(Space above reserved for Recorder of
Deeds certification)





Title
      of Document:
            Multifamily
      Mortgage, Assignment of Rents and Security Agreement and Fixture
      Filing


(Multistate)





Date
of
Document:                                                                             
April 30, 2008





Grantor(s):
            Emerikeyt
      Liberal Springs LLC, a Delaware limited liability
  company





Grantee(s):
            KeyCorp
      Real Estate Capital Markets, Inc., an Ohio
  corporation





Grantee(s)
      Mailing Address:
            127
      Public Square, Cleveland, Ohio
44114





Legal
      Description:








Reference
      Book and Page(s):





The
maximum principal amount of the indebtedness secured by this Multistate
Mortgage, exclusive of protective advances, is $25,371,000.00.





Return
      to:


Roger
      Dains


Chicago
      Title Insurance Company


106
      W. 11th
      Street, #1800


Kansas
      City, MO 64015


CTIC
      File no.:  20082318






































MULTIFAMILY
MORTGAGE,


ASSIGNMENT
OF RENTS


AND
SECURITY AGREEMENT


AND
FIXTURE FILING


(MULTISTATE)


(KANSAS)




















Prepared
by, and after recording


return
to:


James J.
Schwert, Esquire


Oppenheimer
Wolff & Donnelly LLP


Plaza
VII, Suite 3300


45 S.
Seventh Street


Minneapolis,
MN 55402





FANNIE MAE MULTIFAMILY SECURITY
INSTRUMENT -
                                                                                                                                          
Form
4017
 KANSAS
 ©
1997-2001 Fannie Mae


TABLE
      OF CONTENTSPAGE1
            DEFINITIONS.
            12
            UNIFORM
      COMMERCIAL CODE SECURITY AGREEMENT.
            63
            ASSIGNMENT
      OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.
            74
            ASSIGNMENT
      OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.
            95
            PAYMENT
      OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT
      PREMIUM.
            116
            EXCULPATION.
            117
            DEPOSITS
      FOR TAXES, INSURANCE AND OTHER CHARGES.
            128
            COLLATERAL
      AGREEMENTS.
            139
            APPLICATION
      OF PAYMENTS.
            1310
            COMPLIANCE
      WITH LAWS.
            1311
            USE
      OF PROPERTY.
            1412
            PROTECTION
      OF LENDER'S SECURITY.
            1413
            INSPECTION.
            14


FANNIE MAE MULTIFAMILY SECURITY
INSTRUMENT -
                                                                                                                     
Form 4017
 KANSAS
 ©
1997-2001 Fannie Mae
 Page
-i


14
              BOOKS
      AND RECORDS; FINANCIAL REPORTING.
              1415
              TAXES;
      OPERATING EXPENSES.
              1616
              LIENS;
      ENCUMBRANCES.
              1717
              PRESERVATION,
      MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.
              1718
              ENVIRONMENTAL
      HAZARDS.
              1819
              PROPERTY
      AND LIABILITY INSURANCE.
              2420
              CONDEMNATION.
              2621
              TRANSFERS
      OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.
              2622
              EVENTS
      OF DEFAULT.
              3023
              REMEDIES
      CUMULATIVE.
              3124
              FORBEARANCE.
              3125
              LOAN
      CHARGES.
              3226
              WAIVER
      OF STATUTE OF LIMITATIONS.
              3227
              WAIVER
      OF MARSHALLING.
              3228
              FURTHER
      ASSURANCES.
              32


FANNIE MAE MULTIFAMILY SECURITY
INSTRUMENT -
                                                                                                                     
Form 4017
 KANSAS
 ©
1997-2001 Fannie Mae
 Page
-ii




29
              ESTOPPEL
      CERTIFICATE.
              3330
              GOVERNING
      LAW; CONSENT TO JURISDICTION AND VENUE.
              3331
              NOTICE.
              3332
              SALE
      OF NOTE; CHANGE IN SERVICER.
              3433
              SINGLE
      ASSET BORROWER.
              3434
              SUCCESSORS
      AND ASSIGNS BOUND.
              3435
              JOINT
      AND SEVERAL LIABILITY.
              3436
              RELATIONSHIP
      OF PARTIES; NO THIRD PARTY BENEFICIARY.
              3437
              SEVERABILITY;
      AMENDMENTS.
              3538
              CONSTRUCTION.
              3539
              LOAN
      SERVICING.
              3540
              DISCLOSURE
      OF INFORMATION.
              3541
              NO
      CHANGE IN FACTS OR CIRCUMSTANCES.
              3642
              SUBROGATION.
              3643
              ACCELERATION;
      REMEDIES.
              36







FANNIE MAE MULTIFAMILY SECURITY
INSTRUMENT -
                                                                                                                     
Form 4017
 KANSAS
 ©
1997-2001 Fannie Mae
 Page
-iii


44
              RELEASE.
              3645
              FINANCING
      STATEMENT.
              3646
              APPOINTMENT
      OF RECEIVER.
              3747
              WAIVER
      OF REDEMPTION.
              3748
              WAIVER
      OF TRIAL BY JURY
              37





FANNIE MAE MULTIFAMILY SECURITY
INSTRUMENT -
                                                                                                                     
Form 4017
 KANSAS
 ©
1997-2001 Fannie Mae
 Page
-iv


MULTIFAMILY
MORTGAGE,


ASSIGNMENT
OF RENTS


AND
SECURITY AGREEMENT


AND
FIXTURE FILING


(MULTISTATE)





THIS MULTIFAMILY MORTGAGE, ASSIGNMENT
OF RENTS AND SECURITY AGREEMENT AND FIXTURE FILING (the "Instrument") is dated as of
the 30th day of
April, 2008, between EMERIKEYT LIBERAL SPRINGS, LLC, a limited liability company
organized and existing under the laws of Delaware, whose address is c/o Emeritus
Corporation, 3131 Elliott Avenue, #500, Seattle, Washington 98121, as mortgagor
("Borrower"), and
KEYCORP REAL ESTATE CAPITAL MARKETS, INC., a corporation organized and existing
under the laws of Ohio, whose address is 127 Public Square, Cleveland, Ohio
44114, as mortgagee ("Lender").





Borrower is indebted to Lender in the
principal amount of Five Million Three Hundred Ten Thousand Dollars
($5,310,000), as evidenced by Borrower's Multifamily Note payable to Lender,
dated as of the date of this Instrument, and maturing on May 1,
2018.





TO SECURE TO LENDER the repayment of
the Indebtedness, and all renewals, extensions and modifications of the
Indebtedness, and the performance of the covenants and agreements of Borrower
contained in the Loan Documents, Borrower hereby mortgages, warrants, grants,
conveys and assigns to Lender the Mortgaged Property, including the Land located
in Seward County, State of Kansas and described in Exhibit A attached to this
Instrument.





Borrower represents and warrants that
Borrower is lawfully seized of the Mortgaged Property and has the right, power
and authority to mortgage, grant, convey and assign the Mortgaged Property, and
that the Mortgaged Property is unencumbered.  Borrower covenants that
Borrower will warrant and defend generally the title to the Mortgaged Property
against all claims and demands, subject to any easements and restrictions listed
in a schedule of exceptions to coverage in any title insurance policy issued to
Lender contemporaneously with the execution and recordation of this Instrument
and insuring Lender's interest in the Mortgaged Property.





Covenants.  Borrower
and Lender covenant and agree as follows:





1.           DEFINITIONS.





The following terms, when used in this
Instrument (including when used in the above recitals), shall have the following
meanings:





(a)           "Borrower" means all persons or
entities identified as "Borrower" in the first paragraph of this Instrument,
together with their successors and assigns.





FANNIE MAE MULTIFAMILY SECURITY
INSTRUMENT -
                                                                                                                     
Form 4017
 KANSAS
 © 1997-2001 Fannie Mae
 Page -
1


(b)           "Collateral Agreement" means
any separate agreement between Borrower and Lender for the purpose of
establishing replacement reserves for the Mortgaged Property, establishing a
fund to assure completion of repairs or improvements specified in that
agreement, or assuring reduction of the outstanding principal balance of the
Indebtedness if the occupancy of or income from the Mortgaged Property does not
increase to a level specified in that agreement, or any other agreement or
agreements between Borrower and Lender which provide for the establishment of
any other fund, reserve or account.





(c)           "Environmental Permit" means
any permit, license, or other authorization issued under any Hazardous Materials
Law with respect to any activities or businesses conducted on or in relation to
the Mortgaged Property.





(d)           "Event of Default" means the
occurrence of any event listed in Section 22.





(e)           "Fixtures" means all property
which is so attached to the Land or the Improvements as to constitute a fixture
under applicable law, including: machinery, equipment, engines, boilers,
incinerators, installed building materials; systems and equipment for the
purpose of supplying or distributing heating, cooling, electricity, gas, water,
air, or light; antennas, cable, wiring and conduits used in connection with
radio, television, security, fire prevention, or fire detection or otherwise
used to carry electronic signals; telephone systems and equipment; elevators and
related machinery and equipment; fire detection, prevention and extinguishing
systems and apparatus; security and access control systems and apparatus;
plumbing systems; water heaters, ranges, stoves, microwave ovens, refrigerators,
dishwashers, garbage disposers, washers, dryers and other appliances; light
fixtures, awnings, storm windows and storm doors; pictures, screens, blinds,
shades, curtains and curtain rods; mirrors; cabinets, paneling, rugs and floor
and wall coverings; fences, trees and plants; swimming pools; and exercise
equipment.





(f)           "Governmental Authority" means
any board, commission, department or body of any municipal, county, state or
federal governmental unit, or any subdivision of any of them, that has or
acquires jurisdiction over the Mortgaged Property or the use, operation or
improvement of the Mortgaged Property.





(g)           "Hazardous Materials" means
petroleum and petroleum products and compounds containing them, including
gasoline, diesel fuel and oil; explosives; flammable materials; radioactive
materials; polychlorinated biphenyls ("PCBs") and compounds containing them;
lead and lead-based paint; asbestos or asbestos-containing materials in any form
that is or could become friable; underground or above-ground storage tanks,
whether empty or containing any substance; any substance the presence of which
on the Mortgaged Property is prohibited by any federal, state or local
authority; any substance that requires special handling; and any other material
or substance now or in the future defined as a "hazardous substance," "hazardous
material," "hazardous waste," "toxic substance," "toxic pollutant,"
"contaminant," or "pollutant" within the meaning of any Hazardous Materials
Law.





FANNIE MAE MULTIFAMILY SECURITY
INSTRUMENT -
                                                                                                                     
Form 4017
 KANSAS
 © 1997-2001 Fannie Mae
 Page -
2


(h)           "Hazardous Materials Laws"
means all federal, state, and local laws, ordinances and regulations and
standards, rules, policies and other governmental requirements, administrative
rulings and court judgments and decrees in effect now or in the future and
including all amendments, that relate to Hazardous Materials and apply to
Borrower or to the Mortgaged Property. Hazardous Materials Laws include, but are
not limited to, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the Toxic Substance
Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water Act,
33 U.S.C. Section 1251, et seq., and the Hazardous
Materials Transportation Act, 49 U.S.C. Section 5101, et seq., and their state
analogs.





(i)           "Impositions" and "Imposition Deposits" are
defined in Section 7(a).





(j)           "Improvements" means the
buildings, structures, improvements, and alterations now constructed or at any
time in the future constructed or placed upon the Land, including any future
replacements and additions.





(k)           "Indebtedness" means the
principal of, interest on, and all other amounts due at any time under, the
Note, this Instrument or any other Loan Document, including prepayment premiums,
late charges, default interest, and advances as provided in Section 12 to
protect the security of this Instrument.





(l)           [Intentionally
omitted]





(m)           "Key Principal" means the
natural person(s) or entity identified as such at the foot of this Instrument,
and any person or entity who becomes a Key Principal after the date of this
Instrument and is identified as such in an amendment or supplement to this
Instrument.





(n)           "Land" means the land described
in Exhibit A.





(o)           "Leases" means all present and
future leases, subleases, licenses, concessions or grants or other possessory
interests now or hereafter in force, whether oral or written, covering or
affecting the Mortgaged Property, or any portion of the Mortgaged Property
(including proprietary leases or occupancy agreements if Borrower is a
cooperative housing corporation), and all modifications, extensions or
renewals.





(p)           "Lender" means the entity
identified as "Lender" in the first paragraph of this Instrument and its
successors and assigns, or any subsequent holder of the Note.





(q)           "Loan Documents" means the
Note, this Instrument, all guaranties, all indemnity agreements, all Collateral
Agreements, O&M Programs, and any other documents now or in the future
executed by Borrower, Key Principal, any guarantor or any other person in
connection with the loan evidenced by the Note, as such documents may be amended
from time to time.


FANNIE MAE MULTIFAMILY SECURITY
INSTRUMENT -
                                                                                                                     
Form 4017
 KANSAS
 © 1997-2001 Fannie Mae
 Page -
3





(r)           "Loan Servicer" means the
entity that from time to time is designated by Lender to collect payments and
deposits and receive notices under the Note, this Instrument and any other Loan
Document, and otherwise to service the loan evidenced by the Note for the
benefit of Lender.  Unless Borrower receives notice to the contrary,
the Loan Servicer is the entity identified as "Lender" in the first paragraph of
this Instrument.





(s)           "Mortgaged Property" means all
of Borrower's present and future right, title and interest in and to all of the
following:





(1)
            the
      Land;





(2)
            the
      Improvements;





(3)
            the
      Fixtures;





(4)
            the
      Personalty;





(5)
            all
      current and future rights, including air rights, development rights,
      zoning rights and other similar rights or interests, easements, tenements,
      rights-of-way, strips and gores of land, streets, alleys, roads, sewer
      rights, waters, watercourses, and appurtenances related to or benefitting
      the Land or the Improvements, or both, and all rights-of-way, streets,
      alleys and roads which may have been or may in the future be
      vacated;





(6)
            all
      proceeds paid or to be paid by any insurer of the Land, the Improvements,
      the Fixtures, the Personalty or any other part of the Mortgaged Property,
      whether or not Borrower obtained the insurance pursuant to Lender's
      requirement;





(7)
            all
      awards, payments and other compensation made or to be made by any
      municipal, state or federal authority with respect to the Land, the
      Improvements, the Fixtures, the Personalty or any other part of the
      Mortgaged Property, including any awards or settlements resulting from
      condemnation proceedings or the total or partial taking of the Land, the
      Improvements, the Fixtures, the Personalty or any other part of the
      Mortgaged Property under the power of eminent domain or otherwise and
      including any conveyance in lieu
thereof;





(8)
            all
      contracts, options and other agreements for the sale of the Land, the
      Improvements, the Fixtures, the Personalty or any other part of the
      Mortgaged Property entered into by Borrower now or in the future,
      including


FANNIE MAE MULTIFAMILY SECURITY
INSTRUMENT -
                                                                                                                     
Form 4017
 KANSAS
 © 1997-2001 Fannie Mae
 Page -
4


cash or
securities deposited to secure performance by parties of their
obligations;





(9)
            all
      proceeds from the conversion, voluntary or involuntary, of any of the
      above into cash or liquidated claims, and the right to collect such
      proceeds;





(10)
            all
      Rents and Leases;





(11)
            all
      earnings, royalties, accounts receivable, issues and profits from the
      Land, the Improvements or any other part of the Mortgaged Property, and
      all undisbursed proceeds of the loan secured by this Instrument and, if
      Borrower is a cooperative housing corporation, maintenance charges or
      assessments payable by shareholders or
  residents;





(12)
            all
      Imposition Deposits;





(13)
            all
      refunds or rebates of Impositions by any municipal, state or federal
      authority or insurance company (other than refunds applicable to periods
      before the real property tax year in which this Instrument is
      dated);





(14)
            all
      tenant security deposits which have not been forfeited by any tenant under
      any Lease; and





(15)
            all
      names under or by which any of the above Mortgaged Property may be
      operated or known, and all trademarks, trade names, and goodwill relating
      to any of the Mortgaged Property.





(t)           "Note" means the Multifamily
Note described on page 1 of this Instrument, including the Acknowledgment and
Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse
Liability (if any), and all schedules, riders, allonges and addenda, as such
Multifamily Note may be amended from time to time.





(u)           "O&M Program" is defined in
Section 18(a).





(v)           "Personalty" means all
equipment, inventory, general intangibles which are used now or in the future in
connection with the ownership, management or operation of the Land or the
Improvements or are located on the Land or in the Improvements, including
furniture, furnishings, machinery, building materials, appliances, goods,
supplies, tools, books, records (whether in written or electronic form),
computer equipment (hardware and software) and other tangible personal property
(other than Fixtures) which are used now or in the future in connection with the
ownership, management or operation of the Land or the Improvements or are
located on the Land or in the Improvements, and any operating agreements
relating to the Land or the Improvements, and any surveys, plans and
specifications and contracts for architectural, engineering and


FANNIE MAE MULTIFAMILY SECURITY
INSTRUMENT -
                                                                                                                     
Form 4017
 KANSAS
 © 1997-2001 Fannie Mae
 Page -
5


construction
services relating to the Land or the Improvements and all other intangible
property and rights relating to the operation of, or used in connection with,
the Land or the Improvements, including all governmental permits relating to any
activities on the Land.





(w)           "Property Jurisdiction" is
defined in Section 30(a).





(x)           "Rents" means all rents
(whether from residential or non-residential space), revenues and other income
of the Land or the Improvements, including subsidy payments received from any
sources (including, but not limited to payments under any Housing Assistance
Payments Contract), parking fees, laundry and vending machine income and fees
and charges for food, health care and other services provided at the Mortgaged
Property, whether now due, past due, or to become due, and deposits forfeited by
tenants.





(y)           "Taxes" means all taxes,
assessments, vault rentals and other charges, if any, general, special or
otherwise, including all assessments for schools, public betterments and general
or local improvements, which are levied, assessed or imposed by any public
authority or quasi-public authority, and which, if not paid, will become a lien,
on the Land or the Improvements.





(z)           "Transfer" means (A) a sale,
assignment, transfer or other disposition (whether voluntary, involuntary or by
operation of law); (B) the granting, creating or attachment of a lien,
encumbrance or security interest (whether voluntary, involuntary or by operation
of law); (C) the issuance or other creation of an ownership interest in a legal
entity, including a partnership interest, interest in a limited liability
company or corporate stock; (D) the withdrawal, retirement, removal or
involuntary resignation of a partner in a partnership or a member or manager in
a limited liability company; or (E) the merger, dissolution, liquidation, or
consolidation of a legal entity.  "Transfer" does not include (i) a
conveyance of the Mortgaged Property at a judicial or non-judicial foreclosure
sale under this Instrument or (ii) the Mortgaged Property becoming part of a
bankruptcy estate by operation of law under the United States Bankruptcy
Code.  For purposes of defining the term "Transfer," the term
"partnership" shall mean a general partnership, a limited partnership, a joint
venture and a limited liability partnership, and the term "partner" shall mean a
general partner, a limited partner and a joint venturer.





