**07-0004265**




**LOAN
      AGREEMENT**




**for
      a loan in the amount of**




**$8,000,000**




**among**




**ESC-ARBOR
      PLACE, LLC,**




**a
      Washington limited liability company**




**as
      Borrower**




**and**




**GENERAL
      ELECTRIC CAPITAL CORPORATION**




**as
      Agent and a Lender**




**and**




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




**BECOME
      PARTIES TO THIS AGREEMENT**




**as
      Lenders**




**Arbor
      Place Assisted Living**




**Dated
      as of June 30, 2006**








**TABLE
      OF CONTENTS**






PageARTICLE
                  I INCORPORATION OF RECITALS, EXHIBITS AND SCHEDULES
              
              
              2Section
                  1.1
              Incorporation
                  of Recitals.
              2Section
                  1.2
              Incorporation
                  of Exhibits and Schedules.
              2Section
                  1.3
              Definitions.
              2ARTICLE
                  II LOAN TERMS
              
              
              3Section
                  2.1
              Disbursements.
              3Section
                  2.2
              Interest
                  Rate; Late Charge.
              3Section
                  2.3
              Payments.
              3Section
                  2.4
              Maturity.
              4Section
                  2.5
              Prepayment.
              4Section
                  2.6
              Application
                  of Payments.
              4Section
                  2.7
              Capital
                  Adequacy; Increased Costs; Illegality.
              4Section
                  2.8
              Sources
                  and Uses.
              5Section
                  2.9
              Defeasance.
              5Section
                  2.10
              Security.
              8ARTICLE
                  III INSURANCE, CONDEMNATION, AND IMPOUNDS
              
              
              8Section
                  3.1
              Insurance.
              8Section
                  3.2
              Use
                  and Application of Insurance Proceeds.
              11Section
                  3.3
              Condemnation
                  Awards.
              12Section
                  3.4
              Reserved.
              12Section
                  3.5
              Real
                  Estate Tax Impounds.
              12ARTICLE
                  IV LEASING MATTERS
              
              
              13Section
                  4.1
              Representations
                  and Warranties on Leases.
              13Section
                  4.2
              Approval
                  Rights.
              14Section
                  4.3
              Covenants.
              14Section
                  4.4
              Tenant
                  Estoppels.
              15Section
                  4.5
              Security
                  Deposits
              15ARTICLE
                  V REPRESENTATIONS AND WARRANTIES
              
              
              15Section
                  5.1
              Organization
                  and Power.
              15Section
                  5.2
              Guarantor/Master
                  Tenant.
              16Section
                  5.3
              Borrower's
                  Operating Agreement.
              16Section
                  5.4
              Corporate
                  Documents.
              16Section
                  5.5
              Validity
                  of Loan Documents.
              17Section
                  5.6
              Liabilities;
                  Litigation.
              17Section
                  5.7
              Taxes
                  and Assessments.
              17Section
                  5.8
              Other
                  Agreements; Defaults.
              18




**i**


**TABLE
        OF CONTENTS**




TABLE
                  OF CONTENTS
              PageSection
                  5.9
              Compliance
                  with Law.
              18Section
                  5.10
              Condemnation.
              18Section
                  5.11
              Access.
              18Section
                  5.12
              Flood
                  Hazard.
              18Section
                  5.13
              Property.
              19Section
                  5.14
              Location
                  of Borrower.
              19Section
                  5.15
              Margin
                  Stock.
              19Section
                  5.16
              Tax
                  Filings.
              19Section
                  5.17
              Solvency.
              19Section
                  5.18
              Full
                  and Accurate Disclosure.
              20Section
                  5.19
              Single
                  Purpose Entity.
              20Section
                  5.20
              No
                  Broker.
              20Section
                  5.21
              Reserved.
              20Section
                  5.22
              Labor
                  Disputes.
              20Section
                  5.23
              Employees.
              20Section
                  5.24
              ERISA
                  (Borrower).
              21Section
                  5.25
              Intellectual
                  Property.
              21Section
                  5.26
              Anti-Terrorism
                  and Anti-Money Laundering Compliance.
              21Section
                  5.27
              Master
                  Lease.
              23Section
                  5.28
              Management
                  Agreement.
              23Section
                  5.29
              Master
                  Tenant Purchase Contract.
              23Section
                  5.30
              Approvals.
              23ARTICLE
                  VI FINANCIAL REPORTING; NOTICES
              
              
              23Section
                  6.1
              Financial
                  Statements.
              23Section
                  6.2
              Audits.
              25Section
                  6.3
              Books
                  and Records/Audits.
              25Section
                  6.4
              Notice
                  of Litigation or Default.
              25Section
                  6.5
              Bank
                  Accounts.
              26ARTICLE
                  VII COVENANTS
              
              
              26Section
                  7.1
              Inspection.
              27Section
                  7.2
              Due
                  on Sale and Encumbrance; Transfers of Interests.
              27Section
                  7.3
              Taxes;
                  Charges.
              28Section
                  7.4
              Management.
              29Section
                  7.5
              Operation;
                  Maintenance; Inspection.
              29Section
                  7.6
              Taxes
                  on Security.
              29Section
                  7.7
              Single
                  Purpose Entity; Legal Existence; Name, Etc.
              29Section
                  7.8
              Affiliate
                  Transactions.
              30Section
                  7.9
              Limitation
                  on Other Debt.
              30Section
                  7.10
              Further
                  Assurances.
              30Section
                  7.11
              Estoppel
                  Certificates.
              31Section
                  7.12
              Notice
                  of Certain Events.
              31Section
                  7.13
              Indemnification.
              31Section
                  7.14
              Use
                  of Proceeds, Revenues.
              31Section
                  7.15
              Payments
                  Under Master Lease.
              32




**ii**





TABLE
                OF CONTENTS
            PageSection
                7.16
            Reserved.
            32Section
                7.17
            Reserved.
            32Section
                7.18
            Reserved.
            32Section
                7.19
            Compliance
                with Laws and Contractual Obligations.
            32Section
                7.20
            Notice
                of Money Laundering.
            33Section
                7.21
            Anti-Terrorism
                and Anti-Money Laundering Compliance.
            33Section
                7.22
            Employees.
            35Section
                7.23
            Reserved.
            35Section
                7.24
            Representations
                and Warranties.
            35Section
                7.25
            Cooperation.
            35Section
                7.26
            Master
                Lease.
            36Section
                7.27
            Master
                Tenant Purchase Contracts.
            36Section
                7.28
            Financial
                Covenants.
            36ARTICLE
                VIII Health Care Matters
            
            
            36Section
                8.1
            Healthcare
                Laws.
            36Section
                8.2
            Representations,
                Warranties and Covenants Regarding Healthcare Matters.
            37Section
                8.3
            Cooperation.
            40ARTICLE
                IX EVENTS OF DEFAULT
            
            
            41Section
                9.1
            Payments.
            42Section
                9.2
            Certain
                Covenants.
            42Section
                9.3
            Covenants.
            42Section
                9.4
            Representations
                and Warranties.
            42Section
                9.5
            Other
                Encumbrances.
            42Section
                9.6
            Involuntary
                Bankruptcy or Other Proceeding.
            43Section
                9.7
            Voluntary
                Petitions, etc.
            43Section
                9.8
            Default
                Under Master Lease.
            43Section
                9.9
            Default
                Under Management Agreement.
            43Section
                9.10
            False
                Reports.
            43Section
                9.11
            Control.
            43Section
                9.12
            Money
                Laundering.
            44Section
                9.13
            Loan
                Documents.
            44Section
                9.14
            Arkansas
                Loan Documents.
            44Section
                9.15
            Other
                Defaults.
            44ARTICLE
                X REMEDIES
            
            
            44Section
                10.1
            Remedies
                - Insolvency Events.
            44Section
                10.2
            Remedies
                - Other Events.
            45Section
                10.3
            Agent's
                Right to Perform the Obligations.
            45ARTICLE
                XI MISCELLANEOUS
            
            
            46Section
                11.1
            Notices.
            46Section
                11.2
            Amendments
                and Waivers.
            47Section
                11.3
            Limitation
                on Interest.
            47Section
                11.4
            Invalid
                Provisions.
            48






**iii**


TABLE
                  OF CONTENTS
              PageSection
                  11.5
              Reimbursement
                  of Expenses; Portfolio Administration Fee.
              48Section
                  11.6
              Approvals;
                  Third Parties; Conditions.
              49Section
                  11.7
              Lender
                  Not in Control; No Partnership.
              49Section
                  11.8
              Time
                  of the Essence.
              50Section
                  11.9
              Successors
                  and Assigns.
              50Section
                  11.10
              Renewal,
                  Extension or Rearrangement.
              50Section
                  11.11
              Waivers;
                  Forbearance.
              50Section
                  11.12
              Cumulative
                  Rights.
              51Section
                  11.13
              Singular
                  and Plural.
              51Section
                  11.14
              Phrases.
              51Section
                  11.15
              Exhibits
                  and Schedules.
              51Section
                  11.16
              Titles
                  of Articles, Sections and Subsections.
              52Section
                  11.17
              Promotional
                  Material.
              52Section
                  11.18
              Survival.
              52Section
                  11.19
              WAIVER
                  OF JURY TRIAL.
              52Section
                  11.20
              Waiver
                  of Punitive or Consequential Damages.
              53Section
                  11.21
              Governing
                  Law.
              53Section
                  11.22
              Entire
                  Agreement.
              53Section
                  11.23
              Counterparts.
              53Section
                  11.24
              Venue.
              53Section
                  11.25
              Sale
                  of Loan, Participation.
              54Section
                  11.26
              Limitation
                  on Liability of Agent's and Lender's Officers, Employees,
                  etc.
              54Section
                  11.27
              Effectiveness
                  of Facsimile Documents and Signatures.
              54Section
                  11.28
              Agency.
              54





**iv**


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




Exhibits :




Exhibit
      A  Real
      Property


Exhibit
      B  Form
      of
      Interest Holder Agreement


Exhibit
      C  Intellectual
      Property


Exhibit
      D  Ownership
      of Borrower


Exhibit
      E  Provider
      Payment/Reimbursement Programs


Exhibit
      F  Governmental
      Approvals


Exhibit
      G  Master
      Tenant Organizational Chart








Schedules :




Schedule
      2.1   Advance
      Conditions


Schedule
      2.3   Amortization
      Schedule


Schedule
      2.8   Sources
      and Uses


Schedule
      3.1   Insurance
      Exceptions


Schedule
      I   Certain
      Definitions


Schedule
      II   Calculation
      of Net Operating Income








**v**




**INDEX
      OF DEFINED TERMS**


Adjusted
                  Actual Rent - Sch. II
              9
              
              Leases
                  - Sch. 2.1
              3Agent
              1
              
              Lender
              1Anti-Money
                  Laundering Laws
              22
              
              Licenses
              37Anti-Money
                  Laundering Measures
              22
              
              Lists
              22Anti-Terrorism
                  Laws
              22
              
              Management
                  Agreement
              2Arkansas
                  Amendment Documents
              1
              
              Master
                  Lease
              2Arkansas
                  Borrower
              1
              
              Master
                  Tenant
              2Arkansas
                  Loan
              1
              
              Master
                  Tenant Acquisition
              28Arkansas
                  Loan Agreement
              1
              
              Master
                  Tenant LLC Agreement
              16Arkansas
                  Loan Documents
              2
              
              Master
                  Tenant Purchase Contracts
              28Arkansas
                  Mortgage Amendments
              1
              
              Monthly
                  Effective Rent - Sch. II
              9Arkansas
                  Mortgages
              1
              
              Monthly
                  Reports
              24Arkansas
                  Note
              1
              
              Net
                  Operating Income - Sch. II
              9Assignment
                  Agreement
              7
              
              Note
              1Assignment
                  of Membership Interests -
              
              
              Occupancy
              36Sch.
                  2.1
              1
              
              OFAC
              21Bankruptcy
                  Party
              43
              
              OFAC
                  Laws and Regulations
              22Borrower
              1
              
              Operating
                  Agreement
              16Borrower
                  Anti-Terrorism Policies
              34
              
              Other
                  Lists
              21BSA
              22
              
              Permitted
                  Debt
              30Charges
              28
              
              Prepayment
                  Premium
              4Collateral
              8
              
              Project
              1CON
              37
              
              Property
              1Defeasance
              5
              
              Release
                  Date
              5Defeasance
                  Deposit
              7
              
              Rent
                  Proceeds
              32Designated
                  Person
              22
              
              Revenue
                  - Sch. II
              9Event
                  of Default
              44
              
              Scheduled
                  Defeasance Payments
              7Executive
                  Orders
              22
              
              SDN
                  List
              21Expenses
                  - Sch. II
              9
              
              Secondary
                  Market Transactions
              35FIRREA
                  - Sch. 2.1
              4
              
              Security
                  Agreement
              6fiscal
                  month
              24
              
              State
                  Regulator
              33Funding
                  Amount
              3
              
              Subordination
                  Agreement - Sch. 2.1
              1GECC
              1
              
              Subordination
                  Amendment
              1Healthcare
                  Laws
              36
              
              Successor
                  Borrower
              7HIPAA
              36
              
              Tax
                  Impound
              12HIPAA
                  Compliance Date
              37
              
              Taxes
              12HIPAA
                  Compliance Plan
              37
              
              Terrorism
              9HIPAA
                  Compliant
              37
              
              Third-Party
                  Payor Programs
              39Improvements
              1
              
              Title
                  Policy - Sch. 2.1
              2Incorporation
                  Documents
              16
              
              U.S.
                  Obligations
              8Interest
                  Holder Agreement
              33
              
              U.S.
                  Publicly-Traded Entity
              22Interest
                  Rate
              3
              
              Violation
              21Investor
                  Anti-Terrorism Policies
              34
              
              Yield
                  Maintenance Amount
              8







**vi**




**LOAN
      AGREEMENT**




This
      Loan
      Agreement is entered into as of June 30, 2006, among GENERAL ELECTRIC
      CAPITAL CORPORATION, a Delaware corporation (in its individual capacity,
      " **GECC** "
      and in
      its capacity as agent for the Lenders, together with its successors,
      " **Agent** "),
      the
      financial institutions other than GECC who are or hereafter become parties
      to
      this Agreement (together with GECC collectively, or individually, as the context
      may require, " **Lender** "),
      and
      ESC-ARBOR PLACE, LLC , a
      Washington limited liability company (" **Borrower** ").




