ex107111.htm


    EX-10.71.11

     

    


    


     

    LIMITED
LIABILITY COMPANY AGREEMENT OF

     

    BATUS,
LLC

     

    A
Delaware Limited Liability Company

     

    Effective
as of October 15, 2008

     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    THE UNITS
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES ACT
OF ANY STATE.  THE UNITS MAY NOT BE RESOLD, TRANSFERRED, OR ASSIGNED
BY A MEMBER OR ASSIGNEE UNLESS THE MEMBER OR ASSIGNEE HAS COMPLIED WITH THE
TERMS OF THIS LIMITED LIABILITY COMPANY AGREEMENT AND APPLICABLE
LAW.

     


    
      
        
          


            

        

         


      

      
         


        
          

        

      

      
         


      

    


    TABLE
OF CONTENTS

    DRAFTING
NOTE: TO BE INSERTED ONCE DOCUMENT FINALIZED

    


    


    


    


    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


    LIMITED
LIABILITY COMPANY AGREEMENT

    OF

    BATUS,
LLC

     

    THIS
LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”) of BATUS, LLC (the
“Company”) is made and entered into effective as of October 15, 2008 (the
“Effective Date”), by and among the undersigned parties, who by their execution
of this Agreement have become members of the Company pursuant to the provisions
of the Delaware Limited Liability Company Act.

     

    ARTICLE
1

     

    DEFINITIONS

     

    The
following terms used in this Agreement shall have the following meanings (unless
otherwise expressly provided herein):

     

     “Act” means the
Delaware Limited Liability Company Act.

     

    “Additional Capital
Contribution” means with respect to each Member, the Capital
Contributions made by such Member pursuant to Section 8.2 hereof.

     

    “Administrative
Member” means SSL.

     

    “Affiliate” means with
respect to any Person:  (i) any Person directly or indirectly
controlling, controlled by or under common control with such Person; or (ii) any
other Person that owns beneficially, directly or indirectly, ten percent (10%)
or more of the outstanding capital stock, shares or equity interests of such
Person or (iii) any officer, director, general partner (or in the case of a
limited liability company, manager) of such Person or any Person controlling or
controlled by such Person.  For purposes of this definition, the term
“controls,” “is controlled by,” or “is under common control with” shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Solely for purposes of
this Agreement, Baty shall not be deemed to be Affiliates of Emeritus or SSL or
vice versa.

     

    “Allocated Invested
Capital” means the portion of the Invested Capital of the Company
reasonably allocated by the Administrative Member from time to time to each of
the Project Entities.

     

    “Allocation Year”
means (i) the period commencing on the Effective Date and ending on December 31,
2009, (ii) any subsequent twelve (12) month period commencing on January 1 and
ending on December 31, or (iii) any portion of the period described in clauses
(i) or (ii) for which the Company is required to allocate profits, losses and
other items of Company income, gain, loss or deduction pursuant to Section 9
hereof.

     

    “Assumed Cap Ex
Amount” means during the period from the Effective Date to the first
anniversary of the Effective Date, $450 per unit located at the applicable
Project Property increased by $50 per year on each anniversary of the Effective
Date but in no event more than $650 per unit located at the applicable Project
Property.

     


    
      
         


      

      
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    “Assumed Management
Fee” means an amount equal to 5% of the Gross Revenues of the applicable
Project Property.

     

    “Bankruptcy” means
with respect to any Member, the filing of a voluntary or involuntary petition in
bankruptcy by or against a Member pursuant to Chapters 7 or 11 of the United
States Bankruptcy Code, unless such petition is denied or dismissed within
thirty (30) days after filing in the case of a voluntary petition, or within
ninety (90) days after filing in the case of an involuntary petition; the entry
of an order of relief in bankruptcy of a Member; the assignment by a Member of
its Membership Interest or any interest therein for the benefit of creditors;
the appointment of a receiver or trustee for a Member’s property; and the
attachment of a Member’s Membership Interest which is not released within thirty
(30) days; or the undertaking by any Member of any course or action amounting to
the commencement of liquidation or dissolution proceedings.

     

    “Baty” means Daniel R.
Baty.

     

    “Baty Buy Out Notice”
has the meaning set forth in Section 12.3(b).

     

    “Baty Buy Out Option”
has the meaning set forth in Section 12.3(b).

     

     “Baty Buy Out Purchase
Price” means an amount equal to the lesser of (i) the Fair Market Value
of the Membership Interest of Baty, or (ii) 50% of the NOI Value of the Project
Properties, taken as a whole, but in no event less than an amount equal to the
Invested Capital of Baty.

     

    “Buy Out Date” means
the date on which SSL or its designee acquires the interest of the Company in
any Project Entity pursuant to the terms of Section 12.3 of this
Agreement.

     

    “Capital Contribution”
means, with respect to any Member, the amount of money or the fair market value
of services contributed to the Company with respect to the interests in the
Company held or purchased by such Member, including Additional Capital
Contributions.

     

    “Capital Transaction”
means (i) the sale of all or substantially all of the assets of any Project
Entity or of the Company’s ownership interest in any Project Entity or (ii) the
refinancing or replacement of the initial mortgage used for the acquisition of
the Project Property owned by any Project Entity.

     

    “Cash Flow Agreement”
means that Agreement of even date herewith by and between Emeritus and Baty
providing for the sharing of the positive and negative cash flow of each Project
Property.

     

    “Certificate of
Formation” means the certificate of formation pursuant to which the
Company was formed, as originally filed with the office of the Secretary of
State of the State of Delaware, and as amended from time to time.

     

    “Code” means the
Internal Revenue Code of 1986, as amended, or corresponding provisions of
subsequent superseding federal revenue laws.

     

    “Company” means
“Batus, LLC.”

     

    “Company Buy Out
Notice” has the meaning set forth in Section 12.3(a).

     


    
      
         


      

      
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    “Company Buy Out
Option” has the meaning set forth in Section 12.3(a).

     

     “Company Buy Out Purchase
Price” means the lesser of (i) the Fair Market Value of the Project
Property owned by the applicable Project Entity or (ii) the NOI Value of the
Project Property owned by the applicable Project Entity but in no event less
than the Allocated Invested Capital.

     

    “Contributing Member”
has the meaning set forth in Section 8.3(b).

     

    “Contribution Loan”
has the meaning set forth in Section 8.3(b).

     

    “Contribution Notice”
has the meaning set forth in Section 8.3(a).

     

    “Defaulting Member”
has the meaning set forth in Section 16.1.

     

    “Delayed Additional Capital
Contribution” has the meaning set forth in Section 8.3(b).

     

    “Emeritus” means
Emeritus Corporation, a Washington corporation and the parent of
SSL.

     

    “Entity” means any
general partnership, limited partnership, limited liability company,
corporation, joint venture, trust, business trust, cooperative or association or
any other organization that is not a natural person.

     

    “Fair Market Value”
means the fair market value of a Project Property as determined by mutual
agreement of the Members or if no such agreement can be reached within thirty
(30) days after delivery of the Buy Out Notice, then as determined in accordance
with the appraisal procedure set forth in Exhibit A.

     

    “Gross Revenues” means
all revenues generated by the operation of a Project Property, but shall not
include proceeds from the sale of equipment located at the Project Property, any
insurance or condemnation proceeds or any Net Proceeds.

     

    “Invested Capital” of
a Member at any time means (i) the amount of the Member’s total Capital
Contributions to the Company, less (ii) all distributions made to such Member as
a return of Capital Contributions.  For purposes of this definition,
distributions shall first be deemed made from profits of the Company and only
after all profits have been distributed shall distributions constitute a return
of Capital Contributions to the Members.

