan Documents executed or to be
executed  hereunder, other than filings or recordings that may be required under
the  securities  laws  of  the  United States and any filings required under the
Uniform  Commercial  Code  or  in connection with the perfection of the security
interests  of  U.S.  Bank in patents, trademarks and similar types of Collateral
where  perfection  can  only  occur  upon  filing.
7.5     Litigation
     There are no actions, suits or proceedings pending or threatened against or
affecting  Borrower  before  any  Governmental  Body  that  could  reasonably be
expected  to  have  a  material  adverse  affect  on Borrower or the Collateral.
Borrower is not in default under any material provision of any Applicable Law or
Governmental  Approval  of  any  Governmental  Body  which  could  reasonably be
expected  to  have  a  material adverse affect on Borrower or on the Collateral.
7.6     Good  Title  to  Properties
     Borrower  has  good  and marketable title to, or a valid leasehold interest
in,  its property and assets where the failure to have the same could reasonably
be  expected  to  have  a  material  adverse  affect  on  Borrower.
7.7     Licenses  and  Permits
     All  Governmental  Approvals with respect to the business of Borrower were,
to  Borrower's knowledge, duly and validly issued by the respective Governmental
Bodies, are in full force and effect and are, to Borrower's knowledge, valid and
enforceable  in  accordance  with their terms.  With regard to such Governmental
Approvals,  to  the  Borrower's  knowledge,  no fact or circumstance exists that
constitutes  or, with the passage of time or the giving of notice or both, would
constitute  a  material  default  under  any  thereof,  or that would permit the
grantor  thereof  to  cancel  or  terminate  the  rights  granted  to  Borrower
thereunder,  except  upon  the  expiration  of  the full term thereof.  Borrower
presently  holds  all  material  Governmental  Approvals  as  are  necessary  in
connection  with  the  conduct of its business as now conducted and as presently
proposed  to  be  conducted.
7.8     No  Burdensome  Agreements
     Borrower  is  not  a party to any agreement or instrument or subject to any
restrictions  that  now  have or, as far as can be foreseen, could reasonably be
expected  to  have  a  material  adverse  affect  on  Borrower.
7.9     Properties  in  Good  Condition
     All the material properties of Borrower are, and all material properties to
be added in connection with any contemplated expansion when acquired will be, in
good repair and good working order and condition ordinary wear and tear excepted
and  in a manner consistent with past practices of Borrower, and are and will be
in  compliance  with  all  Applicable  Laws where the failure to so comply could
reasonably  be  expected  to  have  a  material  adverse  affect  on  Borrower.
7.10     Financial  Statements
     The  (a)  audited financial statements of Borrower dated December 31, 2002,
and  all  schedules  and  notes  included  in  such financial statements and (b)
unaudited  financial  statements of Borrower that have heretofore been delivered
to  U.S.  Bank  are true and correct in all material respects and present fairly
(i)  the  financial  position  of Borrower as of the date of said statements and
(ii)  the results of operations of Borrower for the periods covered thereby; and
there are not any significant liabilities that should have been reflected in the
financial  statements  or  the notes thereto under generally accepted accounting
principles,  contingent  or  otherwise,  including  liabilities for taxes or any
unusual  forward  or  long-term  commitments, that are not disclosed or reserved
against  in the statements referred to above or in the notes thereto or that are
not  disclosed  herein.  All  such  financial  statements  have been prepared in
accordance  with  generally accepted accounting principles consistently applied.
There  has  been  no material adverse change (including, but not limited to, any
such  change  occasioned  by  accident, act of God, war, fire, flood, explosion,
strike  or  other labor dispute, or orders or action by any Governmental Body or
public  utility)  in  the  operations,  business,  property, assets or condition
(financial  or  otherwise)  of  Borrower  since  December  31,  2002.
7.11     Outstanding  Indebtedness
     Other than current trade payables, Borrower has no Indebtedness, including,
but not limited to, Indebtedness to Affiliates, that is required under generally
accepted  accounting  principles  to  be  reflected  on  Borrower's  audited  or
unaudited  financial  statements,  as  applicable,  which  is  not  so reflected
thereon.