**RECITALS**




A.  Lender
      and Agent have agreed to make the Loan to Borrower subject to the terms and
      conditions contained herein. The Loan is evidenced by that certain Promissory
      Note of even date herewith in the original principal amount of Eight Million
      and
      No/100 Dollars ($8,000,000.00) (the Promissory Note and all amendments thereto
      and substitutions therefor are hereinafter referred to collectively as the
      " **Note** ").
      The
      terms and provisions of the Note are hereby incorporated herein by reference
      in
      this Agreement.




B.  On
      the
      Closing Date, Borrower will be the owner of the real property more particularly
      described on Exhibit
      A attached
      hereto (the " **Property** "),
      and
      the Improvements located thereon (collectively, the " **Improvements** "),
      including, without limitation, an assisted living **** facility.
      The Property, together with the Improvements, are referred to herein as the
      " **Project** ."




C.  On
      or
      about December 1, 2005, Lender made a loan (the " **Arkansas
      Loan** ")
      to
      Emeritus Properties-Arkansas, LLC, a Delaware limited liability company
      (" **Arkansas
      Borrower** ")
      in the
      original principal amount of Fifteen Million Nine Hundred Thirty Thousand and
      No/100 Dollars ($15,930,000.00). The Arkansas Loan is evidenced by, among other
      things (i) that certain Promissory Note dated December 1, 2005, in the
      original principal amount of Fifteen Million Nine Hundred Thirty Thousand and
      No/100 Dollars ($15,930,000.00) made by Arkansas Borrower in favor of Lender
      (the " **Arkansas
      Note** "),
      (ii) that certain Loan Agreement dated December 1, 2005, by and
      between Arkansas Borrower, Agent and Lender (the " **Arkansas
      Loan Agreement** "),
      and
      (iii) those three (3) Mortgages, Assignments of Rents and Security
      Agreements dated December 1, 2005, from Arkansas Borrower in favor of Agent
      (collectively, the " **Arkansas
      Mortgages** ").
      Concurrently herewith, Arkansas Borrower and/or Guarantor and Agent are
      executing (i) those certain First Amendments to Mortgage, Assignment of
      Rents and Security Agreement (collectively, the " **Arkansas
      Mortgage Amendments** "),
      (ii) that certain First Amendment to Loan Agreement, and (iii) that
      certain First Amendment to Subordination, Attornment and Security Agreement
      (the
      " **Subordination
      Amendment** ")
      (the
      First Amendment to Loan Agreement, together with the Arkansas Mortgage
      Amendments, the Subordination Amendment and any other documents executed in
      connection therewith are collectively referred to herein as the " **Arkansas
      Amendment Documents** ").
      The
      Arkansas Note, the Arkansas Loan Agreement, the Arkansas Mortgages, the Guaranty
      of Payment and Performance dated December 1, 2005, from Guarantor in favor
      of Agent, the Subordination, Attornment and Security Agreement dated
      December 1, 2005, by and among Guarantor, Arkansas Borrower and Agent, and
      any other documents evidencing or securing the







Arkansas
      Loan or executed in connection therewith, as amended by the Arkansas Amendment
      Documents, and any further modifications, renewals and extensions thereof,
      are
      referred to herein collectively as the " **Arkansas
      Loan Documents** ."




D.  The
      Project is master leased to Silver Lake Assisted Living LLC, a Washington
      limited liability company (" **Master
      Tenant** ")
      pursuant to a Lease Agreement (the " **Master
      Lease** ")
      of
      even date herewith between Borrower and Master Tenant. Master Tenant and
      Guarantor are parties to a certain Management Agreement dated September 1,
      1998 (the " **Management
      Agreement** "),
      pursuant to which Guarantor provides certain property management services to
      the
      Project.




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




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




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




**ARTICLE
      I**




**INCORPORATION
      OF RECITALS, EXHIBITS AND SCHEDULES**




Section
      1.1  Incorporation
      of Recitals.




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




Section
      1.2  Incorporation
      of Exhibits and Schedules.




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




Section
      1.3  Definitions.




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




2




**ARTICLE
      II**




**LOAN
      TERMS**




Section
      2.1  Disbursements.




Funding. The Loan
      shall be funded in one advance and repaid in accordance with this Agreement
      and
      the other Loan Documents. On the Closing Date, and subject to the terms,
      provisions and conditions of this Agreement (including, without limitation
      Borrower's satisfaction of the conditions to initial advance described in Schedule 2.1 attached
      hereto) and the other Loan Documents, Lender shall disburse to Borrower from
      the
      proceeds of the Loan the amount of Eight Million and No/100 Dollars
      ($8,000,000.00) (the " **Funding
      Amount** ").




Section
      2.2  Interest
      Rate; Late Charge.




The
      outstanding principal balance of the Loan (including any amounts added to
      principal under the Loan Documents) shall bear interest at a rate of interest
      equal to seven and two hundred twenty-nine thousandths of one percent (7.229%)
      per annum (the " **Interest
      Rate** ").
      Interest shall be computed on the basis of a fraction, the denominator of which
      is three hundred sixty (360) and the numerator of which is the actual number
      of
      days elapsed from the date of the initial advance or the date on which the
      immediately preceding payment was due. If Borrower fails to pay any installment
      of interest or principal within five (5) days after the date on which the same
      is due, Borrower shall pay to Agent a late charge on such past-due amount,
      as
      liquidated damages and not as a penalty, equal to the greater of
      (a) interest at the Default Rate on such amount from the date when due
      until paid, and (b) five percent (5%) of such amount, but not in excess of
      the maximum amount of interest allowed by applicable law. While any Event of
      Default exists, the Loan shall bear interest at the Default Rate.




Section
      2.3  Payments.




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




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




(c)  Credit
      for Payments under Master Lease .
      Agent
      acknowledges and agrees that Master Tenant, in its capacity as the tenant under
      the Master Lease, has been




3


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




Section
      2.4  Maturity.




Maturity
      Date .
      The
      Loan shall mature and Borrower shall pay to Agent all outstanding principal,
      accrued and unpaid interest, and any other amounts due under the Loan Documents
      on June 30, 2013.




Section
      2.5  Prepayment.




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




Section
      2.6  Application
      of Payments.




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




Section
      2.7  Capital
      Adequacy; Increased Costs; Illegality.




(a)  If
      Agent
      determines that any law, treaty, governmental (or quasi-governmental) rule,
      regulation, guideline or order regarding capital adequacy, reserve requirements
      or similar requirements or compliance by Lender with any request or directive
      regarding capital adequacy, reserve requirements or similar requirements
      (whether or not having the force of law), in each case, adopted after the
      Closing Date, from any central bank or other governmental authority increases
      or
      would have the effect of increasing the amount of capital, reserves or other
      funds required to be maintained by Lender and thereby reducing the rate of
      return on Lender's capital as a consequence of its obligations hereunder, then
      Borrower shall from time to time upon demand by Agent, pay to Lender, additional
      amounts sufficient to compensate Lender for such reduction. A certificate as
      to
      the amount of that reduction and showing the basis of the computation thereof
      submitted by Agent to Borrower shall, absent manifest error, be final,
      conclusive and binding for all purposes. Lender agrees




4


that,
      as
      promptly as practicable after it becomes aware of any circumstances referred
      to
      above which would result in any such increased cost, Lender shall, to the extent
      not inconsistent with such Lender's internal policies of general application,
      use reasonable commercial efforts to minimize costs and expenses incurred by
      it
      and payable to it by Borrower pursuant to this Section
      2.7(a) .




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




Section
      2.8  Sources
      and Uses.




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




Section
      2.9  Defeasance .




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




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




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




5




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




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




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




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




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




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




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




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




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




In
      connection with the conditions set forth above, Borrower hereby appoints Agent
      as its agent and attorney-in-fact for the purpose of using the Defeasance
      Deposit to purchase or cause to be purchased U.S. Obligations which provide
      payments on or prior to, but as close as possible to, all successive scheduled
      Payment Dates after the Release Date




6


upon
      which interest and principal payments are required under this Agreement and
      the
      Note, including the amounts due on the Maturity
      Date, and
      in
      amounts equal to the scheduled payments due on such dates under this Agreement
      and the Note plus Agent's reasonable estimate of administrative expenses and
      applicable federal income taxes associated with or to be incurred by the
      Successor Borrower during the remaining term of, and applicable to, the Loan
      (the " **Scheduled
      Defeasance Payments** ").
      Borrower, pursuant to the Security Agreement or other appropriate document,
      shall authorize and direct that the payments received from the U.S. Obligations
      may be made directly to Agent and applied to satisfy the obligations of Borrower
      under this Agreement, the Note and this Section 2.9 .




Upon
      compliance with the requirements of this Section 2.9 ,
      the
      Project shall be released from the lien of the Security Document and the pledged
      U.S. Obligations shall be the sole source of collateral securing the repayment
      of the Loan and the Note. Any portion of the Defeasance Deposit in excess of
      the
      amount necessary to purchase the U.S. Obligations required by the preceding
      paragraph and to otherwise satisfy the Borrower's obligations under this Section
      2.9 shall be
      remitted to Borrower with the release of the Project from the lien of the
      Security Document. In connection with such release, a successor entity meeting
      Agent's then applicable single purpose entity requirements and otherwise
      acceptable to Agent, adjusted, as applicable, for the Defeasance contemplated
      by
      this Section
      2.9 (the
      " **Successor
      Borrower** "),
      shall
      be established by Borrower subject to Agent's approval (or at Agent's option,
      by
      Agent) and Borrower shall transfer and assign all obligations, rights and duties
      under and to the Note together with the pledged U.S. Obligations to such
      Successor Borrower pursuant to an assignment and assumption agreement in form
      and substance satisfactory to Lender (the " **Assignment
      Agreement** ").
      Such
      Successor Borrower shall assume the obligations under the Note, the Security
      Agreement and the other Loan Documents and Borrower shall be relieved of its
      obligations thereunder, except (i) that Borrower shall be required to
      perform its obligations pursuant to this Section 2.9 ,
      including maintenance of the Successor Borrower, if applicable, and
      (ii) for those obligations of Borrower which expressly survive repayment of
      the Loan. Borrower shall pay $1,000.00 to any such Successor Borrower as
      consideration for assuming the obligations under the Note, the Security
      Agreement and the other Loan Documents pursuant to the Assignment Agreement.
      Borrower shall pay all reasonable costs and expenses incurred by Agent and
      Lender in connection with this Section 2.9 ,
      including Agent's and Lender's reasonable attorneys' fees and expenses, and
      any
      administrative and tax expenses associated with or incurred by the Successor
      Borrower, which amounts shall, as set forth above, be included when calculating
      the amount of the Defeasance Deposit.




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




(x)  The
      term
      " **Defeasance
      Deposit** "
      shall
      mean an amount equal to the Yield Maintenance Amount, any costs and expenses
      incurred or to be incurred in the purchase of U.S. Obligations necessary to
      meet
      the Scheduled Defeasance Payments (including Lender's reasonable estimate of
      administrative expenses and applicable federal, state or local income taxes
      associated with or to be incurred by the Successor Borrower during the remaining
      term of, and applicable to, the Loan) and any revenue, documentary




7


stamp
      or
      intangible taxes or any other tax or charge due in connection with the transfer
      of the Note or otherwise required to accomplish the agreements of this Section 2.9 ,
      all as
      estimated by Agent.




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




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




Section
      2.10  Security.




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




**ARTICLE
      III**




**INSURANCE,
      CONDEMNATION, AND IMPOUNDS**




Section
      3.1  Insurance .




Borrower
      shall maintain insurance as follows:




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




8


of
      any of
      the provisions contained in this Article III ,
      Borrower shall at all times maintain ordinance or law coverage in amount equal
      to the full replacement cost of the Project and otherwise in form and substance
      and with carriers approved by Agent in Agent's reasonable
      discretion.




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




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




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




9




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




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




(g)  Borrower has
      advised Agent and Lender that, to
      the
      limited extent described on Schedule
      3.1 ,
      it is
      not in compliance as of the Effective Date with certain requirements set forth
      in Section 3.1 .
      Borrower nonetheless represents and warrants to Agent and Lender that the
      policies of insurance (including the deductible or self-insured retention
      provisions thereof) and risk management programs that Borrower and Guarantor
      have in effect as of the date hereof are, and as may be in effect at any time
      prior to the Maturity Date will be, consistent with custom, practice and prudent
      management standards in the business and industry in which Borrower and
      Guarantor are engaged. As and when insurance meeting the requirements set forth
      in Section 3.1 (to the
      extent Borrower is not in compliance with such requirements as provided in Schedule 3.1 )
      becomes
      generally available to operators of assisted living facilities owned by
      institutional operators and similar to the Facility at commercially reasonable
      rates, as determined by Agent in its reasonable judgment, Borrower shall
      purchase and maintain or shall cause Master Tenant to purchase and maintain
      such
      insurance. Borrower's non-compliance with the requirements of Section 3.1, as
      set
      forth in Schedule
      3.1 ,
      shall
      not give rise to an Event of Default so long as (i) no other Event of
      Default then exists, (ii) such non-compliance is limited to the matters
      described on Schedule 3.1 ,
      as it
      may be amended from time to time prior to the Maturity Date with the consent
      of
      Agent and Lender in their sole discretion, (iii) the
      representations




10


and
      warranties set forth in this Section 3.1(g) remain
      true, correct and complete in all respects, and (iv) Borrower is in
      compliance with the other covenants contained in this Section 3.1 .
      Notwithstanding anything to the contrary set forth herein, if any insurance
      provided by Borrower or Master Tenant in accordance with Schedule
      3.1 provides
      for coverage on a "claims-made" basis, every **** "claims
      made" renewal or replacement policy shall continue to show the first date of
      claims made coverage as of the date of execution of this Loan Agreement, or
      a
      date prior hereto, as its prior acts/retroactive or continuity date.
      Furthermore, if any "claims made" policy is cancelled or non-renewed, and not
      replaced by an "occurrence" policy with "full prior acts", Borrower will
      purchase or will cause Guarantor to purchase an "Extended Reporting Provision
      Option" (i.e., tail coverage), for a term
      equal to the then remaining term of the Loan, and if any "claims made" policy
      is
      subsequently replaced by an "occurrence" policy, Borrower agrees that said
      "occurrence" policy will contain a "full prior acts" provision.




Section
      3.2  Use
      and
      Application of Insurance Proceeds.