     

    “Matching
Contribution” has the meaning set forth in Section 8.3(b).

     

    “Member” means each
Person who executes a counterpart of this Agreement as a Member, in connection
with the initial execution of this Agreement or in connection with the
subsequent admission of such Person as a Member in accordance with the
provisions of this Agreement.

     

    “Membership Interest”
means all of a Member’s share in the profits, losses, and other tax items of the
Company and distributions of the Company’s assets, and all of a Member’s rights
to participate in the affairs of the Company including the right to vote on,
consent to or otherwise participate in any decision of the Members, all pursuant
to this Agreement and the Act.

     


    
      
         


      

      
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    “Net Cash Flow” means
the gross cash proceeds of the Company less the portion thereof used to pay or
establish reserves for all Company expenses, debt payments, capital
improvements, replacements, management fees and contingencies, all as reasonably
determined by the Administrative Member. “Net Cash Flow” shall not be reduced by
depreciation, amortization, cost recovery deductions, or similar allowances, but
shall be increased by any reductions of reserves previously established pursuant
to the first sentence of this definition.

     

    “Net Proceeds” means
the net proceeds from a Capital Transaction after the payment by the Company or
the applicable Project Entity of all costs and expenses associated with that
Capital Transaction.

     

    “NOI Value” means (A)
the sum of (i) the net operating income of the applicable Project Property for
the twelve month period immediately preceding the date of the Buy Out Notice,
less (ii) the Assumed Cap Ex Amount, less (iii) the Assumed Management Fee, (B)
divided by a capitalization rate of 8.25% and (C) less the outstanding principal
balance of the Project Debt.

     

    “Noncontributing
Member” has the meaning set forth in Section 8.3(b).

     

    “Percentage Interest”
means with respect to any Member, the percentage set forth opposite such
Member’s name on Schedule 1 of this Agreement, as amended from time to
time.

     

    “Person” means any
individual or Entity, and the heirs, executors, administrators, legal
representatives, successors, and assigns of such Person where the context so
permits.

     

    “Project Debt” means
the debt secured by a Project Property.

     

    “Project Entities”
means the limited liability companies and corporations listed on Exhibit C
hereto which are the owners of the Project Property.

     

    “Project Property”
means individually and collectively, as the context may require, that certain
real property described in Exhibits B-1 through B-8 hereof and the improvements
thereon and furniture fixtures and equipment therein, all of which comprise the
licensed assisted living facilities described in Exhibit C hereto.

     

    “Regulations” includes
proposed, temporary and final Treasury regulations promulgated under the Code
and the corresponding sections of any regulations subsequently issued that amend
or supersede such regulations.

     

    “Securities Acts” has
the meaning set forth in Section 17.14.

     

     “SSL” means
Summerville Senior Living, Inc., a Delaware corporation, one of the Members of
the Company.

     

    “Units” means the
Membership Interest owned by a Member, expressed as a number equal to the
Percentage Interest held by such Member.

     

    ARTICLE
2

     

    FORMATION
OF COMPANY

     


    
      
         


      

      
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    2.1           Formation.  One
or more Persons has acted as an organizer or organizers to form the Company by
preparing, executing and filing with the Delaware Secretary of State the
Certificate of Formation in accordance with and pursuant to the
Act.

     

    2.2           Name  The
name of the Company is “Batus, LLC.”

     

    2.3           Principal Place of
Business  The principal place of business of the Company shall
be 3131 Elliott Avenue, Suite 500, Seattle, WA 98121.  The Company may
locate its places of business at any other place or places as the Administrative
Member may from time to time deem advisable.

     

    2.4           Registered Office and
Registered Agent  The Company's initial registered agent and
the address of its initial registered office in the State of Delaware are as
follows:

     

    Name                                                      Address

     

    Corporation
Service
Company                                                                2711
Centerville Road

    Suite 400

    Wilmington, Delaware
19808

     

    The
registered office and registered agent may be changed by the Administrative
Member from time to time.

     

    2.5.           Term.  The
term of the Company commenced on August 18, 2008 and shall continue until the
Company is dissolved and terminated in accordance with the provisions of this
Agreement.

     

    ARTICLE
3

     

    BUSINESS
OF COMPANY

     

    The
business of the Company shall be:

     

    (a)           prior
to the Buy Out Date with respect to any Project Entity, to be the sole member of
the Project Entities; and

     

    (b)           to
exercise all other powers necessary to or reasonably connected with the
foregoing purpose which may be legally exercised by limited liability companies
under the Act.

     

    The
business of the Company shall not be modified except with the express consent of
the Members of the Company.

     

    ARTICLE
4

     

    NAMES
AND ADDRESSES OF MEMBERS

     

    The
names, addresses, Percentage Interest and number of Units of each Member are set
forth on attached Schedule 1, as amended or restated from time to
time.

     

    ARTICLE
5

     


    
      
         


      

      
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    RIGHTS
AND OBLIGATIONS OF MEMBERS

     

    5.1           Management of the
Company.  The Members, in their capacities as members, shall
not be entitled to participate in the day-to-day affairs and management of the
Company, but instead, the Members' right to vote or otherwise participate with
respect to matters relating to the Company shall be limited to those matters as
to which the express terms of the Act or this Agreement vest in the Members the
right to so vote or otherwise participate.

     

    5.2           Election and Appointment of
Administrative Member.  SSL is hereby appointed by the Members
as the Administrative Member of the Company.

     

    5.3           Limitation of
Liability.  Each Member's liability shall be limited as set
forth in this Agreement and the Act.  As between the Members with
respect to Company obligations, the liability for those obligations, including
any and all personal guarantees given by the Members for Company obligations,
shall be shared by the Members in accordance with their respective Percentage
Interests.  The Company and each Member shall indemnify, defend and
hold harmless any Member against any Company liability in excess of that
Member's Percentage Interest.

     

    5.4           Indemnification.  The
Company shall indemnify the Members, in each Member’s capacity as a Member, for
all costs, losses, liabilities and damages paid or accrued by such Member, and
advance expenses incurred by the Member in connection with the business of the
Company, to the fullest extent provided or allowed by the Act, unless such debt,
obligation or liability is incurred by the Member in violation of the terms of
this Agreement or as a prohibited exercise of the Member's
authority.

     

    5.5           Inspection of
Records.  Upon reasonable request, each Member shall have the
right to inspect and copy at such Member's expense, during ordinary business
hours the records required to be maintained by the Company pursuant to Section
11.4.

     

    5.6           No Priority and Return of
Capital.  Except as expressly provided in Article 9 or 10, no
Member shall have priority over any other Member, either as to the return of
Capital Contributions or as to profits, losses or distributions; provided; that this
Section 5.6 shall not apply to loans made by a Member to the
Company.

     

    5.7           Withdrawal of
Member.  No Member shall voluntarily resign or otherwise
withdraw as a Member.

     

    ARTICLE
6

     

    ACTION
BY MEMBERS

     

    6.1           General.  In
exercising their rights as provided in this Agreement or in the Act, and in
exercising any other voting rights, the Members shall act collectively through
meetings and/or written consents as provided in this Article.

     

    6.2           No
Meetings.  In light of the fact that, except as otherwise
required by this Agreement or the Act, all decisions of the Company are to be
made by the Administrative Member, the Company will not have meetings of any
kind unless requested by a Member, nor shall any action of the Company require a
vote at a meeting.