7.12     Taxes
     Borrower  has duly filed all tax returns and reports required by Applicable
Law  to  be filed; and all taxes, assessments, levies, fees and other charges of
Governmental  Bodies  upon  Borrower or upon its assets that are due and payable
have  been  paid  (except  as  otherwise  permitted  in  this  Agreement).
7.13     License  Fees
     Borrower  has  paid  all  fees  and  charges  that  have become due for any
Governmental  Approval  for its business or has made adequate provisions for any
such  fees and charges that have accrued where the failure to pay the same could
reasonably  be  expected  to  have  a  material  adverse  affect  on  Borrower.
7.14     Trademarks,  Patents,  Etc.
     Borrower  possesses  all  necessary trademarks, trade names, service marks,
copyrights, patents, patent rights and licenses to conduct its businesses as now
and  as  proposed  to  be conducted, without conflict with the rights or claimed
rights  of  others  where  the  failure  to possess the same could reasonably be
expected  to  have  a  material  adverse  affect  on  Borrower.
7.15     Governmental  Approvals
     Borrower  possesses  all Governmental Approvals necessary for the operation
of Borrower's business where the failure to possess the same could reasonably be
expected  to  have  a  material  adverse  affect  on  Borrower.
7.16     Disclosure
     To  the  best  of  Borrower's knowledge, the exhibits hereto, the financial
information  and statements referred to in Section 7.10 hereof, any certificate,
statement,  report  or  other document furnished to U.S. Bank by Borrower or any
other  Person  in  connection  herewith  or  in  connection with any transaction
contemplated hereby, and this Agreement, do not contain any untrue statements of
material  fact or omit to state any material fact necessary in order to make the
statements  contained  therein  or  herein  not  misleading.
7.17     Regulations  U  and  X
     Borrower  does  not  own and no part of the proceeds hereof will be used to
purchase  or  carry  any margin stock (within the meaning of Regulation U of the
Board  of Governors of the Federal Reserve System) or to extend credit to others
for  the  purpose  of  purchasing or carrying any margin stock.  Borrower is not
engaged  principally  or  as  one of its important activities in the business of
extending credit for the purpose of purchasing or carrying any margin stock.  If
requested  by  U.S.  Bank,  Borrower  will  furnish  to U.S. Bank a statement in
conformity with the requirements of Federal Reserve Form U-1 referred to in said
Regulation.  No  part  of  the proceeds of the Loan will be used for any purpose
that  violates  or  is  inconsistent with the provisions of Regulation X of said
Board  of  Governors.
7.18     Condition  of  Property
     Except  as otherwise disclosed to U.S. Bank, Borrower hereby represents and
warrants  to  U.S.  Bank  that  as  of the date hereof and continuing hereafter,
Borrower's property (both owned and leased) and each portion thereof (a) are not
and  to  the  best knowledge of Borrower after due investigation have not been a
site  for  the use, generation, manufacture, storage, disposal or transportation
of  any Hazardous Material other than Hazardous Materials which are used, stored
and  disposed of in the ordinary course of the Business conducted by Borrower in
compliance  with  Applicable  Law;  (b)  are  presently  in  compliance with all
Hazardous  Materials  Laws; and (c) are not being used and to the best knowledge
of  Borrower  after  due investigation have not been used in any manner that has
resulted  in  or will result in Hazardous Materials being spilled or disposed of
on  any  adjacent  or  other  property.
7.19     Pension  Plans
     No  "reportable  event"  as defined in Section 4043(b) of Title IV of ERISA
has occurred and is continuing with respect to any plan maintained for employees
of Borrower or any Affiliate.  In addition, each of the plans maintained for the
employees of Borrower and its Affiliates are in compliance with the requirements
of  ERISA,  including  the  minimum  funding  requirements.
