**AGREEMENT
      AND GENERAL RELEASE**





Emeritus
      Corporation, its successors and assigns ("Emeritus") and Frank Ruffo, his heirs,
      executors, administrators, successors, and assigns (collectively referred to
      throughout this Agreement as “Ruffo”), agree that:





1.  **Resignation
      as Officer** .
      Ruffo
      hereby resigns as an officer of Emeritus and Emeritus accepts Ruffo's
      resignation effective December 31, 2006.





2.  **Consideration** .
      In
      consideration for signing this Agreement and General Release ("Agreement")
      and
      compliance with the promises made herein, Emeritus agrees, subject to the change
      of control provisions in Paragraph 2(k):





(a)
      to
      pay Ruffo's salary at its current rate ($170,000 per year) and to keep Ruffo
      and
      his wife on the Executive benefit plan through June 30, 2007;





(b)
      beginning on July 1, 2007 through December 31, 2012, to pay an annualized salary
      of $117,500 (equal to 60% of base annual salary at time of retirement; Medicare
      basic and supplemental plan premiums for Ruffo at the annual rate in the year
      in
      which each payment is made (currently $7,000 annual payment); 5% additional
      compensation to cover medical premiums for Ruffo's wife between group COBRA
      and
      reaching Medicare eligibility ($8,500)).





(c);
      beginning July 1, 2007, assuming Ruffo's wife elects to continue insurance
      coverage under COBRA, to pay the cost of providing said coverage for 36 months;





(d)
      Beginning on January 1, 2013, through December 31, 2022, to pay a stipend of
      $2,000.00 per month to help defray the cost of health insurance for Ruffo and/or
      his wife. In the event of Ruffo's death prior to January 1, 2013, Emeritus
      will
      not make the $2,000 monthly payment, but will pay Ruffo's wife $1,000 per month
      from January 1, 2013 through December 31, 2022.


(e)
      to
      payout any bonus earned under the 2006 Executive Bonus plan; even if not earned,
      if other senior executives receive bonuses on a discretionary basis, Ruffo
      will
      be entitled to a discretionary amount on the same basis and in a proportionate
      amount as he received in the past relative to other officers.





(f)
      to
      make matching contributions for the 2006 Top Hat Plan;





(g)
      on
      June 30, 2007, to vest 100% of Ruffo's outstanding stock options. As set forth
      in the 2006 Equity Plan provisions, Ruffo shall have one (1) year -- until
      June
      30, 2008 -- to exercise said options;





(h)
      in
      the event the Company offers a health insurance plan effective at any point
      from
      July 1, 2007 through December 31, 2012 that would have allowed the participation
      of Ruffo and/or his wife if it existed on June 30, 2007, the Company will
      immediately notify him and/or her in writing of the plan. Subject to the
      eligibility provisions of





said
      plan, Ruffo (or his wife, if he predeceases her) will have 60 days from the
      date
      of receipt of notice to elect to participate in the plan under its terms and
      conditions with premiums paid for by the Company through December 31, 2012.
      If
      he/she so elects to participate, the provisions of 2 (b) will be changed to
      provide for an annualized salary of $102,000.00 and the remainder of 2 (b)
      is no
      longer applicable;





(i)
      to
      allow Ruffo to keep the 9400 Dell Computer and cell phone and transferring
      cell
      phone to Ruffo’s personal account; and





(j)
      that
      Ruffo may maintain his long term care insurance policy with Ruffo responsible
      for the premiums;





(k)
      in
      the event of a change of control as defined in the Company’s 2006 Stock Option
      Plan or in the event of Ruffo’s death, Emeritus will have the option of
      calculating an equivalent lump sum amount to cover any remaining financial
      obligations set forth in Paragraphs 2(a) - (j) and paying said lump sum to
      Ruffo
      or his surviving spouse.





3.  **No
      Consideration Absent Execution of this Agreement** .
      Ruffo
      understands and agrees that he would not receive the monies and/or benefits
      specified in paragraph “2” above, except for his execution of this Agreement and
      the fulfillment of the promises contained herein.