     


    
      
         


      

      
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    6.3           Action by Members Without a
Meeting.  Any action requiring Member consent may be taken
without a meeting if one or more written consents describing such action are
executed by Members holding sufficient Units to approve such
action.  Such consents shall be delivered to the Administrative Member
for inclusion in the Company's minutes and notice of such action shall be given
to each Member who did not sign such consent as provided in Section 17.1, within
three (3) business days.  Action taken under this Section 6.3 shall be
effective when the requisite Members have signed the consent or consents and
delivered them to the Administrative Member, unless such consents specify a
different effective date.  The record date for determining Members
entitled to take action without a meeting shall be the date the first Member
signs a consent.

     

    ARTICLE
7

     

    ADMINISTRATIVE
MEMBER

     

    7.1           Management.  Except
as otherwise expressly provided in this Agreement or in the Act, the powers of
the Company shall be exercised by or under the authority of, and the business
and affairs of the Company shall be managed by, the Administrative
Member.  Accordingly, the Administrative Member shall have full and
complete authority, power and discretion to manage and control the business,
affairs and properties of the Company, to make all decisions regarding those
matters and to perform any and all other acts or activities customary or
incident to the management of the Company's business in the ordinary
course.  Without limiting the generality of the foregoing, the
Administrative Member shall have power and authority, on behalf of the Company
acting on behalf of itself and/or on behalf and in the name of the Project
Entities in its capacity as the sole member of the Project
Entities:

     

    (i)           to
acquire property from any Person;

     

    (ii)           to
borrow money from financial institutions, and in connection therewith, to
hypothecate, encumber and grant security interests in the assets of the Company
and/or the Project Entities to secure repayment of the borrowed
sums;

     

    (iii)           to
purchase liability and other insurance to protect the Company's and/or the
Project Entities’ property and business;

     

    (iv)           to
acquire, improve, manage, charter, operate, sell, transfer, exchange, encumber,
pledge or dispose of any real or personal property of the Company or the Project
Entities including, but not limited to, some or all of the Project Properties
and/or its ownership interests in the Project Entities, subject, however, to any
limitations which may be imposed under any loan documents to which the Company
or the Project Entities may be a party;

     

    (v)           to
invest Company and/or Project Entity funds temporarily in time deposits,
short-term governmental obligations, commercial paper or other short-term
investments;

     

    (vi)           to
execute instruments and documents, including without limitation, checks, drafts,
notes and other negotiable instruments, mortgages or deeds of trust, security
agreements, financing statements, documents providing for the acquisition,
mortgage or disposition of the Company's and/or the Project Entities’ property,
including, but not limited to, some or all of the Project Properties and/or its
ownership interests in the Project Entities, subject, however, to any
limitations which may be imposed under any loan documents to which

     


    
      
         


      

      
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    the
Company or the Project Entities may be a party, and any other instruments or
documents necessary to the business of the Company and/or the Project Entities;
provided, however, to the extent any debt documents to which the Company is a
party require personal Guarantees such Guarantees shall be provided by the
Members or, if required by the lender, by Emeritus and Baty and, to the extent
acceptable to the lender shall be pro rata based on their Percentage Interests
in the Company or if the lender will not accept such pro rata guarantees then
the guarantors shall concurrently enter into a Contribution Agreement providing
for reimbursement of one guarantor by the other to the extent the amount paid by
such guarantor exceeds its or its Affiliate’s Percentage Interest in the
Company;

     

    (vii)           subject
to Section 7.5, to employ accountants, legal counsel, managing agents or other
experts to perform services for the Company and/or the Project Entities and to
compensate them from Company and/or Project Entity funds, as
applicable;

     

    (viii)           to
establish reasonable reserves in connection with the ownership of the assets of
the Company and the operation of the business of the Company;

     

    (ix)           enter
into any and all other agreements with any other Person for any purpose related
to the business of the Company and/or the Project Entities;

     

    (x)           to
open bank accounts in the name of the Company and/or the Project
Entities;

     

    (xi)           to
make elections available to the Company and/or the Project Entities under the
Code; and

     

    (xii)           to
do and perform all other acts as may be necessary or appropriate to the conduct
of the Company's business and the business of the Project Entities.

     

    Unless
authorized to do so by this Agreement or by the Administrative Member, no
Member, employee or other agent of the Company shall have any power or authority
to bind the Company or any Project Entity in any way, to pledge its credit or to
render it liable for any purpose.

     

    7.2           Responsibility of
Administrative Member.  The Administrative Member shall have
those duties and responsibilities as provided in the Act.

     

    7.3           Payment of Salary and
Expenses.  The Company shall pay all of its expenses of
operation.  The Company shall also pay or reimburse the Administrative
Member for reasonable out-of-pocket expenses incurred by the Administrative
Member on behalf of the Company including all expenses incurred in the
organization of the Company.  Fees and costs incurred by Members in
connection with the purchase of an interest in the Company shall be borne solely
by that Member. The Company shall not otherwise compensate, through salary or
otherwise, the Administrative Member, any Member or any of their respective
Affiliates.

     

    7.6           Limitation on Liability;
Indemnification.  The Administrative Member shall not be
liable, responsible or accountable, in damages or otherwise, to the Company or
to any Member for any act or omission by any such Administrative Member
performed in good faith pursuant to the authority granted to such Administrative
Member by this Agreement or in accordance with its provisions, and in a manner
reasonably believed by such Administrative Member to be within the scope of the
authority granted to such Administrative Member and in the best interest of
the

     


    
      
         


      

      
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    Company;
provided that such act or omission did not constitute gross negligence,
intentional misconduct, a knowing violation of the law, or a transaction from
which the Administrative Member will personally receive a benefit in money,
property, or services to which the Administrative Member is not legally entitled
as determined by binding dispute resolution. The Company shall indemnify and
hold harmless the Administrative Member and each director, officer, partner,
employee, or agent of the Administrative Member, against any liability, loss,
damage, cost or expense incurred by them on behalf of the Company or in
furtherance of the Company's best interest without relieving the Administrative
Member of liability for gross negligence, intentional misconduct, a knowing
violation of the law or the terms of this Agreement, or any transaction from
which the Administrative Member will personally receive a benefit in money,
property, or services to which the Administrative Member is not legally
entitled.  No Member shall have any personal liability with respect to
the satisfaction of any required indemnification of the above-mentioned
Administrative Member.

     

    Any
indemnification required to be made by the Company shall be made promptly
following the fixing of the liability, loss, damage, cost or expense incurred or
suffered by a final judgment of any court, settlement, contract or
otherwise.  In addition, the Company may advance funds to a
Administrative Member claiming indemnification under this Section 7.6 for legal
expenses and other costs incurred as a result of a legal action brought against
such person only if (i) the legal action relates to the performance of duties or
services by the Administrative Member on behalf of the Company, (ii) the legal
action is initiated by a party other than a Member, and (iii) such
Administrative Member undertakes to repay the advanced funds to the Company if
it is determined that such Administrative Member is not entitled to
indemnification pursuant to the terms of this Agreement.

     

    7.7           Right to Rely on
Administrative Member.

     

    7.7.1                      Any
person dealing with the Company may rely upon a certificate signed by the
Administrative Member as to:

     

    (a) The
identity of the Administrative Member or a Member;

     

    (b) The
existence or nonexistence of any fact or facts regarding the affairs of the
Company; or

     

    (c) The
Administrative Member and/or Members who are authorized to execute and deliver
any instrument or document on behalf of the Company.

