PROMISSORY
NOTE




(Amended
and Restated)




$16,800,000.00
            May
      1, 2008




FOR VALUE
RECEIVED, the undersigned limited liability companies and limited partnerships,
having an address at 3131 Elliott Avenue, Suite 500, Seattle, Washington 98121
(collectively, the “Borrower”), hereby jointly
and severally promise to pay to the order of CAPMARK BANK, a Utah industrial
bank, having an address at 6955 Union Park Center, Suite 330, Midvale,
Utah 84047, together with its successors and assigns or, if this Note has then
been endorsed “to bearer,” to the bearer of this Note (collectively the “Lender”), at Lender’s said
address or at such other place or to such other person as may be designated in
writing to Borrower by Lender, the principal sum of Sixteen Million Eight
Hundred Thousand and No/100 Dollars ($16,800,000.00) (the “Loan”), together with
interest on the unpaid balance thereof at the rate hereinafter set forth.
Capitalized terms used herein without definition shall have the meaning given to
such terms in the Loan Agreement (defined herein).  This Note is an
amendment and restatement of that certain Promissory Note in the original
principal amount of $132,000,000.00 executed by Borrower and other borrower
parties, payable to the order of Lender, and dated February 28, 2007, as amended
and restated April 25, 2008 (the “Original Note”).




ON THE
TERMS AND SUBJECT TO THE CONDITIONS which are hereinafter set
forth:




Section
1.  Interest
Rate.




1.1  Initial Note
Rate.  Interest shall accrue on the outstanding principal
balance of the Loan from and after the date hereof (“Closing Date”) at the rate of
5.80% per annum (“Initial Note
Rate”).  If the Loan is funded on a date other than the first
(1st) day of a calendar month, Borrower shall pay to Lender at the time of
funding of the Loan an interest payment calculated by multiplying (i) the number
of days from and including the Closing Date to (and including) the last day of
the current month or by (ii) the Initial Note Rate calculated based on a 360 day
year and paid for the actual number of days elapsed for any whole or partial
month in which interest is being calculated.




1.2  Calculation Basis; Interest
Accrual Period.  Interest on the outstanding principal balance
of the Loan shall be calculated utilizing a 360 day year and paid for the actual
number of days elapsed for any whole or partial month in which interest is being
calculated.  The interest rate on the outstanding principal balance
hereof from time to time shall be adjusted on the dates (each being a “Rate
Adjustment Date”) described in this paragraph.  The first Rate
Adjustment Date shall be May 1, 2008, and subsequent Rate Adjustment Dates shall
fall on the first day of each subsequent one month anniversary
thereafter.  The first payment adjustment date shall be June 1, 2008,
and subsequent payment adjustment dates shall fall on the first day of each
calendar month thereafter during the term of the Loan.  As used
herein, “Interest Accrual Period” shall mean the period beginning on the 1st day of
a month through the end of such month.




1


1.3  Default Interest
Rate.  If Borrower fails to make any payment of principal,
interest or fees on the date on which such payment becomes due and payable
whether at maturity or by acceleration, or if an Event of Default exists, the
Note Rate then payable on the Loan shall immediately increase to the Note Rate
plus five hundred (500) basis points (the “Default Rate”) and shall
continue to accrue at the Default Rate until full payment of all amounts then
due is received or such Event of Default is cured or waived in writing by
Lender.  Interest at the Default Rate shall also accrue on any
judgment obtained by Lender in connection with collection of the Loan or
enforcement of any obligations due under the Loan Documents until such judgment
is paid in full.




1.4  Note Rate and Note Rate
Adjustment Dates.  The “Note Rate” shall mean an
interest rate which is the average of London Interbank Offered Rates (“LIBOR”), in U.S. dollar
deposits, for a term of one month determined solely by Lender on each Note Rate
Adjustment Date (defined below), but in no event less than three percent (3%),
plus two
hundred eighty (280) basis points (“Margin”).  On each
Note Rate Adjustment Date, Lender will obtain the close-of-business LIBOR from
“Page 3750” on the Telerate Service (or such other page as may replace Page 3750
on that service) on the Note Rate Adjustment Date.  If Telerate
Service ceases publication or ceases to publish LIBOR, Lender shall select a
comparable publication to determine the LIBOR and provide notice thereof to
Borrower.  LIBOR may or may not be the lowest rate based upon the
market for U.S. dollar deposits in the London Interbank Eurodollar Market at
which Lender prices loans on the date on which LIBOR is determined by Lender as
set forth above.  Adjustments to the Note Rate in connection with
changes in LIBOR shall be made two (2) Business Days prior to the beginning of
any Interest Accrual Period (each “Note Rate Adjustment Date”)
except than the Initial Note Rate shall be determined two (2) Business Days
prior to the Closing Date.