4.  **Revocation** .
      Ruffo
      may revoke this Agreement for a period of seven (7) calendar days following
      the
      day he executes this Agreement. Any revocation within this period must be
      submitted, in writing, to Dan Baty and state, "I hereby revoke my acceptance
      of
      our Agreement." The revocation must be personally delivered to Dan Baty or
      his
      designee, or mailed to Dan Baty and postmarked within seven (7) calendar days
      of
      execution of this Agreement. This Agreement shall not become effective or
      enforceable until the revocation period has expired. If the last day of the
      revocation period is a Saturday, Sunday, or legal holiday in the state in which
      Ruffo was employed at the time of his last day of employment, then the
      revocation period shall not expire until the next following day which is not
      a
      Saturday, Sunday, or legal holiday.





5.  **General
      Release of Claims** **.**


(a)Ruffo
      knowingly and voluntarily releases and forever discharges Emeritus, its
      affiliates, subsidiaries, divisions, successors and assigns and the current
      and
      former employees, officers, directors, members, managers and agents thereof
      (collectively referred to throughout the remainder of this Agreement as
“Employer”), of and from any and all claims, known and unknown, Ruffo has or may
      have against Employer as of the date of execution of this Agreement, including,
      but not limited to, any alleged violation of:





·
            Title
                VII of the Civil Rights Act of 1964, as
                amended;





·
            The
                Civil Rights Act of 1991;





·
            Sections
                1981 through 1988 of Title 42 of the United States Code, as
                amended;








·
            The
                Employee Retirement Income Security Act of 1974, as amended
                ("ERISA");





·
            The
                Immigration Reform and Control Act, as
                amended;





·
            The
                Americans with Disabilities Act of 1990, as
                amended;





·
            The
                Age Discrimination in Employment Act of 1967, as
                amended;





·
            The
                Workers Adjustment and Retraining Notification Act, as
                amended;





·
            The
                Occupational Safety and Health Act, as
                amended;





·
            Washington
                Law Against Discrimination in Employment - Wash. Rev. Code Ch. 49.60.010
                et seq.





·
            Washington
                State Civil Rights Act -Wash.
                Rev. Code§49.60.400





·
            Washington
                Statutory Provisions Against Retaliation/Discrimination for Filing
                a
                Workers’ Compensation Claim - Wash. Rev. Code
                §51.48.025





·
            Washington
                Age Discrimination Law - Wash. Rev. Code Title 49,
                §49.44.090





·
            Washington
                Sex Discrimination Law - Wash. Rev. Code Ch. 49.12,
                §200





·
            Washington
                Equal Pay Law - Wash. Rev. Code Title 49,
                §49.12.175





·
            Washington
                Family Leave Act - Wash. Rev. Code §49.78.005 et seq. and §49.78.010 et
                seq.





·
            Washington
                Wage Payment and Work Hour Laws





·
            The
                Washington Industrial Safety and Health Act - Wash. Rev. Code Ch.
                49.17





·
            Any
                allegation for costs, fees, or other expenses including attorneys’ fees
                incurred in these matters.





(b).
      Emeritus knowingly and voluntarily releases and forever discharges Ruffo, his
      heirs and assigns, of and from any and all claims, known and unknown, Emeritus
      has or may have against Ruffo as of the date of execution of this Agreement.








6. **Affirmations** .
      (a)
      Ruffo affirms that he has not filed, caused to be filed, or presently is a
      party
      to any claim, complaint, or action against Employer in any forum or form.








(b)
      Ruffo
      further affirms that he has been paid and/or has received all leave (paid or
      unpaid), vacation and floating holiday pay, compensation, wages, bonuses,
      commissions, and/or benefits (including any monies to which he is entitled
      in
      his section 401(k) plan) to which he may be entitled and that no other leave
      (paid or unpaid), vacation and floating holiday pay, compensation, wages,
      bonuses, commissions and/or benefits (including any monies to which he is
      entitled in his section 401(k) plan) are due to him, except (1) any already
      vested benefit under ERISA, and (2) as provided in this Agreement.





(c)
      Ruffo
      furthermore affirms that he has no known workplace injuries or occupational
      diseases and has been provided and/or has not been denied any leave requested
      under the Family and Medical Leave Act.