     

    7.7.2                      Provided
that the action either has been duly authorized by the Members as provided in
this Agreement or is within the authority of the Administrative Member under
this Agreement, the signature of the Administrative Member shall be all that is
necessary and sufficient to bind the Company to any document, agreement or
instrument, and all of the Members agree that a copy of this Agreement may be
shown to the appropriate parties in order to confirm the same, and further agree
that the signature of the Administrative Member shall be sufficient to execute
any “statement of company” or other documents necessary to effectuate this or
any other provision of this Agreement.

     

    7.8           Standard of Care;
Liability.  The Administrative Member shall discharge its
duties as Administrative Member in good faith, with the care an ordinarily
prudent person in a like position would exercise under similar circumstances,
and in a manner it reasonably believes to be in the best interests of the
Company.

     


    
      
         


      

      
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    ARTICLE
8

     

    CAPITAL
CONTRIBUTIONS; CAPITAL ACCOUNTS

     

    8.1           Capital Accounts and
Members’ Initial Capital Contributions.

     

    8.1.1                      A
separate capital account (“Capital Account”) will be maintained for each Member
throughout the term of the Company in accordance with Code Section 704(b) and
the regulations promulgated thereunder.

     

    8.1.2                      Each
Member shall contribute capital described in this Agreement, the amount and form
of which is as set forth in the attached Schedule 1, as such Member's share of
the Members' initial Capital Contribution, at such times and as provided in this
Section 8.1.  A Member shall not be entitled to receive interest on
any portion of its Capital Contributions or Capital Account.  A Member
will, however, be entitled to receive interest on any loans it makes to the
Company pursuant to Section 8.3.

     

    8.2           Additional Capital
Contributions.

     

    (a)           In
addition to the initial Capital Contributions described in Section 8.1, each
Member shall contribute to the Company upon demand by the Administrative Member,
on no less than thirty (30) days notice, such additional capital in proportion
to their respective Percentage Interests (“Additional Capital Contributions”) as
may be required: (1) to pay operating costs of the Company and/or the Project
Entities which are not funded out of the capital (including Contribution Loans)
and earnings of the Company and/or the Project Entities; (2) to make payments on
optional loans under Section 8.3 which are not funded out of the capital or
earnings of the Company and/or the Project Entities; or (3) for other purposes
as the Administrative Member may determine to be in the best interests of the
Company and/or the Project Entities.  Additional Capital Contributions
pursuant to this Section 8.2 shall be made by the Members on the thirtieth
(30th) day
following receipt of notice from the Administrative Member of such Additional
Capital Contributions (the “Contribution Notice”).  The provisions of
this Section 8.2(a) shall not create any rights in any third
party.  No person or Entity shall have the right to enforce this
Section 8.2 except the Company.

     

    (b)           If
a Member fails to make all or any part of any Additional Capital Contribution
required by Section 8.2(a) (“Noncontributing Member”), the other Member (the
“Contributing Member”) shall make an Additional Capital Contribution in an
amount equal to the Additional Capital Contribution made by the Noncontributing
Member (the “Matching Contribution”), and may, but is not required to, lend to
the Company an amount equal to the amount of such Additional Capital
Contribution not contributed by the Noncontributing Member (a “Contribution
Loan”).  A Contribution Loan shall bear interest at the rate of
fifteen percent (15%).  At any time during the term of the
Contribution Loan, the Noncontributing Member shall be entitled to contribute,
as an Additional Capital Contribution, an amount equal to the principal and
interest due on the Contribution Loan (“Delayed Additional Capital
Contribution”), in which case, the Company shall immediately repay the
Contribution Loan.  The principal portion of the Delayed Additional
Capital Contribution only shall be added to the contributor's Invested Capital
and Capital Account, and the Percentage Interests and Membership Interests of
the Members shall be as though the original contribution was made when called
for.

     

    


     


    
      
         


      

      
        10

        
          

        

      

      
         


      

    


    (c)           In
the event that a Member makes an Additional Capital Contribution in excess of
the amount required pursuant to this Section 8.2, such excess amount shall be
returned to such Member within ten (10) business days of the contribution
date.

     

    8.3           Optional Loans by
Members.

     

    8.3.1                      Optional
Loans.  With the approval of the Administrative Member, a
Member may, but will not be required to, advance additional monies to the
Company (which the Company may in turn loan to one or more of the Project
Entities) as a loan upon such terms as the lending Member and the Administrative
Member may agree.  The interest rate on any loan by a Member to the
Company shall be determined by the Administrative Member and the lending
Member.  Notwithstanding the foregoing, however, no Member may make an
optional loan to the Company pursuant to this Section 8.3 without prior written
notice from the Company to all Members and an opportunity to all Members to loan
the Company the necessary funds in their respective Percentage Interests as
optional loans.

     

    8.3.2                      Treatment of
Loans.  No loan will result in an increase in the Percentage
Interest of the lending Member, and the amount of any such loan will not be
credited to the lending Member's Capital Account, except, in either case, in
accordance with Section 8.2(b).  Any loan will be an obligation of the
Company to the lending Member, with interest, and will be repaid to the lending
Member before any amount may be distributed to any Member with respect to its
Percentage Interest.  Interest on such loans will be payable without
regard to the profits or losses of the Company and will be treated as a
transaction with a Member other than in its capacity as a Member of the Company
pursuant to Section 707(a) of the Code.  All such loans will be
repayable solely from the Company's assets and represented by promissory notes
executed by the Company.

     

    8.4           Withdrawal or Reduction of
Members’ Contributions to Capital.  A Member shall not receive
out of the Company's property any part of its Capital Contribution until all
liabilities of the Company, except liabilities to Members on account of their
Capital Contributions, have been paid and there remains property of the Company
sufficient to pay them.  A Member, irrespective of the nature of its
Capital Contribution, has only the right to demand and receive cash in return
for its Capital Contribution.

     

    ARTICLE
9

     

    ALLOCATIONS
OF NET PROFITS AND LOSSES

     

    Profits
and losses for any Allocation Year shall be allocated to the Members in
proportion to their Percentage Interests.

     

    ARTICLE
10

     

    DISTRIBUTIONS

     

    10.1           Net Cash
Flow.  Except as otherwise provided in Article 14 hereof, Net
Cash Flow, if any, shall be distributed not later than ninety (90) days after
the end of each calendar year, or more frequently as the Administrative Member
may determine in its discretion, to the Members in proportion to their
Percentage Interests.

     


    
      
         


      

      
        11

        
          

        

      

      
         


      

    


    10.2           Amounts
Withheld.  All amounts withheld pursuant to the Code or any
provision of any state, local or foreign tax law with respect to any payment,
distribution or allocation to the Company or the Members shall be treated as
amounts paid or distributed, as the case may be, to the Members with respect to
which such amount was withheld pursuant to this Section 10.2 for all purposes
under this Agreement.  The Company is authorized to withhold from
payments and distributions, or with respect to allocations to the Members, and
to pay over to any federal, state and local government or any foreign
government, any amounts required to be so withheld pursuant to the Code or any
provisions of any other federal, state or local law or any foreign law, and
shall allocate any such amounts to the Members with respect to which such amount
was withheld.

     

    10.3           Distributions in
Kind.  Non-cash assets, if any, shall be distributed in a
manner that reflects how cash proceeds from the sale of such assets for fair
market value would have been distributed (after any unrealized gain or loss
attributable to such non-cash assets has been allocated among the Members in
accordance with Article 9).  No Member shall be entitled to demand a
distribution in kind.