2.           UNIFORM
COMMERCIAL CODE SECURITY AGREEMENT.





This Instrument is also a security
agreement under the Uniform Commercial Code for any of the Mortgaged Property
which, under applicable law, may be subject to a security interest under the
Uniform Commercial Code, whether acquired now or in the future, and all products
and cash and non-cash proceeds thereof (collectively, "UCC Collateral"), and Borrower
hereby grants to Lender a security interest in the UCC
Collateral.  Borrower hereby authorizes Lender to file financing
statements, continuation statements and financing statement amendments in such
form as Lender may require to perfect or continue the perfection of this
security interest and Borrower agrees, if Lender so requests, to execute and
deliver to Lender such financing statements, continuation statements and
amendments.  Borrower shall pay all filing costs and all costs
and


FANNIE MAE MULTIFAMILY SECURITY
INSTRUMENT -
                                                                                                                     
Form 4017
 KANSAS
 © 1997-2001 Fannie Mae
 Page -
6


expenses
of any record searches for financing statements that Lender may
require.  Without the prior written consent of Lender, Borrower shall
not create or permit to exist any other lien or security interest in any of the
UCC Collateral.  If an Event of Default has occurred and is
continuing, Lender shall have the remedies of a secured party under the Uniform
Commercial Code, in addition to all remedies provided by this Instrument or
existing under applicable law.  In exercising any remedies, Lender may
exercise its remedies against the UCC Collateral separately or together, and in
any order, without in any way affecting the availability of Lender's other
remedies.  This Instrument constitutes a financing statement with
respect to any part of the Mortgaged Property which is or may become a
Fixture.





3.           ASSIGNMENT
OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.





(a)           As
part of the consideration for the Indebtedness, Borrower absolutely and
unconditionally assigns and transfers to Lender all Rents. It is the intention
of Borrower to establish a present, absolute and irrevocable transfer and
assignment to Lender of all Rents and to authorize and empower Lender to collect
and receive all Rents without the necessity of further action on the part of
Borrower.  Promptly upon request by Lender, Borrower agrees to execute
and deliver such further assignments as Lender may from time to time
require.  Borrower and Lender intend this assignment of Rents to be
immediately effective and to constitute an absolute present assignment and not
an assignment for additional security only.  For purposes of giving
effect to this absolute assignment of Rents, and for no other purpose, Rents
shall not be deemed to be a part of the "Mortgaged Property," as that term is
defined in Section 1(s).  However, if this present, absolute and
unconditional assignment of Rents is not enforceable by its terms under the laws
of the Property Jurisdiction, then the Rents shall be included as a part of the
Mortgaged Property and it is the intention of the Borrower that in this
circumstance this Instrument create and perfect a lien on Rents in favor of
Lender, which lien shall be effective as of the date of this
Instrument.





(b)           After
the occurrence of an Event of Default, Borrower authorizes Lender to collect,
sue for and compromise Rents and directs each tenant of the Mortgaged Property
to pay all Rents to, or as directed by, Lender, and Borrower shall, upon
Borrower's receipt of any Rents from any sources (including, but not limited to
subsidy payments under any Housing Assistance Payments Contract), pay the total
amount of such receipts to the Lender.  However, until the occurrence
of an Event of Default, Lender hereby grants to Borrower a revocable license to
collect and receive all Rents, to hold all Rents in trust for the benefit of
Lender and to apply all Rents to pay the installments of interest and principal
then due and payable under the Note and the other amounts then due and payable
under the other Loan Documents, including Imposition Deposits, and to pay the
current costs and expenses of managing, operating and maintaining the Mortgaged
Property, including utilities, Taxes and insurance premiums (to the extent not
included in Imposition Deposits), tenant improvements and other capital
expenditures.  So long as no Event of Default has occurred and is
continuing, the Rents remaining after application pursuant to the preceding
sentence may be retained by Borrower free and clear of, and released from,
Lender's rights with respect to Rents under this Instrument.  From and
after the occurrence of an Event of Default, and without the


FANNIE MAE MULTIFAMILY SECURITY
INSTRUMENT -
                                                                                                                     
Form 4017
 KANSAS
 © 1997-2001 Fannie Mae
 Page -
7


necessity
of Lender entering upon and taking and maintaining control of the Mortgaged
Property directly, or by a receiver, Borrower's license to collect Rents shall
automatically terminate and Lender shall without notice be entitled to all Rents
as they become due and payable, including Rents then due and
unpaid.  Borrower shall pay to Lender upon demand all Rents to which
Lender is entitled.  At any time on or after the date of Lender's
demand for Rents, Lender may give, and Borrower hereby irrevocably authorizes
Lender to give, notice to all tenants of the Mortgaged Property instructing them
to pay all Rents to Lender, no tenant shall be obligated to inquire further as
to the occurrence or continuance of an Event of Default, and no tenant shall be
obligated to pay to Borrower any amounts which are actually paid to Lender in
response to such a notice.  Any such notice by Lender shall be
delivered to each tenant personally, by mail or by delivering such demand to
each rental unit.  Borrower shall not interfere with and shall
cooperate with Lender's collection of such Rents.





(c)           Borrower
represents and warrants to Lender that Borrower has not executed any prior
assignment of Rents (other than an assignment of Rents securing indebtedness
that will be paid off and discharged with the proceeds of the loan evidenced by
the Note), that Borrower has not performed, and Borrower covenants and agrees
that it will not perform, any acts and has not executed, and shall not execute,
any instrument which would prevent Lender from exercising its rights under this
Section 3, and that at the time of execution of this Instrument there has
been no anticipation or prepayment of any Rents for more than two months prior
to the due dates of such Rents.  Borrower shall not collect or accept
payment of any Rents more than two months prior to the due dates of such
Rents.





(d)           If
an Event of Default has occurred and is continuing, Lender may, regardless of
the adequacy of Lender's security or the solvency of Borrower and even in the
absence of waste, enter upon and take and maintain full control of the Mortgaged
Property in order to perform all acts that Lender in its discretion determines
to be necessary or desirable for the operation and maintenance of the Mortgaged
Property, including the execution, cancellation or modification of Leases, the
collection of all Rents, the making of repairs to the Mortgaged Property and the
execution or termination of contracts providing for the management, operation or
maintenance of the Mortgaged Property, for the purposes of enforcing the
assignment of Rents pursuant to Section 3(a), protecting the Mortgaged Property
or the security of this Instrument, or for such other purposes as Lender in its
discretion may deem necessary or desirable.  Alternatively, if an
Event of Default has occurred and is continuing, regardless of the adequacy of
Lender's security, without regard to Borrower's solvency and without the
necessity of giving prior notice (oral or written) to Borrower, Lender may apply
to any court having jurisdiction for the appointment of a receiver for the
Mortgaged Property to take any or all of the actions set forth in the preceding
sentence.  If Lender elects to seek the appointment of a receiver for
the Mortgaged Property at any time after an Event of Default has occurred and is
continuing, Borrower, by its execution of this Instrument, expressly consents to
the appointment of such receiver, including the appointment of a receiver ex parte if permitted by
applicable law.  Lender or the receiver, as the case may be, shall be
entitled to receive a reasonable fee for managing the Mortgaged
Property.  Immediately upon appointment of a receiver or immediately
upon the Lender's entering upon and taking possession and control of the
Mortgaged


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Property,
Borrower shall surrender possession of the Mortgaged Property to Lender or the
receiver, as the case may be, and shall deliver to Lender or the receiver, as
the case may be, all documents, records (including records on electronic or
magnetic media), accounts, surveys, plans, and specifications relating to the
Mortgaged Property and all security deposits and prepaid Rents.  In
the event Lender takes possession and control of the Mortgaged Property, Lender
may exclude Borrower and its representatives from the Mortgaged
Property.  Borrower acknowledges and agrees that the exercise by
Lender of any of the rights conferred under this Section 3 shall not be
construed to make Lender a mortgagee-in-possession of the Mortgaged Property so
long as Lender has not itself entered into actual possession of the Land and
Improvements.





(e)           If
Lender enters the Mortgaged Property, Lender shall be liable to account only to
Borrower and only for those Rents actually received.  Lender shall not
be liable to Borrower, anyone claiming under or through Borrower or anyone
having an interest in the Mortgaged Property, by reason of any act or omission
of Lender under this Section 3, and Borrower hereby releases and discharges
Lender from any such liability to the fullest extent permitted by
law.





(f)           If
the Rents are not sufficient to meet the costs of taking control of and managing
the Mortgaged Property and collecting the Rents, any funds expended by Lender
for such purposes shall become an additional part of the Indebtedness as
provided in Section 12.





(g)           Any
entering upon and taking of control of the Mortgaged Property by Lender or the
receiver, as the case may be, and any application of Rents as provided in this
Instrument shall not cure or waive any Event of Default or invalidate any other
right or remedy of Lender under applicable law or provided for in this
Instrument.





4.           ASSIGNMENT
OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.





(a)           As
part of the consideration for the Indebtedness, Borrower absolutely and
unconditionally assigns and transfers to Lender all of Borrower's right, title
and interest in, to and under the Leases, including Borrower's right, power and
authority to modify the terms of any such Lease, or extend or terminate any such
Lease.   It is the intention of Borrower to establish a present,
absolute and irrevocable transfer and assignment to Lender of all of Borrower's
right, title and interest in, to and under the Leases.  Borrower and
Lender intend this assignment of the Leases to be immediately effective and to
constitute an absolute present assignment and not an assignment for additional
security only.  For purposes of giving effect to this absolute
assignment of the Leases, and for no other purpose, the Leases shall not be
deemed to be a part of the "Mortgaged Property," as that term is defined in
Section 1(s).  However, if this present, absolute and unconditional
assignment of the Leases is not enforceable by its terms under the laws of the
Property Jurisdiction, then the Leases shall be included as a part of the
Mortgaged Property and it is the intention of the Borrower that in this
circumstance this Instrument create and perfect a lien on the Leases in favor of
Lender, which lien shall be effective as of the date of this
Instrument.





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(b)           Until
Lender gives notice to Borrower of Lender's exercise of its rights under this
Section 4, Borrower shall have all rights, power and authority granted to
Borrower under any Lease (except as otherwise limited by this Section or
any other provision of this Instrument), including the right, power and
authority to modify the terms of any Lease or extend or terminate any
Lease.  Upon the occurrence of an Event of Default, the permission
given to Borrower pursuant to the preceding sentence to exercise all rights,
power and authority under Leases shall automatically
terminate.  Borrower shall comply with and observe Borrower's
obligations under all Leases, including Borrower's obligations pertaining to the
maintenance and disposition of tenant security deposits.





(c)           Borrower
acknowledges and agrees that the exercise by Lender, either directly or by a
receiver, of any of the rights conferred under this Section 4 shall not be
construed to make Lender a mortgagee-in-possession of the Mortgaged Property so
long as Lender has not itself entered into actual possession of the Land and the
Improvements.  The acceptance by Lender of the assignment of the
Leases pursuant to Section 4(a) shall not at any time or in any event
obligate Lender to take any action under this Instrument or to expend any money
or to incur any expenses.  Lender shall not be liable in any way for
any injury or damage to person or property sustained by any person or persons,
firm or corporation in or about the Mortgaged Property.  Prior to
Lender's actual entry into and taking possession of the Mortgaged Property,
Lender shall not (i) be obligated to perform any of the terms, covenants and
conditions contained in any Lease (or otherwise have any obligation with respect
to any Lease); (ii) be obligated to appear in or defend any action or proceeding
relating to the Lease or the Mortgaged Property; or (iii) be responsible for the
operation, control, care, management or repair of the Mortgaged Property or any
portion of the Mortgaged Property.  The execution of this Instrument
by Borrower shall constitute conclusive evidence that all responsibility for the
operation, control, care, management and repair of the Mortgaged Property is and
shall be that of Borrower, prior to such actual entry and taking of
possession.





(d)           Upon
delivery of notice by Lender to Borrower of Lender's exercise of Lender's rights
under this Section 4 at any time after the occurrence of an Event of
Default, and without the necessity of Lender entering upon and taking and
maintaining control of the Mortgaged Property directly, by a receiver, or by any
other manner or proceeding permitted by the laws of the Property Jurisdiction,
Lender immediately shall have all rights, powers and authority granted to
Borrower under any Lease, including the right, power and authority to modify the
terms of any such Lease, or extend or terminate any such Lease.





(e)           Borrower
shall, promptly upon Lender's request, deliver to Lender an executed copy of
each residential Lease then in effect. All Leases for residential dwelling units
shall be on forms approved by Lender, shall be for initial terms of at least six
months and not more than two years, and shall not include options to
purchase.  If customary in the applicable market, residential Leases
with terms of less than six months may be permitted with Lender's prior written
consent.





(f)           Borrower
shall not lease any portion of the Mortgaged Property for non-residential use
except with the prior written consent of Lender and Lender's prior written
approval of the Lease


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agreement.  Borrower
shall not modify the terms of, or extend or terminate, any Lease for
non-residential use (including any Lease in existence on the date of this
Instrument) without the prior written consent of Lender.  Borrower
shall, without request by Lender, deliver an executed copy of each
non-residential Lease to Lender promptly after such Lease is
signed.  All non-residential Leases, including renewals or extensions
of existing Leases, shall specifically provide that (1) such Leases are
subordinate to the lien of this Instrument (unless waived in writing by Lender);
(2) the tenant shall attorn to Lender and any purchaser at a foreclosure sale,
such attornment to be self-executing and effective upon acquisition of title to
the Mortgaged Property by any purchaser at a foreclosure sale or by Lender in
any manner; (3) the tenant agrees to execute such further evidences of
attornment as Lender or any purchaser at a foreclosure sale may from time to
time request; (4) the Lease shall not be terminated by foreclosure or any other
transfer of the Mortgaged Property; (5) after a foreclosure sale of the
Mortgaged Property, Lender or any other purchaser at such foreclosure sale may,
at Lender's or such purchaser's option, accept or terminate such Lease; and (6)
the tenant shall, upon receipt after the occurrence of an Event of Default of a
written request from Lender, pay all Rents payable under the Lease to
Lender.





(g)           Borrower
shall not receive or accept Rent under any Lease (whether residential or
non-residential) for more than two months in advance.





5.           PAYMENT
OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT
PREMIUM.





Borrower shall pay the Indebtedness
when due in accordance with the terms of the Note and the other Loan Documents
and shall perform, observe and comply with all other provisions of the Note and
the other Loan Documents.  Borrower shall pay a prepayment premium in
connection with certain prepayments of the Indebtedness, including a payment
made after Lender's exercise of any right of acceleration of the Indebtedness,
as provided in the Note.





6.           EXCULPATION.





Borrower's personal liability for
payment of the Indebtedness and for performance of the other obligations to be
performed by it under this Instrument is limited in the manner, and to the
extent, provided in the Note.





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7.           DEPOSITS
FOR TAXES, INSURANCE AND OTHER CHARGES.





(a)           Borrower
shall deposit with Lender on the day monthly installments of principal or
interest, or both, are due under the Note (or on another day designated in
writing by Lender), until the Indebtedness is paid in full, an additional amount
sufficient to accumulate with Lender the entire sum required to pay, when due
(1) any water and sewer charges which, if not paid, may result in a lien on all
or any part of the Mortgaged Property, (2) the premiums for fire and other
hazard insurance, rent loss insurance and such other insurance as Lender may
require under Section 19, (3) Taxes, and (4) amounts for other charges and
expenses which Lender at any time reasonably deems necessary to protect the
Mortgaged Property, to prevent the imposition of liens on the Mortgaged
Property, or otherwise to protect Lender's interests, all as reasonably
estimated from time to time by Lender.  The amounts deposited under
the preceding sentence are collectively referred to in this Instrument as the
"Imposition
Deposits".  The obligations of Borrower for which the
Imposition Deposits are required are collectively referred to in this Instrument
as "Impositions".  The
amount of the Imposition Deposits shall be sufficient to enable Lender to pay
each Imposition before the last date upon which such payment may be made without
any penalty or interest charge being added.  Lender shall maintain
records indicating how much of the monthly Imposition Deposits and how much of
the aggregate Imposition Deposits held by Lender are held for the purpose of
paying Taxes, insurance premiums and each other obligation of Borrower for which
Imposition Deposits are required.  Any waiver by Lender of the
requirement that Borrower remit Imposition Deposits to Lender may be revoked by
Lender, in Lender's discretion, at any time upon notice to
Borrower.





(b)           Imposition
Deposits shall be held in an institution (which may be Lender, if Lender is such
an institution) whose deposits or accounts are insured or guaranteed by a
federal agency.  Lender shall not be obligated to open additional
accounts or deposit Imposition Deposits in additional institutions when the
amount of the Imposition Deposits exceeds the maximum amount of the federal
deposit insurance or guaranty.  Lender shall apply the Imposition
Deposits to pay Impositions so long as no Event of Default has occurred and is
continuing.  Unless applicable law requires, Lender shall not be
required to pay Borrower any interest, earnings or profits on the Imposition
Deposits.  Borrower hereby pledges and grants to Lender a security
interest in the Imposition Deposits as additional security for all of Borrower's
obligations under this Instrument and the other Loan Documents.  Any
amounts deposited with Lender under this Section 7 shall not be trust
funds, nor shall they operate to reduce the Indebtedness, unless applied by
Lender for that purpose under Section 7(e).





(c)           If
Lender receives a bill or invoice for an Imposition, Lender shall pay the
Imposition from the Imposition Deposits held by Lender.  Lender shall
have no obligation to pay any Imposition to the extent it exceeds Imposition
Deposits then held by Lender.  Lender may pay an Imposition according
to any bill, statement or estimate from the appropriate public office or
insurance company without inquiring into the accuracy of the bill, statement or
estimate or into the validity of the Imposition.





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(d)           If
at any time the amount of the Imposition Deposits held by Lender for payment of
a specific Imposition exceeds the amount reasonably deemed necessary by Lender,
the excess shall be credited against future installments of Imposition
Deposits.  If at any time the amount of the Imposition Deposits held
by Lender for payment of a specific Imposition is less than the amount
reasonably estimated by Lender to be necessary, Borrower shall pay to Lender the
amount of the deficiency within 15 days after notice from Lender.





(e)           If
an Event of Default has occurred and is continuing, Lender may apply any
Imposition Deposits, in any amounts and in any order as Lender determines, in
Lender's discretion, to pay any Impositions or as a credit against the
Indebtedness. Upon payment in full of the Indebtedness, Lender shall refund to
Borrower any Imposition Deposits held by Lender.





8.           COLLATERAL
AGREEMENTS.





Borrower shall deposit with Lender such
amounts as may be required by any Collateral Agreement and shall perform all
other obligations of Borrower under each Collateral Agreement.





9.           APPLICATION
OF PAYMENTS.





If at any time Lender receives, from
Borrower or otherwise, any amount applicable to the Indebtedness which is less
than all amounts due and payable at such time, then Lender may apply that
payment to amounts then due and payable in any manner and in any order
determined by Lender, in Lender's discretion.  Neither Lender's
acceptance of an amount which is less than all amounts then due and payable nor
Lender's application of such payment in the manner authorized shall constitute
or be deemed to constitute either a waiver of the unpaid amounts or an accord
and satisfaction.  Notwithstanding the application of any such amount
to the Indebtedness,  Borrower's obligations under this Instrument and
the Note shall remain unchanged.