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




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




(b)  if
      the
      loss exceeds twenty-five percent (25%) of the original principal balance of
      the
      Loan, but is not more than twenty-five percent (25%) of the replacement value
      of
      the Improvements (for projects containing multiple phases or stand alone
      structures, such calculation to be based on the damaged phase or structure,
      not
      the Project as a whole), Agent shall apply the insurance proceeds to restoration
      provided that at all times during such restoration: (a) no monetary default
      or non-monetary default or Event of Default exists hereunder or under any of
      the
      other Loan Documents; (b) Agent determines that there are sufficient funds
      available to restore and repair the Project to a condition approved by Agent;
      (c) Agent determines that the Net Operating Income of the Project during
      restoration plus the
      collectible proceeds of business interruption insurance plus any amounts
      specifically reserved by Guarantor for the sole purpose of funding the
      restoration will be sufficient to pay Debt Service as of the first measuring
      period occurring after the anticipated date of completion of restoration,
      (d) the Borrower will be able to satisfy the financial covenants set forth
      in Sections 7.26(a) and (b) ;
      (e) Agent determines that restoration and repair of the Project to a
      condition approved by Agent will be completed within nine (9) months after
      the
      date of loss or casualty and in any event ninety (90) days prior to the Maturity
      Date; and (f) Borrower promptly commences and is diligently pursuing
      restoration of the Project; or




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




11


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




Section
      3.3  Condemnation
      Awards.




Borrower
      shall immediately notify Agent of the institution of any proceeding for the
      condemnation or other taking of the Project or any portion thereof. Agent may
      participate in any such proceeding and Borrower will deliver to Agent all
      instruments necessary or required by Agent to permit such participation. Where
      the amount of the compensation or award is anticipated to be in excess of
      $25,000 (the " **Award
      Threshold** ")
      Borrower shall not, without Agent's prior consent, (a) agree to any
      compensation or award, and (b) take any action or fail to take any action
      which would cause the compensation to be determined. All awards and compensation
      for the taking or purchase in lieu of condemnation of the Project or any part
      thereof are hereby assigned to Agent as security for the obligations of Borrower
      under this Agreement, all such awards and compensation below the Award Threshold
      may be paid directly to Borrower so long as no Event of Default exists and
      restoration or repair and the continued operation of the applicable Property
      is
      economically feasible (and the condemnation or other taking did not affect
      in
      any way the Improvements) and all such awards and compensation in excess of
      the
      Award Threshold shall be paid to Agent. Borrower authorizes Agent to collect
      and
      receive such awards and compensation in excess of the Award Threshold to give
      proper receipts and acquittances therefor, and in Agent's sole discretion,
      (a)
      to apply the same (after deduction of Lender's reasonable costs and expenses,
      if
      any in collecting the same) toward the payment of the Loan in such order and
      manner as Agent may elect, notwithstanding that the Loan may not then be due
      and
      payable, or (b) to make the same available to Borrower for the restoration
      or repair of the Project. If the net proceeds of the condemnation award are
      made
      available to Borrower for restoration or repair, such proceeds shall be
      disbursed upon satisfaction of and in accordance with the terms and conditions
      set forth in Section
      3.2 .
      Borrower, upon request by Agent, shall execute all instruments requested to
      confirm the assignment of the awards and compensation to Agent, free and clear
      of all liens, charges or encumbrances.




Section
      3.4  Reserved.




Section
      3.5  Real
      Estate Tax Impounds.




At
      the
      time of and in addition to the monthly installment of interest, and if
      applicable, principal due under the Note and this Loan Agreement, Borrower
      shall
      deposit with Agent's or Agent's designee, monthly, a sum of money (the
      " **Tax
      Impound** ")
      equal
      to one-twelfth (1/12th) of the annual charges for real estate taxes,
      assessments, and impositions relating to the Project (collectively, the
      " **Taxes** ").
      At or
      before the initial advance of the Loan, Borrower shall deposit with Agent or
      Agent's designee a sum of money which together with the monthly installments
      will be sufficient to make each of such payments thirty (30) days prior to
      the
      date any delinquency or penalty becomes due with respect to such
      payments




12


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




**ARTICLE
      IV**




**LEASING
      MATTERS**




Section
      4.1  Representations
      and Warranties on Leases.




(a)  Borrower
      represents and warrants to Agent with respect to Leases of the Project
      that **,** to
      its
      knowledge: (i) the occupancy certificate separately delivered to Agent at
      or prior to Closing, if any, is true and correct as of the date hereof, and
      the
      Leases are valid and in and full force and effect; (ii) the Leases
      (including amendments) are in writing, and there are no oral agreements with
      respect thereto; (iii) the copies of the Leases delivered to Agent are true
      and complete; (iv) neither the landlord nor any tenant is in default under
      any of the non-residential Leases; (v) Borrower has no knowledge of any
      notice of termination or default with respect to any non-residential Lease;
      (vi) Borrower has not assigned or pledged (and has not permitted Master
      Tenant or Guarantor to assign or pledge) any of the Leases, the rents or any
      interests therein, except to Agent; (vii) no non-residential tenant or
      other party has an option to purchase all or any portion of the Project;
      (viii) no tenant has the right to terminate its Lease prior to expiration
      of the stated term of such Lease (unless due to




13


casualty
      or condemnation of the Project); and (ix) no tenant has prepaid more than
      one month's rent in advance (except for bona fide security deposits not in
      excess of an amount equal to two month's rent).




(b)  The
      Project shall at all times be master leased to Master Tenant pursuant to the
      Master Lease. The Master Lease shall, at all times during the term of the Loan,
      be subordinated to the lien of the Mortgage pursuant to the terms of the
      Subordination Agreement.




Section
      4.2  Approval
      Rights.




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




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




(c)  Borrower,
      Guarantor and Master Tenant shall have the right to enter into or amend any
      residential Lease which has a term of no more than one (1) month and all such
      residential Leases shall be at market rates on the form previously approved
      by
      Agent without any material modifications.




(d)  Except
      for the expiration of the Master Lease by its terms pursuant to Section 2
      thereof, Borrower shall not suffer or permit an amendment or termination of
      the
      Master Lease.




Section
      4.3  Covenants.




Borrower
      shall and shall cause Master Tenant and Guarantor to: (a)  perform the
      obligations which Borrower and Master Tenant are required to perform under
      the
      Leases; (b) enforce the material obligations to be performed by the tenants
      under the Leases; (c) promptly furnish to Agent any notice of default or
      termination received by Borrower or Guarantor or Master Tenant from any
      non-residential tenant, and any notice of default or termination given by
      Borrower or Master Tenant or Guarantor to any non-residential tenant;
      (d) not collect any rents for more than one month in advance of the time
      when the same shall become due, except for bona fide security deposits not
      in
      excess of an amount equal to two months rent; (e) not enter into any ground
      lease or master lease of any part of the Project other than the Master Lease;
      (f) not further assign or encumber any Lease; (g) not,
      except




14


with
      Agent's prior written consent, cancel or accept surrender or termination of
      any
      Material Non-Residential Lease; and (h) not, except with Agent's prior
      written consent, modify or amend any Material Non-Residential Lease, and any
      action in violation of clauses (e), (f), (g), and (h) of this Section 4.3 shall be
      void at the election of Agent. Borrower will not suffer or permit any breach
      or
      default to occur in any of Borrower's or Guarantor's or Master Tenant's
      obligations under any of the Leases nor suffer or permit the same to terminate
      by reason of any failure of Borrower or Guarantor or Master Tenant to meet
      any
      requirement of any Lease.




Section
      4.4  Tenant
      Estoppels.




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




Section
      4.5  Security
      Deposits




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




**ARTICLE
      V**




**REPRESENTATIONS
      AND WARRANTIES**




Borrower
      represents and warrants to Agent that:




Section
      5.1  Organization
      and Power.




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




Section
      5.2  Guarantor/Master
      Tenant .




(a)  Guarantor's
      principal place of business is at 3131 Elliott Avenue, Suite 500, Seattle,
      Washington 98121. Guarantor is the sole member of Borrower and owns one hundred
      percent (100%) of the membership interests in Borrower free and clear of all
      liens,




15


claims,
      and encumbrances. Guarantor has full right, power and authority to execute
      the
      Loan Documents on its own behalf and on behalf of Borrower.




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




(c)  Master
      Tenant's principal place of business is at 600 University Street, Suite 2500,
      Seattle, Washington 98101. BP Limited Partnership and Providence Health
      Systems-Washington are the sole members of Master Tenant and own one hundred
      percent (100%) of the membership interests in Master Tenant, free and clear
      of
      all liens, claims and encumbrances. The direct and indirect ownership interest
      in Master Tenant is set forth on the organization chart attached hereto as Exhibit
      G .
      All
      such interests are free and clear of all liens, claims, encumbrances and rights
      of others except as set forth on Exhibit
      G .
      Master
      Tenant has full right, power and authority to execute the Loan Documents on
      its
      own behalf. Guarantor shall have the authority to make all material business
      decisions for Master Tenant at all times following the closing of the Master
      Tenant Acquisition.




Section
      5.3  Borrower's Operating
      Agreement.




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




Section
      5.4  Corporate
      Documents .




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




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




16




Section
      5.5  Validity
      of Loan Documents.




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




Section
      5.6  Liabilities;
      Litigation.




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




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




Section
      5.7  Taxes
      and Assessments.




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




Section
      5.8  Other
      Agreements; Defaults.




Neither
      the Borrower nor Guarantor nor Master Tenant is a party to any agreement or
      instrument or subject to any court order, injunction, permit, or restriction
      which




17


would
      reasonably be expected to adversely affect the Project or the business,
      operations, or condition (financial or otherwise) of Borrower or Guarantor
      or
      Master Tenant. Neither Borrower nor Guarantor is in violation of any agreement
      which violation would reasonably be expected to have a material adverse effect
      on the Project, Borrower, Master Tenant, or Guarantor or Borrower's or
      Guarantor's or Master Tenant's business, properties, or assets, operations
      or
      condition, financial or otherwise.




Section
      5.9  Compliance
      with Law.




Borrower,
      Guarantor and Master Tenant have all requisite licenses, permits, franchises,
      qualifications, certificates of occupancy or other governmental authorizations
      to own to lease and operate, the Project and carry on its business, and the
      Project is in compliance with all applicable legal requirements and, to the
      best
      of Borrower's knowledge, is free of structural defects, and all building systems
      contained therein are in good working order, subject to ordinary wear and tear.
      The Project does not constitute, in whole or in part, a legally non-conforming
      use under applicable legal requirements.




Section
      5.10  Condemnation.




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




Section
      5.11  Access.




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




Section
      5.12  Flood
      Hazard.




The
      Project is not situated in an area designated as having special flood hazards
      as
      defined by the Flood Disaster Protection Act of 1973, as amended, or as a
      wetlands by any governmental entity having jurisdiction over the
      Project.




Section
      5.13  Property.




A
      fee
      interest in the Project is, or contemporaneously with the initial funding of
      the
      Loan will be, owned by Borrower free and clear of all liens, claims,
      encumbrances, covenants, conditions and restrictions, security interests and
      claims of others, except only such exceptions to title as have been approved
      by
      Agent. To the best of Borrower's knowledge, the Project is in compliance with
      all zoning requirements, building codes,




18


subdivision
      improvement agreements, declarations, ground leases, and all covenants,
      conditions and restrictions of record. Except as set forth in the exceptions
      to
      title approved by Agent, the zoning and subdivision approval of the Project
      and
      the right and ability to, use or operate the Project is not in any way dependent
      on or related to any real estate other than the Property where the same is
      to be
      made. Except as previously disclosed to Agent in writing, to the best of
      Borrower's knowledge, as of the date hereof, (i) there are no, nor are there
      any
      alleged or asserted, violations of law, regulations, ordinances, codes, permits,
      licenses, declarations, ground leases, covenants, conditions, or restrictions
      of
      record, or other agreements relating to the Project, or any part thereof, (ii)
      the Project is in good condition and repair with no deferred maintenance and
      are
      free from damage caused by fire or other casualty, (iii) there is no latent
      or
      patent structural or other significant defect or deficiency in the Project,
      (iv)
      design and as-built conditions of the Project are such that no drainage or
      surface or other water will drain across or rest upon the Project or land of
      others except in areas designated for such purpose and for which a benefiting
      or
      burdening easement has been established, and (v) none of the Improvements on
      the
      Project create an encroachment over, across or upon any of the Project's
      boundary lines, rights of way or easements, and no buildings or other
      improvements on adjoining land create such an encroachment.




Section
      5.14  Location
      of Borrower.




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




Section
      5.15  Margin
      Stock.




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




Section
      5.16  Tax
      Filings.




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




Section
      5.17  Solvency.




After
      giving effect to the Loan, the fair saleable value of Borrower's assets exceeds
      and will, immediately following the making of the Loan, exceed Borrower's total
      liabilities, including, without limitation, subordinated, unliquidated, disputed
      and contingent liabilities. The fair saleable value of Borrower's assets is
      and
      will, immediately following the making of the Loan, be greater than Borrower's
      probable liabilities, including the maximum amount of its contingent liabilities
      on its Debts as such Debts become absolute and matured. Borrower's assets do
      not
      constitute and, immediately following the making of the Loan will not
      constitute, unreasonably small capital to carry out its business as conducted
      or
      as




19


proposed
      to be conducted. Borrower does not intend to, nor believes that it will, incur
      Debts and liabilities (including contingent liabilities and other commitments)
      beyond its ability to pay such Debts as they mature (taking into account the
      timing and amounts of cash to be received by Borrower and the amounts to be
      payable on or in respect of obligations of such Borrower).




Section
      5.18  Full
      and Accurate Disclosure.




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




Section
      5.19  Single
      Purpose Entity.




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




Section
      5.20  No
      Broker .




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




Section
      5.21  Reserved.




Section
      5.22  Labor
      Disputes.




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




Section
      5.23  Employees.




Borrower
      has no employees **.**




Section
      5.24  ERISA
      (Borrower) .