1.5  Adjustments due to
Calculation Errors.  This Note shall bear interest at the
Initial Note Rate and Note Rate as determined in accordance with the provisions
hereof; provided, however, that, if Lender at any time determines, in the sole
but reasonable exercise of its discretion that it has miscalculated the amount
of the monthly payment of principal and/or interest (whether because of a
miscalculation of the Initial Note Rate, the Note Rate or otherwise), Lender
shall give notice to Borrower of the corrected amount of such monthly payment
(and the corrected amount of the Note Rate, if applicable) and (a) if the
corrected amount of such monthly payment represents an increase thereof,
Borrower shall, within ten (10) calendar days after the date of such notice, pay
to Lender any sums that Borrower would have otherwise been obligated under this
Note to pay to Lender had the amount of such monthly payment not been
miscalculated or (b) if the corrected amount of such monthly payment represents
a decrease thereof, and Borrower is not otherwise in breach or default under any
of the terms and provisions of the Note, the Loan Agreement by and between
Borrower and Lender (the “Loan Agreement”) or any of the other Loan Documents,
Borrower shall, within ten (10) calendar days thereafter be paid the sums that
Borrower would not have otherwise been obligated to pay to Lender had the amount
of such monthly payment not been miscalculated.




1.6  LIBOR
Unascertainable.  Lender’s obligation to maintain interest
based on LIBOR shall be suspended and the Note Rate shall be based on the
Interest Rate Index (plus Margin) upon Lender’s determination, in good faith,
that adequate and reasonable means do not




2


exist for
ascertaining LIBOR or that a contingency has occurred which materially and
adversely affects the London Interbank Eurodollar Market at which Lender prices
loans (which determination by Lender shall be conclusive and binding on Borrower
in the absence of manifest error).  Computation of the Note Rate based
on the Interest Rate Index shall continue until Lender determines that the
circumstances giving rise to Lender’s substitution of the Interest Rate Index
for LIBOR no longer exists and Lender shall promptly notify Borrower of such
determination.  For purposes hereof “Interest Rate Index” shall
mean the weekly average yield on United States Treasury Securities adjusted to a
constant maturity of one year, as made available by the Federal Reserve Board
forty-five (45) days prior to each Note Rate Adjustment Date.




1.7  Adjustment for Impositions
on Loan Payments.  All payments made by Borrower under this
Note and the other Loan Documents (described in Section 8.1.1 below) shall be
made free and clear of, and without deduction or withholding for or on account
of, any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, and all liabilities with respect
thereto, now or hereafter imposed, levied, collected, withheld or assessed by
any governmental authority (all such non-excluded taxes, levies, imposts,
duties, charges, fees, deductions, withholdings and liabilities, collectively,
“Applicable
Taxes”).  If Borrower shall be required by law to deduct any
Applicable Taxes from or in respect of any sum payable hereunder to Lender, the
following shall apply: (i) Borrower shall make all such required deductions and
shall pay the full amount deducted to the relevant taxing authority or other
authority in accordance with applicable law and (ii) the sum payable to Lender
shall be increased in an amount determined by Lender in its sole discretion, as
may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 1.7), Lender
receives an amount equal to the sum Lender would have received had no such
deductions been made.  Payments made pursuant to this Section 1.7
shall be made within ten (10) Business Days after Lender makes written demand
therefore.




1.8  Increased Costs of
Maintaining Interest.  Borrower shall pay to Lender all Funding
Losses incurred from time to time by Lender upon demand.  Lender shall
deliver to Borrower a statement for any such sums to which Lender is entitled to
receive pursuant to this Section 1.8, which statement shall be binding and
conclusive absent manifest error.  Payment of Funding Losses hereunder
shall be in addition to any obligation to pay any other fee in circumstances
where such fee(s) would be due and owing under the Loan
Documents.  For purposes hereof, “Funding Losses” shall mean the
reduction of any amounts received or receivable from Borrower, in either case,
due to the introduction of, or any change in, law or applicable regulation or
treaty (including the administration or interpretation thereof), whether or not
having the force of law, or due to the compliance by Lender with any directive,
whether or not having the force of law, or request from any central bank or
domestic or foreign governmental authority.




1.9  Acceleration.  Notwithstanding
anything to the contrary contained herein, if Borrower is prohibited by law from
paying any amount due to Lender under Section 1.7 or Section 1.8 hereof, Lender
may elect to declare the unpaid principal balance of the Loan, together with all
unpaid interest accrued thereon and any other amounts due hereunder, due and
payable within one hundred twenty (120) days of Lender’s written notice to
Borrower and no




3


Exit Fee
(defined in Section 5 below) shall be due in such event.  Lender’s
delay or failure in accelerating the Loan upon the discovery or occurrence of an
event under Section 1.7 or Section 1.8 shall not be deemed a waiver or estoppel
against the exercise of such right.