10.           COMPLIANCE
WITH LAWS.





Borrower shall comply with all laws,
ordinances, regulations and requirements of any Governmental Authority and all
recorded lawful covenants and agreements relating to or affecting the Mortgaged
Property, including all laws, ordinances, regulations, requirements and
covenants pertaining to health and safety, construction of improvements on the
Mortgaged Property, fair housing, zoning and land use, and
Leases.  Borrower also shall comply with all applicable laws that
pertain to the maintenance and disposition of tenant security
deposits.  Borrower shall at all times maintain records sufficient to
demonstrate  compliance with the provisions of this
Section 10.  Borrower shall take appropriate measures to prevent,
and shall not engage in or knowingly permit, any illegal activities at the
Mortgaged Property that could endanger tenants or visitors, result in damage to
the Mortgaged Property, result in forfeiture of the Mortgaged Property, or
otherwise materially impair the lien created by this Instrument or Lender's
interest in the Mortgaged Property.  Borrower represents and warrants
to Lender that no portion of the Mortgaged Property has been or will be
purchased with the proceeds of any illegal activity.


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INSTRUMENT -
                                                                                                                     
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11.           USE
OF PROPERTY.





Unless required by applicable law,
Borrower shall not (a) except for any change in use approved by Lender, allow
changes in the use for which all or any part of the Mortgaged Property is being
used at the time this Instrument was executed, (b) convert any individual
dwelling units or common areas to commercial use, (c) initiate or acquiesce in a
change in the zoning classification of the Mortgaged Property, or (d) establish
any condominium or cooperative regime with respect to the Mortgaged
Property.





12.           PROTECTION
OF LENDER'S SECURITY.





(a)           If
Borrower fails to perform any of its obligations under this Instrument or any
other Loan Document, or if any action or proceeding is commenced which purports
to affect the Mortgaged Property, Lender's security or Lender's rights under
this Instrument, including eminent domain, insolvency, code enforcement, civil
or criminal forfeiture, enforcement of Hazardous Materials Laws, fraudulent
conveyance or reorganizations or proceedings involving a bankrupt or decedent,
then Lender at Lender's option may make such appearances, disburse such sums and
take such actions as Lender reasonably deems necessary to perform such
obligations of Borrower and to protect Lender's interest, including (1) payment
of fees and out-of-pocket expenses of attorneys, accountants, inspectors and
consultants, (2) entry upon the Mortgaged Property to make repairs or secure the
Mortgaged Property, (3) procurement of the insurance required by
Section 19, and (4) payment of amounts which Borrower has failed to pay
under Sections 15 and 17.





(b)           Any
amounts disbursed by Lender under this Section 12, or under any other
provision of this Instrument that treats such disbursement as being made under
this Section 12, shall be added to, and become part of, the principal
component of the Indebtedness, shall be immediately due and payable and shall
bear interest from the date of disbursement until paid at the "Default Rate", as defined in
the Note.





(c)           Nothing
in this Section 12 shall require Lender to incur any expense or take any
action.





13.           INSPECTION.





Lender, its agents, representatives,
and designees may make or cause to be made entries upon and inspections of the
Mortgaged Property (including environmental inspections and tests) during normal
business hours, or at any other reasonable time.





14.           BOOKS
AND RECORDS; FINANCIAL REPORTING.





(a)           Borrower
shall keep and maintain at all times at the Mortgaged Property or the management
agent's offices, and upon Lender's request shall make available at the
Mortgaged


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INSTRUMENT -
                                                                                                                     
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Property,
complete and accurate books of account and records (including copies of
supporting bills and invoices) adequate to reflect correctly the operation of
the Mortgaged Property, and copies of all written contracts, Leases, and other
instruments which affect the Mortgaged Property.  The books, records,
contracts, Leases and other instruments shall be subject to examination and
inspection at any reasonable time by Lender.





(b)           
Borrower shall furnish to Lender all of the following:





(1)
            within
      120 days after the end of each fiscal year of Borrower, a statement of
      income and expenses for Borrower's operation of the Mortgaged Property for
      that fiscal year, a statement of changes in financial position of Borrower
      relating to the Mortgaged Property for that fiscal year and, when
      requested by Lender, a balance sheet showing all assets and liabilities of
      Borrower relating to the Mortgaged Property as of the end of that fiscal
      year;





(2)
            within
      120 days after the end of each fiscal year of Borrower, and at any other
      time upon Lender's request, a rent schedule for the Mortgaged Property
      showing the name of each tenant, and for each tenant, the space occupied,
      the lease expiration date, the rent payable for the current month, the
      date through which rent has been paid, and any related information
      requested by Lender;





(3)
            within
      120 days after the end of each fiscal year of Borrower, and at any other
      time upon Lender's request, an accounting of all security deposits held
      pursuant to all Leases, including the name of the institution (if any) and
      the names and identification numbers of the accounts (if any) in which
      such security deposits are held and the name of the person to contact at
      such financial institution, along with any authority or release necessary
      for Lender to access information regarding such
  accounts;





(4)
            within
      120 days after the end of each fiscal year of Borrower, and at any other
      time upon Lender's request, a statement that identifies all owners of any
      interest in Borrower and the interest held by each, if Borrower is a
      corporation, all officers and directors of Borrower, and if Borrower is a
      limited liability company, all managers who are not
    members;





(5)
            upon
      Lender's request, a monthly property management report for the Mortgaged
      Property, showing the number of inquiries made and rental applications
      received from tenants or prospective tenants and deposits received from
      tenants and any other information requested by
  Lender;





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(6)
            upon
      Lender's request, a balance sheet, a statement of income and expenses for
      Borrower and a statement of changes in financial position of Borrower for
      Borrower's most recent fiscal year;
and





(7)
            if
      required by Lender, a statement of income and expense for the Mortgaged
      Property for the prior month or
quarter.





(c)           Each
of the statements, schedules and reports required by Section 14(b) shall be
certified to be complete and accurate by an individual having authority to bind
Borrower, and shall be in such form and contain such detail as Lender may
reasonably require.  Lender also may require that any statements,
schedules or reports be audited at Borrower's expense by independent certified
public accountants acceptable to Lender.





(d)           If
Borrower fails to provide in a timely manner the statements, schedules and
reports required by Section 14(b), Lender shall have the right to have
Borrower's books and records audited, at Borrower's expense, by independent
certified public accountants selected by Lender in order to obtain such
statements, schedules and reports, and all related costs and expenses of Lender
shall become immediately due and payable and shall become an additional part of
the Indebtedness as provided in Section 12.





(e)           If
an Event of Default has occurred and is continuing, Borrower shall deliver to
Lender upon written demand all books and records relating to the Mortgaged
Property or its operation.





(f)           Borrower
authorizes Lender to obtain a credit report on Borrower at any
time.





(g)           If
an Event of Default has occurred and Lender has not previously required Borrower
to furnish a quarterly statement of income and expense for the Mortgaged
Property, Lender may require Borrower to furnish such a statement within 45 days
after the end of each fiscal quarter of Borrower following such Event of
Default.





15.           TAXES;
OPERATING EXPENSES.





(a)           Subject
to the provisions of Section 15(c) and Section 15(d), Borrower shall
pay, or cause to be paid, all Taxes when due and before the addition of any
interest, fine, penalty  or cost for nonpayment.





(b)           Subject
to the provisions of Section 15(c), Borrower shall pay the expenses of
operating, managing, maintaining and repairing the Mortgaged Property (including
insurance premiums, utilities, repairs and replacements) before the last date
upon which each such payment may be made without any penalty or interest charge
being added.





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(c)           As
long as no Event of Default exists and Borrower has timely delivered to Lender
any bills or premium notices that it has received, Borrower shall not be
obligated to pay Taxes, insurance premiums or any other individual Imposition to
the extent that sufficient Imposition Deposits are held by Lender for the
purpose of paying that specific Imposition.  If an Event of Default
exists, Lender may exercise any rights Lender may have with respect to
Imposition Deposits without regard to whether Impositions are then due and
payable.  Lender shall have no liability to Borrower for failing to
pay any Impositions to the extent that any Event of Default has occurred and is
continuing, insufficient Imposition Deposits are held by Lender at the time an
Imposition becomes due and payable or Borrower has failed to provide Lender with
bills and premium notices as provided above.





(d)           Borrower,
at its own expense, may contest by appropriate legal proceedings, conducted
diligently and in good faith, the amount or validity of any Imposition other
than insurance premiums, if (1) Borrower notifies Lender of the commencement or
expected commencement of such proceedings, (2) the Mortgaged Property is not in
danger of being sold or forfeited, (3) Borrower deposits with Lender reserves
sufficient to pay the contested Imposition, if requested by Lender, and (4)
Borrower furnishes whatever additional security is required in the proceedings
or is reasonably requested by Lender, which may include the delivery to Lender
of the reserves established by Borrower to pay the contested
Imposition.





(e)           Borrower
shall promptly deliver to Lender a copy of all notices of, and invoices for,
Impositions, and if Borrower pays any Imposition directly, Borrower shall
promptly furnish to Lender receipts evidencing such payments.





16.           LIENS;
ENCUMBRANCES.





Borrower acknowledges that, to the
extent provided in Section 21, the grant, creation or existence of any mortgage,
deed of trust, deed to secure debt, security interest or other lien or
encumbrance (a "Lien")
on the Mortgaged Property (other than the lien of this Instrument) or on certain
ownership interests in Borrower, whether voluntary, involuntary or by operation
of law, and whether or not such Lien has priority over the lien of this
Instrument, is a "Transfer" which constitutes an
Event of Default.





17.           PRESERVATION,
MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.





(a) Borrower (1) shall not commit waste
or permit impairment or deterioration of the Mortgaged Property, (2) shall not
abandon the Mortgaged Property, (3) shall restore or repair promptly, in a good
and workmanlike manner, any damaged part of the Mortgaged Property to the
equivalent of its original condition, or such other condition as Lender may
approve in writing, whether or not insurance proceeds or condemnation awards are
available to cover any costs of such restoration or repair, (4) shall keep the
Mortgaged Property in good repair, including the replacement of Personalty and
Fixtures with items of equal or better function and quality, (5)
shall


FANNIE MAE MULTIFAMILY SECURITY
INSTRUMENT -
                                                                                                                     
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 KANSAS
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provide
for professional management of the Mortgaged Property by a residential rental
property manager satisfactory to Lender under a contract approved by Lender in
writing, and (6) shall give notice to Lender of and, unless otherwise directed
in writing by Lender, shall appear in and defend any action or proceeding
purporting to affect the Mortgaged Property, Lender's security or Lender's
rights under this Instrument.  Borrower shall not (and shall not
permit any tenant or other person to) remove, demolish or alter the Mortgaged
Property or any part of the Mortgaged Property except in connection with the
replacement of tangible Personalty.





(b)           If,
in connection with the making of the loan evidenced by the Note or at any later
date, Lender waives in writing the requirement of Section 17(a)(5) above that
Borrower enter into a written contract for management of the Mortgaged Property
and if, after the date of this Instrument, Borrower intends to change the
management of the Mortgaged Property, Lender shall have the right to approve
such new property manager and the written contract for the management of the
Mortgaged Property and require that Borrower and such new property manager enter
into an Assignment of Management Agreement on a form approved by
Lender.  If required by Lender (whether before or after an Event of
Default), Borrower will cause any Affiliate of Borrower to whom fees are payable
for the management of the Mortgaged Property to enter into an agreement with
Lender, in a form approved by Lender, providing for subordination of those fees
and such other provisions as Lender may require.  "Affiliate of
Borrower" means any corporation, partnership, joint venture, limited liability
company, limited liability partnership, trust or individual controlled by, under
common control with, or which controls Borrower (the term "control" for these
purposes shall mean the ability, whether by the ownership of shares or other
equity interests, by contract or otherwise, to elect a majority of the directors
of a corporation, to make management decisions on behalf of, or independently to
select the managing partner of, a partnership, or otherwise to have the power
independently to remove and then select a majority of those individuals
exercising managerial authority over an entity, and control shall be
conclusively presumed in the case of the ownership of 50% or more of the equity
interests).





18.           ENVIRONMENTAL
HAZARDS.





(a)           Except
for matters covered by a written program of operations and maintenance approved
in writing by Lender (an "O&M Program") or matters
described in Section 18(b), Borrower shall not cause or permit any of the
following:





(1)
            the
      presence, use, generation, release, treatment, processing, storage
      (including storage in above ground and underground storage tanks),
      handling, or disposal of any Hazardous Materials on or under the Mortgaged
      Property or any other  property of Borrower that is adjacent to
      the Mortgaged Property;





(2)
            the
      transportation of any Hazardous Materials to, from, or across the
      Mortgaged Property;





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(3)
            any
      occurrence or condition on the Mortgaged Property or any other property of
      Borrower that is adjacent to the Mortgaged Property, which occurrence or
      condition is or may be in violation of Hazardous Materials Laws;
      or





(4)
            any
      violation of or noncompliance with the terms of any Environmental Permit
      with respect to the Mortgaged Property or any  property of
      Borrower that is adjacent to the Mortgaged
  Property.





The
matters described in clauses (1) through (4) above are referred to collectively
in this Section 18 as "Prohibited Activities or
Conditions".





(b)           Prohibited
Activities and Conditions shall not include the safe and lawful use and storage
of quantities of (1) pre-packaged supplies, cleaning materials and petroleum
products customarily used in the operation and maintenance of comparable
multifamily properties, (2) cleaning materials, personal grooming items and
other items sold in pre-packaged containers for consumer use and used by tenants
and occupants of residential dwelling units in the Mortgaged Property; and (3)
petroleum products used in the operation and maintenance of motor vehicles from
time to time located on the Mortgaged Property's parking areas, so long as all
of the foregoing are used, stored, handled, transported and disposed of in
compliance with Hazardous Materials Laws.





(c)           Borrower
shall take all commercially reasonable actions (including the inclusion of
appropriate provisions in any Leases executed after the date of this Instrument)
to prevent its employees, agents, and contractors, and all tenants and other
occupants from causing or permitting any Prohibited Activities or
Conditions.  Borrower shall not lease or allow the sublease or use of
all or any portion of the Mortgaged Property to any tenant or subtenant for
nonresidential use by any user that, in the ordinary course of its business,
would cause or permit any Prohibited Activity or Condition.





(d)           If
an O&M Program has been established with respect to Hazardous Materials,
Borrower shall comply in a timely manner with, and cause all employees, agents,
and contractors of Borrower and any other persons present on the Mortgaged
Property to comply with the O&M Program.  All costs of performance
of Borrower's obligations under any O&M Program shall be paid by Borrower,
and Lender's out-of-pocket costs incurred in connection with the monitoring and
review of the O&M Program and Borrower's performance shall be paid by
Borrower upon demand by Lender.  Any such out-of-pocket costs of
Lender which Borrower fails to pay promptly shall become an additional part of
the Indebtedness as provided in Section 12.





(e)           Borrower
represents and warrants to Lender that, except as previously disclosed by
Borrower to Lender in writing:





(1)
            Borrower
      has not at any time engaged in, caused or permitted any Prohibited
      Activities or Conditions;


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(2)
            to
      the best of Borrower's knowledge after reasonable and diligent inquiry, no
      Prohibited Activities or Conditions exist or have
  existed;





(3)
            except
      to the extent previously disclosed by Borrower to Lender in writing, the
      Mortgaged Property does not now contain any underground storage tanks,
      and, to the best of Borrower's knowledge after reasonable and diligent
      inquiry, the Mortgaged Property has not contained any underground storage
      tanks in the past.  If there is an underground storage tank
      located on the Property which has been previously disclosed by Borrower to
      Lender in writing, that tank complies with all requirements of Hazardous
      Materials Laws;





(4)
            Borrower
      has complied with all Hazardous Materials Laws, including all requirements
      for notification regarding releases of Hazardous
      Materials.  Without limiting the generality of the foregoing,
      Borrower has obtained all Environmental Permits required for the operation
      of the Mortgaged Property in accordance with Hazardous Materials Laws now
      in effect and all such Environmental Permits are in full force and
      effect;





(5)
            no
      event has occurred with respect to the Mortgaged Property that
      constitutes, or with the passing of time or the giving of notice would
      constitute, noncompliance with the terms of any Environmental
      Permit;





(6)
            there
      are no actions, suits, claims or proceedings pending or, to the best of
      Borrower's knowledge after reasonable and diligent inquiry,
      threatened  that involve the Mortgaged Property and allege,
      arise out of, or relate to any Prohibited Activity or Condition;
      and





(7)
            Borrower
      has not received any complaint, order, notice of violation or other
      communication from any Governmental Authority with regard to air
      emissions, water discharges, noise emissions or Hazardous Materials, or
      any other environmental, health or safety matters affecting the Mortgaged
      Property or any other property of Borrower that is adjacent to the
      Mortgaged Property.





The
representations and warranties in this Section 18 shall be continuing
representations and warranties that shall be deemed to be made by Borrower
throughout the term of the loan evidenced by the Note, until the Indebtedness
has been paid in full.





(f)           Borrower
shall promptly notify Lender in writing upon the occurrence of any
of  the following events:





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(1)
            Borrower's
      discovery of any Prohibited Activity or
  Condition;





(2)
            Borrower's
      receipt of or knowledge of any complaint, order, notice of violation or
      other communication from any Governmental Authority or other person with
      regard to present or future alleged Prohibited Activities or Conditions or
      any other environmental, health or safety matters affecting the Mortgaged
      Property or any other property of Borrower that is adjacent to the
      Mortgaged Property; and





(3)
            any
      representation or warranty in this Section 18 becomes untrue after
      the date of this Agreement.





Any such
notice given by Borrower shall not relieve Borrower of, or result in a waiver
of, any obligation under this Instrument, the Note, or any other Loan
Document.





(g)           Borrower
shall pay promptly the costs of any environmental inspections, tests or audits
("Environmental
Inspections") required by Lender in connection with any foreclosure or
deed in lieu of foreclosure, or as a condition of Lender's consent to any
Transfer under Section 21, or required by Lender following a reasonable
determination by Lender that Prohibited Activities or Conditions may
exist.  Any such costs incurred by Lender (including the fees and
out-of-pocket costs of attorneys and technical consultants whether incurred in
connection with any judicial or administrative process or otherwise) which
Borrower fails to pay promptly shall become an additional part of the
Indebtedness as provided in Section 12.  The results of all
Environmental Inspections made by Lender shall at all times remain the property
of Lender and Lender shall have no obligation to disclose or otherwise make
available to Borrower or any other party such results or any other information
obtained by Lender in connection with its Environmental
Inspections.  Lender hereby reserves the right, and Borrower hereby
expressly authorizes Lender, to make available to any party, including any
prospective bidder at a foreclosure sale of the Mortgaged Property, the results
of any Environmental Inspections made by Lender with respect to the Mortgaged
Property.  Borrower consents to Lender notifying any party (either as
part of a notice of sale or otherwise) of the results of any of Lender's
Environmental Inspections.  Borrower acknowledges that Lender cannot
control or otherwise assure the truthfulness or accuracy of the results of any
of its Environmental Inspections and that the release of such results to
prospective bidders at a foreclosure sale of the Mortgaged Property may have a
material and adverse effect upon the amount which a party may bid at such
sale.  Borrower agrees that Lender shall have no liability whatsoever
as a result of delivering the results of any of its Environmental Inspections to
any third party, and Borrower hereby releases and forever discharges Lender from
any and all claims, damages, or causes of action, arising out of, connected with
or incidental to the results of, the delivery of any of Lender's Environmental
Inspections.