     

    10.4           Limitation Upon
Distributions.  The Company shall not make a distribution if,
after giving effect to the distribution, (a) the Company would not be able to
pay its debts as they become due in the usual course of business, or (b) all
liabilities of the Company, other than liabilities to the Members on account of
their Units and liabilities for which the recourse of creditors is limited to
specified property, exceed the fair value of the Company's assets, except that
the fair value of property that is subject to a liability for which the recourse
of creditors is limited shall be included in the assets of the Company only to
the extent that the fair value of that property exceeds that
liability.

     

    10.5           Capital
Transaction.  In the event of a Capital Transaction, the Net
Proceeds shall be distributed to Members pro rata in accordance with their
respective Percentage Interest; provided, however, in the event there are not
Net Proceeds and a capital contribution is required in order to enable the
Company or the applicable Property Entity to consummate such Capital
Transaction, then the Members shall contribute any funds necessary to consummate
such Capital Transaction pro rata in accordance with their respective Percentage
Interest.

     

    ARTICLE
11

     

    ACCOUNTING,
BOOKS AND RECORDS

     

    11.1           Accounting
Principles.  The Company's books and records shall be kept, and
its income tax returns prepared, under such sound method of accounting,
consistently applied, as the Administrative Member determines is in the best
interest of the Company and its Members.

     

    11.2           Interest on and Return of
Capital Contributions.  No Member shall be entitled to interest
on its Capital Contribution or to return of its Capital Contribution, except as
otherwise specifically provided for herein.

     

    11.3           Accounting
Period.  The Company's accounting and tax period shall be the
calendar year.

     

    11.4           Records, Audits and
Reports.  At the expense of the Company, the Administrative
Member shall maintain records and accounts of all operations and
expenditures

     


    
      
         


      

      
        12

        
          

        

      

      
         


      

    


    of the
Company.  At a minimum the Company shall keep at its principal place
of business the following records:

     

    (a)           A
current list and past list, setting forth the full name and last known mailing
address of each Member;

     

    (b)           A
copy of the Certificate of Formation and all amendments thereto;

     

    (c)           Copies
of this Agreement and all amendments hereto;

     

    (d)           Copies
of the Company's federal, state, and local tax returns and reports, if any, for
the three (3) most recent years;

     

    (e)           Minutes
of every meeting of the Members and any written consents obtained from Members
for actions taken by Members without a meeting; and

     

    (f)           Copies
of the Company's financial statements for the three (3) most recent
years.

     

    11.5           Tax Matters
Partner.

     

    11.5.1                      Designation.  The
Administrative Member shall be the “Tax Matters Partner” of the Company pursuant
to Code Section 6231(a)(7).

     

    11.5.2                      Expenses of Tax Matters
Partner; Indemnification.  The Company shall indemnify and
reimburse the Tax Matters Partner for all reasonable expenses, including legal
and accounting fees, claims, liabilities, losses and damages incurred in
connection with any administrative or judicial proceeding with respect to the
tax liability of the Members attributable to the Company.  The payment
of all such expenses shall be made before any distributions are made to Members
(and such expenses shall be taken into consideration for purposes of determining
Net Cash Flow) or any discretionary reserves are set aside.  Neither
the Tax Matters Partner nor any Member shall have any obligation to provide
funds for such purpose.  The provisions for exculpation and
indemnification of Administrative Member set forth in Section 7.6 of this
Agreement shall be fully applicable to the Member acting as Tax Matters Partner
for the Company.

     

    11.6           Returns and Other
Elections.  The Administrative Member shall cause the
preparation and timely filing of all tax and information returns required to be
filed by the Company pursuant to the Code and all other tax and information
returns deemed necessary and required in each jurisdiction in which the Company
does business.  Copies of such returns shall be furnished to the
Members within a reasonable time after the end of the Company's fiscal
year.

     

    11.7           Information
Reports.  The Administrative Member shall provide to the
Members copies of any financial statements prepared by the Project Entities for
delivery to their lenders or landlords under the terms of any applicable lease
or loan documents to which the Project Properties may be
subject.  Upon request by a Member, the Administrative Member shall
provide the requesting Member a copy of the most recently prepared financial
statements for any or all of the Project Entities.

     

    ARTICLE
12

     


    
      
         


      

      
        13

        
          

        

      

      
         


      

    


    TRANSFERABILITY

     

    12.1           General.  Except
as otherwise expressly provided in this Agreement, a Member shall have no right
to:

     

    (a)           sell,
encumber, assign, transfer, exchange or otherwise transfer for consideration,
(collectively, “sell” or “sale”),

     

    (b)           except
in accordance with Section 12.4, gift, bequeath or otherwise transfer for no
consideration whether or not by operation of law, except in the case of
bankruptcy (collectively “gift”),

     

    all or
any part of its Membership Interest.  In particular, each Member
hereby acknowledges that no sale or gift of any Membership Interest shall be
permitted other than to the other Member without the consent of the
Administrative Member, which may be withheld in its sole and absolute
discretion.  Each Member hereby acknowledges the reasonableness of the
restrictions on sale and gift of Membership Interests imposed by this Agreement
in view of the Company's purposes and the relationship of the
Members.  Accordingly, the restrictions on sale and gift contained
herein shall be specifically enforceable.  Any sale, gift or other
transfer in violation of this Agreement shall be void and of no force and
effect.  In the event that any Member pledges or otherwise encumbers
any of its Membership Interest as security for repayment of a liability as
permitted under this Agreement, any such pledge or hypothecation shall be made
pursuant to a pledge or hypothecation agreement that requires the pledgee or
secured party to be bound by all the terms and conditions of this Article
12.

     

    12.2.                      Pledge as Security.
Notwithstanding the foregoing, the Members shall have the right to pledge their
Membership Interests in the Company and the Administrative Member shall have the
right to pledge the Company’s Membership Interest in each of the Project
Entities to one or more lenders as security for the loan obligations of the
Project Entities.

     

    12.3.                      Buy Out
Options.

     

    (a)           SSL
or its designee(s) shall have the right (the “Company Buy Out Option’) from time
to time at anytime from and after January 1, 2011 on written notice to the
Company (the “Company Buy Out Notice”) to acquire the membership interest of the
Company in any or all of the Project Entities (the “Applicable Project Entity
Interest”) for the Company Buy Out Purchase Price. In the event of the exercise
on one or more occasions of by SSL of the Company Buy Out Option, the closing of
the purchase and sale of the Applicable Project Entity Interest shall occur on
the date specified by SSL in the Company Buy Out Notice, which date shall be no
less than thirty (30) days nor more than one hundred twenty (120) days after the
date of the Company Buy Out Notice. The Company Buy Out Purchase Price shall be
due by wire transfer of immediately available funds at the closing of the
Company Buy Out Option.  At the Closing, the Company shall execute
such documents as may be reasonably requested by SSL to reflect the transfer and
conveyance of the Applicable Project Entity Interest free and clear of all
liens, charges and encumbrances.   For the avoidance of doubt the
parties acknowledge and agree that the Company Buy Out Option may be exercised
on one or more occasions and as to one or more of the Project
Entities.