Section
2.  Note Payments and Prepayment
Rights.




2.1  Note Payments and Payment
Dates.  Commencing on the 1st day of
May, 2008, and continuing on the first (1st) day of each successive month
thereafter, provided that, if the first (1st) day of any month is not a Business
Day, such payment shall be due and payable on the immediately preceding Business
Day (each being a “Payment
Date”), through and including the Payment Date immediately prior to the
Maturity Date,Borrower
shall make (i) eleven (11) consecutive monthly payments of interest only at the
Note Rate (determined as of the immediately preceding Note Rate Payment
Adjustment Date) based upon the principal outstanding during the Interest
Accrual Period in which the applicable Payment Date occurs, and any other
amounts due under the Loan Documents, and (ii) thereafter, commencing April 1,
2009, consecutive monthly principal payments in an amount necessary to fully
amortize the original principal balance of the Loan over a twenty five (25) year
amortization period based upon the actual number of days in each month and a
three hundred and sixty (360) day year, together with interest at the Note Rate,
and any other amounts due under the Loan Documents.




2.2  Prepayments.  Borrower
has the right to prepay all or any part of the Loan prior to the Maturity Date
except as otherwise provided below.  Borrower may only prepay the Loan
in whole or in part (provided each such partial prepayment is in an amount not
less than the sum of $100,000.00) after the Closing Date so long as each of the
following conditions are satisfied:




(A)
            Borrower
      provides written notice to Lender of its intent to prepay not more than
      sixty (60) days and not less than thirty (30) days prior to the intended
      prepayment date.




(B)
            Borrower
      pays with such prepayment all accrued interest through the date of
      prepayment and all other outstanding amounts then due and unpaid under the
      Loan Agreement and the other Loan
Documents.




(C)
            Borrower
      pays with such prepayment the Exit Fee except as otherwise set forth in
      Section 5.




(D)
            Borrower
      pays with such prepayment all costs and expenses incurred by Lender in
      connection with such prepayment and any other costs and expenses due and
      payable by Borrower under the Loan
Documents.




(E)
            No
      Event of Default exists as of the date Borrower delivers notice of intent
      to prepay and as of the date such prepayment is
  made.




4


2.3  Payment Debit
Account.  During the term of the Loan, Borrower shall establish
and maintain a deposit account (the “Payment Debit Account”) with a bank or
financial institution acceptable to Lender and authorize such bank or financial
institution to permit Lender to debit the Payment Debit Account from time to
time without limitation and without further notice, consent or instructions from
Borrower. In the absence of an Event of Default (as defined below), Lender shall
make transfers from the Payment Debit Account only for payment of principal,
interest and deposits to reserves and escrows due from Borrower on a Payment
Date under the Note, the Loan Agreement or any of the other Loan Documents.
Borrower solely will be responsible for maintaining funds in the Payment Debit
Account which are sufficient to pay the aggregate amounts due under the Loan
Documents on each Payment Date. If sufficient funds are not available in the
Payment Debit Account to make the full payment when due, Lender shall not be
required to notify Borrower or demand that Borrower pay the deficiency prior to
declaring an Event of Default. Debits made by Lender from the Payment Debit
Account for less than the full monthly payment amount will not release Borrower
from Borrower's obligations to pay the full amount due nor be deemed a waiver of
Lender's right to collect the full payment amount or to declare an Event of
Default.  Debits made by Lender from the Payment Debit Account
following the occurrence of any Event of Default under the Loan Documents will
not be deemed a waiver of that default by Lender or otherwise prejudice, in any
manner, Lender's rights or remedies with respect thereto. Lender will have the
right, upon reasonable prior notice to Borrower, to discontinue debiting
payments from the Payment Debit Account for the purposes set forth herein and,
if at any time such debiting has been discontinued, to reinstate the requirement
that Borrower maintain a Payment Debit Account in accordance with the terms of
this Note.  Borrower will not be permitted to close, or permit the
Payment Debit Account to be closed, without Lender's prior written consent
unless the Loan has been satisfied in full.  To the extent there are
any inconsistencies between this Section 2.3 and any lockbox, deposit account or
other cash management agreement executed by Borrower in connection with the
Loan, the terms of such lockbox, deposit account or other cash management
agreement, as applicable, shall govern and control.