(h)           If
any investigation, site monitoring, containment, clean-up, restoration or other
remedial work ("Remedial
Work") is necessary to comply with any Hazardous Materials Law or order
of any Governmental Authority that has or acquires jurisdiction over the
Mortgaged Property


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or the
use, operation or improvement of the Mortgaged Property under any Hazardous
Materials Law, Borrower shall, by the earlier of (1) the applicable deadline
required by Hazardous Materials Law or (2) 30 days after notice from Lender
demanding such action, begin performing the Remedial Work, and thereafter
diligently prosecute it to completion, and shall in any event complete the work
by the time required by applicable Hazardous Materials Law.  If
Borrower fails to begin on a timely basis or diligently prosecute any required
Remedial Work, Lender may, at its option, cause the Remedial Work to be
completed, in which case Borrower shall reimburse Lender on demand for the cost
of doing so.  Any reimbursement due from Borrower to Lender shall
become part of the Indebtedness as provided in Section 12.





(i)           Borrower
shall cooperate with any inquiry by any Governmental Authority and shall comply
with any governmental or judicial order which arises from any alleged Prohibited
Activity or Condition.





(j)           Borrower
shall indemnify, hold harmless and defend (i) Lender, (ii) any prior owner or
holder of the Note, (iii) the Loan Servicer, (iv) any prior Loan Servicer, (v)
the officers, directors, shareholders, partners, employees and trustees of any
of the foregoing, and (vi) the heirs, legal representatives, successors and
assigns of each of the foregoing (collectively, the "Indemnitees") from and against
all proceedings, claims, damages, penalties and costs (whether initiated or
sought by Governmental Authorities or private parties), including fees and
out-of-pocket expenses of attorneys and expert witnesses, investigatory fees,
and remediation costs, whether incurred in connection with any judicial or
administrative process or otherwise, arising directly or indirectly from any of
the following:





(1)
            any
      breach of any representation or warranty of Borrower in this
      Section 18;


(2)
            any
      failure by Borrower to perform any of its obligations under this
      Section 18;





(3)
            the
      existence or alleged existence of any Prohibited Activity or
      Condition;





(4)
            the
      presence or alleged presence of Hazardous Materials on or under the
      Mortgaged Property or any property of Borrower that is adjacent to the
      Mortgaged Property; and





(5)
            the
      actual or alleged violation of any Hazardous Materials
  Law.





(k)           Counsel
selected by Borrower to defend Indemnitees shall be subject to
the  approval of those Indemnitees.  However, any Indemnitee
may elect to defend any claim or legal or administrative proceeding at the
Borrower's expense.





(l)           Borrower
shall not, without the prior written consent of those Indemnitees who are named
as parties to a claim or legal or administrative proceeding (a "Claim"), settle or
compromise


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the Claim
if the settlement (1) results in the entry of any judgment that does not include
as an unconditional term the delivery by the claimant or plaintiff to Lender of
a written release of those Indemnitees, satisfactory in form and substance to
Lender; or (2) may materially and adversely affect Lender, as determined by
Lender in its discretion.





(m)           Lender
agrees that the indemnity under this Section 18 shall be limited to the assets
of Borrower and Lender shall not seek to recover any deficiency from any natural
persons who are general partners of Borrower.





(n)           Borrower
shall, at its own cost and expense, do all of the following:





(1)
            pay
      or satisfy any judgment or decree that may be entered against any
      Indemnitee or Indemnitees in any legal or administrative proceeding
      incident to any matters against which Indemnitees are entitled to be
      indemnified under this
Section 18;





(2)
            reimburse
      Indemnitees for any expenses paid or incurred in connection with any
      matters against which Indemnitees are entitled to be indemnified under
      this Section 18; and





(3)
            reimburse
      Indemnitees for any and all expenses, including fees and out-of-pocket
      expenses of attorneys and expert witnesses, paid or incurred in connection
      with the enforcement by Indemnitees of their rights under this
      Section 18, or in monitoring and participating in any legal or
      administrative proceeding.





(o)           In
any circumstances in which the indemnity under this Section 18 applies,
Lender may employ its own legal counsel and consultants to prosecute, defend or
negotiate any claim or legal or administrative proceeding and Lender, with the
prior written consent of Borrower (which shall not be unreasonably withheld,
delayed or conditioned), may settle or compromise any action or legal or
administrative proceeding.  Borrower shall reimburse Lender upon
demand for all costs and expenses incurred by Lender, including all costs of
settlements entered into in good faith, and the fees and out-of-pocket expenses
of such attorneys and consultants.





(p)           The
provisions of this Section 18 shall be in addition to any and all other
obligations and liabilities that Borrower may have  under applicable
law or under other Loan Documents, and each Indemnitee shall be entitled to
indemnification under this Section 18 without regard to whether Lender or
that Indemnitee has exercised any rights against the Mortgaged Property or any
other security, pursued any rights against any guarantor, or pursued any other
rights available under the Loan Documents or applicable law. If Borrower
consists of more than one person or entity, the obligation of those persons or
entities to indemnify the Indemnitees under this Section 18 shall be joint
and several. The obligation of Borrower to indemnify the Indemnitees under this
Section 18 shall survive any repayment or discharge of the Indebtedness,
any foreclosure proceeding, any


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foreclosure
sale, any delivery of any deed in lieu of foreclosure, and any release of record
of the lien of this Instrument.





19.           PROPERTY
AND LIABILITY INSURANCE.





(a)           Borrower
shall keep the Improvements insured at all times against such hazards as Lender
may from time to time require, which insurance shall include but not be limited
to coverage against loss by fire and allied perils, general boiler and machinery
coverage, and business income coverage.  Lender's insurance
requirements may change from time to time throughout the term of the
Indebtedness.  If Lender so requires, such insurance shall also
include sinkhole insurance, mine subsidence insurance, earthquake insurance,
and, if the Mortgaged Property does not conform to applicable zoning or land use
laws, building ordinance or law coverage.  If any of the Improvements
is located in an area identified by the Federal Emergency Management Agency (or
any successor to that agency) as an area having special flood hazards, and if
flood insurance is available in that area, Borrower shall insure such
Improvements against loss by flood.





(b)           All
premiums on insurance policies required under Section 19(a) shall be paid
in the manner provided in Section 7, unless Lender has designated in
writing another method of payment.  All such policies shall also be in
a form approved by Lender.  All policies of property damage insurance
shall include a non-contributing, non-reporting mortgage clause in favor of, and
in a form approved by, Lender.  Lender shall have the right to hold
the original policies or duplicate original policies of all insurance required
by Section 19(a).  Borrower shall promptly deliver to Lender a
copy of all renewal and other notices received by Borrower with respect to the
policies and all receipts for paid premiums.  At least 30 days prior
to the expiration date of a policy, Borrower shall deliver to Lender the
original  (or a duplicate original) of a renewal policy in form
satisfactory to Lender.





(c)           Borrower
shall maintain at all times commercial general liability insurance, workers'
compensation insurance and such other liability, errors and omissions and
fidelity insurance coverages as Lender may from time to time
require.





(d)           All
insurance policies and renewals of insurance policies required by this
Section 19 shall be in such amounts and for such periods as Lender may from
time to time require, and shall be issued by insurance companies satisfactory to
Lender.





(e)           Borrower
shall comply with all insurance requirements and shall not permit any condition
to exist on the Mortgaged Property that would invalidate any part of any
insurance coverage that this Instrument requires Borrower to
maintain.





(f)           In
the event of loss, Borrower shall give immediate written notice to the insurance
carrier and to Lender.  Borrower hereby authorizes and appoints Lender
as attorney-in-fact for Borrower to make proof of loss, to adjust and compromise
any claims under policies of property damage insurance, to appear in and
prosecute any action arising from such property damage


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insurance
policies, to collect and receive the proceeds of property damage insurance, and
to deduct from such proceeds Lender's expenses incurred in the collection of
such proceeds.  This power of attorney is coupled with an interest and
therefore is irrevocable.  However, nothing contained in this
Section 19 shall require Lender to incur any expense or take any
action.  Lender may, at Lender's option, (1) hold the balance of such
proceeds to be used to reimburse Borrower for the cost of restoring and
repairing the Mortgaged Property to the equivalent of its original condition or
to a condition approved by Lender (the "Restoration"), or (2) apply
the balance of such proceeds to the payment of the Indebtedness, whether or not
then due. To the extent Lender determines to apply insurance proceeds to
Restoration, Lender shall do so in accordance with Lender's then-current
policies relating to the restoration of casualty damage on similar multifamily
properties.





(g)           Lender
shall not exercise its option to apply insurance proceeds to the payment of the
Indebtedness if all of the following conditions are met:  (1) no Event
of Default (or any event which, with the giving of notice or the passage of
time, or both, would constitute an Event of Default) has occurred and is
continuing; (2) Lender determines, in its discretion, that there will be
sufficient funds to complete the Restoration; (3) Lender determines, in its
discretion, that the rental income from the Mortgaged Property after completion
of the Restoration will be sufficient to meet all operating costs and other
expenses, Imposition Deposits, deposits to reserves and loan repayment
obligations relating to the Mortgaged Property; (4) Lender determines, in its
discretion, that the Restoration will be completed before the earlier of (A) one
year before the maturity date of the Note or (B) one year after the date of the
loss or casualty; and (5) upon Lender's request, Borrower provides Lender
evidence of the availability during and after the Restoration of the insurance
required to be maintained by Borrower pursuant to this Section 19.





(h)           If
the Mortgaged Property is sold at a foreclosure sale or Lender acquires title to
the Mortgaged Property, Lender shall automatically succeed to all rights of
Borrower in and to any insurance policies and unearned insurance premiums and in
and to the proceeds resulting from any damage to the Mortgaged Property prior to
such sale or acquisition.





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20.           CONDEMNATION.





(a)           Borrower
shall promptly notify Lender of any action or proceeding relating to any
condemnation or other taking, or conveyance in lieu thereof, of all or any part
of the Mortgaged Property, whether direct or indirect (a "Condemnation").  Borrower
shall appear in and prosecute or defend any action or proceeding relating to any
Condemnation unless otherwise directed by Lender in writing.  Borrower
authorizes and appoints Lender as attorney-in-fact for Borrower to commence,
appear in and prosecute, in Lender's or Borrower's name, any action or
proceeding relating to any Condemnation and to settle or compromise any claim in
connection with any Condemnation.  This power of attorney is coupled
with an interest and therefore is irrevocable.  However, nothing
contained in this Section 20 shall require Lender to incur any expense or
take any action.  Borrower hereby transfers and assigns to Lender all
right, title and interest of Borrower in and to any award or payment with
respect to (i) any Condemnation, or any conveyance in lieu of Condemnation, and
(ii) any damage to the Mortgaged Property caused by governmental action that
does not result in a Condemnation.





(b)           Lender
may apply such awards or proceeds, after the deduction of Lender's expenses
incurred in the collection of such amounts, at Lender's option, to the
restoration or repair of the Mortgaged Property or to the payment of the
Indebtedness, with the balance, if any, to Borrower.  Unless Lender
otherwise agrees in writing, any application of any awards or proceeds to the
Indebtedness shall not extend or postpone the due date of any monthly
installments referred to in the Note, Section 7 of this Instrument or any
Collateral Agreement, or change the amount of such
installments.  Borrower agrees to execute such further evidence of
assignment of any awards or proceeds as Lender may require.





21.           TRANSFERS
OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.





(a)           The
occurrence of any of the following events shall constitute an Event of Default
under this Instrument:





(1)
            a
      Transfer of all or any part of the Mortgaged Property or any interest in
      the Mortgaged Property;





(2)
            a
      Transfer of a Controlling Interest in
Borrower;





(3)
            a
      Transfer of a Controlling Interest in any entity which owns, directly or
      indirectly through one or more intermediate entities, a Controlling
      Interest in Borrower;





(4)
            a
      Transfer of all or any part of Key Principal's ownership interests (other
      than limited partnership interests) in Borrower, or in any other entity
      which


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owns,
directly or indirectly through one or more intermediate entities, an ownership
interest in Borrower;





(5)
            if
      Key Principal is an entity, (A) a Transfer of a Controlling Interest in
      Key Principal, or (B) a Transfer of a Controlling Interest in any entity
      which owns, directly or indirectly through one or more intermediate
      entities, a Controlling Interest in Key
  Principal;





(6)
            if
      Borrower or Key Principal is a trust, the termination or revocation of
      such trust; and





(7)
            a
      conversion of Borrower from one type of legal entity into another type of
      legal entity, whether or not there is a
  Transfer.





Lender shall not be required to
demonstrate any actual impairment of its security or any increased risk of
default in order to exercise any of its remedies with respect to an Event of
Default under this Section 21.





(b)           The
occurrence of any of the following events shall not constitute an Event of
Default under this Instrument, notwithstanding any provision of
Section 21(a) to the contrary:





(1)
            a
      Transfer to which Lender has
consented;





(2)
            a
      Transfer that occurs by devise, descent, or by operation of law upon the
      death of a natural person;





(3)
            the
      grant of a leasehold interest in an individual dwelling unit for a term of
      two years or less not containing an option to
  purchase;





(4)
            a
      Transfer of obsolete or worn out Personalty or Fixtures that are
      contemporaneously replaced by items of equal or better function and
      quality, which are free of liens, encumbrances and security interests
      other than those created by the Loan Documents or consented to by
      Lender;





(5)
            the
      grant of an easement, if before the grant Lender determines that the
      easement will not materially affect the operation or value of the
      Mortgaged Property or Lender's interest in the Mortgaged Property, and
      Borrower pays to Lender, upon demand, all costs and expenses incurred by
      Lender in connection with reviewing Borrower's request;
  and





(6)
            the
      creation of a tax lien or a mechanic's, materialman's or judgment lien
      against the Mortgaged Property which is bonded off, released of record
      or


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otherwise
remedied to Lender's satisfaction within 30 days of the date of
creation.





(c)           Lender
shall consent, without any adjustment to the rate at which the Indebtedness
secured by this Instrument bears interest or to any other economic terms of the
Indebtedness, to a Transfer that would otherwise violate this Section 21
if, prior to the Transfer, Borrower has satisfied each of the following
requirements:





(1)
            the
      submission to Lender of all information required by Lender to make the
      determination required by this Section
21(c);





(2)
            the
      absence of any Event of Default;





(3)
            the
      transferee meets all of the eligibility, credit, management and other
      standards (including any standards with respect to previous relationships
      between Lender and the transferee and the organization of the transferee)
      customarily applied by Lender at the time of the proposed Transfer to the
      approval of borrowers in connection with the origination or purchase of
      similar mortgages, deeds of trust or deeds to secure debt on multifamily
      properties;





(4)
            the
      Mortgaged Property, at the time of the proposed Transfer, meets all
      standards as to its physical condition that are customarily applied by
      Lender at the time of the proposed Transfer to the approval of properties
      in connection with the origination or purchase of similar mortgages on
      multifamily properties;





(5)
            in
      the case of a Transfer of all or any part of the Mortgaged Property, or
      direct or indirect ownership interests in Borrower or Key Principal (if an
      entity), if transferor or any other person has obligations under any Loan
      Document, the execution by the transferee or one or more individuals or
      entities acceptable to Lender of an assumption agreement (including, if
      applicable, an Acknowledgement and Agreement of Key Principal to Personal
      Liability for Exceptions to Non-Recourse Liability) that is acceptable to
      Lender and that, among other things, requires the transferee to perform
      all obligations of transferor or such person set forth in such Loan
      Document, and may require that the transferee comply with any provisions
      of this Instrument or any other Loan Document which previously may have
      been waived by Lender;





(6)
            if
      a guaranty has been executed and delivered in connection with the Note,
      this Instrument or any of the other Loan Documents, the Borrower causes
      one or more individuals or entities acceptable to Lender to execute and
      deliver to Lender a guaranty in a form acceptable to Lender;
      and





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(7)
            Lender's
      receipt of all of the following:





(A)
            a
      non-refundable review fee in the amount of $3,000 and a transfer fee equal
      to 1 percent of the outstanding Indebtedness immediately prior to the
      Transfer.





(B)
            In
      addition, Borrower shall be required to reimburse Lender for all of
      Lender's out-of-pocket costs (including reasonable attorneys' fees)
      incurred in reviewing the Transfer request, to the extent such expenses
      exceed $3,000.





(d)           For
purposes of this Section, the following terms shall have the meanings set forth
below:





(1)
            "Initial Owners" means,
      with respect to Borrower or any other entity, the persons or entities who
      on the date of the Note own in the aggregate 100% of the ownership
      interests in Borrower or that
entity.





(2)
            A
      Transfer of a"Controlling Interest" shall mean, with respect to any entity, the
      following:





(i)
            if
      such entity is a general partnership or a joint venture, a Transfer of any
      general partnership interest or joint venture interest which would cause
      the Initial Owners to own less than 51% of all general partnership or
      joint venture interests in such
entity;





(ii)
            if
      such entity is a limited partnership, a Transfer of any general
      partnership interest;





(iii)
            if
      such entity is a limited liability company or a limited liability
      partnership, a Transfer of any membership or other ownership interest
      which would cause the Initial Owners to own less than 51% of all
      membership or other ownership interests in such
  entity;





(iv)
            if
      such entity is a corporation (other than a Publicly-Held Corporation) with
      only one class of voting stock, a Transfer of any voting stock which would
      cause the Initial Owners to own less than 51% of voting stock in such
      corporation;





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(v)
            if
      such entity is a corporation (other than a Publicly-Held Corporation) with
      more than one class of voting stock, a Transfer of any voting stock which
      would cause the Initial Owners to own less than a sufficient number of
      shares of voting stock having the power to elect the majority of directors
      of such corporation; and





(vi)
            if
      such entity is a trust, the removal, appointment or substitution of a
      trustee of such trust other than (A) in the case of a land trust, or (B)
      if the trustee of such trust after such removal, appointment or
      substitution is a trustee identified in the trust agreement approved by
      Lender.





(3)
            "Publicly-Held
      Corporation" shall mean a corporation the outstanding voting stock
      of which is registered under Section 12(b) or 12(g) of the Securities and
      Exchange Act of 1934, as amended.