     

    (b)           SSL
or its designee shall also have the right (the “Baty Buy Out Option”) at any
time from and after January 1, 2001 on written notice to Baty to acquire the
membership interest of Baty in the Company for the Baty Buy Out Purchase
Price.  In the event of the exercise by

     


    
      
         


      

      
        14

        
          

        

      

      
         


      

    


    SSL of
the Baty Buy Out Option, the closing of the purchase and sale of the Membership
Interest of Baty in the Company shall occur on the date specified by SSL in the
Baty Buy Out Notice, which date shall be no less than thirty (30) days nor more
than one hundred twenty (120) days after the date of the Baty Buy Out Notice.
The Baty Buy Out Purchase Price shall be due by wire transfer of immediately
available funds at the closing of the Baty Buy Out Option.  At the
Closing, Baty shall execute such documents as may be reasonably requested by SSL
to reflect the transfer and conveyance of the Membership Interest of Baty free
and clear of all liens, charges and encumbrances.

     

    (c)           If
SSL or its designee(s) exercise the Company Buy Out Option or the Baty Buy Out
Option under this Section 12.3, it will be a condition of the Closing of any
such option that either (i) any guaranty made by Baty of any debt or obligation
of the Company (or the Applicable Project Entity or Entities if less than all of
the Project Entities are being purchased) will be released upon Closing or (ii)
at Closing SSL or its designee(s) shall provide an indemnity to Baty with
respect to his guaranty obligations, which indemnity shall be in form and
substance acceptable to Baty.

     

    12.4           Transfer for Estate
Planning.  Baty may gift or devise all or any portion of his
Membership Interest without the consent of the Administrative Member; provided,
that (a) the transferee is Baty’s spouse, or lineal descendent (including
adopted children) or a trust in which such persons are the sole beneficiaries
and (b) the transferee agrees in writing to be bound by the terms of this
Agreement.  In the event of the gift or devise of all or any portion
of Baty’s Membership Interest to one or more transferees who are under the age
of twenty-one (21), one or more trusts shall be established to hold the gifted
interests for the benefit of such transferee(s) until all of the transferee(s)
reach the age of at least twenty-one (21) years.

     

    ARTICLE
13

     

    ADDITIONAL
MEMBERS

     

    The
Members acknowledge and agree that given the nature of the relationship between
them being established by this Agreement they do not contemplate admitting any
other Members to the Company.

     

    ARTICLE
14

     

    DISSOLUTION
AND TERMINATION

     

    14.1           Events of Causing
Dissolution.  Except as otherwise provided in this Agreement,
the Company shall dissolve upon the earliest to occur of the
following:

     

    (a)           The
time, if any, for dissolution specified in the Certificate of Formation, or in
Section 2.5 of this Agreement;

     

    (b)           As
soon as practical after the sale or other disposition of all or substantially
all of the assets of the Company and/or of the Project Entities, it being
understood and agreed that, it is the intent of the Members to make a
determination on or before the tenth (10th)
anniversary of the Effective Date whether to (i) continue the business of the
Company, (ii) sell the Project Properties then owned by the Project Entities
and/or the Company’s interest in the Project Entities then owned by the Company
and/or (iii) roll some or all of the assets of the

     


    
      
         


      

      
        15

        
          

        

      

      
         


      

    


    Company
up into the business and operations of SSL and/or Emeritus, or an entity owned
or controlled by or under common control with Baty;

     

    (c)           The
entry of a decree of judicial dissolution;

     

    (d)           Upon
the expiration of two (2) years after the effective date of administrative
dissolution;

     

    (e)           The
unanimous consent of the Members; or

     

    (f)           Any
other event or act causing dissolution of the Company pursuant to the Act or
this Agreement.

     

    The
Company shall not dissolve upon an event of dissociation of a
Member.  The events described in this Section 14.1 shall be the
exclusive causes of a dissolution of the Company.

     

    14.2           Allocation of Profit and
Loss in Liquidation.  The allocation of profits, losses and
other items of the Company following the date of dissolution, including but not
limited to gain or loss upon the sale of all or substantially all of the
Company's assets, shall be determined in accordance with the provisions of
Article 9 and shall be credited or charged to the Capital Accounts of the
Members in the same manner as profits, losses, and other items of the Company
would have been credited or charged if there were no dissolution and
liquidation.

     

    14.3           Winding Up, Liquidation and
Distribution of Assets.  Upon dissolution, the Administrative
Member shall immediately proceed to wind up the affairs of the
Company.  The Administrative Member shall sell or otherwise liquidate
all of the Company's assets as promptly as practicable (except to the extent the
Administrative Member may determine to distribute any assets in kind) and shall
apply the proceeds of such sale and the remaining Company assets in the
following order of priority:

     

    (a)           Payment
of creditors, including Members who are creditors, to the extent otherwise
permitted by law, in satisfaction of liabilities of the Company, other than
liabilities for distributions to Members;

     

    (b)           To
establish any reserves that the Administrative Member deems reasonably necessary
for contingent or unforeseen obligations of the Company and, at the expiration
of such period as the Administrative Member shall deem advisable, the balance
then remaining in the manner provided in Paragraph (c) below:

     

    (c)           By
the end of the taxable year in which the liquidation occurs (or, if later,
within ninety (90) days after the date of such liquidation), to the Members in
proportion to the positive balances in their respective Capital Accounts, and
then by their respective Percentage Interests.

     

    14.4           No Obligation to Restore
Negative Capital Account Balance on
Liquidation.  Notwithstanding anything to the contrary in this
Agreement, upon a liquidation within the meaning of Regulation Section
1.704-1(b)(2)(ii)(g), if any Member has a negative Capital Account balance
(after giving effect to all contributions, distributions, allocations and other
Capital Account adjustments for all taxable years, including the year during
which such liquidation occurs), such Member shall have no obligation to make any
Capital Contribution to the Company, and the negative balance of such Member's
Capital Account shall not be

     


    
      
         


      

      
        16

        
          

        

      

      
         


      

    


    considered
a debt owed by such Member to the Company or to any other Person for any purpose
whatsoever.

     

    14.5           Termination.  The
Members shall comply with any applicable requirements of applicable law
pertaining to the winding up of the affairs of the Company and the final
distribution of its assets.  Upon completion of the winding up,
liquidation and distribution of the assets, the Company shall be deemed
terminated.

     

    14.6           Certificate of
Cancellation.  When all debts, liabilities and obligations have
been paid and discharged or adequate provisions have been made therefor and all
of the remaining property and assets have been distributed to the Members, the
Administrative Member shall file a certificate of cancellation as required by
the Act.  Upon filing the certificate of cancellation, the existence
of the Company shall cease, except as otherwise provided in the
Act.

     

    14.7           Return of Contribution
Nonrecourse to Other Members.  Except as provided by law or as
expressly provided in this Agreement, upon dissolution, each Member shall look
solely to the assets of the Company for the return of its Capital
Contribution.  If the property remaining after the payment or
discharge of liabilities of the Company is insufficient to return the
contributions of Members, no Member shall have recourse against any other
Member.

     

    ARTICLE
15

     

    ACTIVITIES
OF ADMINISTRATIVE MEMBER AND MEMBERS

     

    15.1           Independent
Activities.  Each Member and Administrative Member, and their
respective Affiliates shall be entitled to enter into transactions that may be
considered to be competitive with, or a business opportunity that may be
beneficial to, the Company, it being expressly understood that some of the
Members and their Affiliates may enter into transactions that are similar to the
transactions into which the Company may enter, and the Company and each Member
waives the right or claim to participate therein.

     

    15.2           Transactions with Members
and Affiliates.  Nothing herein shall prohibit the Company or
any Project Entity from engaging in any transactions with its Members or its or
their Affiliates provided the same are arm length transactions on commercially
reasonable terms which are no less favorable to the Company or the applicable
Project Entity than the terms available from an unrelated third
party.