Section
3.  Application of
Payments.  Payments made by Borrower on account hereof shall be
applied, first, toward any Late Fees (defined in Section 8.3 below) or other
fees and charges due hereunder, second, toward payment of any interest due at
the Default Rate, third, toward payment of any interest due at the then
applicable Note Rate set forth in Section 1.4 above, and fourth, toward payment
of principal.  Notwithstanding the foregoing, if any advances made by
Lender under the terms of any instruments securing this Note have not been
repaid, any payments made may, at the option of Lender, be applied, first, to
repay such advances and interest thereon, with the balance, if any, applied as
set forth in the preceding sentence.




Section
4.  Maturity
Date.  Anything in this Note to the contrary notwithstanding,
the entire unpaid balance of the principal amount hereof and all interest
accrued thereon through the end of the current Interest Accrual Period and
including interest accruing at the Default Rate, to and including the Maturity
Date (as defined below) together with all fees, costs and amounts due and
payable under the Loan Documents shall, unless sooner paid, and except to the
extent that payment thereof is sooner accelerated, be and become due and payable
on March 1, 2012 (the “Maturity
Date”); provided that if the first (1st) day of that month is not a
Business Day, such payment shall be due and payable on the immediately preceding
Business Day.




5


Section
5.  Exit
Fee.  As consideration of Lender’s making of the Loan to
Borrower, Borrower agrees to pay a deferred financing fee (“Exit Fee”) to Lender in an
amount equal to one percent (1.0%) of the original principal amount of the Loan.
Although the Exit Fee is earned in full on the date hereof, Lender hereby agrees
to defer payment of the Exit Fee until the earlier of (a) the date when full
repayment of the Loan occurs, (b) the Maturity Date, or (c) the date on which
the Loan has been accelerated following an Event of
Default.  Notwithstanding the sale or transfer of the Loan by Capmark
Bank, in whole or in part, to a successor lender, unless Capmark Bank has
transferred its interest in the Exit Fee to its successors or assigns as Lender,
the Exit Fee shall be payable to Capmark Bank.  Notwithstanding the
foregoing, if Borrower refinances the Loan with the proceeds of a loan funded
by, or arranged for Borrower by, Capmark Finance Inc. or Capmark Bank, and
Capmark Finance Inc. or Capmark Bank receives a contractually agreed upon sum in
connection with the financing or arrangement thereof, then no Exit Fee shall be
due.  Borrower acknowledges that neither Capmark Finance Inc., nor
Capmark Bank, has any obligation to make such loan.




Section
6.  Delivery of
Payments.  All payments due to Lender under the Loan Documents
are to be paid in lawful tender of the United States of America, in immediately
available funds, directly to Lender at Lender’s office located at 6955 Union
Park Center, Suite 330, Midvale, Utah 84047, Attn: Servicing - Accounting
Manager, or at such other place as Lender may designate to Borrower in writing
from time to time.  All amounts due under the Loan Documents shall be
paid without setoff, counterclaim or any other deduction
whatsoever.  No payment due under this Note or any of the other Loan
Documents shall be deemed paid to Lender until received by Lender at its
designated office on a Business Day prior to 2:00 p.m. Eastern Standard Time.
Any payment received after the time established by the preceding sentence shall
be deemed to have been paid on the immediately following Business
Day.  Each payment that is paid to Lender within ten (10) days prior
to the date on which such payment is due, and prior to its scheduled Payment
Date, shall not be deemed a prepayment and shall be deemed to have been received
on the Payment Date solely for the purpose of calculating interest
due.  If any payment received by Lender is deemed by a court of
competent jurisdiction to be a voidable preference or fraudulent conveyance
under any bankruptcy, insolvency or other debtor relief law, and is required to
be returned by Lender, then the obligation to make such payment shall be
reinstated, notwithstanding that the Note may have been marked satisfied and
returned to Borrower or otherwise canceled, and such payment shall be
immediately due and payable upon demand.




Section
7.  Security.




The debt
evidenced by this Note is secured by, among other things, (a) five (5)
separate mortgages and deeds of trusts (collectively, the “Mortgage”) by each Borrower,
for the benefit of Lender, and (b) a Payment and Performance Guaranty
Agreement(the“Guaranty Agreement”), given
by Emeritus Corporation (the “Guarantor”), for the benefit
of Lender.




Section
8.  Default.