22.           EVENTS
OF DEFAULT.





The occurrence of any one or more of
the following shall constitute an Event of Default under this
Instrument:





(a)           any
failure by Borrower to pay or deposit when due any amount required by the Note,
this Instrument or any other Loan Document;





(b)           any
failure by Borrower to maintain the insurance coverage required by
Section 19;





(c)           any
failure by Borrower to comply with the provisions of
Section 33;





(d)           fraud
or material misrepresentation or material omission by Borrower, or any of its
officers, directors, trustees, general partners or managers, Key Principal or
any guarantor in connection with (A) the application for or creation of the
Indebtedness, (B) any financial statement, rent roll, or other report or
information provided to Lender during the term of the Indebtedness, or (C) any
request for Lender's consent to any proposed action, including a request for
disbursement of funds under any Collateral Agreement;





(e)           any
Event of Default under Section 21;





(f)           the
commencement of a forfeiture action or proceeding, whether civil or criminal,
which, in Lender's reasonable judgment, could result in a forfeiture of the
Mortgaged Property or otherwise materially impair the lien created by this
Instrument or Lender's interest in the Mortgaged Property;





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(g)           any
failure by Borrower to perform any of its obligations under this Instrument
(other than those specified in Sections 22(a) through (f)), as and when
required, which continues for a period of 30 days after notice of such failure
by Lender to Borrower, but no such notice or grace period shall apply in the
case of any such failure which could, in Lender's judgment, absent immediate
exercise by Lender of a right or remedy under this Instrument, result in harm to
Lender, impairment of the Note or this Instrument or any other security given
under any other Loan Document;





(h)           any
failure by Borrower to perform any of its obligations as and when required under
any Loan Document other than this Instrument which continues beyond the
applicable cure period, if any, specified in that Loan Document;
and





(i)           any
exercise by the holder of any other debt instrument secured by a mortgage, deed
of trust or deed to secure debt on the Mortgaged Property of a right to declare
all amounts due under that debt instrument immediately due and
payable.





23.           REMEDIES
CUMULATIVE.





Each right and remedy provided in this
Instrument is distinct from all other rights or remedies under this Instrument
or any other Loan Document or afforded by applicable law, and each shall be
cumulative and may be exercised concurrently, independently, or successively, in
any order.





24.           FORBEARANCE.





(a)           Lender
may (but shall not be obligated to) agree with Borrower, from time to time, and
without giving notice to, or obtaining the consent of, or having any effect upon
the obligations of, any guarantor or other third party obligor, to take any of
the following actions:  extend the time for payment of all or any part
of the Indebtedness; reduce the payments due under this Instrument, the Note, or
any other Loan Document; release anyone liable for the payment of any amounts
under this Instrument, the Note, or any other Loan Document; accept a renewal of
the Note; modify the terms and time of payment of the Indebtedness; join in any
extension or subordination agreement; release any Mortgaged Property; take or
release other or additional security; modify the rate of interest or period of
amortization of the Note or change the amount of the monthly installments
payable under the Note; and otherwise modify this Instrument, the Note, or any
other Loan Document.





(b)           Any
forbearance by Lender in exercising any right or remedy under the Note, this
Instrument, or any other Loan Document or otherwise afforded by applicable law,
shall not be a waiver of or preclude the exercise of any other right or
remedy.  The acceptance by Lender of payment of all or any part of the
Indebtedness after the due date of such payment, or in an amount which is less
than the required payment, shall not be a waiver of Lender's right to require
prompt payment when due of all other payments on account of the Indebtedness or
to exercise any remedies


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for any
failure to make prompt payment. Enforcement by Lender of any security for the
Indebtedness shall not constitute an election by Lender of remedies so as to
preclude the exercise of any other right available to
Lender.  Lender's receipt of any awards or proceeds under Sections 19
and 20 shall not operate to cure or waive any Event of Default.





25.           LOAN
CHARGES.





If any applicable law limiting the
amount of interest or other charges permitted to be collected from Borrower is
interpreted so that any charge provided for in any Loan Document, whether
considered separately or together with other charges levied in connection with
any other Loan Document, violates that law, and Borrower is entitled to the
benefit of that law, that charge is hereby reduced to the extent necessary to
eliminate that violation.  The amounts, if any, previously paid to
Lender in excess of the permitted amounts shall be applied by Lender to reduce
the principal of the Indebtedness.  For the purpose of determining
whether any applicable law limiting the amount of interest or other charges
permitted to be collected from Borrower has been violated, all Indebtedness
which constitutes interest, as well as all other charges levied in connection
with the Indebtedness which constitute interest, shall be deemed to be allocated
and spread over the stated term of the Note.  Unless otherwise
required by applicable law, such allocation and spreading shall be effected in
such a manner that the rate of interest so computed is uniform throughout the
stated term of the Note.





26.           WAIVER
OF STATUTE OF LIMITATIONS.





Borrower hereby waives the right to
assert any statute of limitations as a bar to the enforcement of the lien of
this Instrument or to any action brought to enforce any Loan
Document.





27.           WAIVER
OF MARSHALLING.





Notwithstanding the existence of any
other security interests in the Mortgaged Property held by Lender or by any
other party, Lender shall have the right to determine the order in which any or
all of the Mortgaged Property shall be subjected to the remedies provided in
this Instrument, the Note, any other Loan Document or applicable
law.  Lender shall have the right to determine the order in which any
or all portions of the Indebtedness are satisfied from the proceeds realized
upon the exercise of such remedies.  Borrower and any party who now or
in the future acquires a security interest in the Mortgaged Property and who has
actual or constructive notice of this Instrument waives any and all right to
require the marshalling of assets or to require that any of the Mortgaged
Property be sold in the inverse order of alienation or that any of the Mortgaged
Property be sold in parcels or as an entirety in connection with the exercise of
any of the remedies permitted by applicable law or provided in this
Instrument.





28.           FURTHER
ASSURANCES.





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Borrower shall execute, acknowledge,
and deliver, at its sole cost and expense, all further acts, deeds, conveyances,
assignments, estoppel certificates, financing statements, transfers and
assurances as Lender may require from time to time in order to better assure,
grant, and convey to Lender the rights intended to be granted, now or in the
future, to Lender under this Instrument and the Loan Documents.





29.           ESTOPPEL
CERTIFICATE.





Within 10 days after a request from
Lender, Borrower shall deliver to Lender a written statement, signed and
acknowledged by Borrower, certifying to Lender or any person designated by
Lender, as of the date of such statement, (i) that the Loan Documents are
unmodified and in full force and effect  (or, if there have been
modifications, that the Loan Documents are in full force and effect as modified
and setting forth such modifications); (ii) the unpaid principal balance of the
Note; (iii) the date to which interest under the Note has been paid; (iv) that
Borrower is not in default in paying the Indebtedness or in performing or
observing any of the covenants or agreements contained in this Instrument or any
of the other Loan Documents (or, if the Borrower is in default, describing such
default in reasonable detail); (v) whether or not there are then existing any
setoffs or defenses known to Borrower against the enforcement of any right or
remedy of Lender under the Loan Documents; and (vi) any additional facts
requested by Lender.





30.           GOVERNING
LAW; CONSENT TO JURISDICTION AND VENUE.





(a)           This
Instrument, and any Loan Document which does not itself expressly identify the
law that is to apply to it, shall be governed by the laws of the jurisdiction in
which the Land is located (the "Property
Jurisdiction").





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





31.           NOTICE.





(a)           All
notices, demands and other communications ("notice") under or concerning
this Instrument shall be in writing.  Each notice shall be addressed
to the intended recipient at its address set forth in this Instrument, and shall
be deemed given on the earliest to occur of (1) the date when the notice is
received by the addressee; (2) the first Business Day after the notice is
delivered to a recognized overnight courier service, with arrangements made for
payment of charges for next Business Day delivery; or (3) the third Business Day
after the notice is deposited in the United States mail with postage prepaid,
certified mail, return receipt requested.  As used in
this


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Section 31,
the term "Business Day" means any day other than a Saturday, a Sunday or any
other day on which Lender is not open for business.





(b)           Any
party to this Instrument may change the address to which notices intended for it
are to be directed by means of notice given to the other party in accordance
with this Section 31.  Each party agrees that it will not refuse
or reject delivery of any notice given in accordance with this Section 31,
that it will acknowledge, in writing, the receipt of any notice upon request by
the other party and that any notice rejected or refused by it shall be deemed
for purposes of this Section 31 to have been received by the rejecting
party on the date so refused or rejected, as conclusively established by the
records of the U.S. Postal Service or the courier service.





(c)           Any
notice under the Note and any other Loan Document which does not specify how
notices are to be given shall be given in accordance with this
Section 31.





32.           SALE
OF NOTE; CHANGE IN SERVICER.





The Note or a partial interest in the
Note (together with this Instrument and the other Loan Documents) may be sold
one or more times without prior notice to Borrower.  A sale may result
in a change of the Loan Servicer.  There also may be one or more
changes of the Loan Servicer unrelated to a sale of the Note.  If
there is a change of the Loan Servicer, Borrower will be given notice of the
change.





33.           SINGLE
ASSET BORROWER.





Until the Indebtedness is paid in full,
Borrower (a) shall not acquire any real or personal property other than the
Mortgaged Property and personal property related to the operation and
maintenance of the Mortgaged Property;  (b) shall not operate any
business other than the management and operation of the Mortgaged Property; and
(c) shall not maintain its assets in a way difficult to segregate and
identify.





34.           SUCCESSORS
AND ASSIGNS BOUND.





This Instrument shall bind, and the
rights granted by this Instrument shall inure to, the respective successors and
assigns of Lender and Borrower.  However, a Transfer not permitted by
Section 21 shall be an Event of Default.





35.           JOINT
AND SEVERAL LIABILITY.





If more than one person or entity signs
this Instrument as Borrower, the obligations of such persons and entities shall
be joint and several.





36.           RELATIONSHIP
OF PARTIES; NO THIRD PARTY BENEFICIARY.





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(a)           The
relationship between Lender and Borrower shall be solely that of creditor and
debtor, respectively, and nothing contained in this Instrument shall create any
other relationship between Lender and Borrower.





(b)           No
creditor of any party to this Instrument and no other person shall be a third
party beneficiary of this Instrument or any other Loan
Document.  Without limiting the generality of the preceding sentence,
(1) any arrangement (a "Servicing Arrangement")
between the Lender and any Loan Servicer for loss sharing or interim advancement
of funds shall constitute a contractual obligation of such Loan Servicer that is
independent of the obligation of Borrower for the payment of the Indebtedness,
(2) Borrower shall not be a third party beneficiary of any Servicing
Arrangement, and (3) no payment by the Loan Servicer under any Servicing
Arrangement will reduce the amount of the Indebtedness.





37.           SEVERABILITY;
AMENDMENTS.





The invalidity or unenforceability of
any provision of this Instrument shall not affect the validity or enforceability
of any other provision, and all other provisions shall remain in full force and
effect.  This Instrument contains the entire agreement among the
parties as to the rights granted and the obligations assumed in this
Instrument.  This Instrument may not be amended or modified except by
a writing signed by the party against whom enforcement is sought.





38.           CONSTRUCTION.





The captions and headings of the
sections of this Instrument are for convenience only and shall be disregarded in
construing this Instrument.  Any reference in this Instrument to an
"Exhibit" or a "Section" shall, unless otherwise explicitly provided, be
construed as referring, respectively, to an Exhibit attached to this Instrument
or to a Section of this Instrument.  All Exhibits attached to or
referred to in this Instrument are incorporated by reference into this
Instrument.  Any reference in this Instrument to a statute or
regulation shall be construed as referring to that statute or regulation as
amended from time to time.  Use of the singular in this Agreement
includes the plural and use of the plural includes the singular.  As
used in this Instrument, the term "including" means "including, but not limited
to."





39.           LOAN
SERVICING.





All actions regarding the servicing of
the loan evidenced by the Note, including the collection of payments, the giving
and receipt of notice, inspections of the Property, inspections of books and
records, and the granting of consents and approvals, may be taken by the Loan
Servicer unless Borrower receives notice to the contrary.  If Borrower
receives conflicting notices regarding the identity of the Loan Servicer or any
other subject, any such notice from Lender shall govern.





40.           DISCLOSURE
OF INFORMATION.





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Lender may furnish information
regarding Borrower or the Mortgaged Property to third parties with an existing
or prospective interest in the servicing, enforcement, evaluation, performance,
purchase or securitization of the Indebtedness, including trustees, master
servicers, special servicers, rating agencies, and organizations maintaining
databases on the underwriting and performance of multifamily mortgage
loans.  Borrower irrevocably waives any and all rights it may have
under applicable law to prohibit such disclosure, including any right of
privacy.





41.           NO
CHANGE IN FACTS OR CIRCUMSTANCES.





All information in the application for
the loan submitted to Lender (the "Loan Application") and in all
financial statements, rent rolls, reports, certificates and other documents
submitted in connection with the Loan Application are complete and accurate in
all material respects.  There has been no material adverse change in
any fact or circumstance that would make any such information incomplete or
inaccurate.





42.           SUBROGATION.





If, and to the extent that, the
proceeds of the loan evidenced by the Note are used to pay, satisfy or discharge
any obligation of Borrower for the payment of money that is secured by a
pre-existing mortgage, deed of trust or other lien encumbering the Mortgaged
Property (a "Prior
Lien"), such loan proceeds shall be deemed to have been advanced by
Lender at Borrower’s request, and Lender shall automatically, and without
further action on its part, be subrogated to the rights, including lien
priority, of the owner or holder of the obligation secured by the Prior Lien,
whether or not the Prior Lien is released.





43.           ACCELERATION;
REMEDIES.





At any time during the existence of an
Event of Default, Lender, at Lender's option, may declare the Indebtedness to be
immediately due and payable without further demand, and may foreclose this
Instrument by judicial proceeding and may invoke any other remedies permitted by
applicable law or provided in this Instrument or in any other Loan
Document.  Lender shall be entitled to collect all costs and expenses
incurred in pursuing such remedies, including costs of documentary evidence,
abstracts, title reports and attorneys’ fees and out of pocket
expenses.





44.           RELEASE.





Upon payment of the Indebtedness,
Lender shall, at its cost, release this Instrument.





45.           FINANCING
STATEMENT.





As provided in Section 2, this
Instrument constitutes a financing statement with respect to any part of the
Mortgaged Property which is or may become a Fixture and for the purposes of such
financing statement: (a) the Debtor shall be Borrower and the Secured Party
shall be Lender; (b) the


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addresses
of Borrower as Debtor and of Lender as Secured Party are as specified above in
the first paragraph of this Instrument; (c) the name of the record owner is
Borrower; (d) the types or items of collateral consist of any part of the
Mortgaged Property which is or may become a Fixture; and (e) the social security
number or the federal employer identification number of Borrower as Debtor is
_____________________.





46.           APPOINTMENT
OF RECEIVER.





Section 3(b) and Section 4(d) are
amended by (i) deleting the following phrase, each time it
appears:  “Lender entering upon and taking and maintaining control of
the Mortgaged Property,” and (ii) inserting the following new phrase in its
place: “Lender entering upon and taking and maintaining control or possession of
the Mortgaged Property or any equivalent action.”





47.           WAIVER
OF REDEMPTION.





Borrower waives all right of redemption
of the Mortgaged Property.





48.           WAIVER
OF TRIAL BY JURY





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





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ATTACHED
EXHIBITS.  The following Exhibits are attached to this
Instrument:





|X|
            Exhibit
      A
            Description
      of the Land (required).





|X|
            Exhibit
      B
            Modifications
      to Instrument (Seniors Housing)





|X|
            Exhibit
      C
            Modifications
      to Instrument (Cross-Default and
  Cross-Collateralization)





|X|           Exhibit
D                                Other
Borrowers, Other Notes, Other Projects




|X|           Exhibit
E                                Modifications
to Instrument









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







EMERIKEYT
      LIBERAL SPRINGS LLC, a Delaware limited liability
  company





By:
            Emeritus
      Properties XVI, Inc., a Nevada
corporation





Its:
            Manager











By:          /s/
Eric Mendelsohn


Name:                     Eric
Mendelsohn


Title:
            Senior
      Vice President Corporate
Development










STATE OF
Washington_






COUNTY OF
_King_____






This
instrument was acknowledged before me on April 23_, 2008 by Eric Mendelsohn as
Senior Vice President Corporate Development of Emeritus Properties XVI, Inc., a
Nevada corporation, the Manager of EMERIKEYT LIBERAL SPRINGS LLC, a Delaware
limited liability company.






_/s/
Alissa B. Panzer_






Notary
Public




Print
Name: _ Alissa B. Panzer ____
   My
Commission Expires:3-8-11





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KEY PRINCIPAL








Key
Principal





Name:                                Emeritus
Corporation





Address:                      3131
Elliott Avenue, #500


Seattle, WA 98121

















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EXHIBIT A





[DESCRIPTION OF THE
LAND]





The South
420 feet of Block 1, WOODLAND TERRACE ADDITION to the City of Liberal, Seward
County, Kansas, more particularly described as follows: Beginning at the
Southwest corner of said Block 1; thence N 00° 10’ 40” W along the West line of
said Block 1, a distance of 420.00 feet; thence N 89° 59’ 58” E a distance of
458.22 feet to a point on the Westerly right-of-way of Terrace Avenue (having an
80 foot right-of-way); thence continuing along said right-of-way on a curve to
the right having a radius of 260 feet an arc distance of 99.39 feet to a point;
thence continuing along said right-of-way S 19° 59’ 58” W a distance of 103.73
feet to a point; thence continuing along said right-of-way on a curve to the
left having a radius of 380 feet an arc distance of 132.64 feet to a point;
thence continuing along said right-of-way S 00° 00’ 02” E a distance of 95 feet
to the Southeast corner of said Block 1, said point also being located at the
intersection of the Westerly right-of-way of Terrace Avenue and the Northerly
right-of-way of 15th Street
(having a 100 foot right-of-way); thence South 89° 59’ 58” W along the Northerly
right-of-way of 15th Street
a distance of 382.99 feet to the Point of Beginning.





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EXHIBIT
B





MODIFICATIONS TO
INSTRUMENT


(Seniors Housing)








The following modifications are made to
the text of the Instrument that precedes this Exhibit:





1.
            Section
      1 of the Instrument is hereby amended to add the following paragraphs at
      the end thereof:





“(aa)
            “Accounts”
      means all money, funds, investment property, accounts, general
      intangibles, deposit accounts, chattel paper, documents, instruments,
      judgments, claims, settlements of claims, causes of action, refunds,
      rebates, reimbursements, reserves, deposits, subsidies, proceeds,
      products, rents and profits, now or hereafter arising, received or
      receivable, from or on account of the Borrower’s ownership and/or, if
      applicable, management and operation of the Mortgaged Property as a
      Seniors Housing Facility.”





“(bb)
            “Contract(s)”
      means any contract or other agreement for the provision of goods or
      services at or otherwise in connection with the operation, use or
      management of the Mortgaged Property, including cash deposited to secure
      performance by parties of their
obligations.”





“(cc)
            “Inventory”
      means all right, title and interest of Borrower in and to inventory of
      every type and description, now owned and hereafter acquired, including,
      without limitation, raw materials, work in process, finished goods, goods
      returned or repossessed or stopped in transit, goods used for
      demonstration, promotion, marketing or similar purposes, property in, on
      or with which any of the foregoing may be stored or maintained, all
      materials and supplies usable or used or consumed at the Mortgaged
      Property, and all documents and documents of title relating to any of the
      foregoing, together with all present and future parts, additions,
      accessories, attachments, accessions, replacements, replacement parts and
      substitutions therefore or thereto in any form
  whatsoever.”