     

    ARTICLE
16

     

    DEFAULT

     

    16.1           Default.  A
Member shall be in default (“Defaulting Member”) hereunder upon the occurrence
of any of the following events:

     

    (a)           If
any Member makes an assignment for the benefit of creditors or applies for the
appointment of a trustee, liquidator or receiver of any part of its/his assets
or commences any proceedings relating to such Member under any federal or state
law relating to bankruptcy, insolvency, reorganization or similar
laws;

     

    (b)           If
any Member has a proceeding commenced against him/it relating to the appointment
of a trustee, liquidator or receiver pursuant to any proceedings under any
federal or

     


    
      
         


      

      
        17

        
          

        

      

      
         


      

    


    state law
relating to bankruptcy, insolvency, reorganization or similar laws which is not
actively contested by such Member, provided that such Member shall be in default
hereunder if the subject proceeding is adversely determined to the Member’s
position;

     

    (c)           If
any Member suffers his/its interest in the Company to become subject to any
attachment, levy, execution or other judicial seizure;

     

    (d)           If
any Member transfers his/its interest in violation of Section 12.1;

     

    (e)           If
any Member breaches or fails to perform any other material provision of this
Agreement and such breach or failure is not cured within thirty (30) days after
written notice of breach approved by the non-breaching Member; provided,
however, that while failure to provide funds in response to a call for
Additional Capital Contributions may result in certain consequences described in
Section 8, it shall not cause a Member to become a Defaulting
Member.

     

    16.2           Remedies.  Upon
any Member becoming a Defaulting Member, the Company may take any one or more of
the following actions as determined by the Administrative Member, in addition to
the other actions permitted by this Agreement:

     

    (a)           Dissolve
and terminate the Company as provided in Article 14 and offset against any
amount to be distributed to the Defaulting Member the damages caused to the
Company by the Defaulting Member; or

     

    (b)           Pursue
any remedy at law or in equity against the Defaulting Member.

     

    16.3           Defaulting
Member.  A Defaulting Member shall have no right to vote upon
or otherwise participate in management of the Company, whether as a
Administrative Member or to vote a Percentage Interest, regardless of whether
the remaining Members have commenced to exercise any available
remedies.

     

    16.4           Attorneys’
Fees.  In the event of any litigation, arbitration or other
proceeding (including proceedings in bankruptcy and probate and on appeal),
declaratory or otherwise brought to enforce or interpret this Agreement,
including an action to collect or enforce a judgment or order entered in any
such litigation or proceeding, the prevailing party therein shall be entitled to
the award of its reasonable attorneys' fees from the non-prevailing
party.  “Attorneys' Fees” means and includes all costs and expenses,
including attorneys', paralegals', clerical and consultants' respective fees and
charges expended or incurred in connection with a matter or proceeding arising
out of or in connection with this Agreement.

     

    ARTICLE
17

     

    MISCELLANEOUS
PROVISIONS

     

    17.1           Notices.  Any
notice, demand, or communication required or permitted under this Agreement
shall be deemed to have been duly given if delivered personally to the party to
whom directed or, if mailed by registered or certified mail, postage and charges
prepaid, addressed:

     

    (a)           if
to Baty:

    



    
      
         


      

      
        18

        
          

        

      

      
         


      

    


    c/o
Columbia Pacific Management

    1910
Fairview Avenue East l Suite 500

    Seattle
WA, 98102

    


    (b)           if
to SSL:

     

    c/o Emeritus Corporation

    3131 Elliott Avenue

    Seattle, WA 98121

    Attn:  Eric Mendelsohn, SVP
Corp. Development

    


    with a copy to:

     

    The Nathanson Group PLLC

    One Union Square

    600 University

    Suite 2000

    Seattle,
WA  98101

    Attn: Randi S. Nathanson

    


    (c)           if
to the Company:

     

    to the Company at the address specified
in Section 2.3.

     

    Except as
otherwise provided herein, any such notice shall be deemed to be given when
personally delivered or, if mailed, three (3) business days after the date of
mailing.  A Member or the Company may change its address for the
purposes of notices hereunder by giving notice to the others specifying such
changed address in the manner specified in this Section 17.1.

     

    17.2           Governing
Law.  This Agreement shall be construed and enforced in
accordance with the internal laws, not the law of conflicts, of the State of
Delaware.

     

    17.3           Amendments.  This
Agreement may not be amended except in writing, signed by all of the
Members.

     

    17.4           Construction.  Whenever
the singular number is used in this Agreement and when required by the context,
the same shall include the plural and vice versa, and the masculine gender shall
include the feminine and neuter genders and vice versa.

     

    17.5           Arbitration.  Any
matter that arises involving the performance or interpretation of this Agreement
or the operation and management of the Company that the Members are unable to
settle by mutual agreement, or that requires the consent of both Members and
they are unable to reach agreement, and in any case in which this Agreement
provides for adjustments, changes, settlements, or determinations by mutual
agreement of the parties and the parties are unable to reach a mutually
satisfactory agreement within a reasonable time, shall be settled and determined
by arbitration.  The dispute, controversy or claim may be submitted to
arbitration by either Member by giving the other Member thirty (30) days prior
written notice of intent to do so.  The arbitration shall be conducted
in accordance with the Commercial Rules of the American Arbitration Association,
which shall administer the arbitration and act as appointing
authority.  The arbitration shall be conducted in Seattle,
Washington.

     


    
      
         


      

      
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    17.6           Headings.  The
headings in this Agreement are inserted for convenience only and shall not
affect the interpretations of this Agreement.

     

    17.7           Waivers.  The
failure of any Person to seek redress for violation of or to insist upon the
strict performance of any covenant or condition of this Agreement shall not
prevent a subsequent act, which would have originally constituted a violation,
from having the effect of an original violation.

     

    17.8           Rights and Remedies
Cumulative.  The rights and remedies provided by this Agreement
are cumulative and the use of any one right or remedy shall not preclude or
waive the right to use any or all other remedies.  Said rights and
remedies are given in addition to any other rights the parties may have by law,
statute, ordinance or otherwise.

     

    17.9           Severability.  If
any provision of this Agreement or the application thereof to any Person or
circumstance shall be invalid, illegal or unenforceable to any extent, the
remainder of this Agreement and the application thereof shall not be affected
and shall be enforceable to the fullest extent permitted by law.

     

    17.10                      Heirs, Successors and
Assigns.  Each of the covenants, terms, provisions and
agreements herein contained shall be binding upon and inure to the benefit of
the parties hereto and, to the extent permitted by this Agreement, their
respective heirs, legal representatives, successors and assigns.

     

    17.11                      Creditors.  None
of the provisions of this Agreement shall be for the benefit of or enforceable
by any creditors of the Company.

     

    17.12                      Counterparts.  This
Agreement may be executed in counterparts, each of which shall be deemed an
original and all of which shall constitute one and the same instrument. Delivery of an executed counterpart of a
signature page of this Agreement by electronic transmission or telecopy shall be
effective as delivery of a manually executed counterpart of this
Agreement.

     

    17.13                      Representation as to
Non-Foreign Status.  Each Member represents and warrants to the
other Members and to the Administrative Member that the Member is neither a
“foreign person” nor a “foreign partner” as such terms are defined for purposes
of Sections 1445 and 1446 of the Code.  Each Member agrees to promptly
notify the Company in writing of any change in such status.