(a)
      Neither Borrower nor Master Tenant is an "employee benefit plan" as defined
      in
      Section 3(3) of ERISA, or a "governmental plan" within the meaning of Section
      3(32) of ERISA; (b) neither Borrower nor Master Tenant is subject to state
      statutes regulating investments and fiduciary obligations with respect to
      governmental plans; (c) the assets of Borrower and Master Tenant do not
      constitute "plan assets" of one or more plans within the meaning of 29 C.F.R.
      Section 2510.3-101; and (d) one or more of the following




20


circumstances
      is true: (i) Equity interests in Borrower and Master Tenant are publicly
      offered securities, within the meaning of 29 C.F.R. Section 2510.3-101(b)(2)
      or
      are securities issued by an investment company registered under the Investment
      Company Act of 1940; (ii) Less than twenty-five percent (25%) of the value
      of
      any class of equity interests in Borrower and Master Tenant are held by "benefit
      plan investors" within the meaning of 29 C.F.R. Section 2510.3-101(f)(2); or
      (iii) Borrower and Master Tenant qualify as an "operating company", a "venture
      capital operating company", or a "real estate operating company" within the
      meaning of 29 C.F.R. Section 2510.3-101(c), (d) or (e). Borrower and Master
      Tenant shall deliver to Agent such certifications and/or other evidence
      periodically requested by Agent, in its reasonable discretion, to verify these
      representations and warranties. Failure to deliver these certifications or
      evidence, breach of these representations and warranties, or consummation of
      any
      transaction which would cause the Loan Documents or any exercise of Agent's
      or
      Lender's rights under the Loan Documents to (1) constitute a non-exempt
      prohibited transaction under ERISA or (2) violate ERISA or any state statute
      regulating governmental plans (collectively, a " **Violation** "),
      which
      failure continues for thirty (30) days after written notice, shall be an Event
      of Default. Notwithstanding anything in the Loan Documents to the contrary,
      no
      sale, assignment, or transfer of any direct or indirect right, title, or
      interest in Borrower or Master Tenant or the Project (including creation of
      a
      junior lien, encumbrance or leasehold interest) shall be permitted which would
      negate Borrower's representations in this section or cause a Violation. At
      least
      fifteen (15) days before consummation of any of the foregoing, Borrower shall
      obtain from the proposed transferee or lienholder (1) a certification to Agent
      that the representations and warranties of this subparagraph will be true after
      consummation and (2) an agreement to comply with this section.




Section
      5.25  Intellectual
      Property.




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




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




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




21


Borrower
      represents and warrants that it requires, and has taken reasonable measures
      to
      ensure compliance with the requirement, that no Person who owns any other direct
      interest in Borrower or Master Tenant is or shall be listed on any of the Lists
      or is or shall be a Designated Person.




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




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




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




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




Section
      5.27  Master
      Lease.




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




22




Section
      5.28  Management
      Agreement.




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




Section
      5.29  Master
      Tenant Purchase Contract .




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




Section
      5.30  Approvals.




The
      form
      of the Master Lease has been submitted to the State of Washington, as required
      under applicable Law.




**ARTICLE
      VI**




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




Section
      6.1  Financial
      Statements.




Borrower
      shall furnish to Agent and shall cause Guarantor and Master Tenant to furnish
      to
      Agent such financial statements and other financial information as Agent may
      from time to time reasonably request. All such financial statements shall show
      all material contingent liabilities and shall accurately and fairly present
      the
      results of operations and the financial condition of Borrower at the dates
      and
      for the period indicated and shall be sufficient to permit Agent to calculate
      Debt Service Coverage Ratio, Project Yield and Net Operating Income. Without
      limitation of the foregoing, Borrower shall furnish to Agent and shall cause
      Guarantor and Master Tenant to furnish to Agent the following
      statements:




(a)  Monthly
      Reports .




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




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




(B)  For
      the
      preceding fiscal month and fiscal year-to-date (i) a cash summary detailing
      all cash activity and reconciling beginning




23


and
      end
      cash balances, and (ii) aged accounts receivable and accounts payable;




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




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




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




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




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




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




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




24




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




Section
      6.2  Audits .




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




Section
      6.3  Books
      and Records/Audits .




Borrower
      shall keep and maintain or cause to be kept and maintained at all times at
      the
      Project or at Borrower's/Guarantor's/Master Tenant's principal place of
      business, or such other place as Agent may approve in writing, complete and
      accurate books of accounts and records adequate to reflect the results of the
      operation of the Project (including computations of Net Operating Income) and
      to
      provide the financial statements required to be provided to Agent pursuant
      to Section
      6.1 above
      and copies of all written contracts, correspondence, reports of Agent's
      independent consultant, if any, and other documents affecting the Project.
      Agent
      and its designated agents shall have the right to inspect and copy any of the
      foregoing. Additionally, Agent may audit and determine, in Agent's sole and
      absolute discretion, the accuracy of Borrower's records and computations. The
      costs and expenses of the audit shall be paid by Borrower if the audit discloses
      a monetary variance in any financial information or computation (including
      the
      computation of Net Operating Income) equal to or greater than the greater of:
      (i) five percent (5%); or (ii) Five Thousand and No/100 Dollars ($5,000.00)
      more than any computation submitted by Borrower.




Section
      6.4  Notice
      of Litigation or Default.




Borrower
      shall promptly provide Agent with:




(a)  written
      notice of any litigation, arbitration, or other proceeding or governmental
      investigation (including any survey results or inspection reports from any
      Governmental Authority) pending or, to Borrower's or Guarantor's or Master
      Tenant's knowledge, threatened against or relating to Borrower, Guarantor,
      Master Tenant or the




25


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




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




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




(d)  a
      copy of
      all notices of default and other material correspondence sent to or received
      from Guarantor under the Management Agreement.




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




(f)  a
      copy of
      all notices of default and other material correspondence sent to or received
      from Guarantor under the Master Tenant Purchase Contracts.




Section
      6.5  Bank
      Accounts.




Borrower
      shall cause Master Tenant to provide Agent with the following information with
      respect to each of the accounts from which payments will be made to Agent
      pursuant to the Loan Documents: (i) bank name; (ii) bank's ABA number;
      (iii) bank account number; and (iv) the name in which the bank account
      is held.




**ARTICLE
      VII**




**COVENANTS**




Borrower
      covenants and agrees with Agent as follows:




26




Section
      7.1  Inspection .




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




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




Without
      the prior written consent of Agent, Borrower shall not nor shall Borrower permit
      Guarantor or Master Tenant to:




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




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




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




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




Agent
      acknowledges that Guarantor and BF Limited Partnership and Guarantor and
      Providence Health Systems-Washington have entered into those certain Purchase
      Contract and Sale Agreements dated March 22, 2006 and April ___, 2006,
      respectively (as amended from time to time, collectively, the " **Master
      Tenant Purchase Contracts** "),
      pursuant to which Guarantor intends to purchase one hundred percent (100%)
      of
      the membership interests in Master Tenant.




Notwithstanding
      the foregoing provisions of this Section 7.2 ,
      the
      direct ownership interests in Master Tenant may be sold to Guarantor pursuant
      to
      the terms of the Master Tenant Purchase Contracts so long as (i) after any
      such transaction (the " **Master
      Tenant**




27


**Acquisition** "),
      Guarantor shall at all times own one hundred percent (100%) of the membership
      interests in Master Tenant free of all liens, claims and encumbrances and
      Guarantor shall have the authority to make all material business decisions
      for
      Master Tenant during the term of the Loan, (ii) all consents and approvals
      necessary or desirable in connection with the Master Tenant Acquisition
      (including, without limitation, all consents and approvals from the Washington
      Department of Social and Health Services) have been obtained from the applicable
      Governmental Authorities and copies thereof have been provided to Lender,
      (iii) Borrower gives Agent not less than five (5) days prior written notice
      of the closing of the Master Tenant Acquisition, (iv) Guarantor has
      delivered to Agent a pledge of one hundred percent (100%) of the ownership
      interests in Master Tenant pursuant to a pledge of membership interest
      substantially similar in form and substance to the Assignment of Membership
      Interests and any legal opinions required by Lender in connection therewith,
      (v) Master Tenant has delivered to Agent any legal opinions required by
      Lender with respect to the due authorization, execution, delivery and
      enforceability of the Subordination Agreement and the perfection of liens
      granted therein in favor of Agent, and (vi) Borrower executes such
      documents and takes such action and causes Master Tenant and Guarantor to
      execute such documents and take such action as are reasonably required by Agent
      in connection with the Master Tenant Acquisition. Borrower shall pay to Agent
      upon demand all costs and expenses incurred by Agent and Lender (including,
      without limitation, reasonable attorney's fees and search costs) in connection
      with the Master Tenant Acquisition.




Absent
      a
      default under this Agreement or under any of the other Loan Documents, the
      Management Agreement may be terminated by Guarantor and Master Tenant solely
      in
      connection with the Master Tenant Acquisition. Borrower shall promptly deliver
      to Lender written evidence of such termination.




Section
      7.3  Taxes;
      Charges.




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




28


legal
      proceedings in good faith and at their own expense and concludes such contest
      prior to the tenth (10th) day preceding the earlier to occur of the Maturity
      Date or the date on which the Project is scheduled to be sold for
      non-payment.




Section
      7.4  Management.




Except
      as
      expressly permitted by the terms of Section
      7.2 herein
      in connection with the Master Tenant Acquisition, Borrower shall not permit
      Master Tenant to terminate or replace the Manager or amend the Management
      Agreement without Agent's prior written consent. Master Tenant and/or Borrower
      shall hold and maintain all necessary licenses, certifications and permits
      required by law.




Section
      7.5  Operation;
      Maintenance; Inspection.




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




Section
      7.6  Taxes
      on Security.




Borrower
      shall pay all taxes, charges, filing, registration and recording fees, excises
      and levies payable with respect to the Note or the Liens created or secured
      by
      the Loan Documents, other than income, franchise and doing business taxes
      imposed on Agent or Lender and other than taxes, charges and fees which are
      being duly contested by Borrower in accordance with the terms of this Agreement
      or any of the other Loan Documents. If there shall be enacted any law (1)
      deducting the Loan from the value of the Project for the purpose of taxation,
      (2) affecting any Lien on the Project, or (3) changing existing laws of taxation
      of mortgages, deeds of trust, security deeds, or debts secured by real property,
      or changing the manner of collecting any such taxes, Borrower shall promptly
      pay
      to Agent, on demand, all taxes, costs and charges for which Agent or Lender
      is
      or may be liable as a result thereof; however, if such payment would be
      prohibited by law or would render the Loan usurious, then instead of collecting
      such payment, Lender may declare all amounts owing under the Loan Documents
      to
      be immediately due and payable.




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




Borrower
      and Master Tenant shall preserve and keep in full force and effect their
      existence as a Single Purpose Entity, entity status, franchises, rights and
      privileges under the laws of the state of their formation, and all
      qualifications, licenses and permits applicable to the ownership of the Project
      and Guarantor shall preserve and keep in full force and effect its entity
      status, franchises, rights and privileges under the laws of the state of its
      formation and all qualifications, licenses and permits applicable to the use
      and
      operation of




29


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




Section
      7.8  Affiliate
      Transactions.




Without
      the prior written consent of Agent, neither Borrower nor Master Tenant nor
      Guarantor shall engage in any transaction affecting the Project with an
      Affiliate of Borrower other than agreements which are (i) terminable by
      Borrower upon thirty (30) days prior written notice (ii) on an arms-length
      basis and (iii) on terms which are no less favorable to Borrower than it
      could secure from an unrelated third party.




Section
      7.9  Limitation
      on Other Debt.




Borrower
      shall not, without the prior written consent of Agent, incur any
      Debt, **** except
      for trade payables in the ordinary course of business, and up to $250,000 in
      the
      aggregate for purchase money debt to purchase and, capital leases of, vehicles,
      equipment and other capital items to be used solely in connection with the
      operation of a Project (purchase money debt not to exceed in the aggregate
      $60,000 may be secured by automobiles and ordinary office equipment used in
      connection with the Project) and which are reasonably related to the operation
      of assisted living facilities/independent living facilities (the " **Permitted
      Debt** ").
      Notwithstanding the foregoing, the amount of secured indebtedness incurred
      by
      Borrower pursuant to this Section 7.9 and
      Master Tenant pursuant to the terms of the Subordination Agreement shall not
      at
      any time in the aggregate exceed $60,000.




Section
      7.10  Further
      Assurances.




Borrower
      shall promptly (a) cure any defects in the execution and delivery of the
      Loan Documents, and (b) execute and deliver, or cause to be executed and
      delivered, all such other documents, agreements and instruments as Agent may
      reasonably request to




30


further
      evidence and more fully describe the collateral for the Loan, to correct any
      omissions in the Loan Documents, to perfect, protect or preserve any liens
      created under any of the Loan Documents, or to make any recordings, file any
      notices, or obtain any consents, as may be necessary or appropriate in
      connection therewith.




Section
      7.11  Estoppel
      Certificates.




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




Section
      7.12  Notice
      of Certain Events.




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




Section
      7.13  Indemnification.




Borrower
      shall indemnify, defend and hold Agent and Lenders harmless from and against
      any
      and all losses, liabilities, claims, damages, expenses, obligations, penalties,
      actions, judgments, suits, costs or disbursements of any kind or nature
      whatsoever, including the reasonable fees and expenses of Agent's and Lender's
      counsel, in connection with (a) any inspection, review or testing of or
      with respect to the Project conducted by Agent or Lender in accordance with
      the
      terms of this Agreement, (b) any investigative, administrative, mediation,
      arbitration, or judicial proceeding, in which Agent or a Lender is designated
      a
      party thereto, commenced or threatened at any time (including after the
      repayment of the Loan) in any way related to the execution, delivery or
      performance of any Loan Document or to the Project, (c) any proceeding
      instituted by any Person claiming a Lien against any of the Project, and
      (d) any brokerage commissions or finder's fees claimed by any broker or
      other party in connection with the Loan, the Project, or any of the transactions
      contemplated in the Loan Documents, including those arising from the joint,
      concurrent, or comparative negligence of Agent or Lender, except to the extent
      any of the foregoing is caused by an indemnitee's gross negligence or willful
      misconduct.




Section
      7.14  Use
      of
      Proceeds, Revenues .




Borrower
      shall use the proceeds of the Loan for proper business purposes. No portion
      of
      the proceeds of the Loan shall be used by Borrower in any manner that might
      cause the borrowing or the application of such proceeds to violate Regulation
      U,




31


Regulation T
      or Regulation X or any other regulation of the Board of Governors of the Federal
      Reserve System or to violate the Securities Act of 1933 or the Securities
      Exchange Act of 1934. Except as otherwise specifically provided in the Loan
      Documents, proceeds from the Project, if any, received by Borrower shall be
      applied to the Indebtedness then due and payable, operating expenses **** or
      other
      approved Project capital improvements, repairs or replacements before
      distribution by Borrower to Guarantor.