“(dd)  “License(s)”
      means any operating licenses, certificates of occupancy, health department
      licenses, food service licenses, certificates of need, business licenses,
      permits, registrations, certificates, authorizations, approvals, and
      similar documents required by applicable laws and regulations for the
      operation of the


Seniors
      Housing Modifications to Instrument
                  Form
      4075©
      2000-2005 Fannie Mae
 Page
B-1


Mortgaged
Property as a Seniors Housing Facility, including replacements and additions
thereto.”





“(ee)
            “Operating
      Lease” means any master lease, operating agreement, operating lease or
      similar document, preapproved by Lender, under which control of the
      occupancy, use, operation, maintenance and administration of the Mortgaged
      Property as a Seniors Housing Facility has been granted to any individual
      or entity other than the Borrower.”





“(ff)
            “Operator”
      means any qualified and licensed (if so required by the applicable laws of
      the Property Jurisdiction) individual or entity obligated under the terms
      of an Operating Lease with the
Borrower.”





“(gg)  “Seniors
      Housing Facility” means a residential housing facility which qualifies as
      “housing for older persons” under the Fair Housing Amendments Act of 1988
      and the Housing for Older Persons Act of 1995 comprised of assisted living
      units.”





“(hh)
            “Third
      Party Payments” means all payments and the rights to receive such payments
      from Medicaid programs or similar federal, state or local programs,
      boards, bureaus or agencies, and from residents, private insurers or
      others.”





2.
            Section
      1(g) of the Instrument is hereby amended to add the following sentence at
      the end thereof:





“The term
“Hazardous Materials”shall also include any
medical products or devices, including, but not limited to, those materials
defined as “medical waste” or “biological waste” under relevant statutes or
regulations pertaining to any Hazardous Materials Law.”





3.           Section
1(o) of the Instrument is hereby amended to add the following sentence at the
end thereof:





“The term
“Leases” shall also include any residency, occupancy, admission and care
agreements pertaining to residents of the Mortgaged Property and any Operating
Lease.”





4.
            Section
      1(s) of the Instrument is hereby
amended:





A)
            to
      revise subsection (14) to read as
follows:





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“(14)                      all
resident and tenant security deposits, entrance fees, application fees,
processing fees, community fees and any other amounts or fees deposited by any
resident or tenant upon execution of a Lease which have not been forfeited by
the resident or tenant; and”





and





B)
            to
      add the following subsections (16), (17), (18) and (19) at the end
      thereof





“(16)                      all
payments due, or received, from residents, second party charges added to base
rental income, base and/or additional meal sales, commercial operations located
on the Mortgaged Property or provided as a service to the residents of the
Mortgaged Property, rental from guest suites, seasonal lease charges, furniture
leases, and laundry services, and any and all other services provided to
residents in connection with the Mortgaged Property, and any and all other
personal property on the Mortgaged Property, excluding personal property
belonging to residents of the Mortgaged Property (other than Personalty
belonging to Borrower);”





“(17)                      subject
to applicable law and regulations, all Licenses and Contracts relating to the
operation and authority to operate the Mortgaged Property as a Seniors Housing
Facility;”





“(18)                      all
Third Party Payments arising from the operation of the Mortgaged Property as a
Seniors Housing Facility, utility deposits, unearned premiums, accrued, accruing
or to accrue under insurance policies now or hereafter obtained by the Borrower
and all proceeds of any conversion of the Mortgaged Property or any part thereof
including, without limitation, proceeds of hazard, property, flood and title
insurance and all awards and compensation for the taking by eminent domain,
condemnation or otherwise, of all or any part of the Mortgaged Property or any
easement therein;” and





“(19)                      all
of Borrower’s Accounts and Inventory.”





5.  Section
1(v) of the Instrument is hereby amended to add the following


sentence
at the end thereof:





“The term
“Personalty” shall also include all personal property currently owned or
acquired by Borrower after the date hereof used in connection with the ownership
and operation of the Mortgaged Property as a Seniors Housing Facility, all
kitchen


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or
restaurant supplies and facilities, dining room supplies and facilities, medical
supplies and facilities, leasehold improvements, or related furniture and
equipment, together with all present and future parts, additions, accessories,
replacements, attachments, accessions, replacement parts and substitutions
therefore, and the proceeds thereof (cash and non-cash including insurance
proceeds) and any other equipment, supplies or furniture owned by Borrower and
leased to any third party service provider or any Operator under any Operating
Lease, use, occupancy, or lease agreements, as well as all Licenses, to the
extent permitted by applicable law and regulations, including replacements and
additions thereto.”





6.           
Section 1(x) of the Instrument is hereby amended to provide as
follows:





“Rents”
means all rents (whether from residential or non-residential space), revenues
and other income of the Land or the Improvements, including rent paid under any
Operating Lease, subsidy payments received from any sources (including but not
limited to payments under any Housing Assistance Payments Contract), parking
fees, laundry and vending machine income and fees and charges for food,
healthcare, and other services provided at the Mortgaged Property, whether now
due, past due, or to become due, security deposits, entrance fees, application
fees, processing fees, community fees and any other amounts or fees forfeited by
any resident or tenant, together with and including all proceeds from any
private insurance for residents to cover rental charges and charges for services
at or in connection with the Mortgaged Property, and the right to Third Party
Payments due for the rents or services of residents at the Mortgaged
Property.  Each of the foregoing shall be considered “Rents” for the
purposes of the actions and rights set forth in Section 3 of this
Instrument.





7.           Section
3(b) of the Instrument is hereby amended to add the following sentence at the
end thereof:





“After an
Event of Default, Lender is further authorized to give notice to all Third Party
Payment payors (other than governmental entities) at Lender’s option,
instructing them to pay all Third Party Payments which would be otherwise paid
to Borrower to Lender, to the extent permitted by law.  In the case of
Third Party Payments from Third Party Payment payors which are governmental
entities, including Medicaid, unless waived by Lender, Lender and Borrower have
executed a Depositary Agreement of even date herewith which establishes special
procedures for the receipt and disposition of the Third Party
Payments.”





8.           Section
3(c) of the Instrument is hereby amended to add the following sentence at the
end thereof:


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“In order
to induce Lender to lend funds hereunder, Borrower (on behalf of itself and any
Operator or manager of the Mortgaged Property) hereby agrees upon the occurrence
of an Event of Default and at the option of Lender, that it shall provide, or
shall cause the Operator to continue to provide all necessary services required
under any Operating Lease or applicable licensing or regulatory requirements
subject, however, to Lender making available (to the extent in Lender’s
possession or under Lender’s control) the revenues generated from the Mortgaged
Property if and to the extent necessary to cover the actual out-of-pocket costs
of such services (exclusive of fees to Operator), and shall fully cooperate with
Lender and any receiver as may be appointed by a court, in performing these
services and agrees to arrange for an orderly transition to a replacement
operator, manager or provider of the necessary services, and to execute promptly
all applications, assignments, consents and documents requested by Lender to
facilitate such transition; provided, however, nothing herein shall be construed
as requiring Borrower to cause the Operator to allow a third party to operate
the Mortgaged Property under its License except to the extent permitted by
applicable law.”





9.          The
first sentence in Section 4(b) of the Instrument is hereby amended to add the
following at the end thereof:





“,
      with the exception of any Operating
Lease.”





10.           The
last sentence in Section 4(e) of the Instrument is hereby amended to state as
follows:





“If
customary in the applicable market, residential Leases with a month-to-month
term or with terms of less than six months shall be permitted with Lender’s
prior written consent.”





11.           The
first sentence in Section 4(f) of the Instrument is hereby amended to add the
following at the end thereof:





“with the
exception of any Operating Lease which has previously been approved by
Lender.”





12.
            Section
      4 of the Instrument is hereby amended to add the following as Section
      4(h):





“Any
Operating Lease is and shall be subject and subordinate in all respects to the
liens, terms, covenants and conditions of the Instrument and the other Loan
Documents, and to all renewals, modifications, consolidations, replacements
and


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extensions
thereof, and to all advances heretofore made or which may hereafter be made
pursuant to the Instrument (including all sums advanced for the purposes of (x)
protecting or further securing the lien of the Instrument, curing defaults by
Borrower under the Loan Documents or for any other purposes expressly permitted
by the Instrument or (y) constructing, renovating, repairing, furnishing,
fixturing or equipping the Mortgaged Property.”





13.
            Section
      11 of the Instrument is hereby amended to add the following sentences at
      the end thereof:





“Borrower
further covenants and agrees that it shall not permit more than 20% of its
effective gross income to be derived from units relying on Medicaid
payments.  If by reason of applicable law or regulation more than 20%
of effective gross income becomes derived from units relying on Medicaid
payments, the Borrower shall diligently and expeditiously take all reasonable
steps necessary to bring the Mortgaged Property into compliance with the
preceding sentence to the extent permissible by applicable law or
regulation.  Borrower further covenants and agrees that it shall limit
the use and occupancy of the Mortgaged Property to residents that meet the
standards for independent living or assisted living, and that it shall not
accept residents that require skilled nursing care or, except to the extent
required by law, permit residents requiring skilled nursing care to remain at
the Mortgaged Property as a routine matter.”





14.           Section
12(a) of the Instrument is hereby amended to add the following at the end
thereof:





“and, (5)
payments for any required licensing fees, permits, or other expenses related to
the operation of the Mortgaged Property as a Seniors Housing Facility by or on
behalf of the Lender, any fines or penalties that may be assessed against the
Mortgaged Property, any costs incurred to bring the Mortgaged Property into full
compliance with applicable codes and regulatory requirements, and any fees or
costs related to Lender’s employment of any operator or service provider for the
Mortgaged Property.”





15.           Section
14(b) of the Instrument is hereby deleted in its entirety and replaced with the
following:





“(b)           
Subject to federal, state and local laws and regulations applicable to resident,
employee and tenant privacy, including but not limited to the Health Insurance
Portability and Accountability Act (“HIPAA”) (collectively the
“Privacy


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Laws”),
Borrower shall furnish or cause to be furnished to Lender all of the
following:”





“(1)
            within
      45 days after the end of each fiscal quarter, a statement of income and
      expenses for Borrower’s or any Operator’s operation of the Mortgaged
      Property for that quarter, a statement of changes in financial position of
      Borrower relating to the Mortgaged Property for that quarter and a balance
      sheet showing all assets and liabilities of Borrower relating to the
      Mortgaged Property as of the end of that
  quarter;”





“(2)
            within
      90 days after the end of each twelve consecutive month fiscal year, a
      statement of income and expenses for Borrower’s or any Operator’s
      operation of the Mortgaged Property for that fiscal year, a statement of
      changes in financial position of Borrower relating to the Mortgaged
      Property for that fiscal year, and a balance sheet showing all assets and
      liabilities of Borrower relating to the Mortgaged Property as of the end
      of that fiscal year;”





“(3)
            within
      30 days after the end of each quarter of Borrower, and at any other time
      upon Lender’s request, a rent schedule for the Mortgaged Property showing
      the name of each resident and tenant, and for each resident and tenant,
      the space occupied, the lease expiration date, the rent payable for the
      current month, the date through which rent has been paid, any income
      attributable to additional resident services, and any related information
      requested by Lender;”





“(4)
            within
      120 days after the end of each fiscal year of Borrower, and at any other
      time upon Lender’s request, an accounting of all security deposits held
      pursuant to all Leases, including the name of the institution (if any) and
      the names and identification numbers of the accounts (if any) in which
      such security deposits are held and the name of the person to contact at
      such financial institution, along with any authority or release necessary
      for Lender to access information regarding such accounts; provided,
      however, that Borrower shall have no obligation to identify the Owners of
      Interests in Key Principal;”





“(5)
            within
      120 days after the end of each fiscal year of Borrower, and at any other
      time upon Lender’s request, a statement that identifies all owners of any
      interest in Borrower and the interest held by each,
  if


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Borrower
is a corporation, all officers and directors of Borrower, and if Borrower is a
limited liability company, all managers who are not members; provided, however,
that Borrower shall have no obligation to identify the owners of interests in
Key Principal;”





“(6)
            upon
      Lender’s request, a monthly property management report for the Mortgaged
      Property, showing the number of inquiries made and rental applications
      received from residents or prospective residents and deposits received
      from residents and any other information requested by
    Lender;”





“(7)
            if
      required by Lender, a statement of income and expense for the Mortgaged
      Property for the prior month or
quarter;”





“(8)
            “within
      10 days of Borrower’s or Operator’s, as applicable, receipt, copies of all
      inspection reports, surveys, reviews, and certifications prepared by, for,
      or on behalf of any licensing or regulatory authority relating to the
      Mortgaged Property and any legal actions, orders, notices, or reports
      relating to the Mortgaged Property issued by the applicable regulatory or
      licensing authorities;”





“(9)
            upon
      the request of Lender, copies of all reports relating to the services and
      operations of the Mortgaged Property, including, if applicable, Medicaid
      cost reports and records relating to account balances due to or from
      Medicaid or any private insurer;
and”





“(10)
            [Intentionally
      Omitted.].”





16.           Section
17(a)(5) is hereby amended to state the following:





“shall
provide for professional management of the Mortgaged Property as a Seniors
Housing Facility either by Borrower, an Operator under an Operating Lease
approved by Lender in writing, or a management company engaged either by the
Borrower or any Operator under a Contract approved by Lender in
writing.”





17.           Section
17(a) of the Instrument is hereby amended to add the following sentence at the
end thereof:





“Borrower
further covenants and agrees that it shall maintain and operate, or shall cause
Operator to maintain and operate, the Mortgaged Property as a Seniors Housing
Facility at all times in accordance with the standards required by
any


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applicable
Licenses and as required by any regulatory authority, that it shall maintain, or
shall cause Operator to maintain, in good standing all Licenses, and that it
shall renew and extend or shall cause Operator to renew and extend all such
required Licenses, and shall not fail to take any action necessary to keep all
such Licenses in good standing and full force and effect.  Borrower
will immediately upon its receipt thereof provide Lender with any notice or
order of a violation which may otherwise have an adverse impact on the Mortgaged
Property, its operations or its compliance with licensing and regulatory
requirements.”





18.  Section
17 of the Instrument is hereby amended to add the following as subsection
(c):





“Borrower
and/or Operator has entered into the Contracts previously identified to Lender
for the provision of goods or services, at or otherwise in connection with the
ownership, operation, use or management of the Mortgaged
Property.  Borrower and/or Operator may in the future enter into
Contracts for the provision of additional goods or services at or otherwise in
connection with the ownership, operation, use or management of the Mortgaged
Property.  Until Lender gives written notice to Borrower of Lender’s
exercise of its rights under this Instrument, Borrower and/or Operator shall
have all rights, power and authority granted to Borrower and/or Operator under
any Contract (except as otherwise limited by this subsection or any other
provision of this Instrument), including the right, power and authority to
modify the terms of any Contract or extend or terminate any Contract, with the
exception of any Operating Lease.  Upon the occurrence of an Event of
Default and at the option of Lender, the permission given to Borrower and/or
Operator pursuant to the preceding sentence to exercise all rights, power and
authority under Contracts shall terminate.  Upon Lender’s delivery of
notice to Borrower of an Event of Default, Lender shall immediately have all
rights, powers and authority granted to Borrower under any Contract, including
the right, power and authority to modify the terms of, extend or terminate any
such Contract.  Borrower hereby represents and warrants and agrees
with Lender that:  (1) except as otherwise disclosed to Lender, the
Contracts are assignable and no previous assignment of Borrower’s interest in
the Contracts has been made; (2) the Contracts are in full force and effect in
accordance with their respective terms and there are no defaults thereunder; (3)
Borrower shall fully perform all of its obligations under the Contracts, and
Borrower agrees not to (A) assign, sell, pledge, transfer, mortgage or otherwise
encumber its interests in any of the Contracts to anyone other than Lender so
long as this Instrument is in effect, or (B) amend or modify any Contract or
consent to any transfer, assignment or other disposition thereof without the
written approval of Lender after an Event of Default; and (4) each Contract
entered into by Borrower subsequent to the date


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hereof,
the average annual consideration of which, directly or indirectly, is at least
$20,000, shall provide:  (i) that it shall be terminable for cause;
and (ii) that it shall be terminable, at Lender’s option, upon the occurrence of
an Event of Default.





19.           Section
18(b) of the Instrument is hereby amended to add the following sentence at the
end thereof:





“Prohibited
Activities and Conditions also shall not include the safe and lawful use and
storage of medical products and devices customarily used in the operation of a
Seniors Housing Facility.”





20.           Section
19(c) is hereby amended to provide as follows:





“Borrower
shall maintain or cause any Operator to maintain at all times commercial
professional liability and general liability insurance, workers’ compensation
insurance, and such other insurance as Lender may require from time to
time.”





21.           Section
21(a) of the Instrument is hereby amended to add the following Sections (8) and
(9) at the end thereof:





“(8)
            a
      Transfer or change in the holder of the Licenses authorizing the Mortgaged
      Property to operate as a Seniors Housing Facility other than to Borrower
      or in connection with a Lender approved change in the Operator;
      and”





“(9)           a
Transfer of the Borrower’s or any Operator’s respective interest(s) in any
Operating Lease other than in favor of Lender as security for the obligations of
Borrower under the loan secured by this Instrument.”





22.           Section
22 of the Instrument is hereby amended to add the following as Sections 22 (g),
(h), (i) and (j):





“(g)           any
failure by Borrower, Operator or any manager (as applicable) to comply with the
use and licensing requirements set forth in Sections 10 and 11”;





“(h)           any
loss by Borrower, Operator or any manager (as applicable) of any License or
other legal authority necessary to operate the Mortgaged Property as a Seniors
Housing Facility, or any failure by Borrower, Operator or any manager (as
applicable) to comply strictly with any consent order or decree or to correct,
within the time deadlines set by any federal, state or local licensing agency,
any deficiency where such failure results, or under applicable laws and
regulations, is


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reasonably
likely to result, in an action by such agency with respect to the Mortgaged
Property that may have a material adverse effect on the income and operations of
the Mortgaged Property or Borrower’s interest in the Mortgaged Property,
including, without limitation, a termination, revocation or suspension of any
applicable Licenses, necessary for the operation of the Mortgaged Property as a
Seniors Housing Facility”;





“(i)           if,
without the consent of Lender, Borrower, Operator or any manager (as
applicable):





“(i)
            ceases
      to operate the Mortgaged Property as a Seniors Housing
      Facility;”





“(ii)
            ceases
      to provide such kitchens, separate bathrooms, and areas for eating,
      sitting and sleeping in each independent living or assisted living unit or
      at a minimum, central bathing facilities for Alzheimer’s/dementia care, as
      are provided as of the date of this
Instrument;”





“(iii)
            ceases
      to provide other facilities and services normally associated with
      independent living or assisted living units, including, without
      limitation, (A) central dining services providing up to three meals per
      day, (B) periodic housekeeping, (C) laundry services, (D) customary
      transportation services, and (E) social
  activities;”





“(iv)
            provides
      or contracts for skilled nursing care for any of the
    units;”





“(v)
            leases
      or holds available for lease to commercial tenants non-residential space
      (i.e., space other than the units, dining areas, activity rooms, lobby,
      parlors, kitchen, mailroom, marketing/management offices) exceeding ten
      percent (10%) of the net rental area;
or”





“(vi)
            takes
      any action or permits to exist any condition that causes the Mortgaged
      Property to be no longer classified as housing for older persons pursuant
      to the Fair Housing Amendments Act of 1988 and the Housing for Older
      Persons Act of 1995”; and





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“(j)           a
default under any Operating Lease or under the Subordination, Assignment and
Security Agreement executed by Borrower, Operator and Lender in connection with
this Loan which continues beyond any applicable cure period, or the termination
of any Operating Lease without Lender’s prior written approval.”