8.1  Events of
Default.  Anything in this Note to the contrary
notwithstanding, on the occurrence of any of the following events (each of which
is referred to herein, together with each




6


of the
Events of Default defined and described in the Loan Agreement and the Mortgage
as an “Event of
Default”), Lender may, in the exercise of its sole and absolute
discretion, accelerate the debt evidenced by this Note, in which event the
entire outstanding principal balance and all interest and fees accrued thereon
shall immediately be and become due and payable without further
notice:




8.1.1  Failure to Pay or
Perform.  If (a) any payment of principal and interest is not
paid in full on or before the Payment Date on which such payment is due or if
the Exit Fee is not paid in full when required, (b) if unpaid principal, accrued
but unpaid interest and all other amounts outstanding under the Loan Documents
are not paid in full on or before the Maturity Date or (c) there exists an
uncured default under any of the Loan Documents which has been executed by
Borrower and/or Guarantor and/or Manager, and such default is not cured within
the grace or cure period, if any, provided in any of such Loan
Documents.




8.1.2  Bankruptcy.




(a)  If
Borrower or Guarantor or Manager (i) applies for or
consents to the appointment of a receiver, trustee or liquidator of Borrower or
Guarantor or Manager, as the case may be, or of all or a substantial part of its
assets, (ii) files a voluntary petition in bankruptcy, or admits in writing its
inability to pay its debts as they come due, (iii) makes an assignment for the
benefit of creditors, (iv) files a petition or an answer seeking a
reorganization or an arrangement with creditors or seeking to take advantage of
any insolvency law, (v) performs any other act of bankruptcy, or (vi) files an
answer admitting the material allegations of a petition filed against Borrower
or Guarantoror
Manager in any bankruptcy, reorganization or insolvency proceeding;
or




(b)  if (i) an
order, judgment or decree is entered by any court of competent jurisdiction
adjudicating Borrower or Guarantor or Manager a bankrupt or an insolvent, or
approving a receiver, trustee or liquidator of Borrower or Guarantor or Manager
or of all or a substantial part of its assets, or (ii) there otherwise commences
with respect to Borrower or Guarantor or Manager or any of its assets any
proceeding under any bankruptcy, reorganization, arrangement, insolvency,
readjustment, receivership or like law or statute, and if such order, judgment,
decree or proceeding continues unstayed for any period of sixty (60) consecutive
days after the expiration of any stay thereof.




8.1.3  Judgments.  If
any judgment for the payment of money in excess of $250,000.00 hereafter awarded
against Borrower or Guarantor or Manager by any court of competent jurisdiction
remains unsatisfied or otherwise in force and effect for a period of thirty (30)
days after the date of such award.




8.2  No Impairment of
Rights.  Nothing in this Section shall be deemed in any way to
alter or impair any right which Lender has under this Note or the Mortgage, or
any other Loan Documents, or at law or in equity, to accelerate such debt on the
occurrence of any other Event of Default provided herein or therein, whether or
not relating to this Note.




7


8.3  Late
Fees.  Without limiting the generality of the foregoing
provisions of this Section, if any payment due on a Payment Date is not received
in full on or before the Payment Date, Borrower shall pay to Lender, immediately
and without demand, a late payment charge, for each month during which such
payment delinquency exists, equal to five percent (5%) of such amount (“Late Fees”) to defray the
expenses incurred by Lender in handling and processing such delinquent payment
and to compensate Lender for the loss of use of such delinquent
payment.




Section
9.  Costs of
Enforcement.  Borrower shall pay to Lender on demand the amount
of any and all expenses incurred by Lender (a) in enforcing its rights hereunder
or under the Mortgage and/or the Loan Documents, (b) as the result of the
occurrence of an Event of Default by Borrower in performing its obligations
under this Note, including but not limited to the expense of collecting any
amount owed hereunder, and of any and all attorneys’ fees incurred by Lender in
connection with such default, whether suit be brought or not, and (c) in
protecting the security for the Loan and Borrower’s obligations under the Loan
Documents.  Such expenses shall be added to the principal amount
hereof, shall be secured by the Mortgage and shall accrue interest at the
Default Rate.




Section
10.  Borrower’s Waiver of Certain
Rights.  Borrower and any endorser, guarantor or surety hereby
waives the exercise of any and all exemption rights which it holds at law or in
equity with respect to the debt evidenced by this Note, and of any and all
rights which it holds at law or in equity to require any valuation, appraisal or
marshalling, or to have or receive any presentment, protest, demand and notice
of dishonor, protest, demand and nonpayment as a condition to Lender’s exercise
of any of its rights under this Note or the Loan Documents.




Section
11.  Extensions.  The
Maturity Date and/or any other date by which any payment is required to be made
hereunder may be extended by Lender, in writing, from time to time in the
exercise of its sole discretion, without in any way altering or impairing
Borrower’s or Guarantor’s liability hereunder.




Section
12.  General.