ARTICLE  VIII.     EVENTS  OF  DEFAULT;  REMEDIES
8.1     Events  of  Default
     "Event  of  Default,"  wherever used herein, means any one of the following
events (whatever the reason for the Event of Default, whether it shall relate to
one  or  more  of  the  parties  hereto,  and  whether  it shall be voluntary or
involuntary  or  be  pursuant  to  or  affected by operation of Applicable Law):
(a)     If  Borrower fails to pay the principal of the Note when and as the same
becomes  due  and payable or any installment of interest on the Note within five
days  after the due date thereof, whether at scheduled maturity, by acceleration
or  otherwise;  or
(b)     If any Indebtedness of Borrower for money borrowed or credit extended in
excess  of  $1,000,000  becomes  or  is  declared  due  and  payable  (after any
applicable  grace period) prior to the stated maturity thereof or is not paid as
and  when it becomes due and payable or within any applicable cure period, or if
any  event  occurs  which  constitutes an event of default under any instrument,
agreement  or  evidence  of such Indebtedness relating to any such obligation of
Borrower;  or
(c)     If any representation or warranty (i) made by Borrower in this Agreement
or  (ii) made by Borrower or any other Person owned or controlled by Borrower in
any  document,  certificate or statement furnished pursuant to this Agreement or
in  connection  herewith,  is  false  or  misleading in any material respect; or
(d)     If  Borrower fails to observe or perform any term, covenant or agreement
to  be  performed  or  observed  pursuant  to  Articles V and VI hereof and such
failure  continues  after  the  expiration  of  the  following  cure  periods:
     (i)     Five  days after the occurrence without notice:  Sections 5.1, 5.5,
5.9,  5.10,  6.2,  6.3,  6.4,  6.6  and  6.8;
     (ii)     Five  days  after  written notice:  Sections 5.7, 5.11, 5.12, 5.14
and  5.15;
     (iii)     Thirty  days  after the occurrence without notice:  Sections 5.2,
5.3, 5.4, 5.6, 5.8; provided that in the event cure of any such breach cannot in
good faith be completed within 30 days, and provided that Borrower commences the
cure  within  such  30-day period and diligently pursues the same to completion,
Borrower  shall  have  up  to  90  days  to  complete  such  cure;
     (iv)     No  cure  period:  Sections 5.13 (except as otherwise specified in
Section  8.1(d)),  6.1,  6.5,  6.7,  6.9,  6.10,  6.11  and  6.12;  or
     (e)     If Borrower fails to observe or perform (not otherwise specified in
this  Article  VIII) any term, covenant or agreement to be performed or observed
pursuant  to  the  provisions of this Agreement, the other Loan Documents or any
other  agreement incidental hereto and such failure continues for a period of 30
days  after  receipt  of  written  notice setting forth in reasonable detail the
nature  of  such  failure;  provided  that  in the event cure of any such breach
cannot  in  good  faith  be completed within 30 days, and provided that Borrower
commences  the cure within such 30-day period and diligently pursues the same to
completion,  Borrower  shall  have  up  to  90  days  to  complete such cure; or
(f)     If  custody  or  control  of  any  substantial  part  of the property of
Borrower  is  assumed by any Governmental Body or if any Governmental Body takes
any  final  action,  the  effect of which could reasonably be expected to have a
material  adverse  affect  on  Borrower;  or
(g)     If Borrower suspends or discontinues a material portion of its business,
or if Borrower makes an assignment for the benefit of creditors or a composition
with creditors, is unable or admits in writing its inability to pay its debts as
they  mature,  files a petition in bankruptcy, becomes insolvent (howsoever such
insolvency may be evidenced), is adjudicated insolvent or bankrupt, petitions or
applies  to  any  tribunal  for  the  appointment of any receiver, liquidator or
trustee  of  or  for  it  or  any  substantial  part  of its property or assets,
commences  any  proceeding  relating  to  it  under  any  Applicable  Law of any
jurisdiction  whether  now  or  hereafter  in  effect  relating  to  bankruptcy,
reorganization,  arrangement, readjustment of debt, receivership, dissolution or
liquidation;  or if there is commenced against Borrower any such proceeding that
remains  undismissed  for  a period of 60 days or more, or an order, judgment or
decree  approving the petition in any such proceeding is entered; or if Borrower
by  any  act  or  failure  to  act  indicates  its  consent  to, approval of, or
acquiescence  in,  any  such  proceeding  or  any  appointment  of any receiver,