Section
      7.15  Payments
      Under Master Lease .




Borrower
      shall cause all rent payments by Master Tenant under the Master Lease to be
      made
      directly to Agent, pursuant to the terms of the Subordination
      Agreement.




To
      the
      extent that any such funds are not sent directly to Agent as required under
      this Section 7.15 but are
      received by Borrower, such amounts shall be held in trust for the benefit of
      Agent and remitted to Agent within two (2) Business Days after receipt by
      Borrower. All amounts from time to time held by Agent pursuant to this Section 7.15 are
      hereinafter referred to as " **Rent
      Proceeds** ."
      Agent
      may apply all such Rent Proceeds toward the Indebtedness then due and payable
      in
      such order as Agent shall determine. The Rent Proceeds may be commingled with
      Agent's or Agent's designee's general funds and shall not be deemed to be held
      in trust for the benefit of Borrower. Borrower hereby grants to Agent for the
      benefit of Lender and Agent a security interest in the Rent Proceeds for the
      purpose of securing the Loan.




Section
      7.16  Reserved.




Section
      7.17  Reserved.




Section
      7.18  Reserved.




Section
      7.19  Compliance
      with Laws and Contractual Obligations.




(a)  Borrower
      will comply with and will cause Guarantor and Master Tenant to comply with
      (i) the requirements of all applicable laws, rules, regulations and orders
      of any governmental authority (including, without limitation, laws, rules,
      regulations and orders relating to all building, zoning, density, land use,
      covenants, conditions and restrictions, subdivision requirements, taxes,
      employer and employee contributions, securities, employee retirement and welfare
      benefits, environmental protection matters, employee health and safety, quality
      and safety standards, accreditation standards and requirements of the applicable
      state department of health or other applicable state regulatory agency (each
      a
      " **State
      Regulator** "),
      quality and adequacy of medical care, distribution of pharmaceuticals, rate
      setting, equipment, personnel, operating policies, additions to facilities
      and
      services and fee splitting) as are now in effect and which may be imposed upon
      Borrower, Master Tenant or Guarantor or the maintenance, use or operation of
      the
      Project or the provision of services to the occupants of the Project where
      the
      failure to so comply would reasonably be expected to result in a Material
      Regulatory Violation or a material adverse change, and (ii) the
      obligations, covenants and conditions contained in all other
      material




32


contractual
      obligations of Borrower, Master Tenant and of Guarantor, but in the case of
      Guarantor only with respect to the operation of the Project; and




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




Section
      7.20  Notice
      of Money Laundering.




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




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




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




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




(c)  Anti-Terrorism
      Policies .
      Borrower agrees to adopt and maintain (and cause Master Tenant to adopt and
      maintain) adequate policies, procedures and controls to ensure that it is in
      compliance with all applicable Anti-Terrorism Laws and related government
      guidance (such policies, procedures and controls are collectively referred
      to in
      this Agreement as " **Borrower
      Anti-Terrorism Policies** ").
      Borrower further agree to make the Borrower Anti-Terrorism Policies, and the
      respective policies, procedures and controls for Persons who are or are to
      become partners, members or shareholders in Borrower and




33


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




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




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




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




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




34




Section
      7.22  Employees.




Neither
      Borrower nor Master Tenant shall have any employees while any portion of the
      Loan is outstanding.




Section
      7.23  Reserved.




Section
      7.24  Representations
      and Warranties.




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




Section
      7.25  Cooperation.




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




35




Section
      7.26  Master
      Lease.




Borrower
      shall not, without Agent's prior written consent, permit the amendment or
      termination of the Master Lease.




Section
      7.27  Master
      Tenant Purchase Contracts .




Borrower
      shall not, without Agent's prior written consent, permit the amendment of the
      Master Tenant Purchase Contracts.




Section
      7.28  Financial
      Covenants.




(a)  Commencing
      on June 30, 2006, and as of the last day of each calendar quarter
      thereafter during the term of the Loan, the average daily occupancy for the
      Project for the immediately preceding three (3) month period shall be greater
      than ninety percent (90%) of the average daily occupancy at the Project for
      the
      three (3) month period immediately preceding the Closing. " **Occupancy** "
      under
      this Section 7.26
      (a) shall
      mean beds occupied by a resident at the Project and paying at least applicable
      Medicare, Medicaid or insurance reimbursable rates.




(b)  Commencing
      on June 30, 2006, and as of the last day of each calendar quarter thereafter
      during the term of the Loan, the Debt Service Coverage Ratio (as determined
      by
      Agent) shall equal or exceed 1.20:1.00 and the Project Yield (as determined
      by
      Agent) shall equal or exceed ten percent (10%).




**ARTICLE
      VIII**




**Health
      Care Matters**




Section
      8.1  Healthcare
      Laws.




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




36




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




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




Section
      8.2  Representations,
      Warranties and Covenants Regarding Healthcare Matters.




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




37




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




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




(c)  The
      Licenses:




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




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




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




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




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




(ii)  Amend
      or
      otherwise change the Project's authorized units/beds capacity and/or the number
      of units/beds approved by the State Regulator;




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




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




(e)  If
      and
      when Borrower or Master Tenant or Guarantor (with respect to the Project),
      participates in Medicare, Medicaid, Blue Cross and/or Blue Shield, and
      any




38


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




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




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




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




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




(iii)  If
      applicable, affect Borrower's or Master Tenant's or Guarantor's continued
      participation at the Project in the Medicaid or Medicare




39


programs
      or any other of the Third-Party Payor Programs, or any successor programs
      thereto, at then current rate certifications.




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




(i)  The
      Project does not currently participate in Medicare, Medicaid or any other Third
      Party Payor Programs. Neither Borrower or Guarantor or Master Tenant is a
      participant in any federal program whereby any Governmental Authority may have
      the right to recover funds by reason of the advance of federal funds, including
      those authorized under the Hill-Burton Act (42 U.S.C. 291, *et
      seq.* ),
      as it
      may be amended.




(j)  Neither
      Borrower or Guarantor or Master Tenant will enter into any patient or resident
      care agreements with patients or residents of the Project which deviate in
      any
      material adverse respect from the form agreements which have been delivered
      to
      and approved by Agent pursuant to Section 4.2 of this
      Loan Agreement.




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




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




Section
      8.3  Cooperation.




(a)  Upon
      the
      request of Agent during the continuance of an Event of Default hereunder or
      under the other Loan Documents provided that Agent has elected as a result
      of
      such Event of Default to exercise its remedies on default, including its remedy
      to take possession of the Project or to seek to have a receiver appointed to
      assume operational responsibility for the Project, Borrower shall, and shall
      cause Master Tenant and Guarantor to, complete, execute and deliver to Agent
      any
      applications, notices, documentation, and other information reasonably necessary
      or desirable, in Agent's reasonable judgment, to permit Agent or its designee
      (including a receiver) to obtain, maintain or renew any one or more of the
      Licenses for the Project (or, to the extent permitted by applicable Laws, to
      become the owner of the existing Licenses for the Project) and to the extent
      permitted by




40


applicable
      Laws to obtain any other provider agreements or Governmental Approvals then
      necessary or desirable for the operation of the Project by Agent or its designee
      for their then current use (including, without limitation, any applications
      for
      change of ownership of the existing Licenses).




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




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




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




**ARTICLE
      IX**




**EVENTS
      OF DEFAULT**




Each
      of
      the following shall constitute an Event of Default:




41




Section
      9.1  Payments.




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




Section
      9.2  Certain
      Covenants.




Borrower's
      failure to (a) maintain insurance as required under Section 3.1 of this
      Agreement; (b) permit inspections as required by Section 7.1 ;
      (c) strictly comply with the provisions of Section
      7.2 ;
      (d) maintain its status as a Single Purpose Entity as required by Section 7.7 ;
      (e) strictly comply with the provisions of Section
      7.15 (payment
      under Master Lease), Section
      7.21 (employees), Section
      7.26 (Master
      Lease), Section 7.27 (Master
      Tenant Purchase Contracts), Section 7.28 (financial covenants), Section
      8.1(c) (licenses and other matters), and Sections 8.2(b) and (c) (licenses).




Section
      9.3  Covenants.




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




Section
      9.4  Representations
      and Warranties.




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




Section
      9.5  Other
      Encumbrances.




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




42




Section
      9.6  Involuntary
      Bankruptcy or Other Proceeding.




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




Section
      9.7  Voluntary
      Petitions, etc.




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




Section
      9.8  Default
      Under Master Lease.




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




Section
      9.9  Default
      Under Management Agreement.




The
      termination of the Management Agreement without Lender's prior written consent
      (except as expressly permitted by the terms of Section 7.2 herein) or the
      occurrence of a default and the expiration of any cure period applicable thereto
      under the Master Lease.




Section
      9.10  False
      Reports.




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




Section
      9.11  Control.




Guarantor
      ceases at any time to, directly or indirectly, control the day-to-day management
      of Borrower and at all times following the closing of the Master Tenant
      Acquisition, the day-to-day management of Master Tenant.




43




Section
      9.12  Money
      Laundering.




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




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




(c)  If
      a
      tenant under any Lease (including, without limitation, Master Tenant), Borrower
      or Guarantor is listed on the Lists or (i) is convicted, or
      (ii) pleads *nolo
      contendere* to
      charges involving money laundering or predicate crimes to money laundering,
      and
      proceeds from the rents of such tenant are used to pay debt service and Borrower
      fails to give Agent such representations and verifications as Agent shall
      reasonably request that such rents are not being used to pay debt
      service.




Section
      9.13  Loan
      Documents.




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




Section
      9.14  Arkansas
      Loan Documents.




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




Section
      9.15  Other
      Defaults.




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




**ARTICLE
      X**




**REMEDIES**




Section
      10.1  Remedies
      - Insolvency Events.




Upon
      the
      occurrence of any Event of Default described in Section 9.7 or
      9 .8 ,
      the
      obligations of Lender to advance amounts hereunder shall immediately terminate,
      and all




44


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




Section
      10.2  Remedies
      - Other Events.




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




Section
      10.3  Agent's
      Right to Perform the Obligations.




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




45


shall
      be
      entitled to be indemnified, together with interest thereon at the Default Rate
      from the date of such payment or expenditure until paid, shall constitute
      additions to the Loan, shall be secured by the Loan Documents and shall be
      paid
      by Borrower to Agent upon demand.




**ARTICLE
      XI**




**MISCELLANEOUS**




Section
      11.1  Notices.




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




If
      to
      Borrower:  ESC-Arbor
      Place, LLC


c/o
      Emeritus
      Corporation


3131
      Elliott Avenue, Suite
      500


Seattle,
      Washington 98121


Attention:  Raymond
      R. Brandstrom, CFO


Facsimile:  (206)
      301-4500




With
      a
      copy to:  The
      Nathanson Group PLLC


One
      Union Square


600
      University Street, Suite
      2000


Seattle, Washington 98101-1195


Attention:  Randi
      S.
      Nathanson, Esq.


Facsimile:  (206)
      623-1738




If
      to
      Agent:  General
      Electric Capital Corporation


Loan
      No. 07-0004265


2 Bethesda Metro Center, Suite 600


Bethesda, Maryland 20814


Attention:  Manager,
      Portfolio Management Group


Facsimile:  (301)
      347-3150






With
      a
      copy to:  General
      Electric Capital Corporation


Loan
      No. 07-0004265


500
      West Monroe
      Street


Chicago,
      Illinois
      60661


Attention:  John
      Cobb


Facsimile:  (866)
      252-2015




46


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


Loan
      No.
      07-0004265


5804
      Trailridge
      Drive


Austin,
      Texas 78731


Attention:  Diana
      Pennington, Senior Vice President,


Chief
      Counsel, Real
      Estate




Facsimile:  (866)
      221-0433




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




Section
      11.2  Amendments
      and Waivers.




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




Section
      11.3  Limitation
      on Interest.




It
      is the
      intention of the parties hereto to conform strictly to applicable usury laws.
      Accordingly, all agreements between Borrower, Agent and Lender with respect
      to
      the Loan are hereby expressly limited so that in no event, whether by reason
      of
      acceleration of maturity or otherwise, shall the amount paid or agreed to be
      paid to Lender or charged by Lender for the use, forbearance or detention of
      the
      money to be lent hereunder or otherwise, exceed the maximum amount allowed
      by
      law. If the Loan would be usurious under applicable law, then, notwithstanding
      anything to the contrary in the Loan Documents: (a) the aggregate of all
      consideration which constitutes interest under applicable law that is contracted
      for, taken, reserved, charged or received under the Loan Documents shall under
      no circumstances exceed the maximum amount of interest allowed by applicable
      law, and any excess shall be credited on the Note the holder thereof (or, if
      the
      Note has been paid in full, refunded to Borrower); and (b) if maturity is
      accelerated by reason of an election by Agent or Lender, or in the event of
      any
      prepayment, then any consideration which constitutes interest may never include
      more than the maximum amount allowed by applicable law. In such case, excess
      interest, if any, provided for in the Loan Documents or otherwise, to the extent
      permitted by applicable law, shall be amortized, prorated, allocated and spread
      from the date of advance until payment in full so that the actual rate of
      interest is uniform through the term hereof. If such amortization, proration,
      allocation and spreading is not permitted




47


under
      applicable law, then such excess interest shall be cancelled automatically
      as of
      the date of such acceleration or prepayment and, if theretofore paid, shall
      be
      credited on the Note (or, if the Note has been paid in full, refunded to
      Borrower). The terms and provisions of this Section 11.3 shall
      control and supersede every other provision of the Loan Documents. The Loan
      Documents are contracts made under and shall be construed in accordance with
      and
      governed by the laws of the State of Illinois, except that (1) if at any
      time the laws of the United States of America permit Lender to contract for,
      take, reserve, charge or receive a higher rate of interest than is allowed
      by
      the laws of the State of Illinois (whether such federal laws directly so provide
      or refer to the law of any state), then such federal laws shall to such extent
      govern as to the rate of interest which Lender may contract for, take, reserve,
      charge or receive under the Loan Documents and (2) to the extent otherwise
      specified in any of the Loan Documents.




Section
      11.4  Invalid
      Provisions.




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




Section
      11.5  Reimbursement
      of Expenses; Portfolio Administration Fee.