12.1  Applicable
Law.  This Note shall be given effect and construed by
application of the laws of the State of Washington (without regard to the
principles thereof governing conflicts of laws), and any action or proceeding
arising hereunder, and each of Lender and Borrower submits (and waives all
rights to object) to non-exclusive personal jurisdiction in the State of
Washington, for the enforcement of any and all obligations under the Loan
Documents except that if any such action or proceeding arises under the
Constitution, laws or treaties of the United States of America, or if there is a
diversity of citizenship between the parties thereto, so that it is to be
brought in a United States District Court, it shall be brought in the United
States District Court for the Western District of Washington or any successor
federal court having original jurisdiction.




8


12.2  Headings.  The
headings of the Sections, subsections, paragraphs and subparagraphs hereof are
provided herein for and only for convenience of reference, and shall not be
considered in construing their contents.




12.3  Construction.  As
used herein, (a) the term “person” means a natural
person, a trustee, a corporation, a limited liability company, a partnership and
any other form of legal entity, and (b) all references made (i) in the neuter,
masculine or feminine gender shall be deemed to have been made in all such
genders, (ii) in the singular or plural number shall be deemed to have been
made, respectively, in the plural or singular number as well, and (iii) to any
Section, subsection, paragraph or subparagraph shall, unless therein expressly
indicated to the contrary, be deemed to have been made to such Section,
subsection, paragraph or subparagraph of this Note.




12.4  Severability.  No
determination by any court, governmental body or otherwise that any provision of
this Note or any amendment hereof is invalid or unenforceable in any instance
shall affect the validity or enforceability of (a) any other such provision or
(b) such provision in any circumstance not controlled by such
determination.  Each such provision shall be valid and enforceable to
the fullest extent allowed by, and shall be construed wherever possible as being
consistent with, applicable law.




12.5  No
Waiver.  Lender shall not be deemed to have waived the exercise
of any right which it holds hereunder unless such waiver is made expressly and
in writing.  No delay or omission by Lender in exercising any such
right (and no allowance by Lender to Borrower of an opportunity to cure a
default in performing its obligations hereunder) shall be deemed a waiver of its
future exercise.  No such waiver made as to any instance involving the
exercise of any such right shall be deemed a waiver as to any other such
instance, or any other such right.  Further, acceptance by Lender of
all or any portion of any sum payable under, or partial performance of any
covenant of, this Note, the Mortgage or any of the other Loan Documents, whether
before, on, or after the due date of such payment or performance, shall not be a
waiver of Lender’s right either to require prompt and full payment and
performance when due of all other sums payable or obligations due thereunder or
hereunder or to exercise any of Lender’s rights and remedies hereunder or
thereunder.




12.6  Waiver of Jury Trial;
Service of Process; Court Costs.  BORROWER HEREBY WAIVES TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO WHICH BORROWER AND LENDER MAY BE PARTIES ARISING
OUT OF, IN CONNECTION WITH, OR IN ANY WAY PERTAINING TO, THIS NOTE AND/OR ANY OF
THE OTHER LOAN DOCUMENTS.  IT IS AGREED AND UNDERSTOOD THAT THIS
WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES
TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT
PARTIES TO THIS NOTE.  THIS WAIVER IS KNOWINGLY, WILLINGLY AND
VOLUNTARILY MADE BY BORROWER, UPON CONSULTATION WITH COUNSEL OF BORROWER’S
CHOICE, AND BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR
OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY
OR TO IN ANY WAY




9


MODIFY
OR NULLIFY ITS EFFECT.  BORROWER FURTHER REPRESENTS AND WARRANTS THAT
IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS
WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE
REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT
IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH
COUNSEL.  BORROWER HEREBY IRREVOCABLY DESIGNATES JIM GREENFIELD, AND
HIS/HER SUCCESSORS IN OFFICE, AS THE TRUE AND LAWFUL ATTORNEY OF BORROWER FOR
THE PURPOSE OF RECEIVING SERVICE OF ALL LEGAL NOTICES AND PROCESS ISSUED BY ANY
COURT IN THE STATE OF WASHINGTON AS WELL AS SERVICE OF ALL PLEADINGS AND OTHER
DOCUMENTS RELATED TO ANY LEGAL PROCEEDING OR ACTION ARISING OUT OF THIS NOTE.
BORROWER AGREES THAT SERVICE UPON SAID JIM GREENFIELD SHALL BE VALID REGARDLESS
OF BORROWER’S WHEREABOUTS AT THE TIME OF SUCH SERVICE AND REGARDLESS OF WHETHER
BORROWER RECEIVES A COPY OF SUCH SERVICE, PROVIDED THAT LENDER SHALL HAVE MAILED
A COPY TO BORROWER IN ACCORDANCE WITH THE NOTICE PROVISIONS
HEREIN.  BORROWER AGREES TO PAY ALL COURT COSTS AND REASONABLE
ATTORNEY’S FEES INCURRED BY LENDER IN CONNECTION WITH ENFORCING ANY PROVISION OF
THIS NOTE.  NOTWITHSTANDING THE FOREGOING, LENDER AGREES TO USE
REASONABLE EFFORTS TO PROVIDE BORROWER WITH NOTICE OF THE FILING OF ANY LAWSUIT
BY LENDER AGAINST BORROWER.