liquidator  or  trustee of or for it or for any substantial part of its property
or assets, suffers any such appointment to continue undischarged or unstayed for
a  period  of  60 days or more, or takes any corporate action for the purpose of
effecting  any  of  the  foregoing;  or  if  any court of competent jurisdiction
assumes  jurisdiction with respect to any such proceeding, or if a receiver or a
trustee or other officer or representative of a court or of creditors, or if any
Governmental Body, under color of legal authority, takes and holds possession of
any  substantial  part  of  the  property  or  assets  of  Borrower;  or
(h)     If any Person or Persons (other than Daniel R. Baty ("Baty") or a Person
owned  or controlled by Daniel R. Baty or Saratoga Partners IV, L.P. or a Person
owned  or  controlled  by  (i)  Saratoga  Partners  IV, L.P. or (ii) the general
partner of Saratoga Partners IV, L.P.) after the date of this Agreement acquires
an  aggregate  30  percent  or more of the outstanding shares of voting stock of
Borrower;  or
(i)     If any material adverse change in the business or financial condition of
Borrower  occurs, or if any event occurs that materially impairs the Collateral.
8.2     Acceleration;  Remedies
     (a)     If  any  Event  of Default described in Section 8.1(g) shall occur,
then  immediately  and automatically U.S. Bank's commitment under the Loan shall
terminate  and  amounts owing under this Agreement and the Note shall become due
and payable and U.S. Bank's obligation to make any advances under the Loan shall
immediately  terminate.
(b)     If  any  Event  of  Default other than those described in Section 8.1(g)
shall  occur and be continuing, U.S. Bank may (i) by written notice to Borrower,
declare  U.S.  Bank's  commitment under the Loan terminated forthwith, whereupon
such  obligations  shall  immediately  terminate;  and (ii) by written notice of
default  to  Borrower,  declare the Loan, with accrued interest thereon, and all
other  amounts  owing  under  this  Agreement and the Note to be due and payable
forthwith,  whereupon  the  same  shall  immediately  become  due  and  payable.
(c)     Except  as  expressly  provided  above in this Section 8.2, presentment,
demand and all other notices of any kind are hereby expressly waived.  U.S. Bank
may proceed to protect and enforce its rights hereunder or realize on any or all
security granted pursuant to any of the Loan Documents in any manner or order it
deems  expedient  without  regard  to  any equitable principles of marshaling or
otherwise.  No  failure  or  delay  on  the  part of U.S. Bank in exercising any
right,  power  or  privilege hereunder and no course of dealing between Borrower
and U.S. Bank shall operate as a waiver thereof; nor shall any single or partial
exercise  of  any  right,  power  or  privilege  hereunder preclude any other or
further  exercise thereof or the exercise of any right, power or privilege.  The
rights  and  remedies herein expressly provided are cumulative and not exclusive
of  any rights or remedies that U.S. Bank would otherwise have.  No notice to or
demand  on  Borrower  in any case shall entitle Borrower to any other or further
notice  or demand in similar or other circumstances or shall constitute a waiver
of  the  right  of U.S. Bank to any other or further action in any circumstances
without  notice  or  demand.
ARTICLE  IX.     MISCELLANEOUS
9.1     Notices
     All  notices,  requests,  consents,  demands,  approvals  and  other
communications hereunder shall be deemed to have been duly given, made or served
if  made  in  writing  and delivered personally, sent via facsimile or mailed by
first-class  mail,  postage prepaid, to the respective parties to this Agreement
as  follows:

(a)     If  to  Borrower:

Emeritus  Corporation
3131  Elliott  Ave.,  Suite  500
Seattle,  Washington  98121
Attention:  Raymond  R.  Brandstrom,  Chief  Financial  Officer
     Facsimile  No.:  (206)  301-4500
(b)     If  to  U.S.  Bank:

U.S.  Bank  National  Association
1420  Fifth  Avenue  -  PD-WA-T10M
Seattle,  Washington  98101
Attention:  Kenneth  A.  Refvem
Facsimile  No.:  (206)  344-3654
The  designation of the persons to be so notified or the address of such persons
for  the  purposes  of  such  notice may be changed from time to time by similar
notice  in  writing,  except  that any communication with respect to a change of
address  shall  be deemed to be given or made when received by the party to whom
such  communication  was sent.  Notices shall be deemed received upon the actual
confirmed  receipt  or  refusal  of receipt thereof, regardless of the method of
delivery  used.