(a)  Borrower
      shall pay all expenses incurred by Agent and Lenders in connection with the
      Loan, including, without limitation, (i) reasonable out-of-pocket costs and
      expenses of Agent and Lender in connection with (a) the negotiation,
      preparation, execution and delivery of the Loan Documents and the documents
      and
      instruments referred to therein; (b) due diligence with respect to the
      Collateral and the creation, perfection or protection of Agent's liens on the
      Collateral (including, without limitation, fees and expenses for title and
      lien
      searches, premiums for title insurance and endorsements thereto, amended or
      replacement Security Document, Uniform Commercial Code financing statements
      or
      other collateral security instruments, title insurance premiums and filing
      and
      recording fees, third party due diligence expenses for the Project plus travel
      expenses, accounting firm fees, costs of the appraisals and Site Assessments
      (and the environmental consultant), the engineering reports, audit costs and
      costs and fees incurred in connection with arranging, setting up, servicing
      any
      pledged accounts or similar collateral); (c) the negotiation, preparation,
      execution and delivery of any amendment, waiver, restructuring, workout or
      consent relating to any of the Loan Documents, (d) the settlement of any dispute
      regarding condemnation and casualty awards and (e) the preservation of rights
      under and enforcement of the Loan Documents and the documents and instruments
      referred to therein, including any communications or discussions relating to
      any
      action that Borrower shall from time to time request Agent to take, as well
      as
      any restructuring or rescheduling of the Loan, (ii) the reasonable fees,
      expenses and other charges of counsel to Agent and the Lender in




48


connection
      with all of the foregoing, (iii) all reasonable fees and expenses of any
      servicer appointed by Agent to service and administer the Loan and its counsel,
      and (iv) Agent's or Lender's reasonable travel and other out-of-pocket expenses
      in connection with site visits to the Project. Borrower shall, upon request,
      promptly reimburse Agent and Lender for all reasonable amounts expended,
      advanced or incurred by Agent and Lender to collect the Note, or to enforce
      the
      rights of Agent and Lender under this Agreement or any other Loan Document,
      or
      to defend or assert the rights and claims of Agent and Lender under the Loan
      Documents or with respect to the Project (by litigation or other proceedings),
      which amounts will include all reasonable court costs, attorneys' fees and
      expenses, fees of auditors and accountants, and investigation expenses as may
      be
      incurred by Agent and Lender in connection with any such matters (whether or
      not
      litigation is instituted), together with interest at the Default Rate on each
      such amount from the date of disbursement until the date of reimbursement to
      Agent, all of which shall constitute part of the Loan and shall be secured
      by
      the Loan Documents.




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




Section
      11.6  Approvals;
      Third Parties; Conditions.




All
      approval rights retained or exercised by Agent with respect to leases,
      contracts, plans, studies and other matters are solely to facilitate Lender's
      credit underwriting, and shall not be deemed or construed as a determination
      that Agent or Lender has passed on the adequacy thereof for any other purpose
      and may not be relied upon by Borrower or any other Person. This Agreement
      is
      for the sole and exclusive use of Agent, Lender and Borrower and may not be
      enforced, nor relied upon, by any Person other than Agent, Lender and Borrower.
      All conditions of the obligations of Agent or Lender hereunder, including the
      obligation to make advances, are imposed solely and exclusively for the benefit
      of Agent and Lender, and their respective successors and assigns, and no other
      Person shall have standing to require satisfaction of such conditions or be
      entitled to assume that Lender will refuse to make advances in the absence
      of
      strict compliance with any or all of such conditions, and no other Person shall,
      under any circumstances, be deemed to be a beneficiary of such conditions,
      any
      and all of which may be freely waived in whole or in part by Agent or Lender,
      as
      applicable, at any time in Agent's or Lender's sole discretion.




Section
      11.7  Lender
      Not in Control; No Partnership.




None
      of
      the covenants or other provisions contained in this Agreement shall, or shall
      be
      deemed to, give Agent or Lender the right or power to exercise control over
      the
      affairs or management of Borrower, the power of Agent and Lender being limited
      to the right to exercise the remedies referred to in the Loan Documents. The
      relationship between Borrower, on the one hand, and Agent and Lender, on the
      other hand, is, and at all times shall remain, solely that of debtor and
      creditor. No covenant or provision of the Loan Documents is intended, nor shall
      it be deemed or construed, to create a partnership, joint




49


venture,
      agency or common interest in profits or income between Agent and Lender, on
      the
      one hand, and Borrower, on the other hand, or to create an equity in the Project
      in Lender or Agent. Neither Agent nor Lender either undertakes or assumes any
      responsibility or duty to Borrower or to any other person with respect to the
      Project or the Loan, except as expressly provided in the Loan Documents; and
      notwithstanding any other provision of the Loan Documents (a) Neither Agent
      nor Lender is nor shall be construed as, a partner, joint venturer, alter ego,
      manager, controlling person or other business associate or participant of any
      kind of Borrower or its stockholders, members, or partners and neither Agent
      nor
      Lender intends to ever assume such status; (b) Neither Agent nor Lender
      shall in any event be liable for any Debts, expenses or losses incurred or
      sustained by Borrower; and (c) Neither Agent nor Lender shall be deemed
      responsible for or a participant in any acts, omissions or decisions of Borrower
      or its stockholders, members, or partners. Agent, and Lender, on the one hand,
      and Borrower, on the other hand, disclaim any intention to create any
      partnership, joint venture, agency or common interest in profits or income
      between Agent and Lender, on the one hand, and Borrower, on the other hand,
      or
      to create an equity in the Project in Agent or Lender, or any sharing of
      liabilities, losses, costs or expenses.




Section
      11.8  Time
      of the Essence.




Time
      is
      of the essence with respect to this Agreement.




Section
      11.9  Successors
      and Assigns.




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




Section
      11.10  Renewal,
      Extension or Rearrangement.




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




Section
      11.11  Waivers;
      Forbearance.




No
      advance of Loan proceeds hereunder shall constitute a waiver of any of the
      conditions to Lender's obligation to make advances nor, in the event Borrower
      is
      unable to satisfy any such condition, shall any such advance have the effect
      of
      precluding Lender or Agent from thereafter requiring such condition to be
      satisfied prior to any future advance to




50


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




Section
      11.12  Cumulative
      Rights.




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




Section
      11.13  Singular
      and Plural.




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




Section
      11.14  Phrases.




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




Section
      11.15  Exhibits
      and Schedules.




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




51




Section
      11.16  Titles
      of Articles, Sections and Subsections.




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




Section
      11.17  Promotional
      Material.




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




Section
      11.18  Survival.




All
      of
      the representations, warranties, covenants, and indemnities hereunder, and
      under
      the indemnification provisions of the other Loan Documents shall survive the
      repayment in full of the Loan and the release of the liens evidencing or
      securing the Loan, and shall survive the transfer (by sale, foreclosure,
      conveyance in lieu of foreclosure or otherwise) of any or all right, title
      and
      interest in and to the Project to any party, whether or not an Affiliate of
      Borrower.




Section
      11.19  WAIVER
      OF JURY TRIAL.




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




52




Section
      11.20  Waiver
      of Punitive or Consequential Damages.




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




Section
      11.21  Governing
      Law.




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




Section
      11.22  Entire
      Agreement.




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




Section
      11.23  Counterparts.




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




Section
      11.24  Venue.




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




53




Section
      11.25  Sale
      of Loan, Participation.




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




Section
      11.26  Limitation
      on Liability of Agent's and Lender's Officers, Employees, etc.




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




Section
      11.27  Effectiveness
      of Facsimile Documents and Signatures.




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




Section
      11.28  Agency.




Both
      GECC
      and the other Lenders agree that GECC shall act as agent for each Lender in
      all
      dealings with Borrower, Guarantor and Master Tenant under or in
      connection




54


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









55


EXECUTED
      as of the date first written above.







**LENDER**:
              
              **GENERAL
                ELECTRIC CAPITAL CORPORATION**,
                a
                Delaware corporation
              
              By:
                /s/
                J. McMahon
              Name:
                Jim McMahon
              Its:
                Vice President & Duly Authorized Signatory








**BORROWER**:
              
              
              **ESC-ARBOR
                PLACE, LLC**,
                a
                Washington limited liability companyBy:
            EMERITUS
                CORPORATION, a Washington corporation, its sole memberBy:/s/
                Raymond R. Brandstrom
              Name:
                Raymond R. Brandstrom
              Its:Vice
                President of Finance








**AGENT**:
              
              **GENERAL
                ELECTRIC CAPITAL CORPORATION**,
                a
                Delaware corporation
              
              By:/s/
                J. McMahon
              Name:Jim
                McMahon
              Its:Vice
                President & Duly Authorized
                Signatory











**EXHIBIT
      A-1**




**The
      Project**










Name
                of Facility:
            Arbor
                PlaceAddress
                of Land:
            12806
                Bothwell-Everett Highway, Everett, WashingtonNumber
                of Independent/Assisted Living Beds/Units:
            100
                units (assisted living)Number
                of Parking Spaces:
            66Legal
                Description of Land:
            See
                Attached





Exhibit
            A-1
 Page
            1


**ARBOR
      PLACE**




**LEGAL
      DESCRIPTION**




PARCEL
      A:




LOT
      2,
      PROVIDENCE MEDICAL CENTER BINDING SITE PLAN FILE NO. 01-107895 BG RECORDED
      UNDER
      AUDITOR’S FILE NUMBER 200208155006, BEING A PORTION OF THE SOUTHEAST QUARTER OF
      THE SOUTHEAST QUARTER OF SECTION 30, TOWNSHIP 28 NORTH, RANGE 5 EAST, W.M.,
      RECORDS OF SNOHOMISH COUNTY, WASHINGTON.




PARCEL
      B:




A
      NON-EXCLUSIVE EASEMENT FOR INGRESS AND EGRESS AS DESCRIBED IN AND CREATED BY
      PROVIDENCE MEDICAL CENTER BINDING SITE PLAN FILE NO. 01-107895 BG RECORDED
      UNDER
      FILE NO. 200208155006, UPON AND SUBJECT TO THE PROVISIONS THEREIN CONTAINED,
      BEING A PORTION OF LOT 1 OF SAID BINDING SITE PLAN, AND NON EXCLUSIVE EASEMENTS
      FOR INGRESS AND EGRESS AS DESCRIBED IN AND CREATED BY INSTRUMENTS RECORDED
      UNDER
      AUDITOR’S FILE NO.’S 200005040193 AND 200005040194, UPON AND SUBJECT TO THE
      PROVISIONS THEREIN CONTAINED, ALL LOCATED IN THE SOUTHEAST QUARTER OF THE
      SOUTHEAST QUARTER OF SECTION 30, TOWNSHIP 28 NORTH, RANGE 5 EAST, W.M., RECORDS
      OF SNOHOMISH COUNTY, WASHINGTON.




SITUATE
      IN THE COUNTY OF SNOHOMISH, STATE OF WASHINGTON










Exhibit
            A-1
 Page
            2




**EXHIBIT
      B**




**Interest
      Holder Certificate and Agreement**







To:  General
      Electric Capital Corporation, as Agent


500
      West
      Monroe Street


Suite
      1500


Chicago,
      Illinois 60661








Date: ***_________________***





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




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




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




Exhibit
            B
 Page
            1


such
      requirement, that no Person who owns any other direct interest in any Owner
      or
      Borrower is or shall be listed on any of the Lists or is or shall be a
      Designated Person. This Section 1 shall not apply to any Person to the extent
      that such Person's interest in Borrower is through a U.S. Publicly-Traded
      Entity. As used in this Agreement " U.S.
      Publicly-Traded Entity "
      means a
      Person (other than an individual) whose securities are listed on a national
      securities exchange, or quoted on an automated quotation system, in the United
      States, or a wholly-owned subsidiary of such a Person. From time to time upon
      the written request of Agent, each Owner shall deliver to Borrower a schedule of
      the name, legal domicile address and (for entities) place of organization of
      each holder of a controlling ownership interest in such Owner.




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




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




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




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




Exhibit
            B
 Page
            2


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




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




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




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




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




11.  No
      transfer of any direct interest in Borrower or of any controlling ownership
      interest in Owner shall be effective unless and until the transferor has
      provided a written certification to Borrower that, after making due inquiry,
      (a) the transferee or any Person who owns a controlling interest in, or
      otherwise controls, the transferee is not listed on any of the Lists and is
      not
      a Designated Person, and the transferee has taken reasonable measures
      to




Exhibit
            B
 Page
            3


assure
      that no holder of any other controlling ownership interest in the transferee
      is
      so listed or is so designated; provided, however, that none of the foregoing
      shall apply to any Person which is, or to the extent that such interest is
      through, a U.S. Publicly-Traded Entity, and (b) the funds for investment in
      Owner or Borrower are derived from legal sources.




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




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




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




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




Exhibit
            B
 Page
            4


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







OWNER :








Exhibit
            B
 Page
            5


**EXHIBIT
      C**




**INTELLECTUAL
      PROPERTY**




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





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

















**EXHIBIT
      D**




**OWNERSHIP
      OF BORROWER**







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











**EXHIBIT
      E**




**PROVIDER
      PAYMENT/REIMBURSEMENT PROGRAMS**







NONE











**EXHIBIT
      F**




**GOVERNMENTAL
      APPROVALS**







[ **TO
      BE INSERTED** ]











**EXHIBIT
      G**




**MASTER
      TENANT ORGANIZATIONAL CHART**





























































































*To
      be
      terminated upon Emeritus' purchase of Silver Lake Assisted Living
      LLC








**SCHEDULE
      2.1**




**ADVANCE
      CONDITIONS**







Part
      A -
      Conditions to Initial Advance


Part
      B -
      Application of Insurance Proceeds





**PART
      A**




**CONDITIONS
      TO INITIAL ADVANCE**




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




1.
            Loan
                Documents.
                The following Loan Documents:




(a)
            the
                Loan Agreement executed by Borrower




(b)
            Promissory
                Note




(c)
            the
                Security Document executed by
                Borrower




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




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




(f)
            the
                Business Associate Agreement executed by Borrower, Guarantor and
                Master
                Tenant




(g)
            a
                Payment and Performance Guaranty executed by
                Guarantor




(h)
            the
                Assignment of Membership Interests ("**Assignment
                of Membership Interests**")




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




2.
            Loan
                Origination Fee.
                The loan origination fee of $80,000, which fee shall be non-refundable
                and
                shall be deemed fully earned upon receipt.