12.7  Offset.  Upon
the occurrence of an Event of Default, Lender may set-off against any principal
and interest owing hereunder, any and all credits, money, stocks, bonds or other
security or property of any nature whatsoever on deposit with, or held by, or in
the possession of, Lender, to the credit of or for the account of Borrower,
without notice to or consent of Borrower or Guarantor.




12.8  Non-Exclusivity of Rights
and Remedies.  None of the rights and remedies herein conferred
upon or reserved to Lender is intended to be exclusive of any other right or
remedy contained herein or in any of the other Loan Documents and each and every
such right and remedy shall be cumulative and concurrent, and may be enforced
separately, successively or together, and may be exercised from time to time as
often as may be deemed necessary or desirable by Lender.




12.9  Incorporation by
Reference.  All of the agreements, conditions, covenants and
provisions contained in each of the Loan Documents are hereby made a part of
this Note to the same extent and with the same force and effect as if they were
fully set forth herein.  Borrower covenants and agrees to keep and
perform, or cause to be kept and performed, all such agreements, conditions,
covenants and provisions strictly in accordance with their terms.




12.10  Joint and Several
Liability.  If Borrower consists of more than one person and/or
entity, each such person and/or entity agrees that its liability hereunder is
joint and several.




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12.11  Business
Purpose.  Borrower represents and warrants that the Loan
evidenced by this Note is being obtained solely for the purpose of acquiring or
carrying on a business, professional or commercial activity and is not for
personal, agricultural, family or household purposes.




12.12  Interest
Limitation.  Notwithstanding anything to the contrary contained
herein or in the Mortgage or in any other of the Loan Documents, the effective
rate of interest on the obligation evidenced by this Note shall not exceed the
lawful maximum rate of interest permitted to be paid.  Without
limiting the generality of the foregoing, in the event that the interest charged
hereunder results in an effective rate of interest higher than that lawfully
permitted to be paid, then such charges shall be reduced by the sum sufficient
to result in an effective rate of interest permitted and any amount which would
exceed the highest lawful rate already received and held by Lender shall be
applied to a reduction of principal and not to the payment of
interest.  Borrower agrees that for the purpose of determining highest
rate permitted by law, any non-principal payment (including, without limitation,
Late Fees and other fees) shall be deemed, to the extent permitted by law, to be
an expense, fee or premium rather than interest.




12.13  Modification.  This
Note may be modified, amended, discharged or waived only by an agreement in
writing signed by the party against whom enforcement of such modification,
amendment, discharge or waiver is sought.




12.14  Time of the
Essence.  Time is strictly of the essence of this
Note.




12.15  Negotiable
Instrument.  Borrower agrees that this Note shall be deemed a
negotiable instrument, even though this Note may not otherwise qualify, under
applicable law, absent this paragraph, as a negotiable instrument.




12.16  Interest Rate after
Judgment.  If judgment is entered against Borrower on this
Note, the amount of the judgment entered (which may include principal, interest,
fees, Late Fees and costs) shall bear interest at the Default Rate, to be
determined on the date of the entry of the judgment.




12.17  Relationship.  Borrower
and Lender intend that the relationship between them shall be solely that of
creditor and debtor.  Nothing contained in this Note or in any of the
other Loan Documents shall be deemed or construed to create a partnership,
tenancy-in-common, joint tenancy, joint venture or co-ownership by or between
Borrower and Lender.




12.18  Waiver of Automatic
Stay.  BORROWER HEREBY AGREES THAT, IN CONSIDERATION OF
LENDER’S AGREEMENT TO MAKE THE LOAN AND IN RECOGNITION THAT THE FOLLOWING
COVENANT IS A MATERIAL INDUCEMENT FOR LENDER TO MAKE THE LOAN, IN THE EVENT
THAT  BORROWER SHALL (A) FILE WITH ANY BANKRUPTCY COURT OF COMPETENT
JURISDICTION OR BE THE SUBJECT OF ANY PETITION UNDER ANY SECTION OR CHAPTER OF
TITLE 11 OF THE UNITED STATES CODE, AS AMENDED (THE “BANKRUPTCY CODE”), OR
SIMILAR LAW OR STATUTE; (B) BE THE SUBJECT OF ANY ORDER FOR RELIEF ISSUED UNDER
THE BANKRUPTCY CODE OR