23.           The
former Sections 22(g), (h) and (i) are hereby amended to be Sections 22 (k), (l)
and (m), respectively and are amended to read as follows:





“(k)           any
failure by Borrower to perform any of its obligations under this Instrument
(other than those specified in Sections 22(a) through (j)), as and when
required, which continues for a period of 30 days after notice of such failure
by Lender to Borrower, but no such notice or grace period shall apply in the
case of any such failure which could, in Lender’s judgment, absent immediate
exercise by Lender of a right or remedy under this Instrument, result in harm to
Lender, impairment of the Note or this Instrument or any other security given
under any other Loan Document;”





“(l)           any
failure by Borrower to perform any of its obligations as and when required under
any Loan Document other than this Instrument which continues beyond the
applicable cure period, if any, specified in that Loan Document;
and”





“(m)                      any
exercise by the holder of any other debt instrument secured by a mortgage, deed
of trust or deed to secure debt on the Mortgaged Property of a right to declare
all amounts due under that debt instrument immediately due and
payable.”





24.           Section
43 of the Instrument is hereby amended to add the following sentences at the end
thereof:





“In
addition to the remedies set forth herein and elsewhere in this Instrument, upon
an Event of Default Lender shall be entitled to mandate the use of a lockbox
bank account or other depositary account, to be maintained under the control and
supervision of Lender, for all income of the Mortgaged Property, including, but
not limited to, Rents, service charges, insurance payments and Third Party
Payments.  Lender may, upon an Event of Default, cause the removal of
Borrower, Operator or any manager (as applicable) from any Mortgaged Property
operations.  Until such time as Lender has located a replacement
operator, Borrower, the acting Operator or manager shall continue to provide all
required services to maintain the Mortgaged Property in full compliance with all
licensing and regulatory requirements as a Seniors Housing Facility, subject,
however to Lender making available to Borrower


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the
income from the Mortgaged Property to the extent necessary to cover the
reasonable cost of such services.  Borrower acknowledges that its
failure to perform or to cause the performance of this service shall constitute
a form of waste of the Mortgaged Property, causing irreparable harm to Lender
and the Mortgaged Property, and shall constitute sufficient cause for the
appointment of a receiver.”





25.           The
following new Section is added to the Instrument after the last numbered Section
and there are no Sections appearing between the last numbered Section and the
numbered Section appearing below:





“[49.]                      BORROWER’S REPRESENTATIONS AND
WARRANTIES.  In addition to any other representations and
warranties contained in this Instrument, Borrower hereby represents and warrants
to Lender as follows:”





“(a)           The
Mortgaged Property is duly licensed as an assisted living residence and Borrower
or Operator is in all respects legally authorized to operate the Mortgaged
Property as a Seniors Housing Facility, under the applicable laws of the
Property Jurisdiction.”





“(b)           Borrower
or Operator (with respect to its operations at the Mortgaged Property), as
applicable, and the Mortgaged Property (and the operation thereof) are in
compliance in all material respects with the applicable provisions of all laws,
statutes, regulations, ordinances, orders, standards, restrictions and rules of
any federal, state or local government or quasi-government body, agency, board
or authority having jurisdiction over the operation of the Mortgaged Property,
including, without limitation: (i) health care and fire safety codes; (ii)
design and construction requirements, (iii) laws regulating the handling and
disposal of medical or biological waste; (iv) the applicable provisions of
Seniors Housing Facility laws, rules, regulations and published interpretations
thereof to which the Borrower or the Mortgaged Property is subject; (v) privacy,
security and billing standards such as those set forth in HIPAA, and (vi) all
criteria established to classify the Mortgaged Property as housing for older
persons under the Fair Housing Amendments Act of 1988 and the Housing for Older
Persons Act of 1995;”





“(c)           If
required, Borrower or Operator (with respect to its operations at the Mortgaged
Property) has a current provider agreement under any and all applicable federal,
state and local laws for reimbursement: (a) to a Seniors Housing Facility; or
(b) for other type of care provided at such facility.  There is no
decision not to renew any provider agreement related to the Mortgaged Property,
nor is there any action pending or, to the knowledge of Borrower, threatened to
impose alternative, interim or final sanctions with respect to the Mortgaged
Property;”


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“(d)           Borrower
or Operator (with respect to its operations at the Mortgaged Property), as
applicable, and the Mortgaged Property are not subject to any proceeding, suit
or investigation by any federal, state or local government or quasi-government
body, agency, board authority or any other administrative or investigative body
which may result in the imposition of a fine or an alternative, interim or final
sanction, or which would have a material adverse effect on Borrower or the
operation of the Mortgaged Property, or which would result in the appointment of
a receiver or manager or would result in the revocation, transfer, surrender,
suspension or other impairment of the Licenses for the Mortgaged Property to
operate as a Seniors Housing Facility;”





“(e)           Upon
Lender’s request and subject to Privacy Laws, copies of resident care agreements
and resident occupancy agreements shall be provided to Lender.  All
resident records at the Mortgaged Property are true and correct in all material
respects;”





“(f)           Neither
the execution and delivery of the Note, the Instrument or the Loan Documents,
Borrower’s or Operator’s, as applicable, performance thereunder, nor the
recordation of the Instrument will adversely affect the Licenses necessary for
the operation of the Mortgaged Property as a Seniors Housing Facility in the
Property Jurisdiction;”





“(g)           Neither
Borrower  nor Operator (with respect to its operations at the
Mortgaged Property) is a participant in any federal program whereby any federal,
state or local, government or quasi-governmental body, agency, board or other
authority may have the right to recover funds by reason of the advance of
federal funds.  Borrower has received no notice, and is not aware of
any violation by the Mortgaged Property or the operation thereof of applicable
antitrust laws of any federal, state or local, government or quasi-government
body, agency, board or other authority; and,”





“(h)           Except
as otherwise specifically disclosed to the Lender in writing, as of the date
hereof in the event any existing Operating Lease or management agreement is
terminated or Lender acquires the Mortgaged Property through foreclosure or
otherwise, neither Borrower, Lender, any subsequent operator or manager, nor any
subsequent purchaser (through foreclosure or otherwise) must obtain a
certificate of need from any applicable state health care regulatory authority
or agency (other than giving such notice required under the applicable state law
or regulation) prior to applying for any applicable License necessary for the
operation of the Mortgaged


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Property
as a Seniors Housing Facility, provided that no service or unit complement is
changed.”





26.  All
capitalized terms used in this Exhibit not specifically defined herein shall
have the meanings set forth in the text of the Instrument that precedes this
Exhibit.





(Initial
Page Attached)


Seniors
      Housing Modifications to Instrument
                  Form
      4075©
      2000-2005 Fannie Mae
 Page
B-15


Initial
Page to Exhibit B Modifications to Instrument











BORROWER'S INITIALS: _/s/
EM__











Seniors
      Housing Modifications to Instrument
                  Form
      4075©
      2000-2005 Fannie Mae
 Page
B-16


EXHIBIT
C





MODIFICATIONS
TO INSTRUMENT


(CROSS-DEFAULT
AND CROSS COLLATERALIZATION)




The
following modifications are made to the text of the Instrument that precedes
this Exhibit:




The
following new Sections are added to the Instrument after the last numbered
Section:





“[50.]                      CROSS-DEFAULT
AND CROSS COLLATERALIZATION.




(a)
            In
      addition to the Mortgaged Property described on Exhibit “A” attached
      hereto, each entity (other than Borrower) set forth on Exhibit “D”
      attached hereto (individually each an “Other Borrower” and collectively,
      the “Other Borrowers”) is owned directly or indirectly by the same party
      who owns the Borrower and each Other Borrower owns a seniors housing
      property as described on Exhibit “D” (collectively, the “Other
      Projects”).  All of the properties described on Exhibit “D”,
      together with the Mortgaged Property, are referred to herein collectively
      as the “Projects”.  Contemporaneous with the closing and funding
      of the Loan to the Borrower evidenced by the Note, the Lender has extended
      additional loans to the Other Borrowers in the amounts set forth on
      Exhibit “D” (collectively, the “Other Loans”) as evidenced by the
      Multifamily Notes described on Exhibit “D”, each dated of even date
      herewith (the “Other Notes”) (the Note and the Other Notes being
      collectively referred to herein as the “Notes”), each Other Loan being
      secured by a Multifamily Mortgage or Deed of Trust, Assignment of Rents
      and Security Agreement dated of even date herewith (“each an Other
      Security Instrument”) against the Other Project owned by the applicable
      Other Borrower (this Instrument and the Other Security Instruments being
      collectively referred to herein as “Security
  Instruments”).




(b)
            The
      Borrower hereby agrees and consents that upon the occurrence of an Event
      of Default under one of the Other Security Instruments an Event of Default
      shall exist under this Instrument and under the Loan Documents executed
      and delivered in connection with this Instrument.  No notice
      shall be required to be given to the Borrower in connection with such
      Event of Default.  Upon an Event of Default under any Security
      Instrument with respect to any one of the Projects, the Lender shall have
      the right, in its sole and absolute discretion, to exercise and perfect
      any and all rights in and under the Loan Documents with regard to any or
      all of the Projects, including, but not limited to, an acceleration of one
      or all of the Notes and the sale of one or all of the Projects in
      accordance with the terms of the respective Security
      Instrument.  No notice, except
as




Cross-Default and
Cross-Collateralization Form 4068
 Modifications
to Instrument (Multi-Project/Multi-Note)
 ©
1997-2001 Fannie Mae
 Page
C-1


may be
required by the respective Security Instrument shall be required to be given in
connection with the Lender’s exercise of any and all of its rights after an
Event of Default has occurred.




(c)
            The
      Borrower acknowledges that the Lender is unwilling to extend the Loan
      evidenced by the Note to the Borrower and the Other Loans evidenced by the
      Other Notes to the Other Borrowers, unless the Borrower and the Other
      Borrowers agree that as additional security to the Lender all of the
      Projects will be treated as a single project through the imposition of
      cross-collateralization and cross-default provisions.  The
      Borrower further acknowledges that the Lender’s agreement to extend the
      Loan is in partial consideration for the cross-collateralization and
      cross-default provisions set forth herein below.  Accordingly,
      at Lender’s sole and absolute discretion, except as otherwise provided
      herein, the Loan and the Other Loans shall be treated as if they were a
      single, integrated joint and several indebtedness of the Borrower and the
      Other Borrowers and the Projects shall secure to the Lender the payment
      and performance of all of the Borrower’s obligations with respect to the
      Loan and all of the Other Borrowers’ obligations with respect to the Other
      Loans (collectively, the “Combined Obligations”), without apportionment or
      allocation of any Project or any portion of any Project (except that the
      Combined Obligations may be apportioned among the Projects for the sole
      and limited purpose of determining the amount of transfer or recordation
      taxes or documentary stamps required in connection with recordation of
      this Instrument and the Other Security
  Instruments).




(1)
            If
      the Borrower fails to pay fully, when due, any amount payable to the
      Lender under the Note, this Instrument or any Loan Document, then the
      Lender may enforce its rights and remedies and may recover such amounts
      from the value of each of the Projects, on a pro rata basis or otherwise,
      as determined by the Lender in its sole
  discretion.




(2)
            At
      Lender’s sole discretion, this Instrument secures the Combined Obligations
      of the Borrower and the Other Borrowers as well as the Indebtedness of the
      Borrower under the Note and the Loan
Documents.




(d)
            The
      Borrower hereby agrees and consents that as additional security to the
      Lender, this Instrument and the Loan Documents executed and delivered in
      connection herewith shall secure and the Mortgaged Property described in
      this Instrument and the collateral described in the Loan Documents shall
      secure, not only the Loan evidenced by the Note but all Other Loans
      evidenced by the Other Notes and shall serve as collateral for each and
      every of the Other Loans as follows:  the Indebtedness secured
      by this Instrument shall include the indebtedness evidenced by the Other
      Notes and this




Cross-Default and
Cross-Collateralization Form 4068
 Modifications
to Instrument (Multi-Project/Multi-Note)
 ©
1997-2001 Fannie Mae
 Page
C-2


Instrument
shall secure the promises and covenants under this Instrument and the Other
Security Instruments, all to the end that this Instrument and the Other Security
Instruments shall stand as security for and shall secure payment, performance
and observance of the Note, this Instrument, the Other Notes and the Other
Security Instruments, and the Mortgaged Property (as defined in this Instrument)
shall be collateral under this Instrument and the Loan Documents, and shall be
collateral for the Other Loans evidenced by the Other Notes.




(e)
            Upon
      the occurrence of an Event of Default under this Instrument or any of the
      Other Security Instruments, the Lender in its discretion may, but shall
      not be obligated to, exercise any or all of the following
      remedies:




(1)
            declare
      immediately due and payable the Indebtedness applicable to the Loan and
      any or all of the Other Loans, whether or not the Lender exercises its
      right to declare immediately due and payable the Indebtedness related to a
      particular Security Instrument under which the Event of Default may have
      occurred; and




(2)
            exercise
      any or all of its rights and remedies under this Instrument, any Loan
      Document or applicable law.




The
Lender may exercise such remedies in one or more proceedings, whether
contemporaneous or consecutive or a combination of both, to be determined by
Lender in its sole discretion.  The Lender may enforce its rights
against any one or more Projects, or portions of Projects, in such order and
manner as it may elect in its sole discretion.  The enforcement of any
one Security Instrument shall not constitute an election of remedies, and shall
not limit or preclude the enforcement of any other Security Instrument or Loan
Document, through one or more additional proceedings.  The Lender may
bring any action or proceeding, including but not limited to judicial or
non-judicial foreclosure proceedings, without regard to the fact that one or
more other proceedings may have been commenced elsewhere with respect to the
same Project or Projects or any portion of them.  The Borrower, for
itself and for any and all persons or entities now or in the future holding or
claiming any lien on, security interest in, or other interest or right of any
nature in or to any Project, and who have actual or constructive notice of this
Instrument, hereby unconditionally and irrevocably waives any rights it may
have, now or in the future, whether at law or in equity, to require the Lender
to enforce or exercise any of its rights or remedies under this Instrument,
under any Other Security Instrument, or under any other Loan Document in any
particular manner or order or in any particular state or county, or to apply the
proceeds of any foreclosure sale or sales in any particular manner or
order.




Cross-Default and
Cross-Collateralization Form 4068 11/01
 Modifications
to Instrument (Multi-Project/Multi-Note)
 ©
1997-2001 Fannie Mae
 Page
C-3


(f)
            No
      judgment obtained by Lender in any one or more enforcement proceedings
      shall merge the related Indebtedness into that judgment, and all
      Indebtedness which remains unpaid shall remain a continuing obligation of
      the Borrower, subject to the nonrecourse provisions of the Loan
      Documents.




(g)
            Proceeds
      of the enforcement or foreclosure of any Security Instrument shall be
      applied to the payment of the Combined Obligations in such order as the
      Lender may determine in its sole
discretion.




(h)
            If
      the Combined Obligations of the Borrower are otherwise subject to
      avoidance under any fraudulent transfer law, then the Combined Obligations
      of the Borrower shall be limited to the largest amount that would not
      render its Combined Obligations subject to avoidance as a fraudulent
      transfer or conveyance under that fraudulent transfer
  law.




(i)
            Until
      the Combined Obligations have been paid and performed in full, the
      Borrower shall withhold exercise of any right of subrogation,
      contribution, reimbursement or indemnity (whether contractual, statutory,
      equitable, under common law or otherwise) and any other rights to enforce
      any claims or remedies which it has now or may have in the future against
      any of the Projects or against any of the Other Borrowers or any guarantor
      or security for the Combined Obligations.  If the Borrower’s
      agreement under this Subsection (i) to withhold exercise of rights of
      subrogation, contribution, reimbursement and indemnity is found by a court
      of competent jurisdiction to be void or voidable for any reason, any such
      rights the Borrower or the Other Borrowers may have against any of the
      Projects or any guarantor or security for the Combined Obligations shall
      be subordinate to any rights the Lender may have against such Projects,
      such guarantor or such security.




(j)
            It
      is understood that the holder of this Instrument is not required to
      exercise any remedies available under any of the Other Notes or any of the
      Other Security Instruments prior to or after exercising its rights and
      remedies under the Note and this Instrument and that the holder of the
      Note and this Instrument may exercise its remedies collectively or
      individually, at its sole option.  It is specifically covenanted
      and agreed that the holder of the Note and this Instrument may proceed, at
      the same time or at different times, to foreclose this Instrument and any
      or all of the Other Security Instruments by any appropriate proceedings
      and that no event of enforcement pursuant to such instruments including
      without limiting the generality of the foregoing, any pending foreclosure,
      judgment or decree of foreclosure, foreclosure sale, rents received,
      possession taken, deficiency judgment or other judgment taken on any or
      all of the Other Security Instruments or this Instrument shall in any way
      stay, preclude or bar the enforcement of any of the Other Notes or the
      Other Security Instruments or the Note or this Instrument.  The
      holder of the Note and this Instrument may pursue any or all of
      its




Cross-Default and
Cross-Collateralization Form 4068 11/01
 Modifications
to Instrument (Multi-Project/Multi-Note)
 ©
1997-2001 Fannie Mae
 Page
C-4


remedies
to the maximum extent permitted by the Note and this Instrument and the Other
Notes and the Other Security Instruments until all of the indebtedness evidenced
thereby has been paid and discharged in full.  Neither the Borrower
nor any of the Other Borrowers nor any person or persons claiming under them
shall have or enjoy any right to marshaling of assets, all such rights being
hereby expressly waived as to the Borrower and all persons claiming under it,
including junior lien holders.  No release of personal liability of
any person and no release of any portion of the security for the Note or the
Other Notes shall have any effect upon any other of the Note or Other Notes or
this Instrument or Other Security Instruments.




(k)
            The
      Borrower agrees that the Lender may, without demand and at any time and
      from time to time and without the consent of, or notice to, the Borrower
      or any Other Borrower, without incurring responsibility to the Borrower or
      any Other Borrower, and without impairing or releasing the Combined
      Obligations of the Borrower and the Other Borrowers, upon or without any
      terms or conditions an in whole or in
part:




(1)
            exercise
      or refrain from exercising any rights against any
  Projects;




(2)
            release
      or substitute any one or more endorsers, guarantors, Other Borrowers or
      other obligors with respect to the Indebtedness or Combined Obligations;
      and




(3)
            release
      any or all of the Other Loans from the Indebtedness secured by the lien of
      this Instrument, and proceed against the Borrower, or any other liable
      parties on or with respect to the Indebtedness, and proceed to enforce the
      Lender’s rights and remedies against and with respect to the Mortgaged
      Property separately and distinctly from the Other Security Instruments and
      the Other Projects as if the Mortgaged Property had not been subject to
      the cross-collateralization provisions of this Instrument and the Other
      Security Instruments.  Nothing contained in this provision or in
      any other provision hereof shall in any way, form or manner impair the
      obligations and liabilities of the Borrower or the rights and remedies of
      the Lender under the Loan Documents including this Instrument, except and
      only to the extent that the same has been specifically released by the
      Lender in writing.  By way of example, but not limitation, the
      Lender may release any Project from the cross-collateralization provisions
      hereof while not releasing such Project or the Security Instrument or
      other Loan Documents encumbering such Project from the cross-default
      provisions hereof.