3.
            Title
                Insurance Policy.
                An ALTA (or equivalent) mortgagee policy or policies of title insurance
                in
                the maximum amount of the Loan, with reinsurance and endorsements
                as Agent
                may require, containing no exceptions to title (printed or otherwise)
                which are unacceptable to Agent, and insuring that the
                Security




Schedule
          2.1 -
          1


Document
      is a first-priority Lien on the Project and related collateral (the
      " **Title
      Policy** ").




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




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




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




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




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




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




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






Schedule 2.1
          -
          2


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




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




13.
            A
                copy of the Management Agreement, certified by Borrower as being
                true,
                correct and complete.




14.
            Tax
                Impounds.
                Borrower's deposit with Agent of the amount required by Agent to
                impound
                for Taxes and to fund any other required escrows or reserves.




15.
            Compliance
                With Laws.
                Evidence that the Project and the operation thereof comply with all
                legal
                requirements, including that all requisite certificates of occupancy,
                building permits, and other licenses, certificates, approvals or
                consents
                required of any governmental authority have been issued without variance
                or condition and that there is no litigation, action, citation, injunctive
                proceedings, or like matter pending or threatened with respect to
                the
                validity of such matters. If title insurance with respect to the
                Project
                described in item








Schedule 2.1
          -
          3


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




16.
            No
                Casualty or Condemnation.
                No condemnation or adverse zoning or usage change proceeding shall
                have
                occurred or shall have been threatened against the Project; the Project
                shall not have suffered any significant damage by fire or other casualty
                which has not been repaired; no law, regulation, ordinance, moratorium,
                injunctive proceeding, restriction, litigation, action, citation
                or
                similar proceeding or matter shall have been enacted, adopted, or
                threatened by any governmental authority, which would, in Agent's
                reasonable judgment, result in a Material Adverse
                Change.




17.
            Audit
                Requirement.
                The annualized Net Operating Income of the Project equals or exceeds
                $865,000 for the three month period ending April 30,
                2006.




18.
            Reserved.




19.
            Broker's
                Fees.
                All fees and commissions payable to real estate brokers, mortgage
                brokers,
                or any other brokers or agents in connection with the Loan or the
                acquisition of the Project have been paid, such evidence to be accompanied
                by any waivers or indemnifications deemed necessary by
                Agent.




20.
            Costs
                and Expenses.
                Payment of Agent's costs and expenses in underwriting, documenting,
                and
                closing the transaction, including fees and expenses of Agent's inspecting
                engineers, consultants and counsel.




21.
            Representations
                and Warranties.
                The representations and warranties contained in this Loan Agreement
                and in
                all other Loan Documents are true and correct in all material
                respects.




22.
            No
                Defaults.
                No Potential Default or Event of Default or default under any of
                the Loan
                Documents shall have occurred or
                exist.




23.
            Appraisal.
                Agent shall obtain an appraisal report for the Project, in form and
                content acceptable to Agent, prepared by an independent MAI appraiser
                in
                accordance with the Financial Institutions Reform, Recovery and
                Enforcement Act ("**FIRREA**")
                and the regulations promulgated pursuant to such
                act.




24.
            Acquisition
                Documents.
                Agent shall have reviewed and approved the purchase contract for
                the
                Project and the closing statements with respect thereto (the "**Acquisition
                Documents**").




25.
            Agent
                shall have received such other items as Agent may reasonably
                require.




Schedule 2.1
          -
          4


**PART
      B**




**APPLICATION
      OF INSURANCE PROCEEDS**




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




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




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




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




4.  All
      restorations constructed by Borrower prior to the date a restorations advance
      is
      requested shall be completed to the satisfaction of Agent and Agent's engineer
      and in accordance with the plans and budget for such restorations, as approved
      by Agent in accordance with the terms hereof, and all legal
      requirements.




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




Schedule 2.1
          -
          5


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




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




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




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







Schedule 2.1
          -
          6





**SCHEDULE
      2.3**









**AMORTIZATION
      SCHEDULE**




Closing
                Date
            
            7/1/2006
            
            
            
            Payment
            
            $57,716.36
            
            -$57,716.36First
                Payment Date
            
            8/1/2006
            
            
            
            Coupon
            
            7.229%
            
            300Original
                Balance
            
            $8,000,000
            
            
            
            Int
                Conv
            
            Actual/360Maturity
                Date
            
            6/30/2013
            
            
            
            Int
                Only Period
            
            0
            
            Months**Annual
                Summary**
            
            
            
            **Days**
            
            **Ending
                Balance**
            
            **Payment**
            
            **Interest**
            
            **Principal**
            
            **Prepayment**
            
            **Balloon
                Amount**Year
                1
            
            
            
            
            
            
            
            
            365
            
            
            7,890,213.97
            
            
            692,596
            
            
            582,810
            
            
            109,786
            
            
            0
            
            
            0Year
                2
            
            
            
            
            
            
            
            
            366
            
            
            7,773,715.70
            
            
            692,596
            
            
            576,098
            
            
            116,498
            
            
            0
            
            
            0Year
                3
            
            
            
            
            
            
            
            
            365
            
            
            7,646,775.78
            
            
            692,596
            
            
            565,656
            
            
            126,940
            
            
            0
            
            
            0Year
                4
            
            
            
            
            
            
            
            
            365
            
            
            7,510,212.94
            
            
            692,596
            
            
            556,033
            
            
            136,563
            
            
            0
            
            
            0Year
                5
            
            
            
            
            
            
            
            
            365
            
            
            7,363,297.71
            
            
            692,596
            
            
            545,681
            
            
            146,915
            
            
            0
            
            
            0Year
                6
            
            
            
            
            
            
            
            
            366
            
            
            7,206,742.40
            
            
            692,596
            
            
            536,041
            
            
            156,555
            
            
            0
            
            
            0Year
                7
            
            
            
            
            
            
            
            
            365
            
            
            0.00
            
            
            634,880
            
            
            480,193
            
            
            154,687
            
            
            0
            
            
            7,052,055.62Year
                8
            
            
            
            
            
            
            
            
            365
            
            
            0.00
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Year
                9
            
            
            
            
            
            
            
            
            365
            
            
            0.00
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Year
                10
            
            
            
            
            
            
            
            
            366
            
            
            0.00
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0**Period**
            
            
            
            
            
            **Date**
            
            
            **Days**
            
            
            **Ending
                Balance**
            
            
            **Payment**
            
            
            **Interest**
            
            
            **Principal**
            
            
            **Prepayment**
            
            
            **Balloon
                Amount**0
            
            
            7/1/2006
            
            
            
            
            