     

    17.14                      Investment
Representations.  The Units have not been registered under the
Securities Act of 1993, the Securities Act of Delaware or any other state
securities laws (collectively, the “Securities Acts”) because the Company is
issuing the Units in reliance upon the exemptions from the registration
requirements of the Securities Acts, and the Company is relying upon the fact
that the Units are to be held by each Member for
investment.  Accordingly, each Member hereby confirms the Units have
been acquired for such Member's own account, for investment and not with a view
to the resale or distribution thereof and may not be offered or sold to anyone
unless there is an effective registration or other qualification relating
thereto under all applicable Securities Acts or unless such Member delivers to
the Company an opinion of counsel, satisfactory to the Company, that such
registration or other qualification is not required.  The Members
understand that the Company is under no obligation to register the Units or to
assist any Member in complying with any exemption from registration under the
Securities Acts.

     


    
      
         


      

      
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    Executed
by the undersigned Members effective as of the date first above
written.

     

    (Signature
Pages Follow)

     


    
      
         


      

      
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    SUMMERVILLE SENIOR LIVING,
INC.

    


    By /s/ Eric
Mendelsohn                                                                

          Eric
Mendelsohn

          Its Senior
V.P. Corporate Development

     

    


    


    


    /s/ Daniel R.
Baty                                           

    DANIEL R. BATY

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


    SCHEDULE
1

    


    MEMBER
INFORMATION

    


    
      	
              Member Name and Address

            	
               

              Capital Contribution1

            	
               

              Number of Units

            	
               

              Percentage Interest

            
	
               

              Daniel
      R. Baty

              c/o
      Columbia Pacific Management, Inc.

              1910
      Fairview Avenue East

              Suite
      500

              Seattle,
      WA 98102

               

            	 
      	
               

              50

            	
               

              50%

            
	
               

              Summerville
      Senior Living, Inc.

              3131
      Elliott Avenue

              Suite
      500

              Seattle,
      WA 98121

            	 
      	
               

              50

            	
               

              50%

            


    

    


    


    


    

      

    

     

      1 The Members’ initial Capital Contributions will be based on
the equity required to complete the acquisition of the Project Properties. Once
determined, the Members will enter into a First Amendment to this Agreement
confirming the amounts of the Members’ initial Capital
Contributions.

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


    EXHIBIT
A

    APPRAISAL
PROCEDURE

    


    Each
party shall within ten (10)
days after written demand by the other select one MAI Appraiser to
participate in the determination of Fair Market Value.  For all
purposes, the Fair Market Value shall be the fair market value of the Project
Property unencumbered by any operating lease to which it may then be subject and
without any value being attributed to the benefits, if any, of the Net Cash Flow
Agreement. Within ten (10)
days of such selection, the MAI Appraisers so selected by the parties
shall select a third (3rd) MAI
Appraiser.  The three (3) selected MAI Appraisers shall each determine
the Fair Market Value of the Project Property within thirty (30) days of the
selection of the third (3rd)
appraiser.  To the extent consistent with sound appraisal practices as
then existing at the time of any such appraisal, and if requested by the
Members, such appraisal shall be made on a basis consistent with the basis on
which the Project Property was appraised at the time of its acquisition by the
applicable Project Entity.  The Members shall share the fees and
expenses of any MAI Appraiser retained pursuant to this Exhibit pro rata based
on their Percentage Interests.

     

    If either
party fails to select a MAI Appraiser within the time period set forth in the
foregoing paragraph, the MAI Appraiser selected by the other party shall alone
determine the fair market value of the Project Property in accordance with the
provisions of this Exhibit and the Fair Market Value so determined shall be
binding upon the parties. If the MAI Appraisers selected by the parties are
unable to agree upon a third (3rd) MAI
Appraiser within the time period set forth in the foregoing paragraph, either
party shall have the right to apply to the presiding judge of the court of
original trial jurisdiction in the county in which the Project Property is
located to name the third (3rd) MAI
Appraiser. The cost of any such proceeding shall be shared by the Members pro
rata based on their Percentage Interests.

     

    Within
five (5) days after
completion of the third (3rd) MAI
Appraiser’s appraisal, all three (3) MAI Appraisers shall meet and a majority of
the MAI Appraisers shall attempt to determine the fair market value of the
Project Property. If a majority are unable to determine the fair market value at
such meeting, the three (3) appraisals shall be added together and their total
divided by three (3).  The resulting quotient shall be the Fair Market
Value.  If, however, either or both of the low appraisal or the high
appraisal are more than ten
percent (10%) lower or higher than the middle appraisal, any such lower
or higher appraisal shall be disregarded.  If only one (1) appraisal
is disregarded, the remaining two (2) appraisals shall be added together and
their total divided by two (2), and the resulting quotient shall be such Fair
Market Value.  If both the lower appraisal and higher appraisal are
disregarded as provided herein, the middle appraisal shall be such Fair Market
Value.  In any event, the result of the foregoing appraisal process
shall be final and binding.

     

    “MAI Appraiser” shall mean an
appraiser licensed or otherwise qualified to do business in the state where the
Project Property is located and who has substantial experience in performing
appraisals of facilities similar to the Project Property and is certified as a
member of the American Institute of Real Estate Appraisers or certified as a
SRPA by the Society of Real Estate Appraisers, or, if such organizations no
longer exist or certify appraisers, such successor organization or such other
organization as is approved by the Members.

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
B-1 THROUGH B-8

     

    THE
PROJECT PROPERTIES LEGAL DESCRIPTIONS

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
C

     

    THE
FACILITIES

     

    


     

    
      	
              Facility
      Name, Address and Number of Beds/Units

            	
              Project
      Entity Owner

            	
              Tenant

            
	
              Emeritus
      at Grand Terrace

              22325
      Barton Road

              Grand
      Terrace, CA 92313

            	
              EMERITOL
      GRAND TERRACE INC

            	
              Emeritus
      Corporation

            
	
              Seville
      Estates

              7401
      Seville Drive

              Amarillo,
      TX 79121

            	
              EMERITOL
      SEVILLE ESTATES LLC

            	
              ESC
      IV, L.P., a Washington limited partnership

            
	
              Dowlen
      Oaks

              2250
      Dowlen Road

              Beaumont,
      TX 77706

            	
              EMERITOL
      DOWLEN OAKS LLC

            	
              ESC
      IV, L.P., a Washington limited partnership

            
	
              Saddleridge
      Lodge

              1808
      W Loop 250 N

              Midland,
      TX 79705

            	
              EMERITOL
      SADDLERIDGE LODGE LLC

            	
              ESC
      IV, L.P., a Washington limited partnership

            
	
              Meadowlands
      Terrace

              3801
      Martin Luther King Jr. Blvd

              Waco,
      TX 76708

            	
              EMERITOL
      MEADOWLANDS TERRACE LLC

            	
              ESC
      IV, L.P., a Washington limited partnership

            
	
              Lakeridge
      Place

              2649
      Plaza Parkway

              Wichita
      Falls, TX 76308

            	
              EMERITOL
      LAKERIDGE PLACE LLC

            	
              ESC
      IV, L.P., a Washington limited partnership

            
	
              Eastman
      Estates

              2920
      N. Eastman Road

              Longview,
      TX  75605

            	
              EMERITOL
      EASTMAN ESTATES LLC

            	
              ESC
      IV, L.P., a Washington limited
partnership

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


    
      	
              Harbour
      Pointe Shores

              1020
      Catala Avenue SE

              Ocean
      Shores, WA 98569

            	
              EMERITOL
      HARBOUR POINTE SHORES LLC

            	
              Emeritus
      Corporation