(d)
      Ruffo
      affirms that he has returned any and all of Employer's property in his
      possession or control.





(e)
      Ruffo
      further affirms that Ruffo has not been retaliated against for reporting any
      allegations of wrongdoing by Employer or its officers, including any allegations
      of corporate fraud. Both Parties acknowledge that this Agreement does not limit
      either party’s right, where applicable, to file or participate in an
      investigative proceeding of any federal, state or local governmental agency.
      To
      the extent permitted by law, Ruffo agrees that if such an administrative claim
      is made, Ruffo shall not be entitled to recover any individual monetary relief
      or other individual remedies.





**** 7 **.** **Confidentiality** **.** Except
      as required by law, Ruffo agrees not to disclose any information regarding
      the
      existence or substance of this Agreement, except to his spouse, tax advisor,
      and
      an attorney with whom Ruffo chooses to consult regarding his consideration
      of
      this Agreement. Employer also affirms he has not divulged any proprietary or
      confidential information of Employer and will not divulge such information
      at
      anytime hereafter.




8.  **Non-disparagement.** The
      parties hereto agree they have not made and will not make any statements
      disparaging each other. The parties further specifically agrees not to speak
      with the press or media about each other in a disparaging or negative
      manner.





**** 9. **** **Governing
      Law and Interpretation** **.** This
      Agreement shall be governed and conformed in accordance with the laws of
      Washington without regard to its conflict of laws provision. In the event the
      Ruffo breaches any provision of this Agreement, Ruffo and Employer affirm that
      either may institute an action to specifically enforce any term or terms of
      this
      Agreement. Should any provision of this Agreement be declared illegal or
      unenforceable by any court of competent jurisdiction and cannot be modified
      to
      be enforceable, excluding the general release language, such provision shall
      immediately become null and void, leaving the remainder of this Agreement in
      full force and effect. ****




10. **Nonadmission
      of Wrongdoing** **.** The
      parties agree that neither this Agreement nor the furnishing of the
      consideration for this Release shall be deemed or construed at anytime for
      any
      purpose as an admission by either party of any liability or unlawful conduct
      of
      any kind.







**** 11. **Amendment** **.** This
      Agreement may not be modified, altered or changed except upon express written
      consent of both parties wherein specific reference is made to this
      Agreement.




**** 12. **** **Entire
      Agreement** **.** This
      Agreement sets forth the entire agreement between the parties hereto, and fully
      supersedes any prior agreements or understandings between the parties. Ruffo
      acknowledges that he has not relied on any representations, promises, or
      agreements of any kind made to him in connection with his decision to accept
      this Agreement, except for those set forth in this Agreement.







**RUFFO
      HAS BEEN ADVISED THAT HE HAS AT LEAST TWENTY-ONE (21) CALENDAR DAYS TO CONSIDER
      THIS AGREEMENT AND HAS BEEN ADVISED IN WRITING TO CONSULT WITH AN ATTORNEY
      PRIOR
      TO EXECUTION OF THIS AGREEMENT.**





**RUFFO
      AGREES THAT ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO THIS AGREEMENT
      DO
      NOT RESTART OR AFFECT IN ANY MANNER THE ORIGINAL TWENTY-ONE (21) CALENDAR DAY
      CONSIDERATION PERIOD.**








**HAVING
      ELECTED TO EXECUTE THIS AGREEMENT, TO FULFILL THE PROMISES AND TO RECEIVE THE
      SUMS AND BENEFITS IN PARAGRAPH “2” ABOVE, RUFFO AND EMERITUS FREELY AND
      KNOWINGLY, AND AFTER DUE CONSIDERATION, ENTER INTO THIS AGREEMENT INTENDING
      TO
      WAIVE, SETTLE AND RELEASE ALL CLAIMS EACH HAS OR MIGHT HAVE AGAINST THE
      OTHER.**








IN
      WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this
      Agreement as of the date set forth below:







**Emeritus
        Corporation**





__/s/
      Frank Ruffo__________


Frank
      Ruffo


Date:12/27/06










By:/s/
      Daniel R. Baty


Daniel
      R.
      Baty


Chief
      Executive Officer


Date:
      12/27/06