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SIMILAR
LAW OR STATUTE; (C) FILE OR BE THE SUBJECT OF ANY PETITION SEEKING ANY
REORGANIZATION, ARRANGEMENT, COMPOSITION, READJUSTMENT, LIQUIDATION,
DISSOLUTION, OR SIMILAR RELIEF UNDER ANY PRESENT OR FUTURE FEDERAL OR STATE ACT
OR LAW RELATING TO BANKRUPTCY, INSOLVENCY, OR OTHER RELIEF FOR DEBTORS; (D) HAVE
SOUGHT OR CONSENTED TO OR ACQUIESCED IN THE APPOINTMENT OF ANY TRUSTEE,
RECEIVER, CONSERVATOR, OR LIQUIDATOR; OR (E) BE THE SUBJECT OF AN ORDER,
JUDGMENT OR DECREE ENTERED BY ANY COURT OF COMPETENT JURISDICTION APPROVING A
PETITION FILED AGAINST ANY BORROWER FOR ANY REORGANIZATION, ARRANGEMENT,
COMPOSITION, READJUSTMENT, LIQUIDATION, DISSOLUTION, OR SIMILAR RELIEF UNDER ANY
PRESENT OR FUTURE FEDERAL OR STATE ACT OR LAW RELATING TO BANKRUPTCY, INSOLVENCY
OR RELIEF FOR DEBTORS, THEN, TO THE EXTENT PERMITTED BY APPLICABLE LAW AND
SUBJECT TO COURT APPROVAL, LENDER SHALL THEREUPON BE ENTITLED, AND BORROWER
HEREBY IRREVOCABLY CONSENTS TO, AND WILL NOT CONTEST, AND AGREES TO STIPULATE
TO, RELIEF FROM ANY AUTOMATIC STAY OR OTHER INJUNCTION IMPOSED BY SECTION 362 OF
THE BANKRUPTCY CODE OR SIMILAR LAW OR STATUTE (INCLUDING, WITHOUT LIMITATION,
RELIEF FROM ANY EXCLUSIVE PERIOD SET FORTH IN SECTION 1121 OF THE BANKRUPTCY
CODE) OR OTHERWISE, ON OR AGAINST THE EXERCISE OF THE RIGHTS AND REMEDIES
OTHERWISE AVAILABLE TO LENDER AS PROVIDED IN THE LOAN DOCUMENTS, AND AS
OTHERWISE PROVIDED BY LAW, AND BORROWER HEREBY IRREVOCABLY WAIVES ITS RIGHTS TO
OBJECT TO SUCH RELIEF.




12.19  “Business
Day”.  Any reference to the term Business Day in this Note
shall mean any day other than a Saturday, a Sunday, or days when Federal Banks
located in the State of New York or Commonwealth of Pennsylvania are closed for
a legal holiday or by government directive. When used with respect to the Note
Rate Adjustment Date, “Business Day” shall mean a day upon which United States
dollar deposits may be dealt in on the London and New York City interbank
markets and commercial banks and foreign exchange markets are open in London and
New York City.




12.20  Successors and Assigns
Bound. The obligations set forth in this Note shall be binding upon
Borrower and its successors and assigns.




IN
WITNESS WHEREOF, each Borrower has duly executed and delivered this Note, or
caused it to be duly executed and delivered on its behalf by its duly authorized
representatives, on the day and year first above written.







[SIGNATURE
PAGES ATTACHED]


12





FRETUS
Investors Greenwood LLC


a Delaware limited liability
company





By:           FRETUS
Investors LLC, a Washington limited liability company


Its:           Manager





By:           Emeritus
Corporation, a Washington corporation


Its:           Administrative
Member











By:           /s/
Eric
Mendelsohn


Eric Mendelsohn


Its:           Senior
Vice President Corporate Development





13


FRETUS Investors El Paso LP, a
Delaware limited partnership


By:           Village
Oaks Cielo Vista Investors LLC, a Delaware limited liability
company


Its:           General
Partner


FRETUS Investors Houston LP, a
Delaware limited partnership


By:           Champion
Oaks Investors LLC, a Delaware limited liability company


Its:           General
Partner


FRETUS Investors San Antonio
LP, a Delaware limited partnership


By:           Northwest
Oaks Investors LLC, a Delaware limited liability company


Its:           General
Partner





By:           FRETUS
Investors LLC, a Washington limited liability company


Its:           Managing
Member





By:           Emeritus
Corporation, a Washington corporation


Its:           Administrative
Member











By:           /s/
Eric
Mendelsohn


Eric Mendelsohn


Its:           Senior
Vice President Corporate Development


14