9.2     Payment  of  Expenses
     Whether  or  not  the  transactions  hereby  contemplated  are consummated,
Borrower  shall  pay  on  demand  all costs and expenses of U.S. Bank reasonably
incurred in connection with the preparation, negotiation, execution and delivery
of  the  Loan  Documents,  as well as any amendments, modifications, consents or
waivers  relating  thereto, including, without limitation, reasonable attorneys'
fees,  appraisal fees, title insurance fees and recording fees.  In addition, if
there  shall  occur any Event of Default, U.S. Bank shall be entitled to recover
any  costs  and  expenses incurred in connection with the preservation of rights
under,  and  enforcement  of,  the Loan Documents, whether or not any lawsuit or
arbitration  proceeding  is  commenced,  in  all  such cases, including, without
limitation, reasonable attorneys' fees and costs (but specifically excluding the
allocated  fees of internal counsel).  Reasonable attorneys' fees shall include,
without  limitation,  attorneys'  fees and costs incurred in connection with any
bankruptcy  case or other insolvency proceeding commenced by or against Borrower
or  any Person granting a security interest in any item of Collateral, including
all  fees  incurred in connection with (a) moving from relief from the automatic
stay,  to  convert or dismiss the case or proceeding, or to appoint a trustee or
examiner,  or (b) proposing or opposing confirmation of a plan of reorganization
or  liquidation,  in  any  case without regard to the identity of the prevailing
party.
9.3     Setoff
     As additional security for the payment of the obligations described in this
Agreement  and the other Loan Documents and any other obligations of Borrower to
U.S.  Bank  of  any nature whatsoever (collectively the "Obligations"), Borrower
hereby  grants to U.S. Bank, and any Participant, a security interest in, a lien
on  and  an  express contractual right to set off against all depository account
balances,  cash  and  any  other  property  of  Borrower now or hereafter in the
possession  of  U.S.  Bank, or any Participant, and the right to refuse to allow
withdrawals  from  any  account  (collectively  "Setoff").  U.S.  Bank  and  any
Participant  may, at any time upon the occurrence of an Event of Default, Setoff
against  the  Obligations  whether  or  not  the  Obligations  (including future
installments)  are then due or have been accelerated, all without any advance or
contemporaneous notice or demand of any kind to Borrower, such notice and demand
being  expressly  waived.
9.4     Waiver  of  Setoff
     In  the  event  that  U.S. Bank sells all or any portion of the Loan to any
Participant,  Borrower  hereby  waives  the  right  to  interpose  any  setoff,
counterclaim  or  cross-claim  (other  than  compulsory  counterclaims  or
cross-claims) in connection with any litigation or dispute under this Agreement,
regardless  of  the  nature  of  such  setoff,  counterclaim  or  cross-claim.
9.5     Fees  and  Commissions
     Borrower  agrees to indemnify U.S. Bank and hold it harmless with regard to
any  commissions,  fees,  judgments or expenses of any nature and kind that U.S.
Bank  may  become  liable  to  pay  by  reason  of any claims by or on behalf of
brokers,  finders  or  agents  in  connection  with any act or failure to act by
Borrower  or  any  litigation  or  similar  proceeding arising from such claims.
Borrower  states  that  it  is  aware  of  no  valid  basis for any such claims.