Cross-Default and
Cross-Collateralization Form 4068 11/01
 Modifications
to Instrument (Multi-Project/Multi-Note)
 ©
1997-2001 Fannie Mae
 Page
C-5


(l)
            Notwithstanding
      the existence of any other security interests in any Project held by the
      Lender or by any other party, the Lender shall have the right to determine
      in its sole discretion the order in which any or all of the Projects or
      portions of any of the Projects shall be subjected to the remedies
      provided in this Instrument and the Other Security Instruments and the
      Loan Documents executed and delivered in connection therewith or
      applicable law.  The Lender shall have the right to determine in
      its discretion the order in which any or all portions of the Combined
      Obligations are satisfied from the proceeds realized upon the exercise of
      such remedies.




(m)
            No
      invalidity, irregularity or unenforceability of all or any part of the
      Combined Obligations of the Borrower or the Other Borrowers shall affect,
      impair or be a defense to the recovery by the Lender of the Indebtedness
      or Combined Obligations of any Other
Loan.




[51.]                      EXHIBIT D.Exhibit
D is attached to this Instrument.




(Initial
Page Attached)




Cross-Default and
Cross-Collateralization Form 4068 11/01
 Modifications
to Instrument (Multi-Project/Multi-Note)
 ©
1997-2001 Fannie Mae
 Page
C-6


Initial
Page to Exhibit C Modifications to Instrument














BORROWER’S INITIALS: __/s/
EM___


Cross-Default and
Cross-Collateralization Form 4068 11/01
 Modifications
to Instrument (Multi-Project/Multi-Note)
 ©
1997-2001 Fannie Mae
 Page
C-7


EXHIBIT
D TO INSTRUMENT




OTHER
BORROWERS, OTHER NOTES, OTHER PROJECTS




Other
Borrower                                                                                     Other
Loan                                           Other
Notes                                                                Other
Project







Emerikeyt
Palms at Loma Linda,
Inc.,                                                                                                                                Multifamily
Note
from                                                                Palms
at Loma Linda


a
California
corporation                                                                                     $14,475,000                                           Emerikeyt
Palms at
Loma                                                                25585
Van Leuven Street


Linda
Inc.                                                                Loma
Linda, CA 92354


to
KeyCorp Real Estate


Capital Markets, Inc.





Emerikeyt
Springs at Oceanside,
Inc.,                                                                                                                                Multifamily
Note
from                                                                The
Springs at Oceanside


a
California
corporation                                                                                     $  5,586,000                                           Emerikeyt
Springs at Oceanside3524 Lake Boulevard


Inc. to KeyCorp Real
Estate                                                                           Oceanside,
CA 92056


Capital Markets, Inc.





(Initial
Page Attached)





Initial
Page to Exhibit D to Instrument





BORROWER’S
INITIALS:/s/
EM





EXHIBIT
E





MODIFICATIONS
TO INSTRUMENT





The following modifications are made to
the text of the Instrument that precedes this Exhibit:





1.
            Section
      1(s)(15) is amended by adding the following to the end
      thereof:





“excluding
the trademark and/or tradename “Emeritus” and any variation
thereof”





2.
            Section
      1(z) is amended in its entirety to read as
  follows:





“(z)
            “Transfer” means (A) a
      sale, assignment, transfer or other disposition (whether voluntary,
      involuntary or by operation of law); (B) the granting, creating or
      attachment of a lien, encumbrance or security interest (whether voluntary,
      involuntary or by operation of law); (C) the issuance or other creation of
      an ownership interest in a legal entity, including a partnership interest,
      interest in a limited liability company or corporate stock, other than the
      issuance of stock of Key Principal which is sold or intended to be sold on
      a public market; (D) the withdrawal, retirement, removal or involuntary
      resignation of a partner in a partnership or a member or manager in a
      limited liability company; or (E) the merger (other than a merger related
      to Key Principal in which Key Principal is the surviving entity),
      dissolution, liquidation, or consolidation of a legal
      entity.  “Transfer” does not include (i) a conveyance of the
      Mortgaged Property at a judicial or non-judicial foreclosure sale under
      this Instrument or (ii) the Mortgaged Property becoming part of a
      bankruptcy estate by operation of law under the United States Bankruptcy
      Code.  For purposes of defining the term “Transfer,” the term
      “partnership” shall mean a general partnership, a limited partnership, a
      joint venture and a limited liability partnership, and the term “partner”
      shall mean a general partner, a limited partner and a joint
      venturer.”





3.
            Section
      4(e) is modified by adding the words “Subject to all applicable Privacy
      Laws (as hereinafter defined),” at the beginning of the first
      sentence.





4.           Section
4(f) is amended in its entirety to read as follows:





“Borrower
shall not lease any portion of the Mortgaged Property for non-residential use
except with the prior written consent of Lender and Lender’s prior written
approval of the Lease agreement with the exception of any Operating Lease which
has previously been approved by Lender; provided, however, that Lender’s prior
written consent and prior written approval shall not be required with respect to
commercial leases for hair salons, physical therapy spaces, or other leases
covering floor space not exceeding 3,000 square feet, provided that the lessee
and its business and non-residential use of a portion of the Mortgaged Property
are consistent with similarly situated senior housing facilities (an “Immaterial Commercial
Lease”).  Borrower shall not modify the terms of, or extend or
terminate, any Lease for non residential use (including any lease in existence
on the date of this Instrument) without the prior written consent of Lender;
provided, however, no


Page
E-1


such
consent shall be required with respect to any modification, extension or
termination of any Immaterial Commercial Lease.  Borrower shall,
without request by Lender, deliver an executed copy of each non residential
Lease to Lender promptly after such Lease is signed.  All non
residential Leases, including renewals or extension of existing Leases, but
specifically excluding all Immaterial Commercial Leases, shall specifically
provide that (1) such Leases are subordinate to the lien of this Instrument
(unless waived in writing by Lender); (2) the tenant shall attorn to Lender and
any purchaser at a foreclosure sale, such attornment to be self executing and
effective upon acquisition of title to the Mortgaged Property by any purchaser
at a foreclosure sale or by Lender in any manner; (3) the tenant agrees to
execute such further evidences of attornment as Lender or any purchaser at a
foreclosure sale may from time to time request; (4) the Lease shall not be
terminated by foreclosure or any other transfer of the Mortgaged Property; (5)
after a foreclosure sale of the Mortgaged Property, Lender or any other
purchasers at such foreclosure sale may, at Lender’s or such purchaser’s option,
accept or terminate such Lease; and (6) the tenant shall, upon receipt after the
occurrence and during the continuance of an Event of Default of a written
request from Lender, pay all Rents payable under the Lease to
Lender.”





5.
            Section
      7 entitled “Deposits for Taxes, Insurance and Other Charges”, subsection
      (a) provision (1) is deleted in its entirety and amended to read as
      follows:





“(1)
            any
      water and sewer charges which, if not paid, may result in a lien on all or
      any part of the Mortgaged Property, provided that such deposits for water
      and sewer charges shall not be required as long as water and sewer charges
      are paid when due and prior to any lien attaching to the Mortgaged
      Property and the Lender is provided evidence satisfactory to it of such
      payment within fifteen (15) days of such payment and provided further that
      no Event of Default has occurred under this
  Instrument,”





6.
            Section
      7(c) is modified by adding the following at the end
    thereof:





“Provided
no Event of Default shall have occurred and be continuing, any tax refunds
received by Lender from any taxing authority shall be credited against any
Imposition Deposits required to be made by Borrower with respect to such
taxes.”





29.
            Section
      7 of the Instrument is hereby modified to add the following new subsection
      7(f):





“(f)
            Notwithstanding
      the foregoing provisions of this Section 7, Lender hereby conditionally
      waives the requirement of such Imposition Deposits for insurance premiums
      pursuant to Section 7(a)(2) above; provided,
  that:





(ii)
            Borrower
      pays all insurance premiums and costs when due and prior to any
      delinquency and Borrower provides Lender with proof of such (in the form
      of a paid invoice) no later than fifteen (15) days after such
      payment.  Further, Lender shall have the right to examine
      Borrower’s records relating to the payment of insurance and other expenses
      of the Property upon reasonable notice from
  Lender;





(iii)
            The
      Lender’s annual property inspections show that the Property is in good
      condition;





Page
E-2





(iii)
            No
      change to, or replacement of, any insurance policy shall be made by
      Borrower without the express written consent of Lender; provided, however,
      that Borrower shall be permitted to change insurance carriers so long as
      the new insurance policy complies with all requirements of the Loan
      Documents, and the Lender is named as an additional
    insured;





(iv)
            In
      the event of any Event of Default, whether monetary or non-monetary, the
      suspension of the collection of monthly Imposition Deposits will
      automatically terminate and Borrower shall, on the first day of the month
      following notice by Lender, and throughout the remaining loan term resume
      and continue to pay Imposition Deposits;








(v)
            If
      a Transfer of the Property occurs, Imposition Deposits will automatically
      and immediately be reinstated; and








(vi)
            The
      Lender, in its sole discretion, retains the right to reinstate monthly
      Imposition Deposits at any time.  In the event Lender exercises
      this right to reinstate the collection of monthly Imposition Deposits,
      Borrower shall, on the first month following notice by Lender, and
      throughout the remaining loan term resume and continue to pay Imposition
      Deposits.”








8.
            Section
      10 is deleted in its entirety and replaced with the
    following:





“10.
            COMPLIANCE WITH
      LAWS.  Borrower shall comply, or shall cause Operator to
      comply, in all material respects with all laws, ordinances, regulations
      and requirements of any Governmental Authority and all recorded lawful
      covenants and agreements relating to or affecting the Mortgaged Property,
      including all laws, ordinances, regulations, requirements and covenants
      pertaining to health and safety, construction of improvements on the
      Mortgaged Property, fair housing, zoning and land use, and
      Leases.  Borrower also shall comply, or shall cause Operator to
      comply, with all applicable laws that pertain to the maintenance and
      disposition of tenant security deposits.  Borrower shall at all
      times maintain, or cause Operator to maintain, records sufficient to
      demonstrate compliance with the provisions of this
      Section 10.  Borrower shall take, or shall cause Operator
      to take, appropriate measures to prevent, and shall not engage in or
      knowingly permit, any illegal activities at the Mortgaged Property that
      could endanger tenants or visitors, result in damage to the Mortgaged
      Property, result in forfeiture of the Mortgaged Property, or otherwise
      materially impair the lien created by this Instrument or Lender’s interest
      in the Mortgaged Property.  Borrower represents and warrants to
      Lender that no portion of the Mortgaged Property has been or will be
      purchased with the proceeds of any illegal
  activity.”





9.
            Section
      11 is modified by adding after the words “Borrower shall not”, the words
      “nor shall Borrower permit Operator
to:”.





Page
E-3


10.
            Section
      13 is modified to add the following at the end
  thereof:





“;
provided, however, any such inspections shall be conducted in a manner which
complies with applicable Privacy Laws”





11.
            Section
      14(a) is deleted in its entirety and replaced with the
      following:





“(a)
            Borrower
      shall, or shall cause Operator to, keep and maintain at all times at the
      Mortgaged Property or the Borrower’s or Operator’s offices, and upon
      Lender’s request shall make available or cause Operator to make available,
      complete and accurate books of account and records (including copies of
      supporting bills and invoices) adequate to reflect correctly the operation
      of the Mortgaged Property, and copies of all written contracts, Leases,
      and other instruments which affect the Mortgaged Property.  The
      books, records, contracts, Leases and other instruments shall be subject
      to examination and inspection at any reasonable time by Lender; provided,
      however, any such inspections shall be conducted in a manner which
      complies with applicable Privacy
Laws.





12.
            Section
      14(d) is modified by:





(i)
            adding
      after the words “If Borrower fails to provide”, the words “, or cause to
      be provided,”; and





(ii)
            adding
      after the words “Lender shall have the right to have Borrower’s”, the
      words “and/or Operators, as
applicable”.





13.
            Section
      14(e) is modified by adding after the words “Borrower shall deliver”, the
      words “, or cause to be
delivered,”.





14.
            Section
      15(b) is modified by adding after the words “Borrower shall pay”, the
      words “, or cause to be paid,”.





15.
            Section
      15(c) is modified by:





(i)
            adding
      after the words “Borrower has timely delivered”, the words “, or cause to
      be delivered,” in the first sentence;
and





(ii)
            adding
      after the words “any bills or premium notices that it”, the words “or the
      Operator” in the first sentence.





16.
            Section
      15(d) is amended by adding the words “or Operator” after each appearance
      of the word “Borrower”.





17.
            Section
      15(e) is deleted in its entirety and replaced with the
      following:





(e)
            Borrower
      shall promptly deliver, or cause to be delivered, to Lender a copy of all
      notices of, and invoices for, Impositions, and if Borrower or Operator
      pays any Imposition directly, Borrower shall promptly furnish, or cause to
      be furnished, to Lender receipts evidencing such
  payments.”





Page
E-4


18.
            Section
      17(a) is modified by:





29.
            adding
      after the words “(3) shall restore or repair”, the words “or cause
      Operator to restore or repair,” in the first
  sentence;





(ii)
            adding
      after the words “restoration or repair, (4) shall”, the words “keep or
      cause the Operator to” in the first sentence;
  and





(iii)
            adding
      the words “or in connection with any required repair or restoration of the
      Mortgaged Property” to the end of the last
  sentence.





19.
            The
      second line of Section 18 entitled “Environmental Hazards”, subsection (e)
      is modified by deleting the colon at the end thereof and inserting the
      following:





“(or in
any written reports delivered to or obtained by Lender prior to the date
hereof):”





20.
            Section
      18(e)(3) is modified by adding the words “(or in any written reports
      delivered to or obtained by Lender prior to the date hereof)”, before the
      words “, the Mortgaged Property does not now
  contain”.





21.
            Section
      18(h) is deleted in its entirety and replaced with the
      following:





“(h)
            If
      any investigation, site monitoring, containment, clean-up, restoration or
      other remedial work (“Remedial Work”) is
      necessary to comply with any Hazardous Materials Law or order of any
      Governmental Authority that has or acquires jurisdiction over the
      Mortgaged Property or the use, operation or improvement of the Mortgaged
      Property under any Hazardous Materials Law, Borrower shall, or shall cause
      the Operator to, by the earlier of (1) the applicable deadline required by
      Hazardous Materials Law or (2) 30 days after notice from Lender demanding
      such action, begin performing the Remedial Work, and thereafter diligently
      prosecute it to completion, and shall in any event complete or cause to be
      completed the work by the time required by applicable Hazardous Materials
      Law.  If Borrower fails to begin, or to cause Operator to begin,
      on a timely basis or diligently prosecute any required Remedial Work,
      Lender may, at its option, cause the Remedial Work to be completed, in
      which case Borrower shall reimburse Lender on demand for the cost of doing
      so.  Any reimbursement due from Borrower to Lender shall become
      part of the Indebtedness as provided in
  Section 12.”





22.
            Section
      18 entitled “Environmental Hazards”, subsection (k) is modified by
      deleting the last sentence thereof and inserting in lieu thereof the
      following:





“However,
any Indemnitee may, if it determines in its sole discretion that counsel
selected by Borrower is not adequately defending such Indemnitee, elect to
defend any claim or legal or administrative proceeding at Borrower’s
expense.”





23.
            Section
      18 entitled “Environmental Hazards”, subsection (m) is modified by
      deleting the words “natural persons who are” after the words “deficiency
      from any” and replacing it with the words “members, shareholders
      or”.





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24.
            Section
      18 entitled “Environmental Hazards”, subsection (o) is modified by adding
      after the words, “under this Section 18 applies, Lender may” and before
      the words “employ its own legal counsel” the words, “if Lender determines
      in its sole discretion that counsel and consultants retained by Borrower
      are inadequately defending Lender”.





25.
            Section
      19(b) is modified to provide that Borrower may also deliver to Lender
      certified copies of a policy with an original certificate of insurance in
      form acceptable to Lender.





26.
            Section
      21(b) is modified to delete the period at the end of Section 21(b)(6) and
      add new Sections 21(b)(7), 8 and 9 as
follows:





“(7)
            Transfers
      of the stock of any Publicly-Held Corporation occurring through a public
      stock exchange or over the counter
market;





(8)
            Any
      existing liens, encumbrances or security interests affecting Personalty
      used exclusively in operating the Mortgaged Property as a Senior Housing
      Facility that have been disclosed to Lender in writing and are in effect
      on the date hereof and creation of any liens, encumbrances or security
      interests in Personalty used exclusively in operating the Mortgaged
      Property as a Senior Housing Facility that is acquired by Borrower or
      Operator after the date hereof, provided the value of the Personalty
      acquired after the date hereof that is subject to such liens does not, at
      any time, exceed $200,000.00; and





(9)
            The
      grant of a leasehold interest in an Immaterial Commercial
      Lease.”





27.
            Section
      21 is modified by adding the following new subsection
  (e).







(e)
            Borrower
      shall have a one-time right to pay a $10,000 processing fee in lieu of the
      review fee specified in 21(c)(6)(A) and a transfer fee equal to Zero
      Dollars ($0.00) in lieu of the 1% transfer fee specified in 21(c)(6)(A) in
      the event of a Transfer of a direct or indirect Controlling Interest in
      Borrower to a new entity provided that (i) in all events Emeritus
      Corporation, a Washington corporation, shall then own directly or
      indirectly through one or more intermediaries a 100% ownership interest in
      such new entity; and (ii) such new entity must satisfy all credit and
      underwriting requirements of Fannie Mae as in effect at the time of a
      Transfer under this subsection.  Borrower, the transferor and
      transferee shall be required to comply with all the requirements of
      Section 21(c) in connection with any Transfer set forth in this
      subsection.  This subsection shall be used only to calculate the
      appropriate review fee and transfer fee and shall not be deemed to be a
      consent by Lender to any Transfer set forth
  above.




28.
            Section
      40 is modified by adding the words “Subject to any limitations imposed by
      applicable Privacy Laws” at the beginning of the
  Section.





29.
            Section
      45 is modified by adding the following additional sentence to the end
      thereof:





“This
      Instrument is to be filed in the real estate records of Seward County,
      Kansas.  A description of the real estate is attached hereto as
      Exhibit A.  Borrower is the record owner of the real
      estate.”


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30.
            All
      capitalized terms used in this Exhibit not specifically defined herein
      shall have the meanings set forth in the text of the Instrument that
      precedes this Exhibit.





(Initial
Page Attached)


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Initial
Page to Exhibit E Modifications to Instrument











BORROWER’S
INITIALS:/s/
EM


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