            8,000,000.001
            
            
            8/1/2006
            
            
            31
            
            
            7,992,083.42
            
            
            57,716.36
            
            
            49,799.78
            
            
            7,916.58
            
            
            0.00
            
            
            0.002
            
            
            9/1/2006
            
            
            31
            
            
            7,984,117.56
            
            
            57,716.36
            
            
            49,750.50
            
            
            7,965.86
            
            
            0.00
            
            
            0.003
            
            
            10/1/2006
            
            
            30
            
            
            7,974,498.85
            
            
            57,716.36
            
            
            48,097.65
            
            
            9,618.71
            
            
            0.00
            
            
            0.004
            
            
            11/1/2006
            
            
            31
            
            
            7,966,423.52
            
            
            57,716.36
            
            
            49,641.03
            
            
            8,075.33
            
            
            0.00
            
            
            0.005
            
            
            12/1/2006
            
            
            30
            
            
            7,956,698.23
            
            
            57,716.36
            
            
            47,991.06
            
            
            9,725.30
            
            
            0.00
            
            
            0.006
            
            
            1/1/2007
            
            
            31
            
            
            7,948,512.09
            
            
            57,716.36
            
            
            49,530.23
            
            
            8,186.13
            
            
            0.00
            
            
            0.007
            
            
            2/1/2007
            
            
            31
            
            
            7,940,275.00
            
            
            57,716.36
            
            
            49,479.27
            
            
            8,237.09
            
            
            0.00
            
            
            0.008
            
            
            3/1/2007
            
            
            28
            
            
            7,927,203.28
            
            
            57,716.36
            
            
            44,644.64
            
            
            13,071.72
            
            
            0.00
            
            
            0.009
            
            
            4/1/2007
            
            
            31
            
            
            7,918,833.54
            
            
            57,716.36
            
            
            49,346.62
            
            
            8,369.74
            
            
            0.00
            
            
            0.0010
            
            
            5/1/2007
            
            
            30
            
            
            7,908,821.55
            
            
            57,716.36
            
            
            47,704.37
            
            
            10,011.99
            
            
            0.00
            
            
            0.0011
            
            
            6/1/2007
            
            
            31
            
            
            7,900,337.38
            
            
            57,716.36
            
            
            49,232.19
            
            
            8,484.17
            
            
            0.00
            
            
            0.0012
            
            
            7/1/2007
            
            
            30
            
            
            7,890,213.97
            
            
            57,716.36
            
            
            47,592.95
            
            
            10,123.41
            
            
            0.00
            
            
            0.0013
            
            
            8/1/2007
            
            
            31
            
            
            7,881,613.98
            
            
            57,716.36
            
            
            49,116.36
            
            
            8,600.00
            
            
            0.00
            
            
            0.0014
            
            
            9/1/2007
            
            
            31
            
            
            7,872,960.44
            
            
            57,716.36
            
            
            49,062.83
            
            
            8,653.53
            
            
            0.00
            
            
            0.0015
            
            
            10/1/2007
            
            
            30
            
            
            7,862,672.11
            
            
            57,716.36
            
            
            47,428.03
            
            
            10,288.33
            
            
            0.00
            
            
            0.0016
            
            
            11/1/2007
            
            
            31
            
            
            7,853,900.67
            
            
            57,716.36
            
            
            48,944.92
            
            
            8,771.44
            
            
            0.00
            
            
            0.0017
            
            
            12/1/2007
            
            
            30
            
            
            7,843,497.51
            
            
            57,716.36
            
            
            47,313.21
            
            
            10,403.15
            
            
            0.00
            
            
            0.0018
            
            
            1/1/2008
            
            
            31
            
            
            7,834,606.71
            
            
            57,716.36
            
            
            48,825.55
            
            
            8,890.81
            
            
            0.00
            
            
            0.0019
            
            
            2/1/2008
            
            
            31
            
            
            7,825,660.56
            
            
            57,716.36
            
            
            48,770.21
            
            
            8,946.15
            
            
            0.00
            
            
            0.0020
            
            
            3/1/2008
            
            
            29
            
            
            7,813,515.84
            
            
            57,716.36
            
            
            45,571.65
            
            
            12,144.71
            
            
            0.00
            
            
            0.00


Schedule
          2.3 - 1





21
            
            
            4/1/2008
            
            
            31
            
            
            7,804,438.40
            
            
            57,716.36
            
            
            48,638.92
            
            
            9,077.44
            
            
            0.00
            
            
            0.0022
            
            
            5/1/2008
            
            
            30
            
            
            7,793,737.28
            
            
            57,716.36
            
            
            47,015.24
            
            
            10,701.12
            
            
            0.00
            
            
            0.0023
            
            
            6/1/2008
            
            
            31
            
            
            7,784,536.72
            
            
            57,716.36
            
            
            48,515.80
            
            
            9,200.56
            
            
            0.00
            
            
            0.0024
            
            
            7/1/2008
            
            
            30
            
            
            7,773,715.70
            
            
            57,716.36
            
            
            46,895.35
            
            
            10,821.01
            
            
            0.00
            
            
            0.0025
            
            
            8/1/2008
            
            
            31
            
            
            7,764,390.51
            
            
            57,716.36
            
            
            48,391.16
            
            
            9,325.20
            
            
            0.00
            
            
            0.0026
            
            
            9/1/2008
            
            
            31
            
            
            7,755,007.26
            
            
            57,716.36
            
            
            48,333.12
            
            
            9,383.24
            
            
            0.00
            
            
            0.0027
            
            
            10/1/2008
            
            
            30
            
            
            7,744,008.36
            
            
            57,716.36
            
            
            46,717.46
            
            
            10,998.90
            
            
            0.00
            
            
            0.0028
            
            
            11/1/2008
            
            
            31
            
            
            7,734,498.24
            
            
            57,716.36
            
            
            48,206.24
            
            
            9,510.12
            
            
            0.00
            
            
            0.0029
            
            
            12/1/2008
            
            
            30
            
            
            7,723,375.78
            
            
            57,716.36
            
            
            46,593.91
            
            
            11,122.45
            
            
            0.00
            
            
            0.0030
            
            
            1/1/2009
            
            
            31
            
            
            7,713,737.22
            
            
            57,716.36
            
            
            48,077.80
            
            
            9,638.56
            
            
            0.00
            
            
            0.0031
            
            
            2/1/2009
            
            
            31
            
            
            7,704,038.66
            
            
            57,716.36
            
            
            48,017.80
            
            
            9,698.56
            
            
            0.00
            
            
            0.0032
            
            
            3/1/2009
            
            
            28
            
            
            7,689,638.69
            
            
            57,716.36
            
            
            43,316.39
            
            
            14,399.97
            
            
            0.00
            
            
            0.0033
            
            
            4/1/2009
            
            
            31
            
            
            7,679,790.12
            
            
            57,716.36
            
            
            47,867.79
            
            
            9,848.57
            
            
            0.00
            
            
            0.0034
            
            
            5/1/2009
            
            
            30
            
            
            7,668,338.09
            
            
            57,716.36
            
            
            46,264.34
            
            
            11,452.02
            
            
            0.00
            
            
            0.0035
            
            
            6/1/2009
            
            
            31
            
            
            7,658,356.92
            
            
            57,716.36
            
            
            47,735.19
            
            
            9,981.17
            
            
            0.00
            
            
            0.0036
            
            
            7/1/2009
            
            
            30
            
            
            7,646,775.78
            
            
            57,716.36
            
            
            46,135.22
            
            
            11,581.14
            
            
            0.00
            
            
            0.0037
            
            
            8/1/2009
            
            
            31
            
            
            7,636,660.39
            
            
            57,716.36
            
            
            47,600.97
            
            
            10,115.39
            
            
            0.00
            
            
            0.0038
            
            
            9/1/2009
            
            
            31
            
            
            7,626,482.03
            
            
            57,716.36
            
            
            47,538.00
            
            
            10,178.36
            
            
            0.00
            
            
            0.0039
            
            
            10/1/2009
            
            
            30
            
            
            7,614,708.87
            
            
            57,716.36
            
            
            45,943.20
            
            
            11,773.16
            
            
            0.00
            
            
            0.0040
            
            
            11/1/2009
            
            
            31
            
            
            7,604,393.86
            
            
            57,716.36
            
            
            47,401.35
            
            
            10,315.01
            
            
            0.00
            
            
            0.0041
            
            
            12/1/2009
            
            
            30
            
            
            7,592,487.63
            
            
            57,716.36
            
            
            45,810.14
            
            
            11,906.22
            
            
            0.00
            
            
            0.0042
            
            
            1/1/2010
            
            
            31
            
            
            7,582,034.30
            
            
            57,716.36
            
            
            47,263.02
            
            
            10,453.34
            
            
            0.00
            
            
            0.0043
            
            
            2/1/2010
            
            
            31
            
            
            7,571,515.89
            
            
            57,716.36
            
            
            47,197.95
            
            
            10,518.41
            
            
            0.00
            
            
            0.0044
            
            
            3/1/2010
            
            
            28
            
            
            7,556,370.80
            
            
            57,716.36
            
            
            42,571.27
            
            
            15,145.09
            
            
            0.00
            
            
            0.0045
            
            
            4/1/2010
            
            
            31
            
            
            7,545,692.64
            
            
            57,716.36
            
            
            47,038.20
            
            
            10,678.16
            
            
            0.00
            
            
            0.0046
            
            
            5/1/2010
            
            
            30
            
            
            7,533,432.79
            
            
            57,716.36
            
            
            45,456.51
            
            
            12,259.85
            
            
            0.00
            
            
            0.0047
            
            
            6/1/2010
            
            
            31
            
            
            7,522,611.84
            
            
            57,716.36
            
            
            46,895.41
            
            
            10,820.95
            
            
            0.00
            
            
            0.0048
            
            
            7/1/2010
            
            
            30
            
            
            7,510,212.94
            
            
            57,716.36
            
            
            45,317.47
            
            
            12,398.89
            
            
            0.00
            
            
            0.0049
            
            
            8/1/2010
            
            
            31
            
            
            7,499,247.45
            
            
            57,716.36
            
            
            46,750.87
            
            
            10,965.49
            
            
            0.00
            
            
            0.0050
            
            
            9/1/2010
            
            
            31
            
            
            7,488,213.70
            
            
            57,716.36
            
            
            46,682.61
            
            
            11,033.75
            
            
            0.00
            
            
            0.0051
            
            
            10/1/2010
            
            
            30
            
            
            7,475,607.59
            
            
            57,716.36
            
            
            45,110.25
            
            
            12,606.11
            
            
            0.00
            
            
            0.0052
            
            
            11/1/2010
            
            
            31
            
            
            7,464,426.68
            
            
            57,716.36
            
            
            46,535.45
            
            
            11,180.91
            
            
            0.00
            
            
            0.0053
            
            
            12/1/2010
            
            
            30
            
            
            7,451,677.27
            
            
            57,716.36
            
            
            44,966.95
            
            
            12,749.41
            
            
            0.00
            
            
            0.0054
            
            
            1/1/2011
            
            
            31
            
            
            7,440,347.39
            
            
            57,716.36
            
            
            46,386.48
            
            
            11,329.88
            
            
            0.00
            
            
            0.0055
            
            
            2/1/2011
            
            
            31
            
            
            7,428,946.99
            
            
            57,716.36
            
            
            46,315.96
            
            
            11,400.40
            
            
            0.00
            
            
            0.0056
            
            
            3/1/2011
            
            
            28
            
            
            7,413,000.29
            
            
            57,716.36
            
            
            41,769.67
            
            
            15,946.69
            
            
            0.00
            
            
            0.0057
            
            
            4/1/2011
            
            
            31
            
            
            7,401,429.65
            
            
            57,716.36
            
            
            46,145.72
            
            
            11,570.64
            
            
            0.00
            
            
            0.0058
            
            
            5/1/2011
            
            
            30
            
            
            7,388,300.74
            
            
            57,716.36
            
            
            44,587.45
            
            
            13,128.91
            
            
            0.00
            
            
            0.0059
            
            
            6/1/2011
            
            
            31
            
            
            7,376,576.35
            
            
            57,716.36
            
            
            45,991.97
            
            
            11,724.39
            
            
            0.00
            
            
            0.0060
            
            
            7/1/2011
            
            
            30
            
            
            7,363,297.71
            
            
            57,716.36
            
            
            44,437.73
            
            
            13,278.63
            
            
            0.00
            
            
            0.0061
            
            
            8/1/2011
            
            
            31
            
            
            7,351,417.68
            
            
            57,716.36
            
            
            45,836.32
            
            
            11,880.04
            
            
            0.00
            
            
            0.0062
            
            
            9/1/2011
            
            
            31
            
            
            7,339,463.69
            
            
            57,716.36
            
            
            45,762.37
            
            
            11,953.99
            
            
            0.00
            
            
            0.0063
            
            
            10/1/2011
            
            
            30
            
            
            7,325,961.48
            
            
            57,716.36
            
            
            44,214.15
            
            
            13,502.21
            
            
            0.00
            
            
            0.0064
            
            
            11/1/2011
            
            
            31
            
            
            7,313,849.03
            
            
            57,716.36
            
            
            45,603.91
            
            
            12,112.45
            
            
            0.00
            
            
            0.0065
            
            
            12/1/2011
            
            
            30
            
            
            7,300,192.51
            
            
            57,716.36
            
            
            44,059.85
            
            
            13,656.51
            
            
            0.00
            
            
            0.0066
            
            
            1/1/2012
            
            
            31
            
            
            7,287,919.65
            
            
            57,716.36
            
            
            45,443.50
            
            
            12,272.86
            
            
            0.00
            
            
            0.0067
            
            
            2/1/2012
            
            
            31
            
            
            7,275,570.38
            
            
            57,716.36
            
            
            45,367.10
            
            
            12,349.26
            
            
            0.00
            
            
            0.0068
            
            
            3/1/2012
            
            
            29
            
            
            7,260,222.30
            
            
            57,716.36
            
            
            42,368.27
            
            
            15,348.09
            
            
            0.00
            
            
            0.0069
            
            
            4/1/2012
            
            
            31
            
            
            7,247,700.62
            
            
            57,716.36
            
            
            45,194.68
            
            
            12,521.68
            
            
            0.00
            
            
            0.0070
            
            
            5/1/2012
            
            
            30
            
            
            7,233,645.62
            
            
            57,716.36
            
            
            43,661.36
            
            
            14,055.00
            
            
            0.00
            
            
            0.0071
            
            
            6/1/2012
            
            
            31
            
            
            7,220,958.50
            
            
            57,716.36
            
            
            45,029.24
            
            
            12,687.12
            
            
            0.00
            
            
            0.00


Schedule
          2.3 - 2





72
            
            
            7/1/2012
            
            
            30
            
            
            7,206,742.40
            
            
            57,716.36
            
            
            43,500.26
            
            
            14,216.10
            
            
            0.00
            
            
            0.0073
            
            
            8/1/2012
            
            
            31
            
            
            7,193,887.81
            
            
            57,716.36
            
            
            44,861.77
            
            
            12,854.59
            
            
            0.00
            
            
            0.0074
            
            
            9/1/2012
            
            
            31
            
            
            7,180,953.20
            
            
            57,716.36
            
            
            44,781.75
            
            
            12,934.61
            
            
            0.00
            
            
            0.0075
            
            
            10/1/2012
            
            
            30
            
            
            7,166,496.10
            
            
            57,716.36
            
            
            43,259.26
            
            
            14,457.10
            
            
            0.00
            
            
            0.0076
            
            
            11/1/2012
            
            
            31
            
            
            7,153,390.98
            
            
            57,716.36
            
            
            44,611.24
            
            
            13,105.12
            
            
            0.00
            
            
            0.0077
            
            
            12/1/2012
            
            
            30
            
            
            7,138,767.84
            
            
            57,716.36
            
            
            43,093.22
            
            
            14,623.14
            
            
            0.00
            
            
            0.0078
            
            
            1/1/2013
            
            
            31
            
            
            7,125,490.11
            
            
            57,716.36
            
            
            44,438.63
            
            
            13,277.73
            
            
            0.00
            
            
            0.0079
            
            
            2/1/2013
            
            
            31
            
            
            7,112,129.73
            
            
            57,716.36
            
            
            44,355.98
            
            
            13,360.38
            
            
            0.00
            
            
            0.0080
            
            
            3/1/2013
            
            
            28
            
            
            7,094,401.71
            
            
            57,716.36
            
            
            39,988.34
            
            
            17,728.02
            
            
            0.00
            
            
            0.0081
            
            
            4/1/2013
            
            
            31
            
            
            7,080,847.81
            
            
            57,716.36
            
            
            44,162.45
            
            
            13,553.91
            
            
            0.00
            
            
            0.0082
            
            
            5/1/2013
            
            
            30
            
            
            7,065,787.65
            
            
            57,716.36
            
            
            42,656.21
            
            
            15,060.15
            
            
            0.00
            
            
            0.0083
            
            
            6/1/2013
            
            
            31
            
            
            7,052,055.62
            
            
            57,716.36
            
            
            43,984.33
            
            
            13,732.03
            
            
            0.00
            
            
            0.0084
            
            
            7/1/2013
            
            
            30
            
            
            0.00
            
            
            0.00
            
            
            0.00
            
            
            0.00
            
            
            0.00
            
            
            7,052,055.62











Schedule
          2.3 - 2


**SCHEDULE
      2.8**




**SOURCES
      AND USES**









SOURCES
            
            USESLoan:$8,000,000
            
            
            Purchase
                Price:
            
            $
            5,100,000Borrower
                Equity:$3,030,000
            
            
            Debt
                Payoff:
            
            $
            5,600,000Closing
                Costs:
            
            
            
            
            $
            250,000Application
                Fee:
            
            
            
            
            $
            80,000Total:$11,030,000
            
            
            Total:
            
            $
            11,030,000











**SCHEDULE
      3.1**




**INSURANCE
      EXCEPTIONS**









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




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




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















Schedule
            3.1
 Page
            1


**SCHEDULE
      I**




**CERTAIN
      DEFINITIONS**







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




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




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




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




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




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




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




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




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




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




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




Schedule
            I
 Page
            1


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




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




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




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




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




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




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




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




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




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




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




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




Schedule
            I
 Page
            2


obligor,
      guarantor or otherwise, or in respect of which obligations such Person otherwise
      assures a creditor against loss.




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




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




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




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




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




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




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




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




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




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




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




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




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




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




" **Governmental
      Authority** "
      means
      any federal, state, county or municipal government or political subdivision
      thereof, any governmental or quasi-governmental agency, authority, board,
      bureau, commission, department, instrumentality or public body (including,
      without limitation, the State Regulator), or any court, administrative tribunal,
      or public body, including but not limited to all such authorities relating
      to
      the quality and




Schedule
            I
 Page
            3


adequacy
      of medical care, distribution of pharmaceuticals, rate setting, equipment,
      personnel, operating policies, additions to facilities and services and fee
      splitting.




" **Guarantor** " **** means
      Emeritus Corporation, a Washington corporation.




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




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




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




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




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




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




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




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




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




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




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




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




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




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




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




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




Schedule
            I
 Page
            4


" **Lien** "
      means
      any interest, or claim thereof, in the Project securing an obligation owed
      to,
      or a claim by, any Person other than the owner of the Project, whether such
      interest is based on common law, statute or contract, including the lien or
      security interest arising from a deed of trust, mortgage, assignment,
      encumbrance, pledge, security agreement, conditional sale or trust receipt
      or a
      lease, consignment or bailment for security purposes. The term " **Lien** "
      shall
      include reservations, exceptions, encroachments, easements, rights of way,
      covenants, conditions, restrictions, leases and other title exceptions and
      encumbrances affecting the Project.




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




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




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




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




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




" **Material
      Regulatory Violation** "
      means
      any of the following: (i) revocation of any license, permit, approval or
      other Governmental Approval (including, without limitation, any CON) required
      for the lawful operation of the Project, or (ii) other circumstances under
      which (a) a Borrower is, or in Lender's judgment is reasonably likely to be
      required by a determination of any Governmental Authority to cease or suspend
      operation of the Project or (b) any then existing certification of Master
      Tenant, Guarantor or the Borrower under any Third Party Payor Program in which
      Guarantor or Borrower or the Project then participates, is, or in Agent's
      judgment is reasonably likely to be terminated, in whole or in part, prior
      to
      the expiration of the term thereof, (iii) the Project receives a




Schedule
            I
 Page
            5


Level 4/immediate
        jeopardy finding that is not removed, as determined by the applicable surveying
        agency, within ten (10) days from the date the immediate jeopardy designation
        went into effect, (iv) the Project is at any time assessed material fines
        or penalties (whether monetary (e.g. fines or penalties in an aggregate amount
        in excess of $2,500) or non-monetary) by any Governmental Authority having
        jurisdiction over Guarantor, Borrower or such Project, (v) the Project
        continues to have a substandard quality of care designation for a consecutive
        period of ten days (10) days after receipt by Guarantor or Borrower of notice
        from the Governmental Authority or any other Person of the original substandard
        quality of care determination; or (vi) the commencement of any State or
        Federal remedy imposing a ban on new admissions or denying payment for new
        admissions that is not removed within thirty (30) days of that remedy going
        into
        effect.




"**Maturity
      Date**" means (a) June 30, 2013, or (b) any earlier date on
      which the entire Loan is required to be paid in full, whether at maturity,
      by
      acceleration or otherwise, under this Agreement or any of the other Loan
      Documents, or any later date to which the same may be extended in accordance
      with the terms of the Loan Agreement.




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




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




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




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




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




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




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




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




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




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




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




Schedule
            I
 Page 6


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




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




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




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




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




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




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




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




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




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




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




" **Security
      Document** "
      means
      that certain first priority Deed of Trust, Assignment of Rents and Security
      Agreement executed by Borrower for the benefit of Agent, encumbering the
      Project.




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




Schedule
            I
 Page
            7


" **Site
      Assessment** "
      means
      that certain Property Condition Assessment Report prepared by EMG dated
      May 16, 2006, Project No. 77515.06R-001.042.




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




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




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




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




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




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




" **Term
      Sheet** "
      means
      that certain term Sheet dated April 19, 2006, addressed to Eric Mendelsohn,
      Emeritus Corporation, and signed by Chris Taylor.




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




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




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




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




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




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




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




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







Schedule
            I
 Page
            8


Code
      definitions for Index.


**SCHEDULE
      II**









**CALCULATION
      OF NET OPERATING INCOME**




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




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




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




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




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