9.6     No  Waiver
     No  failure  or delay on the part of U.S. Bank or the holder of the Note in
exercising  any  right,  power  or  privilege hereunder and no course of dealing
between  Borrower  and  U.S.  Bank  or the holder of the Note shall operate as a
waiver  thereof; nor shall any single or partial exercise of any right, power or
privilege  hereunder  preclude  any  other  or  further  exercise thereof or the
exercise  of  any  right,  power  or  privilege.  The rights and remedies herein
expressly  provided  are  cumulative and not exclusive of any rights or remedies
that  U.S.  Bank  or any subsequent holder of the Note would otherwise have.  No
notice  to or demand on Borrower in any case shall entitle Borrower to any other
or  further  notice  or  demand  in  similar  or  other  circumstances  unless
specifically  required  by  the terms of this Agreement or any of the other Loan
Documents or shall constitute a waiver of the right of U.S. Bank to any other or
further  action  in  any  circumstances  without  notice  or  demand.
9.7     Agreement  to  Release  Deed  of  Trust
     Pursuant  to the terms set forth in the Deed of Trust, Borrower has granted
to  U.S. Bank a first priority and exclusive security interest in Borrower's fee
interest  in  its  real property located in Scottsdale, Arizona (the "Scottsdale
Property").  Borrower  has  informed  U.S.  Bank  that  it  intends  to sell the
Scottsdale  Property.  U.S.  Bank  acknowledges  and  agrees  that  Borrower has
advised  U.S.  Bank  that  there are no assurances that a sale of the Scottsdale
Property  will  occur,  and  accordingly  U.S.  Bank acknowledges that it is not
relying  on  such  sale in entering into this Agreement or any of the other Loan
Documents  or  in making the Loan to Borrower.  In connection with such proposed
sale,  U.S.  Bank  agrees  to release the Deed of Trust upon satisfaction of the
following  conditions:
(a)     At the time of the closing of such sale, there shall not exist any Event
of  Default.
(b)     The  amount  of  the  purchase price is not less than $1,500,000 and the
amount  of  the  cash  down  payment  is  not  less than 25 percent of the total
purchase  price.
(c)     All  cash  paid  for the Scottsdale Property (including the down payment
and  all  subsequent  payments  )  shall (i) be immediately paid to U.S. Bank to
reduce  the  outstanding  principal  balance of the Loan to the extent there are
outstanding  amounts  under  the Loan and (ii) immediately reduce the Commitment
Amount.
(d)     For  any sale other than an all cash sale, U.S. Bank shall have reviewed
and  approved  (such  review  and  approval  not  to be unreasonably withheld or
delayed)  any  promissory  note,  mortgage,  deed  of  trust and other documents
arising  out  of  or  related  to  the  payment  and collateral for the deferred
purchase  price.
(e)     Borrower shall deliver to U.S. Bank the following documents, in form and
substance  acceptable  to  U.S.  Bank  concurrently  with  the  sale:
     (i)     The  original promissory note made by the purchaser to the order of
Borrower.  The  following  endorsement  shall  be  added to the last page of the
promissory  note:  "Pay  to  the  order  of  U.S. Bank" and shall be executed by
Borrower.
     (ii)     An  assignment  to  U.S.  Bank  of  the  mortgage or deed of trust
evidencing the encumbrance by Borrower of the Scottsdale Property, duly executed
by  Borrower  and  acknowledged  by  a  notary.
     (iii)     All  other documents, agreements and instruments which secure the
purchaser's  obligations  to  Borrower  under  the  Purchase  Agreement,  which
documents  shall  be  duly  executed  and  assigned  by  Borrower to U.S. Bank.
9.8     Entire  Agreement  and  Amendments
     This  Agreement  represents the entire agreement between the parties hereto
with respect to the Loan and the transactions contemplated hereunder and, except
as  expressly  provided  herein, shall not be affected by reference to any other
documents.  This Agreement, or any provision hereof, may not be changed, waived,
discharged or terminated orally, but only by an instrument in writing, signed by
both  parties,  in  the  case  of  an amendment or modification, or by the party
against  whom  enforcement  of  the  waiver, discharge or termination is sought.
9.9     Benefit  of  Agreement
     This  Agreement  is  binding upon and inures to the benefit of Borrower and
U.S.  Bank  and  their  successors and assigns and all subsequent holders of the
Note  or any portion thereof.  Borrower expressly acknowledges that U.S. Bank is
not  prohibited  or restricted from assigning rights or participations hereunder
or  any  portion  thereof to another Person but U.S. Bank shall provide Borrower
with  notice  of  any  such  assignment  of  rights  or participation interests.
Borrower,  however,  is precluded from assigning any of its respective rights or
delegating any of its obligations hereunder or under any of the other agreements
between  Borrower  and U.S. Bank without the prior written consent of U.S. Bank.
9.10     Severability
     If  any  provision  of  this Agreement or any of the Loan Documents is held
invalid  under  any  Applicable Laws, such invalidity shall not affect any other
provision  of  this  Agreement  that  can be given an effect without the invalid
provision,  and,  to  this  end,  the  provisions  hereof  are  severable.
9.11     Descriptive  Headings
     The  descriptive  headings  of  the  several sections of this Agreement are
inserted  for  convenience only and do not affect the meaning or construction of
any  of  the  provisions  hereof.
9.12     Governing  Law
     Except  to the extent that the federal laws of the United States of America
provide U.S. Bank with greater rights or remedies, this Agreement and the rights
and  obligations  of  the  parties  hereunder and under the other Loan Documents
shall  be  construed in accordance with and shall be governed by the laws of the
state  of  Washington  without  regard  to  the  choice  of  law  rules thereof.
9.13     Consent  to  Jurisdiction,  Service  and  Venue
     For  the  purpose  of  enforcing  payment  of  the Note, performance of the
obligations  under  the  Note,  any  arbitration  award  under  the  other  Loan
Documents,  or otherwise in connection herewith, Borrower hereby consents to the
jurisdiction  and  venue  of  the  courts  of  the state of Washington or of any
federal  court located in such state including, but not limited to, the Superior
Court of Washington for King County and the United States District Court for the
Western District of Washington.  Borrower hereby waives the right to contest the
jurisdiction  and  venue  of  courts  located in King County, Washington, on the
ground of inconvenience or otherwise and waives any right to bring any action or
proceeding  against U.S. Bank in any court outside King County, Washington.  The
provisions  of  this  Section 9.13 do not limit or otherwise affect the right of
U.S.  Bank  to  institute  and  conduct  action in any other appropriate manner,
jurisdiction,  or  court.
9.14     Counterparts
     This  Agreement  and  each  of the Loan Documents may be executed in one or
more counterparts, each of which shall constitute an original agreement, but all
of  which  together  shall  constitute  one  and  the  same  instrument.
9.15     Jury  Waiver
     BORROWER AND U.S. BANK HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM
ARISING  OUT  OF  THIS  AGREEMENT  OR  ANY  OTHER  LOAN DOCUMENT, WHETHER NOW OR
HEREAFTER  ARISING  AND  WHETHER  SOUNDING  IN  CONTRACT, TORT OR OTHERWISE, AND
HEREBY CONSENT AND AGREE THAT ANY SUCH CLAIM SHALL BE DECIDED BY TRIAL WITHOUT A
JURY  AND  THAT  EITHER  PARTY  MAY FILE AN ORIGINAL COUNTERPART OR COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE WAIVER AND AGREEMENT CONTAINED
HEREIN.
9.16     Statutory  Notice
     ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR FORBEAR
FROM  ENFORCING  REPAYMENT  OF  A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

<PAGE>
IN WITNESS WHEREOF, Borrower and U.S. Bank have caused this Agreement to be duly
executed  by  the  respective,  duly authorized signatories as of the date first
above  written.
                                          EMERITUS  CORPORATION


                                          By     /s/  Willam  M.  Shorten
                                                 -------------------------------
                                          Name:  William  M.  Shorten
                                                 ------------------------------
                                          Title: Director of Real Estate Finance
                                                 -------------------------------

                                          U.S.  BANK  NATIONAL  ASSOCIATION


                                          By     /s/  Ken  Refvem
                                                 -------------------------------
                                          Name:  Ken  Refvem
                                                 -------------------------------
                                          Title: Vice  President
                                                 -------------------------------